By JAMES FINK
Business First

With the clock ticking toward a court-mandated closing date and skepticism over the bid by local interests to acquire the Statler Towers increasing, a U.S. Bankruptcy Court judge will consider whether the potential buyers are in breach of their purchase contract.

Hon. Carl Bucki will consider the breach claim Monday afternoon. The filing comes from the attorney representing the Statler's mortgage holder, Mohmoud al Issa, who alleges that because a good-faith deposit of $261,000 by New Buffalo Statler Redevelopment LLC - the group that made the winning bid for the historic downtown Buffalo building at an August auction - was suddenly held up Oct. 15, ratcheting up the level of skepticism about whether New Buffalo will be able to close on its $1.3 million bid. The closing deadline is Nov. 30.

"We're dealing with a changing situation," said Raymond Fink, al Issa's attorney. "We've got a bid that's going through some sort of metamorphosis."

Still, the attorney representing New Buffalo Statler Redevelopment thinks his clients will come through in the end.

"My client thinks they will close," said William Savino, a partner with Damon Morey LLP, which Tuesday was retained by new investors in the New Buffalo Statler Redevelopment LLC partnership.

Savino declined to identify the new investors, other than to say they are out-of-town interests.

Listed partners in New Buffalo Statler Redevelopment include William Koessler, Park Lane Catering president; developers Richard Sterben and Sam Savarino; and Tom Zawadzki, an area financial consultant.

"They tell me they will close," Savino said following a status conference Tuesday afternoon ordered by Bucki.

A phalanx of lawyers met with Bucki behind closed doors for nearly 45 minutes before the public court session.

The sale of the Statler, which Bucki ordered earlier this year after he placed the building and its owner of record, BSC Buffalo Development LLC, into involuntary Chapter 11 protection. BSC Buffalo Development, headed by British investor Bashar Issa - the son of al Issa - acquired the 18-story Niagara Square landmark three years ago. Bashar Issa is facing legal and financial troubles in Buffalo and Manchester, England.

New Buffalo Statler Redevelopment has twice asked for closing-date extensions from Bucki, citing the need to secure short-term and long-term financing for its renovation plans for the building. New Buffalo plans a mixed-use project including apartments, a hotel, Class A office space, restaurants and a jazz club, all anchored by Park Lane Catering's operations in the building's lobby.

"The trustee continues to be very concerned about the situation," said Garry Graber, a Hodgson Russ LLP partner and special counsel to court-appointed trustee Morris Horwitz.

Horwitz said he is mulling various options for the building, including declaring New Buffalo in default and putting the Statler back on the auction block.

"We do not want to see the building closed and weatherized," Graber said.

New Buffalo had promised to make the $261,000 good-faith payment as one of the conditions for extending its closing date.

The group has put more than $300,000 into the building since winning the bid during the Aug. 12 auction, including paying $97,000 in fees to auctioneer Cash Cunningham and paying the weekly carrying and operating costs since early September.

"These purchasers do continue to put additional skin in the game that they will never get back," Graber said. "I am satisfied they are trying."

Still, virtually all the lawyers involved in the process admitted they were surprised by last week's stop-payment order, which came from a Connecticut investor who advanced the $261,000 to New Buffalo. Horwitz said he drafted a letter warning of a potential default.

Graber warned while New Buffalo is not in default, that could change.

"It could literally be done on a day-by-day basis," he said.