By JAMES FINK
Business First

Faced with bleak prospects for the 86-year-old building, a federal judge decided Monday evening to allow trustees to begin the process of closing down and mothballing the Statler Towers.

The decision by Hon. Carl Bucki, chief judge of U.S. Bankruptcy Court for the Western District of New York, was anticipated against the backdrop of the prospective buyers stopping carrying-cost payments earlier this month and reports that the building's anchor tenant, Park Lane Catering, has not paid $34,000 in owed rent - a claim Park Lane Catering's attorney disputes.

After hearing more than 90 minutes of arguments, Bucki agreed with the court-appointed trustee, Amherst attorney Morris Horwitz, and his special counsel, Garry Graber, that it is now time to start mothballing the downtown Buffalo landmark.

The building is faced with a dwindling tenant roll and rental payments, and is also facing insurance coverage that may expire by Jan. 10. Approximately $25,000 remains of a $45,760 deposit that was made with National Fuel Gas Distribution Co. for natural-gas service. Including payroll and utility costs, plus other related expenses, it costs more than $20,000 a week to keep the building open.

"It has to be closed," Horwitz said. "It costs too much on a weekly basis to keep it open. We are not going to burn through $500,000 just for a handful of tenants."

The Statler has been under Chapter 11 involuntary bankruptcy protection since mid-April. The building was auctioned Aug. 12 to New Buffalo Statler Redevelopment LLC, a local investment group that bid $1.3 million for the building, but still owes $800,000 in three-times-delayed closing payments.

Horwitz and Graber declared New Buffalo in default after the group failed to make required payments by a court-ordered Nov. 30 closing date.

"For the sake of the city, we all wanted this to work out," Bucki said. "I firmly hoped this would be a successful enterprise, but there comes a time when you have to realistic."

Bucki set a final hearing on the Statler's closing and a status conference with the deep pool of attorneys connected with the case for Jan. 12. The building will likely be completely closed and shuttered by late January.

"Where we go from there, I hope we have answers on Jan. 12," Bucki said.

The Statler will remain open long enough for Park Lane Catering to handle several large events, including a New Year's Eve wedding, the Ice Ball on the same night and a Jan. 9 wedding.

During Monday's hearing, Bucki heard from Buffalo attorney Gabriel Ferber, father of the groom set to be married at the Statler on Jan. 9.

"Tina has her heart set on this romantic location," Ferber said of his son's fiancée. "We tried to persuade her (to consider another location). We've been holding our breath as we read the paper."

Bucki allowed Horwitz and Graber to use slightly more than $98,000 of the $500,000 that sits in New Buffalo Statler Redevelopment's escrow account to pay back wages owed, since mid-December, to the building's nine employees and to begin winterization measures such as shutting down the building's water and heating systems.

The building's 14 remaining tenants have started the process of finding new office space. All were notified Dec. 16 by Horwitz of the possible closing of the 18-story structure.

Horwitz hasn't closed the door on the possibility that the building will be sold. New Buffalo continues to court possible investors, and others have expressed some interest.

"There's a very real possibility an offer may made," Horwitz said. "It's anyone's building at this point."

Any potential buyer would need to make an offer that includes paying the nearly $300,000 owed in back city, Erie County and water-district taxes.

"We'd look at any reasonable offer that goes over the taxes and closing costs," Horwitz said.

Any final offer would need Bucki's approval.

Raymond Fink, who represents Mohomoud al Issa, father of British investor Bashar Issa - who bought the building in 2006, argued that any remaining funds should go to his client. Fink alleges that al Issa is the rightful mortgage holder, based on a May 2008 filing made in the Erie County Clerk's office.

Since late summer, Fink has contended that the New Buffalo bid should have been considered in default after it missed the initial Aug. 28 closing deadline, and that the building should have been re-auctioned or privately sold.

"We are distressed to find ourselves in this situation that we predicted several months ago," Fink said.

Bucki declined to rule on Fink's contention. The judge said he will consider several matters during the Jan. 12 hearing, including whether the building should be switched to Chapter 7 protection under the bankruptcy code - a move that would all but seal its fate.

"I am concerned about the effect this will have on the City of Buffalo," Bucki said.

The judge noted that the $133 million federal courthouse located just across Delaware Avenue and Niagara Square from the Statler is due to open within the next year.

"What is going on at one corner is in direct contrast to what is going on at the other corner," Bucki said.

Graber said that currently, the Statler is "a building that has no value."

"The people who bought it haven't been able to finance it or find new investors," he said. "There are no other buyers out there. It is arguable that the building has a negative worth number."