The Intelligencer New Era today carried a front page story headed “Bank to sheriff: Sell PAM building; City music school’s trustees still hopeful.”
Veteran builder, property manager and investor Robert Field, who is also the publisher of NewsLanc.com, has been an “Advisor” to the Business Committee of the Pennsylvania Academy of Music (PAM) for the past several months. The Committee consists of Arthur Mann, Sr., Chair; Mary Burton, and Jon Tryon, Esq. Dr. Bob Falk, Chair of PAM, is a member ex officio.
PAM has engaged well known bankruptcy lawyer Larry McMichael, a senior partner at Dilworth Paxson in Philadelphia, to advise it in connection with a possible Chapter 11. (McMichael is presently lead counsel for The Philadelphia Inquirer in its own bankruptcy case.) The Academy has been fully briefed concerning the potential of Chapter 11 Bankruptcy to keep itself in operation and resolve issues of debt. PAM has hoped to avoid the Chapter 11 expense of an estimated $250,000 by negotiating an amicable arrangement with lenders that would bring about similar arrangements.
Field has opined that the existing single purpose building would not likely sell for more than a fraction of the current mortgage held by UNCB. The bank, however, says that it has an appraisal on the building at an amount sufficient to cover what is owed UNCB.
Were a suitable purchaser, such as Franklin & Marshall College, to come forward, PAM has expressed an interest in a cooperative arrangement to either sharing the building or relocate back to Liberty Place, so long as it had assurance of access to the concert halls. PAM has also considered moving into spacious meeting areas at the currently closed Brunswick Hotel.
Under Chapter 11 Bankruptcy, the court would order a new appraisal. To the extent that the mortgage held by the bank is greater than the new appraisal, the bank would be treated as an unsecured creditor and its chances of collection would be diminished even more.
Tentative arrangements have been negotiated with a Steinman Trust and the Lancaster Newspapers, Inc. concerning the payment of additional bank loans to PAM which they have guaranteed.
Similar negotiations concerning loans guaranteed by the Ferree Trust, a foundation funded by local philanthropist Paul Ware, have been stalled due to the Trust demand for a greater number of pianos and other instruments than PAM feels it can part with and properly operate as a music academy. Ware was Chairman of PAM until several months ago when he stepped down in the midst of accusations of conflicted interests.
As described by the Intelligencer New Era, the Business Committee has offered to deed the building over to UNCB in exchange for a lease through 2010 and an agreement that the building not be sold during that period. It seeks to increase revenue and reduce costs by June 2010 to a level that will attract friendly investors to purchase the mortgage held by UNCB at or in excess of its market value.
PAM’s suspension of interest and principal payments several months ago has created significant regulatory problems for UNCB. The issue is of particular concern of UNCB at a time when many small banks are struggling to remain viable despite heavy losses on residential and commercial real estate loans.
The Academy’s building, an architectural showcase, cost over $30 million. About $12 million was raised through private donors and state and county grants. The balance was financed through mortgages and bank loans in anticipation of a successful fund raising campaign that failed to materialize.
The current levels of revenue and expense have caused significant monthly losses even before debt service. The Business Committee anticipated it would take until June, 2010 to redress the balk of the operational deficits and, if successfully achieved, the rest of the year to raise funds to purchase the mortgage.
What about the millions of taxpayer dollars already spent on the project?
If PAM is forced to sell, what will become of the building? Another giant white elephant?
Or, might it become the long-rumored “Performing Arts Center”?
I attended the Commissioner Meeting when Molly, Dick and Pete were in office when they gave the academy 1 million from the County.
A gift of our tax money in the future has to be entrusted just like going to a person for a donation. One needs to ask the hard questions when being solicited for a donation, especially when it is not their money to give out.