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Newly filed liens stalling group's bid to buy, rehab Statler

The investment partnership that wants to buy Buffalo's historic Statler Towers is finding the path to ownership riddled with potholes.

Sources familiar with the proposed $3.5 million deal said the Greystone Group -- which includes partners in Buffalo, Toronto and Erie, Pa. -- is facing difficulties in acquiring the landmark hotel-turned-office-building from British developer Bashar Issa.

"Nobody expected this to be a walk in the park, but this deal has more hair on it than anyone imagined," said one source who spoke on the condition of anonymity.

The tangle of issues includes a mounting pile of creditor liens against the cash-strapped Issa.

In the past three weeks, more than $150,000 in liens have been filed against Issa's BSC Development Buffalo LLC, the entity that owns the complex. Those liens include a $28,787 claim from Silvestri Architects, the Amherst firm that drew up a $100 million blueprint to revitalize the building as a mix of hotel, residential and office space. The firm also researched historic tax credit options for the project.

Firm principal Phil Silvestri said while he hopes to work with the potential new owners to make his "vision for the building a reality," he would also like to get paid.

"Bashar made a big splash with our plans," Silvestri said. "We put a lot hours and a lot of creativity into those designs, and all we got were promises, no money."

Buffalo-based Gallagher Elevator Co. has filed two liens, totaling $58,000, for work done to replace the building's main elevators.

Greystone is also said to be facing new demands from Issa to tie future Statler profits to the deal. Meanwhile, the group is also weighing escalating cost estimates to overhaul the mostly vacant, 85-year-old building in an increasingly tight credit market.

Issa did not respond to inquiries about the pending deal.

Chris N. Scott, a vice president with Erie, Pa.-based Scott Enterprises, one of the Greystone partners, is cautious in his characterization of how the acquisition effort is proceeding.

"We're carefully moving through the due diligence phase," said Scott. "There have been so many false promises connected to this building in the past, we don't want to be part of that."

Scott, whose family-owned company operates more than a dozen hotels and restaurants in Erie as well as the highly successful Splash Lagoon Waterpark and Resort, acknowledged that overhauling the faded Statler will be expensive and complex.

"This will be a massive undertaking, a real monster, but it's a fantastic building that holds enormous potential," he said.

Issa bought the downtown landmark in 2006 and turned heads with promises of a $100 million renovation effort that would convert the mostly vacant structure to its former glory. That revival screeched to a halt in April when Issa, citing cash-flow problems, stopped interior demolition work.

Issa, who this summer sold a vacant downtown lot where he had proposed to construct a $361 million commercial tower for $2.1 million, has faced severe financial pressures at home in Manchester, England. Three major development projects have been halted as lenders have backed away, and efforts are under way to sell his British portfolio to satisfy a laundry list of creditors.

Issa's overall financial problems have cast a slight shadow over the Buffalo property as foreign creditors eye all of the struggling developer's assets.

Another wild card in the Statler deal is a potential foreclosure by Issa's father, Mohmoud al Issa. According to documents filed in the Erie County Clerk's Office in late May, the elder Issa lent his son $4.5 million in the form of a mortgage tied to the Statler and the South Elmwood Avenue property he sold in July.

But if the deal succeeds, Scott confirmed that his hospitality company would act as the hotel operator of a revived Statler.

"That's where we'd come in," Scott said. "We haven't solidified anything with any hotel brand, but we've had some good conversations."

He confirmed his company has an interest in signing a luxury category Marriott Renaissance hotel to the site, but said it is also investigating Wyndham Hotel Group brands.

Marriott International currently operates and franchises some 140 Renaissance Hotels and Resorts properties. Many of those upscale Renaissance units offer on-site spas and related amenities, and all feature full-scale restaurants, meeting space and concierge services.

Issa had been attempting to secure a Wyndham Historic hotel for the Statler, a building that began its life as a flagship Ellsworth Statler property. Issa's plans called for a 346-room hotel, spread over a dozen floors of the 18-story building.

The mastermind of the Greystone Group is Toronto developer Howard Hurst, who has been described as the "visionary" of the would-be Statler owners. Hurst's interest in the faded Buffalo landmark dates back to 2005, when Buffalo developer Sam Savarino considered buying the property.

Hurst, who has declined comment while the deal is pending, acted as an adviser to Savarino in that never-consummated deal.

The Greystone Group partner list is also said to include attorney/developer Thomas Barnes and financial consultant Tom Zawadski, both of Buffalo, and Williamsville real estate broker Richard Sterben.

e-mail: slinstedt@buffnews.com

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