YMCA Resolves Downtown Lease, But Still On The Hook For $2.7M
The YMCA of Greater Pittsburgh and landlord of its Downtown location reached an agreement in federal bankruptcy court on Tuesday. The YMCA’s settlement payments will essentially subsidize the next tenant of the Market Square gym, which closed its doors June 8.
The agreement reached in court will allow the Y to focus on its mission and could help secure a new tenant for the space at 236 Fifth Avenue, said Lucas Piatt, president and CEO of Millcraft Investments, the Y’s landlord. Millcraft’s affiliate, MSP Commercial Subtenant, L.P. is listed in the bankruptcy proceedings as the respondent.
“Our settlement will allow us to make it more attractive for someone to come in and actually be able to turn a profit and provide a great service for folks,” Piatt said.
The YMCA will continue to pay about $100,000 in monthly rent through Sept. 30. Beginning on Nov. 1, the organization will pay Millcraft $2.3 million in monthly installments through June 2022, plus interest. As collateral, Millcraft will hold a mortgage on the Homewood Brushton YMCA, as well as a lien on mineral rights at Camp Kon-O-Kwee Spencer.
YMCA president Kevin Bolding said no nonprofit ever wants to go to bankruptcy court.
“The Downtown Y issue for us, when we look at all the history and everything that that Y has had, it’s made a tremendous impact on the community,” he said. “But from a financial standpoint, it was a big operational obstacle for us. So taking care of that is a necessary and important first step for us as we try to get healthy again.”
In its May bankruptcy filing, the YMCA asserted it was losing $85,000 per month on the Downtown gym and that maintaining the expensive location hampered its ability to carry out its charitable mission at other branches.
Millcraft is just one of the YMCA’s creditors. At Tuesday’s hearing, an attorney for the others, Ronald Roteman, argued that they were being treated unfairly under the settlement, which simply promised repayment in full.
“One of the fundamental principles in bankruptcy is the equality of distribution among similarly situated creditors,” Roteman wrote in an email, explaining why he argued for some sort of security for the remaining creditors.
They will be paid over four years with an additional 4 percent fixed interest rate. The creditors will hold a second mortgage on the Homewood Brushton YMCA as collateral. Millcraft will be paid in 44 monthly installments.
The YMCA may file a motion to dismiss their case from bankruptcy court. While the settlement with Millcraft would stand, the agreement with the other creditors would dissolve, said a lawyer for the YMCA, Michael Shiner of Tucker Arensberg.
“The question is whether we feel we’ve worked out the issues sufficiently that we can do the clean-up outside of bankruptcy court,” said Shiner. “But we’ve accomplished what we really needed to do in the filing by addressing the biggest issue, which was the Millcraft problem.”
Shiner said they would likely make that decision by the end of June.