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Youngstown's Attempt to Acquire Phar-Mor Building Is Dead -- for Now
By Dan O'BrienYOUNGSTOWN, Ohio -- An unidentified entity's offer to buy the virtually vacant Phar-Mor Centre is thwarting the city's plan to acquire that facility and attract new tenants to the central business district.Mahoning County Commissioner Vicki Allen Sherlock revealed at yesterday's meeting of the board of commissioners that the city's offer to purchase the mortgage on the building was rebuffed by the bank that controls the lead position on the loans. Sherlock reported that executives at Bank One informed the county and city that another party placed a competing bid for the $2 million in debt owed on the building, and the lender has agreed to let that entity exercise their right to the mortgage. The city and county were working together to acquire the Phar-Mor Centre and relocate the Mahoning County Department of Job and Family Services downtown from the McGuffey Mall, a plaza on the city's east side owned by the Cafaro Co. of Youngstown. The agency, which was located in the old Higbee's Parkade building downtown before moving to the McGuffey Mall in the early 1980s, is comprised of the human services department and the child support enforcement agency. It employs 400."We were negotiating with the city and were looking to move forward and make an offer," Sherlock said. "They shut us down."In a complicated arrangement, the real estate of the Phar-Mor building is owned by a trust involving about 20 different families related to the Wick family of Youngstown. Although the city owns the lease, an entity known as Strouss Building Associates pays the mortgage loans. Strouss Building Associates was paying the Wick Trust about $100,000 annually for operation of the building.Last year, Strouss Building Associates defaulted on the loans. Thus, the prime lender, Bank One, now owns the lead position on the mortgage but has not foreclosed on the property.In order for the city to bring the county welfare department to the Phar-Mor Centre, it has to purchase the loans first. Then, the city could lease the facility to the county, or perhaps arrange a future sale through the Wick trust.In a letter dated May 27, Youngstown Finance Director David Bozanich wrote to Jeff Nicholson of Bank One in Columbus offering $25,000 -- contingent upon legislative approval -- to purchase the mortgage position on the building. "Although we recognize the significant write down on this loan, we believe this offer is in all parties' best interests," Bozanich wrote.A fax from Nicholson to Bozanich, dated June 23, stated the city's offer was "not acceptable given that it is contingent upon legislative approval and the purchase price is too low." Bank One then requested the city to submit a new bid to the bank with an unconditional offer to purchase the loans by June 27.Sherlock complained although the date on the fax was June 23, it was not transmitted until June 28, one day after the deadline had passed.Another request for the city's proposal was faxed June 29 at 4:13 p.m. from Nicholson to Bozanich, and stipulated the city must make anotherunconditional offer by the close of business June 30, the next day. "If the bank has not received an offer from the city of Youngstown by the close of business tomorrow, Bank One will proceed with finalizing its negotiations with another party," Nicholson wrote.Sherlock said it would be illegal for the city or county to close such a deal without legislative approval and it was impossible to formulate another offer with such short notice.A letter from Bozanich to Nicholson transmitted July 1 via fax reiterated the city's position: "The city and county would like to request that Bank One allow for a more open and competitive process as to the sale of the Strouss loans. Although, the government and legal approval process may require some flexibility on behalf of the bank, we believe that our offer will be substantially higher than any offer the bank has received to date," Bozanich wrote.Calls to Nicholson were not returned.According to Sherlock, the bank simply refused to hear any other offers from the city. "That's exactly what happened. We tried to make another offer and were totally rebuffed," she said. "This is so typical of what happens in the Mahoning Valley -- we're stuck with Bank One's decision."A number of city and county officeholders believe that relocating the welfare department to the Phar-Mor Centre would help revitalize downtown. The landmark structure was built to house the Strouss department store, which merged with Kaufmann's in the early 1980s. The department store closed in 1986. But the building reopened the following year after extensive remodeling to accommodate the headquarters of the rapidly growing Phar-Mor Inc.By 1990, the Phar-Mor Centre was filled with additional tenants and was a hub for downtown activity. But as the promise of the drugstore chain evaporated with scandal and two bankruptcies, the building emptied. With the Phar-Mor Centre apparently out of the running for the Department of Job and Family Services, the county is faced with two options, Sherlock said. The least preferable is to continue paying rent to the Cafaro Co. and keep the department at McGuffey Mall. "We're certainly committed to leaving there. It's deplorable. We shouldn't be there."The county agency leases 83,000 square feet of office space and roughly 22,000 square feet of storage at the McGuffey Mall. The county pays $5.24 a square foot for office space and $3.00 a square foot for storage, or more than $400,000 a year in rent.Sherlock declared the terms of the lease are unfair to the county especially since the building is deteriorating and the county must bear all repair costs."We have to be out of there," she said.The other option for the Department of Job and Family Services is to sign a lease, possibly a lease-to-own, agreement with Oakhill Renaissance Place, the former Southside Medical Center. Oakhill Renaissance Place is administered by the Southside Community Development Corp. and already houses some government offices.Adrian Byrne, interim director of Southside Development, said an offer presented to commissioners several months ago still stands. "It will be interesting to see what happens from here on," Byrne said. "The offer remains on the table and we're open for discussion."Southside Development proposed a lease arrangement in April to house the Department of Job and Family Services which, by the nonprofit group's calculations, could save the county $1.2 million in rent and other costs over the first two years of the lease and $4 million over the length of a 15-year lease. Among the tenants at Oakhill are the Youngstown District Board of Health, Grace Place Medical Services, Head Start, Mahoning County Coroner's office, Specialty Hospital of the Mahoning Valley, Oak Hill Pharmacy and Dacas Hot Meals.Contact Dan O'Brien at [email protected]"