A lender’s three-year-long attempt to force a foreclosure on the Hiram Sibley building and two adjacent East End properties is at least temporarily thwarted. The buildings’ owner is trying to reverse a recent Bankruptcy Court ruling ordering that foreclosure be allowed to move ahead.
Built in 1925 by Hiram Watson Sibley and named to honor his deceased father, Western Union founder Hiram Sibley, the gracefully arched landmark Hiram Sibley building was designed to mimic a section of Hampton Court Palace in London.
Currently a mixed-use blend of apartments, offices and street-level retail, the distinctive structure has been most familiar to many Rochesterians as home to a series of East End watering holes. It currently houses the Brass Bar and Lounge and Filger’s East End. Previous occupants include the Bar, Barfly, Monty’s Corner and a long string of other similar night spots.
Formerly owned by beleaguered Rochester real estate developer Thomas Masaschi, the landmark Hiram Sibley building and the adjacent properties were transferred by Thomas Masaschi some three years ago to his brother, Louis, a Longmeadow, Mass.-based real estate developer.
Deeds filed with the Monroe County Clerk record the transfers by LLCs run by Thomas Masaschi of the three East End properties in 2019 to East/Alexander Holdings, an LLC managed by Louis Masaschi. The transfers were done for a consideration of $1 per property, the deeds state.
The transfers came as Thomas Masaschi’s Rochester umbrella company, DHD Ventures, increasingly fell under legal fire from lenders including US Income Partners, which in 2019 filed a series of lawsuits claiming that DHD had defaulted on some $20 million in loans. Some DHD properties were also falling behind on property tax payments.
In addition to the Hiram Sibley building, aging downtown Rochester properties DHD acquired and proposed to redevelop in recent years include the Alliance and Columbus buildings, the Hotel Cadillac, 88 Elm St., the Terminal Building and the former Gannett Rochester headquarters building.
DHD properties under threat of foreclosure include the Cadillac Hotel and a former oil refinery on Flint Street near Corn Hill. When COVID hit in 2020, the state put a moratorium on foreclosures, temporarily halting all such property seizures. State court records show that numerous cases brought by US Income Partners against DHD are currently being appealed by DHD in Fourth Department Appellate Division.
The East/Alexander foreclosure traces to a $13.2 million loan East/Alexander took out in 2019. The LLC defaulted on the interest only loan early in its term and despite inking a forbearance agreement in May 2020 ultimately failed to make good on its debt, the California-based lender, M360 Community Development Fund LLC, states in a court complaint.
As of October 2021, East/Alexander owed M360 a total of $15.3 million, the lender stated in the 2021 state court complaint. Accrued interest since then has brought the debt to $16.9 million, the lender states in a recent bankruptcyfiling.
In January, State Supreme Court Justice Scott Odorisi put East/Alexander into receivership, giving the receiver permission to put the LLC’s properties up for sale.
East/Alexander responded on April 1 by filing a Chapter 11 bankruptcy seeking court protection to reorganize. The bankruptcy automatically halts the foreclosure and puts any move by the receiver to put the properties on the block on ice for the Chapter 11’s duration.
Before the month was out, M360 filed a motion seeking to have the automatic stay on the foreclosure removed. The 770-page filing includes loan documents and agreements exhaustively detailing the history of East/Alexander’s unpaid $16.9 million obligation.
East/Alexander, “failed to make mortgage payments to M360 for almost a year and a half prior to filing its Bankruptcy Petition and failed to pay real estate taxes due to the County and the City of almost half a million dollars necessitating M360 to make that advance to protect its lien. Further, the Debtor withheld rents and revenues collected from the Properties as well as critical documentation from the Court-appointed Receiver, necessitating the Receiver to seek contempt sanctions against Debtor, after which this Chapter 11 case was filed on the eve of the contempt sanctions hearing,” states M360 official Richard Marshall in a filing backing the relief-from-stay request.
East/Alexander LLC countered with a motion seeking to have the receiver Odorisi appointed replaced by Big Crow Management North Inc., a company run by Thomas Masaschi.
“The rates being charged by Big Crow North herein are those customarily charged by (Big Crow North) for similar services to other clients.” Thomas Masaschi assured the court in a May 6 filing arguing for his management company’s appointment. Aside from Big Crow North managing a property in which his brother has a 40 percent interest, his management company has no connection to any party in the case and therefore “is a disinterested person within the meaning of the Bankruptcy Code,” he added.
In a ruling handed down May 25, Bankruptcy Judge Paul Warren said yes to the lender and no to the Masaschis.
While East/Alexander blamed COVID for its failure to keep up loan payments, the LLC was already falling behind before the pandemic struck, Warren noted.
“East/Alexander expresses optimism in its ability to increase the value of its property and thereby reduce or eliminate M360’s unsecured claim altogether. But no evidence is offered by East/Alexander to justify its optimism,” the judge concluded.
Given his decision to let the foreclosure proceed, East/Alexander’s request to turn management of the properties over to Thomas Masaschi’s company “is moot,” Warren ruled.
His decision is not yet final, however.
In late May, East/Alexander filed a notice of its intent to appeal Warren’s ruling in the federal Western District of New York’s Rochester Division. No district court action beyond the notice of appeal has yet been taken in the case.
Will Astor is Rochester Beacon senior writer. The Beacon welcomes comments from readers who adhere to our comment policy including use of their full, real name.