Photo by Dani Fresh
The owners of a beleaguered affordable housing complex in Harrisburg are moving to change the status of their bankruptcy filing, as they seek additional time to sell the property.
Uptown Partners, LP, which owns the Residences at Governor’s Square, will seek to convert their bankruptcy filing from Chapter 7 to Chapter 11, according to their attorney, who appeared at a federal court hearing on Tuesday.
The change should give Uptown Partners additional time to market and sell the 222-unit housing development in Uptown Harrisburg, said attorney Robert Chernicoff. Currently, about half of the units are unoccupied.
While no formal offers to purchase the development are on the table, Chernicoff said that there are “people that are talking to us.”
“We are hopeful,” Chernicoff told TheBurg. “We are maintaining the status quo until we can get it sold.”
While looking for a buyer, Uptown Partners has enough money to continue to operate Governor’s Square “for now,” he said.
Chapter 11 is a “reorganization” bankruptcy in which a company formulates a plan to repay creditors, with the hope that it will be able to continue to operate under existing or new ownership. In contrast, Chapter 7 is a “liquidation” bankruptcy that requires the sale of assets to repay creditors.
The Baltimore-based owners of the housing complex filed for Chapter 7 bankruptcy in May, with Chernicoff then stating that Uptown Partners was running out of money to operate the complex.
In June, bankruptcy trustee for the case, Kara Gendron, filed for a dismissal of the case. However, at a hearing in the U.S. Bankruptcy Court for the Middle District of Pennsylvania last week, Chief Judge Henry Van Eck asked Gendron and Chernicoff to come up with another plan and continued the case for a week.
On Tuesday, Gendron and Chernicoff brought forth a new proposal to convert from Chapter 7 to Chapter 11 bankruptcy, which should give Uptown Partners more time to find a buyer for Governor’s Square.
According to Chernicoff, there has been some interest in the property, but, so far, there have been no formal offers to purchase it. The company plans to hire a national real estate broker to attempt to sell Governor’s Square, he said.
The case has been continued until Sept. 26, but that hearing would be cancelled if the filing is converted to a Chapter 11 bankruptcy.
In recent years, the apartment complex has received hundreds of code citations and condemnations from the city, and residents have dealt with issues like mold, rodent infestations and leaky roofs, among other problems. About half the units are currently unoccupied as they have been deemed uninhabitable, Chernicoff said.
At last week’s hearing, Chernicoff said that a concern of entering Chapter 11 bankruptcy would be that the owners continue to rack up code violations from the city and lose more money.
According to Matt Maisel, communications director for the city, the codes department continues to cite Uptown Partners for serious health-related violations, but has backed off citing for less serious violations, such as those related to aesthetics.
Meanwhile, Rhonda Mays of the Fair Housing Council of the Capital Region said that their organization is still receiving regular requests from residents for assistance. Currently, however, there is not much they can do to help, she said.
“We are basically letting people know that the council does not have the information for them,” she said.
The council can refer residents to other housing assistance agencies and encourage them to find other housing, but that’s a difficult task during a housing crisis, Mays said.
Gendron shared previously that she believes that Governor’s Square needs to be sold for at least $12 million or more in order to pay off lien-holders. Separately, the city has stated that $22.5 million is needed to renovate Governor’s Square, based on a building assessment report ordered by the Harrisburg Housing Authority in 2021.
Gendron told TheBurg last week that finding a buyer for the properties also may be hard because of the mortgages and entities involved. For instance, Uptown Partners received an about $9 million federal loan from the U.S. Department of Housing and Urban Development when they acquired Governor’s Square.
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