Governor’s Square sign. File photo by Dani Fresh.
The future of a large affordable housing development in Harrisburg remains uncertain as bankruptcy proceedings play out in court.
On Tuesday, a federal judge weighed the bankruptcy filing by Uptown Partners, LP, owner of the Residences at Governor’s Square, which includes properties that have received hundreds of code violations and condemnations.
Baltimore-based Uptown Partners filed for Chapter 7 bankruptcy in May. Today, Chief Judge Henry Van Eck of the U.S. Bankruptcy Court for the Middle District of Pennsylvania heard the case, but ultimately decided to continue it for another week.
According to the attorney for Uptown Partners, Robert Chernicoff, the property owner, was running out of money to operate the complex, which includes 222 units in the Camp Curtin neighborhood.
For years, residents have raised concerns about the livability of the properties, citing issues like mold, leaky roofs and rodents, among other problems. According to Chernicoff, about half the units are currently unoccupied as they have been deemed uninhabitable.
The bankruptcy trustee for the case, Kara Gendron, filed for a dismissal of the case in June, explaining on Tuesday that she believed it was in the best interest of creditors and the residents.
Typically, Chapter 7 bankruptcy filings proceed relatively quickly and include liquidating or auctioning off assets. However, Uptown Partners has continued operations at Governor’s Square, and Gendron said that the company is continuously losing money, which doesn’t allow her to sell assets and pay back creditors easily.
“The cash flow isn’t ideal and, in fact, it loses money each month,” Gendron said. “Everyone wants this property to be fixed, and they don’t want people on the street. I feel like I’m stuck between a rock and a hard place.”
In contrast to a Chapter 7 bankruptcy, a Chapter 11 bankruptcy would give owners much longer to formulate a plan to return the business to a financially healthy position. However, Chernicoff said that the owner was concerned that, had they filed for Chapter 11, they would have continued to rack up code citations from the city. Also “the owner just wants to move on,” Chernicoff said.
The owner of Uptown Partners was not present at the hearing. According to Chernicoff, he was having trouble reaching his client, who was traveling in Europe, he said.
Harrisburg objected to Gendron’s motion to dismiss the case. Attorney Clayton Davidson, who is representing the city, said that the city was in favor of the company entering bankruptcy and is “more optimistic that a buyer can be found.”
Van Eck said that he was not likely to sustain Gendron’s motion to dismiss, based on her reasoning. He said that he didn’t believe it was in the best interest of all parties. So, he continued the case, asking that the trustee and debtor come up with a different plan. However, he noted the need for a timely decision on the case, citing the “human impact” it has on residents.
“I think it’s great we are doing something to minimize the impact,” Van Eck said. “But if we are kicking the can down the road until it’s 10 [degrees] below outside, what are we going to do then? One thing we can’t do is what we’ve been doing, which seems to be almost nothing.”
According to Chernicoff, if the bankruptcy case is dismissed, more units will need to be vacated, which would mean additional evictions. The owner doesn’t have enough funds to keep operating as they are, he said.
According to Gendron, the best outcome ultimate would be finding a buyer for Governor’s Square. However, according to Gendron, there are currently no formal offers on the table.
“If I sell it, that would be fantastic,” she said. “I’ve had multiple entities come to me about buying it. The problem is nobody has the funding right now. It is going to require a lot of repairs.”
Gendron believes that Governor’s Square needs to be sold for at least $12 million or more in order to pay off lien-holders. The city has shared that, based on a building assessment report ordered by the Harrisburg Housing Authority in 2021, $22.5 million was needed to renovate Governor’s Square.
If Governor’s Square is sold, it would likely remain affordable housing until at least 2034, as required by restrictive covenants that came with an about $9 million federal loan from the U.S. Department of Housing and Urban Development (HUD) and state tax credits awarded to the owner, when they obtained and renovated the properties. Renovations and construction were completed in 2012.
Gendron said that she is unclear on whether or not the HUD loan is assignable or if it needs to be paid at the time of sale.
“Selling would be very good for the tenants,” Gendron said. “But it’s hard to sell this property because of the mortgages and entities involved, trying to get them paid, and having a plan to fix it up.”
Over a year ago, prospective buyer Stephen Schuback came forth, expressing his interest in purchasing Governor’s Square, and took to fixing up units for residents, through a contract with the owner.
However, because of the HUD grant given to the owners years ago, Uptown Partners and a potential buyer must get approval for the sale from HUD. The Harrisburg Redevelopment Authority (HRA), which functions as a conduit for the loan between HUD and Governor’s Square, did not believe that Schuback had enough money to renovate the properties. Schuback had proposed a $12 million renovation.
Schuback attended Tuesday’s hearing, claiming that he still believes he had the finances for the project.
“Wouldn’t the people be in better shape right now if I had taken over?” he said. “The tenants are going to be the ones who suffer.”
Governor’s Square resident Monique Bryant also attended the hearing and said that she has had issues with mold and a leaky roof, among other problems.
“The people don’t have a voice,” she said. “The people don’t have help. Don’t just leave them without anything.”
The next hearing is scheduled for Aug. 22 at 10:30 a.m.
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