'Defensive move' cited by Reading authority in buying complex

The Reading Redevelopment Authority has acquired The Bookbindery, a 41-apartment low-income complex at Fourth and Walnut streets, from Philadelphia-based Pennrose Properties.

"This was more of a defensive move," said Adam Mukerji, authority executive director, who said Pennrose was delinquent on all five of its loans totaling $1.5 million.

"We didn't want it to become another slum and blight project," he said.

The authority wanted to protect a major asset in the city's critical focus area, near the GoggleWorks Center for the Arts, Olivet Boys & Girls Club, and several properties the authority bought in the 300 block of North Fourth Street that are going to Habitat for Humanity, he added.

Pennrose officials were unavailable for comment.

The Reading Housing Authority is managing the complex. Executive Director Daniel F. Luckey said it's still studying the building and finding a lot of deferred maintenance.

"The bones of the building are decent," he said. "There's nothing imperative that needs to be done immediately."

Still, he said, it's not in the condition that he wants.

Mukerji said Pennrose had paid some money on the first mortgage and nothing on the rest, citing cash flow problems.

Pennrose also had not paid the city some $200,000 a year on The Abraham Lincoln hotel, which it bought in 1993 with help from federal loans via the city.

Its deal allowed it to forgo an annual $200,000 payment on the loans if it had no profit that year, and for more than 10 years it annually said it had no profit.

When the city demanded to see its books, Pennrose said the agreement didn't require that, only that it state it made no profit. The city had to make the annual payments.

The hotel was recently bought and is being refurbished by developer Alan Shuman.

The 42-year-old Pennrose owns more than 60 apartment complexes in Pennsylvania.

It bought the former Arnold's Bookbindery in 1991 and transformed it into apartments for low-income, handicapped or elderly residents.

Mukerji said its tax credits for low-income housing were about to expire and he heard Pennrose was trying to sell the building for $1 million.

He said there's little chance the city authority would have gotten any of that money to pay down the loans, so he made the deal.

The Pennsylvania Housing Finance Agency owned the first and third mortgages on the building, totaling about $750,000. The city authority had the second, fourth and fifth mortgages, totaling about $800,000.

The authority bought out the two PHFA mortgages at 40 cents on the dollar, or about $300,000, then told Pennrose it would forgive the mortgages but take the building.

Pennrose agreed, and the deal was made Oct. 25.

"We bought out PHFA, but we didn't give Pennrose a penny," Mukerji said.

Mukerji said it's too early to determine whether either of the two authorities, or someone else, ultimately will get the building, which is still on the tax rolls.

The two authorities have to figure out how much money they can put into the building, and whether, as PHFA suggests, there's another 15-year tax-credit program available.

Source: Reading Eagle