Published Date Written by Dan Miller
The Middletown Industrial and Commercial Development Authority tonight approved an agreement of sale to acquire the Elks Building from the Greater Middletown Economic Development Corporation.
As described by authority Solicitor Salvatore Bauccio, the acquisition is to be a cashless transaction in which the authority takes title to the historic building, and assumes responsibility for the $500,000 mortgage on the property.
However, much more needs to take place before the deal is final. Bauccio said approval of the agreement of sale begins a 90-day "due diligence" period. What that basically means is that the authority has up to 90 days to assess the physical condition of the building, analyze the building's existing lease obligations, and uncover anything else that could increase or impact the overall cost of owning the property.
If, for example, the physical issues with the building are much more expensive than what the authority believes to be the case, the 90-day period gives the authority a way out of the deal. At the same time, Bauccio said the authority could be ready to close on the sale before expiration of the 90 days.
Besides the physical issues - which Bauccio said include needed repairs to portions of both the ceiling and roof - at least another $50,000 is needed to buy digital conversion equipment for the Elks Theatre.
Even if the authority decides to move forward, the agreement still needs final approval from Middletown Borough Council, and from the Pennsylvania Department of Community and Economic Development.
DCED is the source of the $500,000 mortgage. Bauccio said the $500,000 is to be repaid to DCED in five annual installments of $500,000, the first one due in 2015. Bauccio said that the authority wants to refinance terms of the mortgage with DCED, in such a way as to allow the authority to move quickly toward fixing the building and improving it, while also meeting its repayment obligations.
The hope is that these improvements will eventually increase the building's cash flow so the property can be more self-sustaining, he said.
The authority in the same meeting gave tentative approval to obtaining a $3 million line of credit from PNC Bank. Bauccio said the line of credit would give the authority funds while awaiting release of government grant money. He said that the authority is in the process of applying for a $500,000 state grant. The PNC line of credit also requires borough council approval, besides final approval from the authority.
Bauccio would not release a copy of the sales agreement until after he can review the agreement with the borough solicitor, which could occur Thursday. He said the agreement provides for the Elks Theatre to be operated not by GMEDC but by a yet-to-be-formed local nonprofit organization.
Borough Council President Chris McNamara, an authority member, said the new organization is to be put together by two Middletown businesswomen; Robin Pellegrini and Dana Ward. Pellegrini is also on the authority and serves as its community liaison, McNamara said.
McNamara said authority ownership of the building is essential to preservation of the historic structure and the Elks Theatre itself.
"The theater is not closing as a result of this. Just the opposite" is the case, McNamara said.
The GMEDC board had already approved the sales agreement with the authority. GMEDC board Vice Chairman Gordon Einhorn was at the meeting at the start, but left while the authority was holding a closed-door executive session on real estate and personnel matters, before the authority reconvened to vote on the sales agreement.