Receiver Seeks to Unload Arcade

It has been disheartening for Riversiders and lovers of great architecture to see the crown jewel of our commercial district, Frederick Clarke Withers' Arcade building, vacant and boarded up, frozen in a far-off legal action.

Those following the saga may be somewhat cheered by the news reported in Wednesday's Riverside-Brookfield Landmark:

Bank may reclaim Arcade next week

Unless there are objections filed in federal court by 4 p.m. on Feb. 17, the Arcade Building in downtown Riverside will be dumped into the hands of its mortgage holder, according to the latest court filing in the Wextrust securities fraud suit.

On Feb. 6, Timothy Coleman, who was appointed receiver of Wextrust's assets by a federal judge last August, filed a motion seeking an order to approve the receiver relinquishing its interests in the Arcade Building and other Wextrust properties.

In his filing in New York District Court, Coleman asked Judge Denny Chin to approve his request of letting the current mortgage holder, Cap Financial CV3 LLC, assume ownership of the Arcade Building.

Supporting documents state that Wextrust raised $2.3 million from securities investors when it bought the building in December 2004 for $3.4 million.

Wextrust obtained a $2.9 million mortgage on the property; that mortgage is in default and several liens have been filed against the property. The company servicing the mortgage, according to court documents, stated that the monthly debt service on the building is roughly $21,000 in addition to $73,174 in annual real estate taxes.

A real estate advisor hired by Coleman estimates that it would take $250,000 to complete the renovation of the Arcade Building. Meanwhile, Don Price, president of Wexford Development Group, states in a declaration in support of the receiver's motion that the Arcade is in need of "minor (but necessary) repairs."

Price also states that the building's ownership remains unclear "because two conflicting operating agreements exist. The most likely scenario is that both Wexford Equity Partners LLC and [Wexford Development Group] have ownership interests and that an unaffiliated individual, Peter Sahlas, owns a small interest in Riverside Arcade LLC."

Elsewhere in the court documents Sahlas' ownership interest is pegged at 8.7 percent. Sahlas was the principal owner of the Arcade Building until he sold the majority stake in the building to Wexford in 2004.

-Bob Uphues

So next week, if the court approves the receiver's proposal, the freeze with respect to the Arcade building will be lifted and control will revert to the mortgage-holder.

One would expect the mortgage-holder to analyze the unique aspects of the landmark Arcade and any quirks involved with its financials with greater scrutiny than a court-appointed receiver with wide-ranging and international responsibilities. Given the architectural and historic significance of the Arcade, the mortgage-holder would undoubtedly benefit from the kind of target-marketing that Landmarks Illinois had offered to the receiver. (See post below, from 12/08.)

There may yet be hope.