Investors snap up Temple student housing from community developer Beech Co.

Bond investors have turned to acquiring financially troubled companies Beech international villagea four-story building with space for 200 students, plus ground-floor retail, in the 1500 block of Cecil B. Moore Ave. near Temple University.

In a civil lawsuit filed last month in Philadelphia Common Pleas Court, the bondholders were led by UMB, a Missouri-based bank, this nonprofit claims Beech Interplex Inc.that Beech International built in 2010 with $17 million raised from the sale of municipal bonds without income taxes, the city owes $1.1 million in unpaid debt. property taxes and failed to provide investors with required financial reports and warnings.

Now that the shops and many rooms are empty, the rents in the building no longer generate enough money to cover the costs of the building costs, according to the civil lawsuit UMB filed against Beech last month in federal court in Philadelphia.

UMB accuses Beech of fraud, breach of contract and accounting violations. The bank is trying to foreclose on the property, transfer it to a trustee and put it up for sale so that investors can get their money back before the city seizes it for non-payment of taxes.

“We are reviewing this lawsuit with our attorneys” and will file a response with the court, according to a statement from Beech’s CEO and president Ken Scott.

It is an unusual default for a bond issue backed by the Philadelphia Industrial Development Authoritya government agency founded in 1967 that helps about one nonprofit in the city each month issue bonds using the income tax exemption to save costs on projects that provide public benefits, such as housing.

It is up to Beech, and not the city, to pay taxes or other money owed, said Kevin Lessard, a spokesman for the Philadelphia Industrial Development Corp.the joint venture between the city and the Chamber of Commerce that oversees the authority, approves and helps set up financing for private developers, and administers a range of grant programs. He said he hopes Beech and his bondholders can resolve their conflicts.

Temple referred students to Beech International in its early years but has stopped doing so, said Robert L. Archie, an attorney for Beech.

“I don’t think Temple fulfilled its obligation. They didn’t take care of the students,” Archie said, noting that the various Temple appointees served on the Beech International board.

Archie called the bondholders’ move to take control “hasty.” In my opinion, they go too far.” He added: “We can’t go out and produce students.”

Fewer than half of the project’s 100 double rooms have been recently occupied, Archie said. A Beech employee, who was not authorized to speak for the record, estimated occupancy at about 60%. The shops on the ground floor are empty.

Beech built a student complex at Temple in 1990, also with tax-exempt bonds that were eventually paid off, Archie said in an interview. That earlier project also enjoyed a city property tax exemption, which Beech International was unable to obtain, leading to litigation that is ongoing in a Pennsylvania appeals court, he said.

Beech blames the project’s problems on a decline in demand for student housing. According to Temple data, the university is enrolling 30,000 studentsdown from 39,000 five years ago.

The university enrolled 4,900 first-year students this fall, an increase of 30% from a year earlier. First-year Temple students are encouraged to live on or near campus. Most students don’t; the Temple Office of Sustainability notes that the overall share of Temple students who commute from home, rather than live in Beech or one of eight other residential buildings on or near campus, has increased to 86% in 2022by 82% in 2019.

UMB, which says it is supported by most bondholders, also says in the lawsuit that it wants to replace Beech as manager of the property and appoint an outside receiver who could improve property income or sell the building to raise money raise to repay $15 million. still owed to bondholders.

According to the lawsuit, Beech failed to pay property taxes on the property in 2018. The following year, the city filed a lien on the property. Beech also failed to pay taxes in 2022 and 2023, accumulating a $1.08 million bill as of Oct. 4, and the company failed to notify bondholders of its inability to pay.

Beech is, together with its parent company Beech Co. and several subsidiaries, which grew out of a 1990 initiative by the nonprofit William Penn Foundation to support the revitalization of neighborhoods near Temple, including the Cecil B. Moore Avenue business district, parts of which burned during civil wars. unrest in the mid-1960s and were only redeveloped in recent years.

William Penn provided a $25 million grant for the effort. Beuk was founded by Floyd Alston, former chairman of the city Board of Education turned nonprofit developer, died in 2012.

Temple “values ​​its relationship with Beech,” but the university “has met and continues to meet all obligations” and “has no responsibility or authority for Beech’s performance” under its credit agreements, Temple spokesman Steve Orbanek said.

Although Beech has said it built student housing at Temple’s request, “Beech International Village was not built at the request of the university,” the university spokesperson said.

As vacancies increased during the 2020-2022 pandemic, attorney Archie said, Beech tried to convince the nonprofit Pennsylvania Housing Finance Authority to certify the property for senior housing, but has not yet received approval.

He said Beech could try to have the Philadelphia Housing Authority take over the site.