A deal that calls for the bankrupt YMCA of Greater Pittsburgh to continue to pay its landlord at the Downtown Y — though it has closed that fitness branch — was approved Tuesday by a federal bankruptcy judge.
Pamela Haley, spokeswoman for the YMCA, said the settlement of the lease dispute between the nonprofit and its landlord, Millcraft Industries, was approved by U.S. Bankruptcy Judge Thomas Agresti.
The deal calls for the YMCA to pay Millcraft more than $2.75 million over the next four years.
It “will allow us to proceed with our formal reorganization,” said Ms. Haley. “This is a process of several steps to help us create the Y of the 21st century, as our focus remains on providing important services that support children and families in our communities.”
The YMCA filed for Chapter 11 bankruptcy protection last month citing rent of about $100,000 a month at the Downtown branch on Fifth Avenue near Market Square as a significant drain on its funds.
It closed the Downtown Y Friday despite efforts by members to get elected officials involved in trying to keep it open for its approximately 2,000 members and 100 employees.
The settlement — which came after the judge ordered the YMCA and Millcraft to mediate the dispute — calls for the YMCA to make monthly rent payments of about $100,000 through September.
After that, it will pay off a claim of $2.35 million plus interest to Millcraft in monthly installments over the next four years.
In exchange for Millcraft ending the lease, it will hold a mortgage on the YMCA’s branch in Homewood-Brushton and a lien on future mineral rights at the YMCA’s Camp Kon-O-Kwee Spencer in Beaver County.
It also calls for both parties to attempt to find a new tenant to operate a fitness center at the Downtown facility which the YMCA has occupied since 2008.
“Perhaps with the help of the landlord, we can work together to find a potential new operator,” said Ms. Haley.
“The Y left all our equipment in the space in hopes it will assist the landlord when showing it to clients.”
The settlement didn’t sit well with some members who had mounted a petition drive asking Mayor Bill Peduto and Allegheny County Executive Rich Fitzgerald to try and keep the facility open.
Dave Fawcett, a Downtown attorney, said members, Downtown residents, local businesses and others with a stake in the operation weren’t apprised of the deal and should have been given an opportunity to voice their opinions.
“Why wasn’t there a 30-day period during which interested parties could weigh in?” he said. “The YMCA is an extremely valuable community asset.”
Also objecting were other creditors besides Millcraft.
In court documents filed before the deal was approved, lawyers for a committee of unsecured creditors in the case said it unfairly favors Millcraft by giving the landlord priority in collecting money from the YMCA.
In addition, they noted the deal calls for the YMCA to pay interest to Millcraft “while the remaining general unsecured creditors have yet to be offered any treatment of their claims, let alone identical treatment.”
Attorneys for the unsecured creditors committee could not be reached for comment.
The YMCA will continue to operate another Downtown branch in the U.S. Steel Tower.
A branch in Delmont, Westmoreland County, is scheduled to close June 29.
The settlement deal calls for the nonprofit to file its reorganization plan by June 22.
Joyce Gannon: jgannon@post-gazette.com or 412-263-1580.
Updated at 5:15 p.m. June 12, 2018.
First Published: June 12, 2018, 6:30 p.m.