This is what a $10 million public subsidy got molested taxpayers: A flurry of finger-pointing lawsuits and Pittsburgh’s newest skyscraper in loan default.
No, the $10 million in public subsidies used to help build the 26-story FNB Financial Center in the Lower Hill District is not at the center of the complicated legal dispute. It’s not even a part of it. But it does reinforce why taxpayers never should be turned into venture capitalists for very wealthy corporations always ready to visit a friendly corporate wealthfare office in an attempt to limit their exposure.
As the Pittsburgh Business Times broke the story this past week:
“Dueling lawsuits reveal a legal battle has emerged between three key players in the development of FNB Financial Center … the only completed commercial part of the long-awaited redevelopment of the Lower Hill District.
“The lawsuits, one by the building’s developer, an affiliate of Buccini Pollin Group (BPG), and the other by Clay Cove Capital, a key, minority-owned investor, also show that the … building is facing a loan default, with the filings detailing opposing versions as to how the development project got to this point. Both organizations, along with the building’s anchor tenant and lender F.N.B. Corp., are part of a joint venture that built and operate the tower.”
At the crux of this inside baseball is Clay Cove alleging that BPG and F.N.B. engaged in a “deliberate and sustained campaign” to gain control of the nearly 550,000-square-foot building at the expense of minority investors,” the Business Times says. “On the other side, BPG accuses Clay Cove of attempting to stop a proposal that F.N.B. made in April to buy the project outright.”
F.N.B. denies the allegations, one of which, made by Clay Cove, that alleges F.N.B. “prevented the building from reaching stabilization through several strategies, including turning down prospective tenants,” the Business Times further reports. “The lawsuit also alleges that F.N.B. sublet 25,000 square feet in a different nearby building for its own use instead of opting for more space at FNB Financial Center.”
But one of the nubs of the rub here, as the Business Times reports it, is that in one of the lawsuits, BPG “vigorously defended its actions as well as that of F.N.B.’s, noting the building went into default due to ongoing financial challenges similar to what many office buildings have faced since the pandemic.”
“The project is financially challenged, as revenues are inadequate to service the underlying debt, maintain day-to-day operations and contribute the resources required for continued leasing,” the Business Times quotes the lawsuit, which further attributed the limited progress in getting the building leased up to “the Covid-19 pandemic and other impediments.”
But this project was a toad from the beginning, with the bank defending the $10 million public subsidy (it initially sought $15 million) as “necessary to continue FNB’s investment in the project in a post-COVID economic environment”:
“We believe this is a priority project for the city and region because it creates several thousand construction and permanent jobs, generates millions in tax revenue and helps restart our economy at a critical moment,” a spokeswoman said at the time.
Funny, we’ve seen nothing in the jobs and population data that point to this skyscraper, which opened last year, helping to “restart our economy at a critical moment.”
And do remember that the FNB Financial Center debuted in a climate of high vacancy rates for premium Downtown office space. And it was a glut that pre-dated the convenient Covid excuse of the day. Why did these banking geniuses believe they could make a go of it when other office buildings could not. Did “flight-to-quality” become a flight of fancy?
The courts, of course, will sort out this mess. And it’s now anybody’s guess what the fate of the FNB skyscraper will be.
But, again, taxpayers never should have had their pockets picked and assumed any of the risk that, from the get-go, was a highly risky venture that appears to have come home to roost.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
