The estate of late Lancaster County developer Richard Welkowitz is hoping to make a deal to settle its debts, according to a filing in Lancaster County court.
- The proposed deal would funnel money to the estate’s secured and unsecured creditors and it would allow the estate to avoid a potential tax hit, according to the filing.
- The estate owes banks and other creditors roughly $211.3 million, according to the filing, which also acknowledges that the estate is insolvent.
- An attorney for the estate, Alex Snyder of law firm Barley Snyder, declined to comment.
What’s the deal: The estate is proposing a $13.8 million deal to sell its ownership stake in partnerships that own more than 5,000 ATMs. The cash-dispensing machines generate fees for their owners and have value as hard assets.
- Welkowitz, who died in 2019, had invested in the ATMs through a partnership with Daryl Heller, CEO of Lancaster-based Heller Capital Group, according to the legal filing. Welkowitz owned a 95% membership interest.
- Heller is a minority owner of the entities that invested in the ATMs and chairman of the company that manages the machines, Paramount Management Group, according to the legal filing.
- After consulting with investment bankers and determining there would be few other takers, if any, the Welkowitz estate is now proposing to sell its stake to Heller.
- If the sale wins approval from a Lancaster County court, Heller would pay $3 million up front and then make monthly payments of $300,000 for 36 months.
- Heller declined to comment.
Where will the money go: The sale proceeds would go to unsecured creditors after deducting remaining expenses for the estate, according to the legal filing.
- Unsecured creditors include Gettysburg-based ACNB Bank, Lancaster-based Fulton Bank, York-based PeoplesBank, Indiana, Pennsylvania-based S&T Bank and the former Riverview Bank, which was purchased by Millersburg-based Mid Penn Bank, according to court documents.
- The ATM investments, meanwhile, would continue to repay their debts to secured creditors. None of the loans are in default, according to the filing.
- The lenders are owed a collective $51.2 million, according to the filing. The banks include:
- Berks County-based Customers Bank ($24.8 million)
- Chambersburg-based F&M Trust ($5.9 million)
- Ephrata National Bank ($2.4 million)
- Harrisburg-based Centric Bank ($2.4 million)
- York-based Traditions Bank ($2 million)
- Souderton-based Univest Bank & Trust ($4.1 million)
- Ohio-based Northwest Bank ($3.2 million)
- Johnstown-based Ameriserv Bank ($6.4 million)
- Some of the ATM lenders also have unsecured debt, according to court filings. They include Centric, Customers, Northwest and Traditions.
- Spokespersons for ACNB, Centric, Customers, Ephrata National, F&M Trust, Fulton, Mid Penn, PeoplesBank, S&T and Univest declined to comment. Efforts to reach Ameriserv were not successful.
- Banks generally do not comment on individual borrowers.
What about taxes: According to the legal filing, the estate could owe taxes on the ATMs in two to three years when it exhausts its deductions for depreciation.
- Further, the estate said in the filing that it is insolvent and that it expects “many” of the unsecured lenders to cancel its unpaid debt, which would eliminate the depreciation deductions and create net taxable income.
- “The proposed sale to Heller will allow the Estate to structure payments so as to avoid taxable income,” the estate said in its filing. “Further, the continued support and management of Heller is vital to the survival and performance of the ATM Entities.”
Are there other assets: The ATMs are the most valuable but the court filing lists others.
- They include Scranton parking garages valued at $4 million, a Sands Event Center lease listed at $2 million, a home valued at $870,000, Blackford Dental entities and other assets valued at $725,000; and $650,000 in cash.
What’s next: The sale requires court approval and approval of the ATM lenders, as well as “reasonable approval” of unsecured lenders, according to the court filing, which was made in May.
- According to a note on the docket for the Welkowitz estate, a hearing is scheduled for Aug. 17.
The background: Welkowitz committed suicide in December 2019, leaving behind tens of millions of dollars in debt to local banks and others.
- Welkowitz was the low-profile head of Blackford Development, the firm behind North Cornwall Commons in Lebanon County and a host of other developments in Lancaster County and beyond, according to a rare 2015 profile in the Central Penn Business Journal.
Editor’s note: This story has been updated to include a response from Daryl Heller of Heller Capital Group.