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OAK BROOK, IL-A Dec. 19 closing on the sale of University Square Business Center in Huntsville, AL is off. The property is one of three remaining assets of Banyan Strategic Realty Trust, which sold the rest of its portfolio for $185 million earlier this year to Rahway, NJ-based Denholtz Management Corp., which had first crack at 184,738-sf University Square.

The property is 87% occupied, with 50 tenants.

“We are, of course, disappointed that Denholtz failed to complete the purchase of University Square,” says Banyan chairman, interim president and CEO L.G. Schafran. “We will immediately commence a marketing program in an effort to sell this asset at a favorable price.”

Walking away from the deal costs Denholtz a $1-million earnest money deposit, which Banyan says it will use to meet a $500,000 principal payment on industrial revenue bonds on its 6901 Riverport Dr. project in Louisville, KY, which is 55% occupied. In addition to that 322,065-sf office property, Denholtz had the opportunity to buy the 304,082-sf Northlake Tower Festival Mall in Tucker, GA. Although that property is 98% occupied, that rate may drop under 90% with the expected departure of AMC Theaters, according to the company’s third-quarter report.

Had Denholtz bought all three properties, the purchase price would have been $38.7 million, according to Banyan’s quarterly report. As a result of its failure to go through with the University Square deal, the other two properties can be had.

“Our other properties are already being marketed for sale and lease,” Schafran says. “We will continue to make periodic liquidating distributions to our shareholders as conditions permit.” Those distributions have totaled $4.95 per share.

However, those sales are taking a back seat for now as the REIT continues fighting a lawsuit stemming from the suspension of former president Leonard G. Levine. The case is still in discovery, with both sides facing deadlines of Jan. 31 for written discovery and April 30 for non-expert depositions. The case may not go to trial until early 2003, according to Banyan.

Because the case involves approximately $2 million, the REIT says dissolution should wait until the lawsuit is resolved. “Our remaining properties will continue to be marketed for sale and/or lease, and will be disposed of as conditions warrant,” Schafran says. “However, we believe the adoption of this strategy allows our shareholders to obtain the full benefit of the anticipated result of this litigation and may have the added value of allowing the real estate markets to recover as we await the outcome.”

The declining markets and litigation means the final liquidation will take longer than first expected, company officials say.

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