Battle being waged for control of Pitcairn real estate empire

Pitcairn Properties, a Jenkintown real estate firm with ties to one of the region's wealthiest families, is fighting a takeover attempt by an investor group that placed $50 million with the company six years ago.

The tense and high-consequence battle has an intriguing cast: the blue-blooded Pitcairn clan; Eric L. Blum, a tenacious Philadelphia deal-maker; and former Main Line investment adviser Barry R. Bekkedam, now living in Florida after pouring $30 million of clients' money into a Ponzi scheme.

At stake is control of the $800 million Pitcairn real estate empire, which is heavily leveraged, as is common in the industry.

Pitcairn Properties Inc. is a separate company from Pitcairn Trust Co., which manages money for the Pitcairn family as well as for others.

Pitcairn Properties was founded in 1968 to diversify the wealth of the Pitcairn family, best known for its support of the General Church of the New Jerusalem and the grand Bryn Athyn Cathedral. The company has had, until recently at least, a reputation for working things out with partners.

The Pitcairns and other New Church families who own common stock in Pitcairn Properties are pitted against Blum, known in local financial circles for a shrewd, take-no-prisoners approach to protecting the money entrusted to him.

The dispute was spurred by Pitcairn Properties' failure, starting in September, to make four consecutive dividend payments and to meet a redemption request on the $50 million investment.

After months of negotiations amid a dreadful market for commercial real estate, Blum told Pitcairn Properties in June that he would take over the majority of the company's board, which, he argued, his group's investment agreement allowed.

Pitcairn Properties sued to block him in July, accusing him of conduct that was "self-interested" and "riddled with conflicts of interest" and that, left unchecked, would unfairly wipe out common stockholders and force the liquidation of $800 million in real estate at the worst possible time economically.

Blum is on the Pitcairn Properties board as a representative of investors who were clients of Bekkedam. They bought $50 million in preferred stock in Pitcairn Properties in June 2004. Blum has countered in court documents that his attempt to take control of Pitcairn's board was justified by contract.

Pitcairn Properties management, including chief executive officer and board member Salah A. Mekkawy, did not respond to requests for comment. Blum, who lives in Spring House, Montgomery County, and runs his investments out of the Cira Centre in West Philadelphia, also declined to comment.

Blum's attorney, Daniel P. O'Brien, of Klehr, Harrison, Harvey, Branzburg L.L.P., e-mailed a statement expressing disappointment "with the decision of the current board of directors of Pitcairn Properties to file a baseless lawsuit. The claims are unfounded in law and in fact."

The investors Blum represents include, according to court documents, Physicians Reciprocal Insurers, a medical-malpractice insurer on Long Island that put in $22 million; and the Glenn family of Atlanta, whose wealth stems from a steel mill and who provided $18 million. The remainder came from unidentified smaller investors.

Bekkedam, who closed his Ballamor Capital Management Inc. firm in Radnor after investing clients' money in the Ponzi scheme run by convicted Fort Lauderdale lawyer Scott Rothstein, said he always tried to put his clients in deals where they could take control of their assets if things went badly.

"The bottom line is that Pitcairn is not thrilled that they are going to lose control of their company," Bekkedam said Thursday from Florida. "The reality is there is very little wiggle room on their part."

Members of the Pitcairn family own at least 22 percent of Pitcairn Properties' common stock, according to a document filed in Delaware Chancery Court. Two of them, James F. Jungé and his son, Dirk, sit on the Pitcairn Properties board.

James Jungé married into the Pitcairn family. Dirk Jungé is chairman and chief executive of Pitcairn Trust, a Jenkintown wealth manager that has some cross-ownership with Pitcairn Properties but is a separate company. He did not respond to a request for comment made through Pitcairn Trust.

The family, whose wealth stems from a 19th-century cofounder of PPG Industries Inc., sold its stake in the company in 1985 for $530 million. In 1986, the family sold its real estate for $150 million.

There are about 600 living descendants of John Pitcairn, according to an April Dow Jones article. Half of them have a combined $1 billion at Pitcairn Trust, the article said.

Some Pitcairns went back into the real estate business, helping to put up such high-profile buildings as the Bell Atlantic Tower in Center City. Outside investors were brought in, diluting the family stake in Pitcairn Properties.

Among the investors was Mekkawy, who became chairman and chief executive of the company in 1998. He branched out from development into the purchase of existing buildings with institutional partners who provided most of the down payments.

The $50 million preferred-stock sale in 2004 enabled Pitcairn Properties to quickly complete $900 million in deals during the following three years.

Purchases included solid properties, such as 6 Penn Center in Philadelphia for $59 million and the Chesterbrook Corporate Center in Tredyffrin Township for $250 million. But there was plenty of trouble, as well: The $66 million purchase of Northlake Office Park in Atlanta and the $78.5 million deal for an office building in Chantilly, Va.

Pitcairn Properties suffered a setback last year when it lost a court case against a partner, Ronald Parr, who accused the company of cheating him out of his 50 percent interest in a Long Island land deal. Pitcairn had to pay $9.5 million after being blasted by a judge in Suffolk County, N.Y.

It is hard to predict how Pitcairn Properties will fare in Delaware court. Blum is practiced in fights with investment partners.

Thomas Kelly, who formed Marconi Broadcasting L.L.C. in 2006 to buy local radio station WHAT-AM (1340), last year, accused Blum in Delaware court of unfairly squeezing him out of his $1.1 million investment in the station.

A judge said in February that Blum owed fiduciary duty to Kelly, but ruled that a 2008 deal that wiped out Kelly was valid. Mediation on the matter was scheduled, but Blum canceled it, according to a letter filed in court Monday.