After a series of contentious hearings, a bankruptcy judge Friday blessed an agreement to sell the McNally Smith College of Music building.

Barring an unexpected bid by Thursday’s deadline, the deal will leave $60,000 plus the proceeds of a music equipment auction — expected to bring in around $500,000 — for unsecured creditors, who include former college employees and students.

The for-profit college in downtown St. Paul closed on short notice in December.

Trustee Patti Sullivan testified Wednesday that she’s spoken with numerous real estate brokers and prospective buyers but no good offers are forthcoming. That group included the city of St. Paul, which declined its right to match the purchase price.

Instead, Sullivan wants to turn over the building to Exchange Street Partners, a local investment group that bought the mortgage at a steep discount from Bremer Bank before the bankruptcy case was filed in February.

In exchange for getting the building right away and without going through foreclosure, the investors are giving up the school’s music equipment, which is being auctioned off June 20-22; early online bidding for that equipment had reached $269,000 Friday.

The investors also paid $60,000 for the school’s restaurant and auditorium equipment and have agreed to cover the trustee’s operating costs since February — about $35,000 a month.

“It’s not something I’ve taken lightly,” Sullivan said Wednesday of the proposed sale. “It’s something I truly think is in the best interest of the creditors.”

MOVING QUICKLY

U.S. Bankruptcy Judge Katherine Constantine on Wednesday pressed the parties to allow two more months for prospective buyers to come forward.

“I’ve never seen the sale of this large an asset conducted so quickly,” she said.

But the judge relented Friday after hearing Exchange Street Partners had the building appraised at only $4 million and that the investors refused the delay unless the estate would start paying its own bills.

To beat the investors’ bid, someone would have to offer more than $5 million to clear the mortgage, a Small Business Administration loan and three small mechanic’s liens.

“It’s better not to take that gamble,” Sullivan said.

The parties did simplify the requirements for competing bids Friday. To give prospective bidders time to respond, Sullivan will contact those who’ve shown interest and will accept bids through Thursday instead of Monday.

WOULD MORE TIME HAVE HELPED?

Constantine was not quite alone in thinking more time and marketing could net a bigger sale and more money for creditors.

Former McNally Smith chief financial officer Kevin Sullivan, who says the college owes him $16,793, suggested the trustee hire a real estate broker in hopes of selling the building at a higher price.

“I believe the property has not been adequately exposed for sale and marketed to a broad market of potential buyers,” he wrote the court.

His objection was the only one of more than 200 unsecured creditors with claims totaling $6.69 million. He did not attend this week’s hearings.

HISTORY THEATRE SEEK TO EXTEND LEASE

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St. Paul schools superintendent gets high marks, but board wants progress on equity, enrollment, student achievement The History Theatre, the building’s lone tenant, has a lease that expires July 2, the day Exchange Street Partners is expected to close on the purchase.

Karen Mueller, the theater’s general manager, said she’s negotiating a one-year extension of the lease.

“Given the conversations we’ve had, I’m confident we’ll be here,” she said.