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A lawsuit over the use of incentives filed by the owner of a nearly vacant downtown office building that lost its main tenant when Delaware North Cos. moved to the Key Center was dismissed Wednesday by U.S. District Court Judge John T. Elfvin.

The judge dismissed all of the claims made by Vandor Inc., the Toronto-based real estate company that owns the former Delaware North headquarters building at Main and Court streets, in a lawsuit that had sought $387 million in damages from more than a dozen of the Buffalo area's most prominent companies, development agencies, executives and elected officials.

"We're extremely pleased by the outcome," said Bryan J. Keller, Delaware North's vice president and general counsel. "I think it establishes the lack of merit in these claims."

Elfvin also granted a request by Delaware North, the City of Buffalo and the Buffalo Economic Renaissance Corp. for sanctions that would allow them to collect "reasonable costs" from Vandor for defending themselves against the claims.

Vandor had argued that the $17.5 million in bond financing that Delaware North and its new landlord, 60 Key Center Associates, received through the Erie County Industrial Development Agency had left it at a competitive disadvantage.

Delaware North last year moved its offices two blocks up Main Street to Key Center after its lease at its former offices at 438 Main St. expired at the end of 1999. The move, which opened up 63,000 square feet of space that Delaware North had been leasing in the 12-story building, left Vandor with a property that had an 85 percent vacancy rate, Vandor officials have said.

At the same time, an entity affiliated with Delaware North, 438 Main St. Inc., launched foreclosure proceedings last year against Vandor, which acquired the Main-Court building from the Buffalo-based concessions giant in December 1994.

Keller said he believes Vandor's lawsuit "was raised in some sort of desperate effort to forestall the foreclosure." Vandor's attorney, John Bartolomei, could not be reached to comment.

The foreclosure process still is proceeding after Erie County Court Judge
Michael D'Amico in mid-December dismissed counterclaims that had been filed by Vandor. Vandor has filed notice that it plans to appeal that ruling.

438 Main St. sold the building to Vandor in December 1994 for $1 million and also agreed to hold a $5.5 million mortgage on the property, according to records filed in the county clerk's office. Delaware North also agreed to remain as a tenant in the building for five years.

Delaware North moved out of the Main-Court building when its lease expired at the end of 1999, leaving Vandor with a gaping hole to fill in the building. And when Vandor failed to make a $4.2 million balloon payment on the mortgage that was due on June 30, 438 Main St., Delaware North launched foreclosure proceedings against the company.

Delaware North signed a 15-year lease in 1999 to move its offices to more than 100,000 square feet of space in the Key Center's south tower, with the company and its new landlord, Key Center Associates, receiving $17.5 million in bond financing through the Erie County IDA.

State and local officials said at the time that the incentives helped cement Delaware North's presence in Buffalo. There had been concerns the city's second-largest private corporation would move some or all of its operations to other parts of the country.

Delaware North officials said at the time that it might have made more sense from a financial point of view to move its subsidiaries closer to its other businesses outside the state. There had been talk of moving two of its business groups, Sportservice and CA One, to Boston.

The Vandor lawsuit named as defendants top Delaware North officials, including chairman Jeremy Jacobs, as well as Mayor Anthony M. Masiello and the City of Buffalo, the Buffalo Economic Renaissance Corp. and the Erie County IDA.

The lawsuit also named local commercial real estate agent James Militello and his company, James R. Militello Realty, which has since been hired by Delaware North to manage the office building. Other defendants include 60 Key Center Associates, along with the Key Tower's leasing agent, Ciminelli Development Co., and its president, Paul Ciminelli.

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