A wealthy downstate businessman who lost out in the foreclosure auction for One Seneca Tower last fall has now signed a contract to acquire the 38-story building in downtown Buffalo from the lender, with plans for a $100 million redevelopment.
Harvey Kaylie, together with confidant David Nalbandyan, have agreed to purchase the tallest private building in upstate New York. The purchase price was not disclosed, but sources confirmed it’s about $27 million.
The new investors’ plans are still in flux, but will involve a mixed-use redevelopment with office, retail and residential space, Nalbandyan said. The first floor would feature a shopping mall, with at least 10 eateries and an undetermined number of stores. The building would also have at least 15 floors of office space, and at least 100 apartments, consisting of either rental or condo units. There’s also a possibility of “squeezing” a boutique hotel into the mix, Nalbandyan said.
Finally, the building would feature an observation deck and restaurant on the top, bringing back a feature from an earlier era. “I never saw Buffalo before the way I saw it from the top of the building,” said Nalbandyan, who lives in New York City, but has friends in Buffalo. “It’s something, and I believe all the people in the town will enjoy it.”
On the outside, he said, plans call for refreshing the plaza area, perhaps even with some form of public park, and installing exterior colored lighting on the facades, “like the Empire State Building.”
However, nothing is written in stone yet. “You can plan to the last thing, but during the development you see how it will really work,” he said. “Everything is in the plan, so we have to see how it will go.”
City leaders are pleased with the news. “We are happy to see the One Seneca Tower finally moving out of the foreclosure phase and back into productive reuse,” Buffalo Mayor Byron W. Brown said. “We look forward to working with any new owner to ensure a development that is compatible with downtown, considers the recommendations in the Urban Land Institute study I commissioned as chair of BUDC, and continues the positive momentum in Buffalo.”
The purchase price is the same as Kaylie’s original unsuccessful bid at the October auction, when loan servicer LNR Partners took possession of the building on behalf of the investors who still held a $91 million mortgage on the property. However, the new deal also includes the separate five-story parking ramp across Washington Street, with 814 spaces.
The contract to sell implies that Miami Beach-based LNR could not find a better offer, and didn’t want to hold out any longer. The subsidiary of Starwood Capital Group had put the tower up for sale in February, and later added the ramp, seeking to recoup far more of the loan losses than the auctions fetched. But the effort apparently failed to garner enough interest, as only one other party was known to have bid.
Nalbandyan, a minority investor alongside Kaylie, will be the managing partner of the project. He said the buyers are now doing their due diligence on the building, but would not say when the deal is expected to close. However, according to a source familiar with the process, the goal is to complete the deal within the next 30 days.
“We are excited about the building,” Nalbandyan said. “We really want to give a new life to this building, and it’s not just because it’s business. We want to give new life to the whole area of downtown Buffalo. It’s important to reboot the area, reboot the building, and reboot the downtown.”
Kaylie has undertaken other real estate investment and development projects, including in the New York City area, but Nalbandyan admitted that the tower is far bigger in scale. “It’s a big project, but we’re able to handle it, that’s for sure,” he said.
And he insisted that they have the wherewithal to get it done, entirely with private money and no loans. “No one’s going to give you a loan for this building,” he said.
Built in 1972 as the headquarters for Marine Midland Bank, the beige concrete edifice includes more than 1.2 million square feet of total space, with about 853,000 square feet that is currently available for lease. The building was dominated for most of its history by Marine, later HSBC Bank USA, with law firm Phillips Lytle LLP as the No. 2 tenant and a host of other professional firms occupying other space.
But it abruptly switched from 95 percent occupied to 95 percent vacant in late 2013, when both HSBC and Phillips Lytle moved out.
The building had been owned most recently by Seneca One Realty of New York City, led by Mark Karasick, which had purchased it in 2005 for $85 million. But the loss of its lead tenants, followed by other tenant departures, left the owners unable to cover the building’s operating costs and mortgage payments, prompting the loan servicer at the time to initiate foreclosure in December 2013.
Nalbandyan said the investors are open to additional ideas for the building, including stores, restaurants or businesses that “want to be a part of the tower.” And he said he welcomes other investors who are “interested to join us as a partner.”
“Maybe they have ideas and they want to share with us,” he said.
Meanwhile, he said they’re not done with Buffalo, either. “I believe in Buffalo. It’s been growing really strong. The economy came back really strong, and I love the building,” he said. “And of course we’re looking for more business in Buffalo. We’re going to continue to invest, build, redevelop and we want to stay for the long-term business partnership in Buffalo. This is our idea.”