An Erie County Court has cleared the way for a foreclosure sale of the former home of Delaware North Cos., at the corner of Main and Court streets in downtown Buffalo.
The 12-story, 135,000-square-foot building will go on the auction block on July 10, in what could be the final chapter in a battle between Delaware North, its former owner, and current owner, Toronto-based real estate company, Vandor Inc.
Delaware North Cos. sold the building to Vandor in December 1994 in a $6.5 million deal that saw the Canadian company make a $1 million up front cash payment, and the Buffalo business agreeing to hold a $5.5 million mortgage on the balance of the sale price. As part of the sale, Delaware North agreed to stay on as an owner-turned-tenant for five years.
When its lease expired at the end of 1999, the huge, privately-held company, which occupied 63,000-square-feet of space at 438 Main St., moved two blocks up Main Street to the Key Center, leaving Vandor with a gaping tenant hole to fill. When Vandor failed to make a $4.2 million ballon mortgage payment on June 30, 2000, Delaware North began foreclosure proceedings in an attempt to recoup its losses.
Gabe Ferber, of Amherst law firm Nesper, Ferber and DiGiacomo, which is handling the foreclosure action for Delaware North, said the goal of the sale is to recover the unpaid $4.2 million.
"Our objective is to recover the indebtedness. To the extent that the sale price isn't sufficient, there is a guarantor to pursue," Ferber said.
That guarantor is Vandor Real Estate of Toronto, the parent company of the shell corporation that purchased the building from Delaware North.
The City of Buffalo also is seeking $324,851 in back taxes from the 1999-2000 tax period, plus another $180,603 for the first half of the 2000-2001 tax year from Vandor. The
company will be receiving a bill for the second half of the year next week.
The city had put the property on its own foreclosure auction schedule for Oct. 22. based on the outstanding tax bill.
The recent announcement that Gov. Pataki is pushing for casino gambling in the heart of downtown Buffalo, could bring some motivated buyers to next month's auction, according to George Hamberger of Hunt Commercial Real Estate.
"Since the casino announcement, I'm getting calls on a number of downtown properties we represent," Hamberger said.
"If the Statler Towers ends up being converted to a casino/hotel complex, a large number of displaced office tenants will be scrambling to find alternative space downtown. The Main-Court Building could be the answer for a number of those people."
He also noted that casino-related businesses are also sniffing around downtown to get a sense of what's available.
"This should be a very good time to put a downtown building on the market," he said.
Despite that upbeat assessment, it remains unclear how close Delaware North will be able to come to covering the debt. At the time Vandor bought the structure, its assessed value was $6.5 million. Following the 2000 revaluation, the assessed valuation plummeted to $3.8 million.
Based on its recent acquisition activity downtown, Amherst's Ciminelli Development would also seem to be a good bet to be part of the July 10 auction. The Main-Court Building is located across the street from the Lafayette Court office building Ciminelli purchased in 2000.
"It's not something we're actively pursuing, but we take a look at everything," said Ciminelli vice president Jim Dentinger.
Ciminelli, which earlier this month bought the Sidway Building at the corner of Main and Goddell streets, has signaled an interest in buying more downtown property.
Earlier this year, a federal court dismissed a $387 million case brought by Vandor against Delaware North and several business executives, development officials and elected officials. The suit charged that Vandor had been put at a competitive disadvantage by the $17.5 million in bond financing Delaware North and Key Center received as part of its move from 438 Main St.
Delaware North maintained its headquarters at what was then known as One Delaware North Place from early 1990 through the end of 1999. Prior to serving as Delaware North's home address, the building was the headquarters for the now-defunct Western New York Savings Bank.
Delaware North Chairman Jeremy Jacobs reportedly bought the building in an $8 million cash transaction in part to help out Western's struggling successor, Goldome Bank. At the time, Jacobs was Goldome's largest shareholder.