Two groups of out-of-town investors one of whom attended the University at Buffalo for two years in the 1970s -- has acquired downtown Buffalo's landmark Olympic Towers office building, ending a difficult sale process and closing a hard chapter in the building's history.
Prime Asset Fund, an investment group with offices in Los Angeles and Tampa, and Genesee Street Partners LLC, a New York City partnership, paid $2.5 million to buy the building at 300 Pearl Street, said brokerage firm CBRE-Buffalo.
The purchase was made through Olympic Towers Acquisition Company LLC, a partnership formed for the deal. Genesee Street is part of BenAlon Capital Management LLC, a New York City-based alternative asset fund manager specializing in distressed loans.
The new owners plan to invest money into the building to spruce it up and lease out vacant space. In particular, they are planning an architectural redesign of the four-story lobby atrium, along with additional amenities and upgrades to the 110-year-old building.
"These guys have some nice vision and some plan for the building," said Shana Stegner, director of office sales and leasing for CBRE, who, along with Sarah Cashimere-Warren, handled the transaction for the sellers and who will continue to manage leasing for the building. "They're super-excited."
The goal is to turn what is now considered "Class B" office space into "Class A" space, which carries the best quality and is most appealing for tenants.
"It's a property that I think has tremendous potential," said Prime Asset co-founder Bruce Korman, a 52-year-old veteran of distressed real estate investing, who studied electrical engineering at UB from 1977 to 1979, and remembered the building. "We like the idea of beautifying the property and having it live up to its historic heritage."
Built in 1902 as a YMCA, the Olympic Towers is on the National Register of Historic Places. It consists of two structures, the original 10-story brick tower and a four-story glass annex built in 1986, that are connected by the atrium.
However, the building has been somewhat neglected in recent years, after a prior owner defaulted on a loan and it was taken over by the lender, a commercial mortgage-backed security trust managed by JPMorgan Chase & Co. The nation's largest bank hired a "special servicer," C-III Capital Partners LLC, to administer the property, but wanted to sell it.
"If you buy a distressed, bank-owned property, the story is the same," Korman said. "The property manager's been pulling their hair out, because they have a client that's not set up to manage a building properly. So it inevitably suffers from lack of capital and a little TLC."
He said the building just needs "a fairly modest change."
"You've got this very beautiful brick tower and you have this glass annex, which like most glass buildings is clean and neat, and in between you have inferior finishes and a facade that needs updating," he said. "We could change the impression of the property quite a bit by redesigning the lobby."
With 144,000 square feet of leasable space, the building is home to various federal agencies, including the General Services Administration, the Food and Drug Administration and the U.S. Bankruptcy Court for the Western District of New York. It also houses other professional tenants and The Gourmet Store eatery.
The building is 76 percent occupied, but Korman believes that can be increased with some new amenities and different thinking. The new owners are planning workout facilities, document storage and after-hours electronic access to the building for tenants. And, he said, "we're considering the best uses of space that is now vacant."
In particular, he said, they're looking at setting up an executive suite on the fifth floor, enabling individual lawyers or other professionals to rent a small office but share centralized administrative services.
"We see no reason why, in a market like Buffalo, which actually has a fairly low vacancy rate compared to other metro cities, that building shouldn't be rented up," Korman said.
He said he did not yet know how much money the owners would invest, saying they still have to hire an architect before they'll know the cost. But "we want to do a first-class job, so it costs what it costs."
"Our property has character and charm, and the location is great. I'm confident that it will be a very successful building over the long haul," he said.
The sale ends a four-year saga that has seen repeated efforts by the lender to sell the building, with no success. In May 2010, the property was auctioned online by brokerage Jones Lang LaSalle on Auction.com, but the top bid of $2.9 million came in below the bank's undisclosed minimum.
So CBRE took on the marketing of the process, issuing two separate public "call for offers" over the past year to nudge potential buyers into action. The asking price, which was $3.9 million, was reduced to $3.5 million.
"It's a great deal on this building. It is a fantastic price," Stegner said. "It's a step in the right direction Now we've got real new owners."