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AppleTree Business Park working to fill Catholic Health space

The departure of Catholic Health System from the AppleTree Business Park removes the second-largest tenant in the Cheektowaga office complex, raising a spectre of concern for investors holding the loan on the property.

Catholic Health, which occupies 13.5 percent of the space at AppleTree, is now consolidating all of its corporate staff from eight different sites in Buffalo and its suburbs into a new $51 million administrative headquarters and training facility downtown.

That 139,000-square-foot building, now being completed by Uniland Development Co. at 144 Genesee St., at the foot of the Kensington Expressway, will house 700 jobs, including 400 from the suburbs. And it will host state-of-the-art training and education facilities that will be available not only for Catholic Health but also for other hospitals and schools.

The facility is nearing completion, and workers are already starting to move in, including from AppleTree.

“We hate to see them go, but once they made a decision, we were very supportive in working with them and ensuring a smooth transition,” said James F. Dentinger, president of McGuire Development Co., the leasing agent for AppleTree.

But that has left a gap at AppleTree. According to Trepp LLC, a commercial real estate and mortgage research firm, the 425,526-square-foot office park was 87 percent occupied as of the first quarter. Dentinger said occupancy has generally averaged 93 percent over time.

The largest tenant is the Internal Revenue Service, which has leased space at the property since it became an office park in 1990, and recently signed a long-term renewal that includes some expansion.

The park is owned by AmCap Corp., a Stamford, Conn.-based private-equity real estate investment firm that owns and manages mostly open-air retail shopping centers, anchored by supermarkets, in 15 states. AmCap bought the AppleTree Mall in 1980 and later converted it to an office park.

The business park backs a $36.5 million loan on the property that is not set to mature until 2022. That loan is 2.2 percent of a larger $1.74 billion commercial mortgage-backed investment security sold to investors in 2011 by Goldman Sachs & Co and Citigroup.

Trepp, which updates investors daily on significant developments affecting commercial mortgages and investment securities, flagged the departure of Catholic Health in a bulletin to investors last week. AmCap founder and CEO Jay Kaiser could not be reached for comment.

However, the research firm noted that the loan is current, and Dentinger – who has represented the park since 1991 – said he was confident that they could “backfill” the space, especially since Catholic Health had built its space incrementally over time and occupied several suites rather than one huge block of space.

A Rochester-area collections firm, ConServe, recently signed a lease for 25,000 square feet, and Dentinger said officials are also “getting close” with a few other large tenants.

The property went through a similar “restacking” about 10 years ago. “It’s just a natural progression for a project of its size,” he said. “It’s very marketable space. We certainly think we have a lot of positive momentum to help us backfill these spaces.”