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One Seneca Tower now worth a quarter of its sale price

It’s official: The nearly vacant One Seneca Tower is worth only about a quarter of what a group of New York City investors paid for it less than a decade ago.

The City of Buffalo has agreed to slash the assessed value of the 38-story downtown Buffalo office tower to $22 million, less than half of its previous assessment of $49 million and just a quarter of its $89 million valuation a few years ago, when 850,000-square-foot skyscraper was nearly filled with tenants.

But with only about 6 percent of the tower now occupied after the loss of major tenants, from HSBC Bank USA and the Phillips Lytle law firm to the Canadian Consulate and the PriceWaterhouseCoopers accounting firm, the tallest building in Western New York is worth only a fraction of the $85.1 million that Seneca One Realty paid in January 2005, when it acquired the tower.

“The assessment is the fair market value,” said Richard J. Schechter, the tower’s court-appointed receiver.

The loss of its major tenants left the tower on weak financial footing, with the owners unable to cover the $75 million loan that remains and facing a $73 million balloon payment that is due in February.

With the nearly empty tower generating just a small fraction of the rent it once did, when it was known as One HSBC Center, trustee LaSalle Bank and the property’s servicers initiated foreclosure proceedings in December 2013 in anticipation of an eventual default. That left the building in the control of Schechter as a court-appointed receiver.

While the food and retail services in the lobby and lower levels also are now gone, several smaller office tenants have renewed leases or moved into the building to bolster its occupancy, but only under one-year leases because of uncertainty about the future. Among them is Pegula Sports and Entertainment, a company formed by Buffalo Sabres owner Terry Pegula, which agreed last month to lease nearly all of the 31st floor of the tower.

Rumors have circulated that Pegula may be interested in buying the tower, but his spokesman categorically denied that Pegula is considering such a purchase.