A New York City businessman drove the bidding on One Seneca Tower up to $28 million Thursday afternoon, before the mortgage holder won the day at a public auction.
Bidding began at $5 million, and rose slowly in alternating offers to $10 million, before the downstate investor tried to get a jump by leaping up to $15 million. Attorneys representing the bondholders and mortgage servicer, LNR Partners, maintained a consistent lead on the other bidder, raising the price by $1 million intervals, until the businessman yielded after consulting his partners on his cellphone.
“Sold to the plaintiff, for $28 million,” said Peter Allen Weinmann, the court-appointed referee who conducted the auction before more than 75 people.
The outcome was never in doubt, as the bondholders are owed $91 million on the mortgage for the 853,000-square-foot tower, Buffalo’s tallest building. Real estate industry observers widely expected the investors would not accept a substantial loss on their investment, but rather take title to the building and maximize its value through a sale or redevelopment.
LNR’s specific long-term plans are still uncertain. But the 38-story tower, which is 95 percent empty, is now worth no more than $20 million, based on recent appraisals – a far cry from the debt level. And it’s not clear how much LNR and the investors are willing to spend to reposition the building, or how long they are willing to wait.
However, the attached parking ramp across Washington Street is facing a separate foreclosure sale early next year, so experts predict LNR will at least wait to gain title to that in order to unify the properties and manage them together.
Both had been owned by New York City-based Seneca One Realty until a previous servicer foreclosed in late 2013 after the two top tenants, HSBC Bank USA and law firm Phillips Lytle LLP, moved out.
But it was the sudden appearance of a new and aggressive player in the middle of the tower’s auditorium that captivated the crowd.
David Nalbandyan, advised by local businessman Andrew Shaevel, is part of a group of New York real estate investors that tried to break into the market, pushing the bidding well past the building’s perceived value. In addition to Shaevel, he was accompanied by a partner, Oxana Nichitina of Buffalo, and Alla Rabinovich of Recckio Real Estate & Development.
If they had won, Nalbandyan said his group planned to convert the tower into an entertainment and office building, with retail shopping, music and condominiums in addition to office space. “We still have to work on it,” he said.
But even though he failed to secure the Seneca tower, Nalbandyan said his group is “absolutely 100 percent” determined to buy into Western New York’s real estate arena. He declined to comment on whether he would reach out to LNR to negotiate a deal directly. “I believe in the city,” he said. “I believe that Buffalo is growing up, very strongly, and we want to be part of the city.”
The investor group has experience in real estate investing and development on Manhattan’s West Side, with some manufacturing and commercial buildings, he said. “What’s happening in Buffalo is what’s happening on the West Side of New York City,” he said. “Twenty years ago, it was warehouses and manufacturing. Today, it’s one of the top places in the world.”
They don’t own any buildings here yet, but Nalbandyan has “spent considerable time here looking at properties” over the last six months, Shaevel said. Nalbandyan even tried to buy one of Paul Kolkmeyer’s buildings but never reached a deal, Shaevel added.
“We’re in Buffalo, so anyone who is interested in working with me, we are interested,” said the Russian-born Nalbandyan, 34, who said he’s in the “electronics business” but wouldn’t elaborate.
Nalbandyan already has ties to Western New York, through a longtime friendship with entrepreneur Jon Purizhansky, dating back 20 years to when both lived in Israel. Purizhansky, a principal in Amherst-based distressed-asset management firm Hylan Asset Management LLC, connected him with Shaevel, a veteran businessman whose Bobalew Ventures LLC firm owns a substantial part of Hylan.
Shaevel is also the managing partner of Mensch Capital Partners, which owns and is seeking to redevelop the former Westwood Country Club property in Amherst. His partners in that venture include Paul Ciminelli of Ciminelli Real Estate Corp., Mark Hamister of Hamister Group and Kolkmeyer, whose Priam Enterprises bought five commercial office buildings in downtown Buffalo last year.