Redevelopment seems to be all the rage in Buffalo these days.
New apartments. New hotels. New restaurants. Even new office space, and a few new warehouses.
The new space is filling up almost as quickly as it’s created. And demand is growing for more.
But there’s still a big white elephant in the room, threatening to detract from the boom.
No one really wants to talk about it or knows what to do with it, yet it’s on everybody’s mind, as a big asterisk next to Buffalo’s apparent revival:
What about One Seneca Tower?
At 38 stories, the landmark structure is the tallest private-sector building in upstate New York, and its imposing cement edifice anchors the foot of Main Street in downtown Buffalo. Since its construction 43 years ago, it has dominated the city’s skyline as a sign of strength.
But it’s been nearly completely vacant since its two major tenants abandoned their longtime home two years ago and the Canadians closed their consulate.
And after two years of hand-wringing, expert pontificating and legal maneuvering, it’s still in limbo – seized by the loan holder after its New York City investors defaulted, but not yet in the hands of a responsible, long-term owner with the skills, vision and wherewithal to bring it back to life.
So what happens now? Perhaps not much, at least in the short-term.
First, the mortgage servicer that took possession of the 853,000-square-foot building through foreclosure late last year still has to gain control of the accompanying parking ramp across Washington Street, which is linked to the tower by a footbridge. That foreclosure, which was processed independently through the court, is winding its way toward a separate public auction early this year. Until then, it’s unlikely that the servicer, LNR Partners LLC, would seek to do anything with the tower other than routine security and maintenance.
At some point, though, LNR and the investors that hold the mortgage will want to dump off the real estate, to recoup what they can on their sizable losses on the $91 million loan. The questions are, who will buy it, how much will they be willing to pay, and what will they do with it?
The building is now assessed at just $20 million, while a recent independent appraisal valued it at as little as $12 million, given that it’s only 5 percent occupied. That’s a far cry from the loan amount or even the $85 million that Seneca One Realty paid for it 10 years ago, when it was fully occupied with long-term leases.
Another New York City real estate investor, Harvey Kaylie, showed his ability and willingness to spend $27 million for the building back at the foreclosure auction in October, shocking many in the community. He says he’s still interested and willing to pony up, but how much will he pay this time? And even if he restates that earlier offer, it’s still a big haircut from the amount that investors are owed on the loan. More like a buzz cut, in fact. So they may not sell unless they can get a lot more than that, or at least not without holding onto it for a while to see if something better comes along.
Local developers have had plenty of opportunity for several years to consider the property, but they haven’t shown much interest. They know it will take tens of millions of dollars to reposition or redevelop it. And flooding the market with new office, retail, hotel or residential space might also run counter to their own interests, because many of them already own buildings that would compete with a revitalized Seneca Tower.
Other out-of-town developers, likely from larger and more expensive cities like New York, Toronto, Boston or San Francisco, would be the most likely alternatives, since the level of investment involved here is a drop in the bucket compared to projects in those cities. Options could range from wealthy individuals or families, to large real estate firms or even a Wall Street giant like Blackstone Group, which is investing billions in real estate projects. But their level of interest in Buffalo’s tallest building isn’t yet evident, although the city’s star has certainly been rising in visibility on a national scale.
Finally, there’s the question of what a new owner would do with it. It’s set up for office space, of course, but the space needs updating. And putting the entire building on the office market at once would double the vacancy rate downtown, in a city that still takes a while to absorb empty space. Rents would likely plummet, tenants would shift around the marketplace, and many other buildings – and landlords – would suffer. That’s certainly the big fear.
More likely, the building will be divided up into sections for redevelopment. Perhaps a high-end hotel, or sky-high condos with views. Perhaps a return of the top-floor restaurant. Perhaps glamorous but expensive rental apartments. Or perhaps some luxury retailer. Even better, a combination of uses, along with some office space, to make the entire project easier to absorb, and more appealing to support.
That’s what the Urban Land Institute suggested. That’s what others have echoed.
But it won’t come cheap. It won’t happen easily. And it won’t come very soon.