Let the bidding begin.
The owner of One Seneca Tower is putting Buffalo’s tallest building up for sale this week in its first formal effort to unload the property after taking possession of it through foreclosure last year.
The building’s owner has issued a “first call for offers” to gauge interest in the office tower, which last sold at auction for $28 million, but has been valued as low as $12 million.
Bids are due back within a week, with a formal deadline of Feb. 22, although there is a little flexibility in that date, said broker Richard Schecter of Pyramid Brokerage Co., which is marketing the building.
“They want to sell it,” he said. “They’re willing to listen to all offers at this point.”
Real estate observers are closely watching to see who will make an offer, and what they plan to do with it.
The timing also caught some people off guard, because such a move hadn’t been expected until after the tower and a related parking ramp were unified under one owner, likely in a few weeks.
“Perhaps this reflects a level of interest that was unexpected since the October auction of the tower alone,” said Peter Hunt, CEO of Hunt Real Estate Corp.
Local developers and businesspeople have shied away from taking on the building in the past, citing the tower’s enormous size and the difficulty of either re-leasing it or redeveloping it. Experts including the Urban Land Institute have recommended a mixed-use redevelopment, with some combination of residential, office, hospitality and retail uses, and observers expect that would cost from $75 million to $100 million. And that doesn’t count the regular upkeep or infrastructure improvements that would be needed in the meantime.
As a result, at least one real estate investor, with roots in New York City, is skeptical that a buyer will emerge, unless they can bring back-office tenants from out of town to occupy it quickly.
“I don’t think anyone will buy it,” said Anthony Kissling of Kissling Interests. “If you didn’t have a use for it, why would you want to own it? You’d just have to pay real estate taxes and insurance, and you have to pay heat.
“It’s too big for Buffalo right at this minute. There are a lot of ideas to do this, that, and the other thing, but when it comes time to write a check, nobody’s going to buy it. It costs too much every year to carry it.”
That isn’t stopping the building’s owners from trying to find a buyer. The solicitation will go out nationwide and internationally, with additional confidential material available on Real Capital Markets, an online real estate marketplace. There is no minimum bid listed, but Schechter stressed that doesn’t mean that LNR and the investors will accept just anything.
The building, which was acquired in 2005 for $85 million, is currently assessed by the city at $20.3 million, while a recent appraisal by the lender valued it at just $12 million.
If a bid is accepted, officials hope to close quickly, possibly by the end of April.
“They’re looking for a quick turnaround, but it’s up to the offers,” Schechter said. “They’re not looking to provide long periods of due diligence, but we’re willing to entertain all offers.”
Built and opened in 1973, the 38-story former One HSBC Center is the tallest privately-owned building in upstate New York, with 1.17 million square feet of total space and 853,000 square feet of rentable space on 4.7 acres at the foot of Main Street. The building, which sits on a two-square-block plaza that straddles Main, has large floors that are mostly column-free, with 27 elevators and an observation deck.
It was the longtime former headquarters of Buffalo-based Marine Midland Bank, which became HSBC Bank USA after British financial giant HSBC Holdings Plc bought it, and remained mostly occupied by HSBC until two years ago. That’s when both HSBC and law firm Phillips Lytle LLP, the No. 2 tenant, moved out of the building. HSBC consolidated to the Atrium building down the street and the law firm moved to new headquarters on the top four floors of One Canalside.
As a result, the giant building went from 95 percent full to 95 percent empty in a matter of months at the end of 2013, causing the New York City-based owners, Seneca One Realty, to default on the $91 million mortgage from its original purchase of the tower in 2005. The loan servicer, acting on behalf of the investors who held the mortgage, initiated foreclosure proceedings that brought a public auction in October.
Special servicer LNR Partners represents the legal trust GSMS 2005-GG4 Seneca One Realty LLC, which holds the deed for investors, after outbidding out-of-town investor Harvey Kaylie, a New York City businessman who surprised the local real estate community when he offered $27 million for the tower at the auction. He has previously reiterated his interest in the building, and is expected to bid again.
LNR issued the “first call for offers.” The marketing brochure for the tower includes both the 480-space underground parking garage and the five-story parking ramp across Washington Street, with 820 spaces. The ramp is under the control and operation of the city of Buffalo until 2022, while the ramp is still in a related foreclosure proceeding and will be going up for public auction on March 3.
“We’ll see what happens with that, but they’re looking to get as many offers on the table as possible for this first call for offers,” Schechter said.