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How state’s search for Athenex site ended at officials’ Dunkirk properties

When a real estate representative asked Kevin Muldowney last year if he knew of a location in Chautauqua County that would be a good spot for a 300,000-square-foot factory – with easy access to the Thruway and water, sewer and electricity – he said he had just the site.

Muldowney knew because he owned the land in the Town of Dunkirk.

Muldowney, an aide to a New York State senator, and a neighboring property owner, Ryan Mourer, who is the town’s code enforcement officer, ended up reaching an agreement to sell their land to a developer representing the manufacturing company.

They say they were kept in the dark about the buyer and project’s purpose.

It was only in the last month that local economic development officials and the property owners learned the identities of the other parties in the transaction: The state of New York, which is buying the properties, and Athenex, the Buffalo biotech company that will move into a $200 million drug-manufacturing facility the state intends to construct on the site. Athenex has promised to hire 450 workers at the plant, and suppliers are expected to hire another 450 workers in the Dunkirk area.

Muldowney and the other property owner did not know the identity of the buyer or the state’s involvement at the time of the sale agreement, according to the real estate official for the buyer.

Nonetheless, the leader of a good-government group said the transaction raises concerns. That is because a secretive site-selection process ended with the state buying land whose owners are an employee of the State Legislature and a town official.

“There are a lot of red flags and questions which should be answered here,” said Susan Lerner, executive director of Common Cause New York.

She called for greater transparency in the process.

Once he learned of the state’s role in the transaction, Muldowney, who works for State Sen. Catharine Young, R-Olean, sought an informal advisory opinion from the state Legislative Ethics Commission.

And Lisa Reid, executive director and counsel to the commission, said she doesn’t see any ethical concerns for Muldowney.

The state has agreed to pay a total of $250,000 for the 31 acres. That is not more than the fair market value for the two properties, although the state is awaiting the results of independent appraisals on the parcels, according to a spokesman for the state agency that is overseeing the project.

“The state is not going to overpay,” SUNY Polytechnic’s David Doyle said. “There are safeguards in place.”

The full Ethics Legislative Commission will review the transaction and issue a formal opinion at its next meeting, Reid added.

Lerner, of Common Cause, said it’s important for independent appraisals to verify the values of the properties and the prices the state is preparing to pay.

Representatives of McGuire Development and Ciminelli Real Estate Corp., which were involved in identifying the properties for the site, as well as SUNY Polytechnic officials, say that political connections and the government positions of the two sellers played no role in the site’s selection.

Muldowney did not return a phone call seeking his comments for this story.

Pathway to expansion

Athenex, a maker of specialty cancer drugs founded 13 years ago in Buffalo, spent more than a year in negotiations with the state of New York for expansion plans in the region.

The state asked Athenex to consider opening a manufacturing center for cancer drugs in Chautauqua or Cattaraugus counties, with the state paying for the cost of building and equipping the facility.

The state also is paying for Athenex’s new North American headquarters on the Buffalo Niagara Medical Campus, where Athenex will hire 250 workers and suppliers will add 250 jobs.

Athenex has an ongoing contractual relationship with Ciminelli Real Estate as a development consultant, said Dennis M. Penman, Ciminelli’s executive vice president.

Ciminelli reached out to Buffalo Niagara Enterprise to find suitable locations in Western New York for the Athenex plant, according to Paul Pfeiffer, director of investor and public relations of BNE. But Pfeiffer said the agency did not know the project was for the state-funded Athenex expansion.

BNE contacted the Chautauqua County Industrial Development Agency, among other organizations, to seek sites in the region. The IDA and other agencies were told to find 30 to 40 acres of land, with room for a 300,000-square-foot factory that would be a heavy user of utilities and could create between 500 and 1,100 jobs.

But local officials knew little else, according to IDA officials. They did know the company wanted a greenfield site, not a brownfield site that would require extensive environmental cleanup. And the buyer did not want to rehabilitate an existing building.

This level of confidentiality isn’t unusual, said Kevin M. Sanvidge, the IDA’s chief executive officer, and the agency pursued this lead as it would any other job lead of this size and scale.

The unnamed company’s requirements limited the search somewhat, though the IDA found several sites in and around Dunkirk and Jamestown, Sanvidge said.

The agency ended up presenting 10 potential properties to the BNE and the developer for consideration, he said.

Pfeiffer said the BNE was involved in site analysis but not final site selection.

At this point, SUNY Polytechnic, which manages the state’s major economic-development projects in the region, and McGuire Development – with which SUNY has its own contractual relationship – began working to pick the site for the project, including negotiating with property owners.

Athenex had a handful of preferred locations, and company officials were deeply engaged in the process.

Flint D. Besecker, Athenex’s chief operating officer, said he and CEO Johnson Y.N. Lau spent hours driving on the Thruway and Route 86 exploring sites in the Southtowns and Southern Tier.

James Dentinger, McGuire’s president, said the company detailed the pros and cons of each site, including how much it would cost to prepare it for construction and to link it to sewer, gas, water and electrical connections.

Narrowing the focus

One of the finalist sites was made up of adjoining parcels along Route 5 in the Town of Dunkirk, just outside the city limits.

“This fit exactly what they wanted,” Sanvidge said.

Sanvidge said the site came to the IDA’s attention when Kristine Morabito, the agency’s business development manager, asked Muldowney if he knew of any available land that might work for the manufacturing project. In addition to being an aide to Young, Muldowney is also a businessman who works closely with the IDA.

“He said, ‘Well, I have one, and this other guy has one, and they’re the size you want, and they’re next to each other,’ ” Sanvidge said.

The Muldowney-owned parcel is the smaller portion of what became the 31-acre Athenex site. Muldowney ended up agreeing to sell 12 acres of industrial land he owns through his Muldowney Development on Lake Shore Drive East to McGuire, through McGuire’s Virginia Place Investors LLC.

Dentinger said McGuire began negotiations with Ryan Mourer, the owner of a larger, neighboring parcel, before he talked to Muldowney. Mourer is the Town of Dunkirk’s part-time code enforcement officer. Dentinger said he was aware of Mourer’s position and he did ask for and receive assurances that someone else would handle building inspection duties on the project.

Mourer was not aware that Dentinger represented the state of New York and Athenex in the transaction, Dentinger said.

Mourer, who is selling about 19 acres of vacant industrial land, was out of town and unreachable last week. But Dunkirk Town Supervisor Richard Purol confirmed this account.

“We had no idea who this company was going to be,” Purol said.

Negotiations with another property owner fell through, Dentinger said, but Muldowney agreed to sell. Dentinger said Muldowney did not know the identities of Dentinger’s clients, and Dentinger said he did not know Muldowney’s political positions at the time of the negotiations nor even until this month.

The sale contract is between the McGuire limited liability company and Mourer and Muldowney. But prior to closing, McGuire will pass ownership of the properties to SUNY Polytechnic, and the state ultimately will pay for the properties.

The contract calls for the owners to receive about $250,000 in total, Dentinger said, with Muldowney receiving $48,000 – $4,000 per acre – for his portion of the site and Mourer receiving about $200,000 – or around $10,000 per acre – for his 19 acres.

Mourer’s property is worth more because of its better frontage along the road and better access to the necessary utilities, Dentinger said.

“That parcel really led this project,” Dentinger said.

SUNY Polytechnic won’t pay the property owners until independent appraisals are performed on the two properties, and until due diligence is completed on the site.

That also won’t happen until the state budget is approved, because Gov. Andrew M. Cuomo’s budget proposal includes the $200 million in financing for the Athenex project in Dunkirk.

Spilling the beans

The Cuomo administration kept a tight lid on the project, and code-named it “Little Big Apple.”

But after news of a budget line item for an economic-development project in Chautauqua County came out, The Buffalo News in January reported the money was for the Athenex drug-manufacturing center.

It was about that time that Muldowney realized the state connection to his real estate transaction, according to Reid of the Legislative Ethics Commission.

Muldowney is a community liaison who has worked in Sen. Young’s office since 1999, according to state payroll records. He was elected to the Chautauqua County Legislature in November.

Young declined an interview request and instead issued a statement.

“This property transaction is strictly between the buyer and the seller. I read the story about Athenex in The Buffalo News.

When it subsequently came to my attention that Kevin Muldowney’s property was the partial site of the new plant, I immediately advised him to seek and follow an opinion from the Legislative Ethics Commission, which he did,” Young wrote.

Asked through her chief of staff to elaborate on when, and how, she learned of Muldowney’s role in the project, Young declined to comment further.

Muldowney agreed to waive the typical confidentiality that covers interactions among legislators, legislative employees and the commission to allow Reid, the commission’s executive director, to discuss with a reporter his request for an advisory opinion.

Reid said commission staff informally looked into this and they don’t believe Muldowney’s conduct raises any ethical concerns because he didn’t have any interaction with a state agency while conducting the sale and because, at $4,000 an acre, he is selling the property for less than its appraised value, based on what he told the staffers.

“Based on my review, I don’t see a conflict, I don’t see a problem with gift laws,” she said.

Doyle and Dentinger emphasized that the expected $250,000 price tag for the properties is a small part of a project that will have a significant economic impact on the northern Chautauqua County and regional economies.

The state is spending $200 million to build and equip the high-tech drugmaking factory and Athenex is promising to spend $1.5 billion over 10 years on labor, supplies and materials at the site.

“Prior ownership of the property had no bearing whatsoever on the transaction. It’s strictly on the merits, strictly on the fact that the parcels met the needs of Athenex and the state,” Doyle said.

email: swatson@buffnews.com