After backing away from acquiring Buffalo’s tallest building, New York City investor Harvey Kaylie shifted his attention to a more manageable deal elsewhere in the city, buying a four-story office building on Pearl Street in his first real estate acquisition in Western New York.
Kaylie, an electronics entrepreneur who founded and runs a circuitry business in Brooklyn, paid $1.675 million on Wednesday to purchase a 33,228-square-foot building at 388 and 392 Pearl St., adjacent to the Augspurger Ramp and south of Chippewa Street.
That’s a lot less than the $27 million he offered to acquire One Seneca Tower, the 38-story office building that dominates the Buffalo skyline. And he won’t have to spend upward of $100 million to redevelop the building, which Kaylie put under contract to acquire at the same time as One Seneca just a few weeks ago.
The building is partially occupied, with about 7,500 square feet of vacant space on both the first and second floors. There are no plans to make any changes regarding those tenants, which include professional firms, said Kaylie’s local broker, Rick Recckio Jr. He noted the building already has a good income stream.
“Harvey’s the kind of guy that doesn’t want to do a lot of rehab,” Recckio said. “He likes turnkey operations, and that’s what this is.”
Kaylie said the building’s interior will largely remain as office space. He and his team plan to seek another tenant for the second floor, while investing “whatever it takes” in renovations. Kaylie also wants to convert part of the first floor to retail use, particularly for a coffee shop or other food-service operation, and is negotiating with a national tenant toward that end.
“We’re going to put money to modernize it some more and to make it a viable investment,” Kaylie said. “It’ll be very upscale.”
The gray brick building, which dates to 1900, has undergone several changes to its facade over the last few decades. At one time, it featured a zigzag front, with a longtime restaurant in a small corner section of the building. That was stripped to a shell in the 1980s and nearly demolished, and the building was later renovated in a simpler art deco style.
The building had been owned since November 2013 by Paul Lamparelli, Peter Lamparelli, Steve Przbyla and Sean Insalaco, through Chapin 392 Pearl LLC. They upgraded its roof, mechanics and common areas. Today, the building has a rooftop clock facing the street and a black awning over its main entrance. It also has a central interior atrium running the height of the building, with skylights and partially exposed brick walls.
“It’s a nice building, in a nice area. We got it at a good price,” Recckio said.
Kaylie said he was attracted by the building’s location, right off Chippewa Street, “which is a strong area, especially in the evening.” And he says he’s just getting started.
The businessman said he wants to buy additional office, retail or industrial properties – but not apartment buildings – within a 10-minute drive from downtown Buffalo. He has an industrial property already under contract, but would not provide more details until the purchase closes. Overall, he said he expects to invest as much as $50 million in real estate purchases in Buffalo in a major bet on the city’s future, and plans to have on-site management in place here soon.
“We know what we want to do, and it’s for the long-term,” Kaylie said. “I believe that Buffalo has a very good future, and the timing is right, and we want to be there investing for it. We’re very serious.”
Kaylie, who owns some real estate in other markets, emerged on the Buffalo scene last October when he bid on One Seneca Tower at the foreclosure auction. That auction was ultimately won by the loan servicer LNR Partners, which took possession from the former owners, Seneca One Realty of New York City. Kaylie bid again for the accompanying parking ramp on Washington Street in March, also losing that to LNR, as most observers had expected, because the mortgage servicer represents Wall Street investors who were owed $91 million on the prior loan to Seneca One.
But Kaylie came back in the ensuing weeks and negotiated a contract directly with LNR for both the tower and the ramp, for the same $27 million.
“When you have a chance to get One Seneca, you go for it,” Recckio said. “It’s a once-in-a-lifetime opportunity.”
However, LNR insisted on a highly abbreviated two-week period of “due diligence.” Kaylie backed out of the deal two days before that review process ended, after concluding there were too many challenges with the scale of such a project, and he needed to get more partners lined up to support the purchase and a mixed-use redevelopment.
“It’s not the initial cost that counts. It’s what comes after that counts,” Kaylie said. “You have to have the right partner, especially one that’s familiar with construction. We didn’t seem to have the interest, so we decided to back down.”
He also acknowledged that he was suspicious about LNR’s rush to dispose of the property.
“I don’t know what’s in their head, but the decision is to stay away from it,” he said.