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Loss of Emerson cuts Trico project cost by $10M

Krog Corp.'s redevelopment of the Trico Building in downtown Buffalo will cost about $10 million less than previously planned, under a new plan that no longer includes the Emerson School of Hospitality.

Krog is still trying to regain the popular Buffalo public school as a tenant in the sprawling 10-story complex at 791-817 Washington St. But it faces an uphill battle after the school district withdrew in December, citing continuing delays and uncertainty about whether the school could open on time.

[Related: Developer urges district to reconsider culinary school for Trico building]

So the Orchard Park developer refiled its application for tax breaks for the project with the Erie County Industrial Development Agency, again citing a need for help with the total cost, now pegged at $80.54 million.

That's down from $90.5 million before, after the developer found other, less expensive ways to fill the gaping hole in its plan for the former windshield wiper factory at the southern end of the Buffalo Niagara Medical Campus.

What didn't change, though, are the 617,000-square-foot building's "structural and environmental challenges" that led the ECIDA to approve $3.6 million in mortgage recording and sales tax breaks last August. Krog is hoping that will work again, this time for $3.13 million.

"This project will not move forward without financial assistance provided by the agency," it wrote, warning that the alternative would be "total demolition" of the historic facility by the city at a cost of $6 million to $8 million to taxpayers. "If this project fails, it is unlikely that anyone will ever attempt to redevelop this parcel. The building will be demolished and a significant piece of Buffalo's history will ultimately be gone."

Krog previously had proposed a project that incorporated an 85,000-square-foot school, with a 138-room extended-stay hotel operated by Hart Hotels and a parking ramp.

The plan also included about 150 loft-style market-rate apartments on the upper floors, aimed at meeting the housing needs of the various institutions on the Buffalo Niagara Medical Campus. The building would have had 35,000-square feet of office space for a high-tech anchor tenant, 56,000 square feet of commercial space for medical research tenants and 12,000 square feet of retail and food space.

The project would have used 480,000 square feet of space, while demolishing the 120,000 square-foot "ice house" sandstone structure along Ellicott Street.

While those plans have been firm for some time, work has not yet begun on the building at 817 Washington St., which is still owned by a city agency, the Buffalo Brownfield Restoration Corp. Krog has had it under contract for $35,000 since 2015, but the purchase has been delayed by more than two years because of due diligence, financial issues and other questions. Until it closes, the developer can't start construction.

That prompted the Buffalo Public Schools to pull out two months ago and seek new proposals for a hospitality school from the development community. Krog warned that it had already incurred $1 million in cleanup and design costs related to the school district project and threatened to sue.

Buffalo Public Schools has received five new proposals, including a new submission from Krog for the Trico building. The district has not yet made a decision.

[Related: Five proposals submitted for new Emerson School of Hospitality]

In the meantime, Krog is moving forward on Trico without the public school component of the plan.

According to the new application, the building is still "in need of significant repairs and environmental remediation" after more than 10 years of vacancy and neglect. It faces "a number of structural issues that have developed as a result of the structure's failing roof system," and the combination of extra expenses already drove the cost up significantly.

Additionally, the site poses a safety hazard to pedestrians and others.

"The building currently has a fence around it to prevent pedestrians from being close enough to be hit by the occasional debris that breaks off the building and falls on the street below," Krog wrote in its application. "The structural integrity of the building will continue to erode if the building is not renovated soon."

Total costs include $66.7 million for renovation, $2.4 million for furniture and fixtures and $10.3 million in "soft costs" for professional services, plus over $1 million in other expenses.

The project will be financed with $17.49 million in equity from the developer, $40 million in loans from M&T Bank or others and $23 million in public funding.

The National Register-listed building is expected to benefit from $12 million in federal historic tax credits and $5 million in state historic tax credits. Krog is also pursuing Buffalo Building Reuse Program funds, a city property tax break and a National Grid grant.

The building also contains asbestos and other contaminants. It's already enrolled in the state Brownfield Cleanup Program, which will qualify it for state tax credits.

If the project obtains all necessary approvals, officials now hope to start work in April and finish in 24 months.

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