As Carl and William Paladino tackle their latest redevelopment project in downtown Buffalo, they're looking for help from the Erie County Industrial Development Agency.
The father-and-son owners of Ellicott Development Co., together with investor Nancy S. Krieger, are seeking sales and mortgage recording tax breaks for their historic renovation of the former Buffalo Envelope Co. building.
Located on 2.38 acres at 270 Michigan Ave., at the corner of Seneca Street, the complex includes a three-story base throughout the site and a six-story section on part of the building. Constructed in 1890, it was home to Buffalo Envelope from 1900 to the early 1980s.
It now contains some commercial offices – particularly for the state Department of Environmental Conservation – but also significant vacant space that the developer wants to repurpose.
Ellicott – through Michigan-Seneca Group Inc. – plans to spend $6.6 million to renovate the underused building into a combination of 35,450 square feet of commercial office and warehouse space across the first three floors, with six market-rate apartments on the upper three that total another 11,550 square feet.
The apartments will include three 1,272-square-foot units, renting for $1,250 each, and three 1,837-square-foot units with three bedrooms, renting for $2,400 each. The developer also intends to construct a one-story, 100-car parking deck on the west end of the property.
But Ellicott says it can't do it without ECIDA assistance. "Like other adaptive reuse projects that we have undertaken, the viability of this project is plagued in many ways, requiring a need for every available resource to finance and yield a modest return," Ellicott wrote in its ECIDA application. "Redeveloping a long-term underutilized structure such as this results in many extraordinary and unknown costs that are not confronted in new ground-up development."
Portions of the building are eligible for state and federal historic tax credits, which Ellicott is pursuing to help with financing. But that also means the developer must get the property listed on the National Register of Historic Place and must comply with rigorous preservation standards set by the government, which can also drive up the cost.
The 47,000-square-foot building also has to be modernized to make it marketable to potential tenants, including asbestos abatement, masonry repair, replacement of windows with historically accurate ones, a new elevator and staircase in the six-story section, and the installation of a new fire-suppression system and new utilities.
Meanwhile, Ellicott says the rents it can collect won't cover those costs. As a result, Ellicott added, lenders are unwilling to commit enough financing, resulting in a funding gap. Without the ECIDA's assistance, they said, "we cannot proceed with the project."
Funding includes $2 million in equity and $4.663 million in bank financing, with $1.15 million in expected historic tax credits. The building is assessed at $2.75 million.
A public hearing will be held at 9 a.m. May 29 at ECIDA's 95 Perry St. office. Ellicott is asking for $34,972 in mortgage recording tax breaks and $291,463 in sales tax help. Officials also plan to apply for the city's 485-a property-tax program.
The project has already been approved by the city, and the developer hopes to start work July 1 and finish by August 2020.