The developer behind the Lancaster Square at Gates Circle proposal is ready to move forward with an adjacent renovation project – if the Erie County Industrial Development Agency provides more than $380,000 in tax breaks.
TM Montante Development – fresh off the buyout of its partner, Rochester developer Robert C. Morgan – is asking the agency for tax breaks for its renovation of a six-story, multitenant building at 1275 Delaware Ave., just south of Gates Circle.
Plans call for converting the 50,000-square-foot building into 40,000 square feet of apartments, 9,000 square feet of ground-floor and garden-level commercial space for a professional or back-office user, and 1,000 square feet for a lobby food-service operation in the original diner and cafe space.
The 62-year-old former medical office building has been vacant for three years, as well as underused since the former Millard Fillmore Hospital at Gates Circle closed in 2012 as part of a state-mandated hospital restructuring. The market-rate apartments would include 22 one-bedroom and 11 two-bedroom units, varying in size from 659 to 1,235 square feet, with rents ranging from $1,100 to $2,500 per month.
However, Montante says the $12.46 million project can't proceed without the tax breaks. Its bank lenders say the project is risky because the vacant building will need a lead and asbestos cleanup, exterior rehabilitation and significant interior reconstruction.
Even with the ECIDA tax breaks factored in, the project would earn a 3% initial rate of return, which is already below market, the developers said.
"Without financial assistance, the project will not move forward," Montante wrote. "The 1275 Delaware building will remain vacant and deteriorating, additional private sector investment will not be secured at the project site, and the short-term construction-related and permanent jobs will not be realized."
Project costs include the original $1.95 million purchase price, $7.7 million in renovation and $2.9 million in professional costs. Financing includes $3.4 million in equity, $3 million in state and federal historic tax credits and a utility grant, and $6.1 million in bank loans from Bank on Buffalo.
The developer is seeking $45,693 in mortgage-recording tax breaks and $335,218 in sales tax exemptions. It will also seek a property tax break through the city's 485-a program, which would be more lucrative and would last longer than the property tax incentives available through the ECIDA.
The site plan has been approved by the city. Construction work could begin April 1 and finish one year later.
The ECIDA will hold a public hearing on Montante's application at 10 a.m. Feb. 25, at 95 Perry St., Suite 403.