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Done Deal: State Purchases Most of Fountain Plaza Building

The south tower of the complex formerly known as Key Center has a new owner. New York State’s Fort Schuyler Management Corporation (FSMC) purchased the upper floors of 562 Main Street from Key Success LLC for $9,544,500 yesterday. The 100,000 sq.ft. of space was previously occupied by Delaware North which relocated to 250 Delaware last month.

McGuire Development Company is working with the State to create the Buffalo Information Technologies Innovation and Commercialization Hub in the building. The space will be anchored by IBM, train IT professionals, educate new IT staff through State University of New York partnerships, and develop next-generation IT software needed to drive state-of-the-art discoveries in the areas of molecular research, genomics, energy efficiency development, and defense. IBM has pledged to bring 500 new information technology jobs to Buffalo.

FSMC is a State University of New York (SUNY Polytechnic Institute) affiliated, private, not-for-profit, 501c(3) corporation that facilitates research and economic development opportunities in support of New York’s emerging nanotechnology and semiconductor clusters. It has been involved with the purchase of the acreage where Solar City is being built at Riverbend in South Buffalo and one floor of Conventus, Ciminelli’s new building on the Medical Campus. The $9.544 million purchase price was just slightly higher than the $9.3 million the State paid for the 46,000 sq.ft. in Conventus.

Written by Buffalo Rising

Buffalo Rising

Sometimes the authors at Buffalo Rising work on collaborative efforts in order to cover various events and stories. These posts can not be attributed to one single author, as it is a combined effort. Often times a formation of a post gets started by one writer and passed along to one or more writers before completion. At times there are author attributions at the end of one of these posts. Other times, “Buffalo Rising” is simply offered up as the creator of the article. In either case, the writing is original to Buffalo Rising.

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  • WNY_Planner

    That’s 100,000 sq. ft. of space off of the local tax rolls going to a multi-national company whose expansion will yield no property tax, sales tax, or corporate tax and whose employees will pay no personal income tax.  I fail to see how the StartUp-NY program is good for tax-payers, let along the existing businesses that have suffered through the State’s burdensome business climate without any government handouts.

  • OldFirstWard

    So how does a professional appraiser only put a value of $12 million on the former One Seneca Tower?  Which is half of what a NYC investor paid back in October. 
    Is this building worth almost as much as a 38 story tower?

  • nubflo

    OldFirstWard says more about the Seneca One tower (its lack of value in its current state) and less about the Key Tower.

  • OldFirstWard

    nubflo
    I have not seen the inside in years, but I find it hard to believe that the interior is in bad condition. The place had marble floors, a beautiful lobby, and auditorium, underground parking, and beautiful views.  Sure it is probably dated but professional firms have occupied the place until the last couple years.

  • biniszkiewicz

    OldFirstWard nubflo
    operational expenses at One Seneca are sky high. The mechanicals are very old and inefficient and cannot be split up floor by floor. It’s expensive to rehab. By contrast, Key is a modern building mechanically.

  • biniszkiewicz

    OldFirstWard nubflo
    operational expenses at One Seneca are sky high. The mechanicals are very old and inefficient and cannot be split up floor by floor. It’s expensive to rehab. By contrast, Key is a modern building mechanically.

  • flexme

    Appraisals of office buildings are based in part on the value of the signed leases for space in the buildings

  • flexme

    Appraisals of office buildings are based in part on the value of the signed leases for space in the buildings

  • WNYer

    biniszkiewicz OldFirstWard nubflo

  • WNYer

    biniszkiewicz 
    Maybe our version of the Empire State Building can be retrofitted to LEED-Gold designation and attract tenants seeking such accreditation?
    http://www.greenbiz.com/news/2011/09/13/empire-state-buildings-green-transformation-earns-leed-gold

  • WNYer

    biniszkiewicz 
    Maybe our version of the Empire State Building can be retrofitted to LEED-Gold designation and attract tenants seeking such accreditation?
    http://www.greenbiz.com/news/2011/09/13/empire-state-buildings-green-transformation-earns-leed-gold

  • ExWNYer

    OldFirstWard
    I agree with you. I was in this particular Key Tower building not long ago and it is nice, but I know Seneca was the premier office building at one point. Ironically, my dad worked in One Seneca with IBM back in the 70’s and 80’s. It was very nice. Given the proximity to Canalside, I can’t imagine it will be empty forever.

  • LouisTully

    ExWNYer OldFirstWard “I agree with you.”
    Well, there’s a first.

  • LouisTully

    ExWNYer OldFirstWard “I agree with you.”
    Well, there’s a first.

  • Wise Profit

    WNY_Planner I just did some quick searches and didn’t see this was a Startup NY program. Can you source that information please?

  • Wise Profit

    WNY_Planner I just did some quick searches and didn’t see this was a Startup NY program. Can you source that information please?

  • OldFirstWard

    biniszkiewicz
    “It’s expensive to rehab.”
    Yes, I suppose it is, but what building is cheap?  Where I would beg to differ is that this building (One Seneca) for the most part, is a modern building, by preservation standards. It is an all steel frame construction, fire proofed, and built with utility chases specifically for mechanicals. There are mega escalators in the lobby, banks of elevators, etc and there is access to those mechanicals, they are not buried. If a 150 year old building can be retrofitted, a building from the 70’s should be a walk in the park. 
    I really think that all this tenant movement, and constant bad reporting on anything related to the building is the money people driving down the price and wrestling the building out of the hands of the investors with less capitol and power. At least a majority of it.

  • OldFirstWard

    biniszkiewicz
    “It’s expensive to rehab.”
    Yes, I suppose it is, but what building is cheap?  Where I would beg to differ is that this building (One Seneca) for the most part, is a modern building, by preservation standards. It is an all steel frame construction, fire proofed, and built with utility chases specifically for mechanicals. There are mega escalators in the lobby, banks of elevators, etc and there is access to those mechanicals, they are not buried. If a 150 year old building can be retrofitted, a building from the 70’s should be a walk in the park. 
    I really think that all this tenant movement, and constant bad reporting on anything related to the building is the money people driving down the price and wrestling the building out of the hands of the investors with less capitol and power. At least a majority of it.

  • WNY_Planner This isn’t Start-UP NY, it’s one of SUNY Poly’s statewide R&D hubs.

  • WNY_Planner This isn’t Start-UP NY, it’s one of SUNY Poly’s statewide R&D hubs.

  • This is really good news.  I don’t see how it can be spun any other way. IBM moving downtown.  Not the IBM that makes motherboards, but the IBM that consults and answers questions about the human genome that is the growing IBM. 

    Complaining about the taxes on the building is penny wise pound foolish.  Getting open office space off the market is huge.  It will ultimately make the Seneca Tower more attractive and help consume the class a space that becomes available as a result of the FNFG merger.
    So the big question is how much did the owner make the on the deal?  He bought the building in the early 90’s, correct?  I seem to remember an article where WC outlined it back when the owner had the lawsuit against Uniland over the Delaware North HQ.

  • This is really good news.  I don’t see how it can be spun any other way. IBM moving downtown.  Not the IBM that makes motherboards, but the IBM that consults and answers questions about the human genome that is the growing IBM. 

    Complaining about the taxes on the building is penny wise pound foolish.  Getting open office space off the market is huge.  It will ultimately make the Seneca Tower more attractive and help consume the class a space that becomes available as a result of the FNFG merger.
    So the big question is how much did the owner make the on the deal?  He bought the building in the early 90’s, correct?  I seem to remember an article where WC outlined it back when the owner had the lawsuit against Uniland over the Delaware North HQ.

  • WNY_Planner  Reports I’ve seen put the bill for this at 55 million for NYS. Here’s about 10 million, 45 more on the way.  It’s not part of the specific StartUp NY program, but for 55 million of state money, it’s pretty similar.

  • OldFirstWard biniszkiewicz I think the point is that the two buildings can’t be compared apples to apples.  Its the same reason 50′ yachts sell less used than 30′ yachts sometimes. It’s too much to handle and the maintenance cost is very prohibitive.

  • Gorton Fishman

    WNY_Planner I think the hope is that the corporate tax reform signed by Cuomo (should mostly be in effect in 2 years) is designed to make NYS a more competitive business climate. I’d like to see NY lower the personal income tax rates as well, but lower tax rates for businesses will hopefully boost wages as well.
    That said, I definitely share your apprehensions about the amount of welfare certain businesses get. Clearly if tax cuts boost businesses, why play favorites and not make NY business friendly in general?

  • VirginiaHolloway

    OldFirstWard I don’t think appraisal is a truly empirical science.  Two appraisers can look at the same property and come up with different figures, and – with apologies to any appraisers reading this  – the same appraiser would probably come up with two different numbers depending on who their client was.

    It’s like structural engineers – apologies to you too – hired by owners of dilapidated buildings.  The perspective of the owner is going to influence what the engineer puts in their report.  
    So, to the cases in this post/comment.  The One Seneca Tower appraisal was probably paid for by the owner who is looking to minimize their taxes going forward.  The Fountain Plaza appraisal was probably paid for by the owner who was looking to make as much as possible selling to the state (who probably didn’t really care how much they paid.)

  • No_Illusions

    Except cutting taxes doesn’t increase wages. It increases the bottom line for investors.
    Corporations are very myopic nowadays. They only care about short term profits over long term investments.

  • flexme

    You have no statically basis in fact for your statement.

  • 300miles

    How did they buy “most” of the building?   Is it setup as a commercial condo?

  • rustbeltbrett

    VirginiaHolloway OldFirstWard exactly, and i just met the previous property manager who had it appraised lower at 85 million in the mid 2000s and then jumped up a reappraisal to 125 mil to get more financing. Tenants taxes went skyhigh and they all left. Stupid, stupid, stupid. He bankrupted the building and left us with a huge problem. I can’t believe my professor brought him in to class to speak. Horrible example

  • Gorton Fishman

    No_Illusions I’m going to avoid that debate, I was describing the idea behind Startup NY + the corporate tax reform package.

  • Wise Profit

    OldFirstWard biniszkiewicz The problem is there is a single heating system for the entire building and that 25% of each floor is wasted space for elevators and stairwells. New companies want large floor plates so you don’t have employees running up and down floors all day. HSBC is about as inefficient as can be and the fact that its one of the largest buildings in Buffalo doesn’t help.

  • MichaelJarosz

    biniszkiewicz OldFirstWard nubflo It was built as a corporate HQ with a single tenant in mind. That would be Marine Midland, bought out by HSBC.
    Working at SOM for 25 years, I personally knew some of the designers who worked on it. SOM not only did the core and shell, but the interiors too. The red, white and blue (no joke) color scheme hasn’t held up over time. 
    Buildings intended for a single occupant can be hard to renovate.

  • WNY_Planner

    Wise Profit WNY_Planner
    I stand corrected.  NYS will own the space and the equipment, which still means no property tax or sales tax.  The phrases “Fort Schuyler Management Corporation” and “private sector” usually mean corporate handouts.  I do think this will result in positive spin-off, but not via IBM, which is a catalyst, at best…a cattle brand for the herd.