Will Uniland Grab Delaware North With Taxpayer Help?
By Tony Farina
The future home of Delaware North’s global headquarters in downtown Buffalo is very much the subject of speculation these days, and that buzz is centered on the possible move of the $2.6 billion company and its 350 employees around the block from its current location to property recently acquired by Uniland Development at the northwest corner of Delaware and Chippewa.
Nobody is saying much publicly about the potential deal, but the rumblings are widespread that Amherst-based Uniland, the largest real estate developer in the Buffalo-Rochester corridor, would like to lure Delaware North to its new property at the corner of Delaware and Chippewa that it acquired last September for $3 million, and includes the Delaware Court building and a gas station along South Elmwood Ave.
Much of the speculation is centering on the possibility that Uniland, like it did with the Catholic Health facility on Genesee St., will seek taxpayer funds through the Erie County Industrial Development Agency (ECIDA) to build a new home for Delaware North, luring it away from its current headquarters in the south tower of the Key Center where it has been since 2000. It’s a possibility that Key Center views as a near death sentence for its building.
The question that is raising the most eyebrows on the possible huge deal is should taxpayers hand out money to hugely successful Uniland to lure Delaware North from its current headquarters, changing the downtown landscape in a big way? That’s the question that many are asking behind the scenes, and in some cases, publicly.
Count David Sweet, president of Main Seneca Corp., among those who believe corporate welfare in the form of IDA handouts “creates unfair competition” by luring tenants away from competitors and is opposed to giving companies like Uniland taxpayer money.
“My slant is companies should start doing [things] with their own money,” said Sweet. “I don’t agree the competition should be buttered up with money. Why do they keep handing out taxpayer money to change the competition,” adding it has happened time and again in the local development arena.
Uniland got a substantial assist earlier this year from the ECIDA in the development of the Catholic Health Building on Genesee St., when you compare the project incentives of approximately $5 million to the total project cost.
According to a local real estate attorney, the incentives Uniland received in that project, including sales and property tax abatement, were in excess of 15 percent. Typically, a developer would attempt to obtain a profit margin of between 10 and 15 percent on sizable construction projects. As the project costs increase, the profit margin would decrease and it would not be unreasonable for a developer to earn approximately seven percent on a construction project like Catholic Health (in excess of $32 million).
While the Catholic Health incentives were clearly “substantial,” according to experts, some inducement resolutions are seen as necessary and beneficial to the surrounding municipality or area as a whole, like in the medical corridor in a depressed area of the city and be a positive economic stimulant to growth.
In the alternative, however, giving incentives to developers who will simply build another office building close to existing office buildings will only detract from and devalue the non-incentivized existing buildings. In that case, according to experts, the developer requests tax incentives to solidify its profits while other building owners are hurt and injured through the loss of tenants to a building which is newer and can now afford lower rents because of the government subsidies.
That’s the exact point that David Sweet was making about “creating unfair competition” and the New York City-based owner of Key Center, where Delaware North currently resides, is fearful that is what is going to happen to him if Delaware North jumps to Uniland.
Calling Delaware North a good tenant, Erwin Zafir told us in a telephone interview that he doesn’t want to be left holding the bag in a Delaware North-Uniland deal that will seriously devalue his property and leave it 50 percent vacant. He wrote a letter last month to city and county officials, including the ECIDA, requesting assistance in keeping Delaware North.
“If it’s [government money] there, we should be entitled to it,” said Zafir, so we can have a level playing field. “While we’re opposed to doing selective subsidies, if it’s not a level playing field, you never know what’s going on.”
In the case of the incentives given to Uniland for the Catholic Health facility, Assemblyman Sean Ryan (D.-Buffalo) wrote a letter to the ECIDA urging the agency to reject tax breaks being sought by the Uniland Development Company, saying the $46 million facility had already been selected to receive $4 million in state funding and asked “why should the taxpayers of Erie County be expected to provide nearly $5 million to subsidize a developer, when the tax subsidies will do nothing to create more jobs or improve the project?”
Ryan’s letter fell on deaf ears but in the same letter he called on IDA’s "to stop giving away tax subsidies that do little to create the kind of good our entire region needs,” adding that “property and sales tax breaks given out by IDA’s in Erie County mean less revenue for every single municipality and school district in Erie County.”
Responding to Key Center Owner Zafir’s call for assistance, Deputy County Executive Richard Tobe released the following statement to the Reporter: “Over the last 15 months, County Executive Mark Poloncarz has been against giveaways to any entity that does not produce commensurate benefits to the community. If the owners of Key Center, who have previously received ECIDA benefits, wish to have a project that complies with recently-enacted New York State law considered, they should submit an application to the ECIDA where it will be reviewed.”
Reached by telephone, Tobe said no formal application has been made by any of the parties, including Uniland, in time for consideration at the agency’s June 3 policy board meeting. Charles Roberts, a spokesman for Delaware North, said the “selection process for our global headquarters—in which there are 350 employees — remains focused only on downtown Buffalo, with an announcement to be made in the coming months.”
Delaware North has also been reported as considering a parking lot at West Huron and Franklin Streets as a possible headquarters site when its current lease expires in 2015, but most of the buzz concerns a move to the prime Uniland site at Delaware and Chippewa.
Uniland executives could not be reached for comment in time for this story.
|Niagara Falls Reporter - Publisher Frank Parlato Jr.||www.niagarafallsreporter.com||
May 28, 2013