Now that HSBC Bank USA has settled the question of where it will relocate its employees, the real estate community has shifted its attention to the next big source of speculation: Delaware North Cos.
The Buffalo-based food service and hospitality company, currently located in Key Center at Fountain Plaza, is considering moving its headquarters. The company, which announced its property search last year, is evaluating whether to stay in its longtime space or move.
The options include building something new. But the family-owned company with $2 billion in annual sales, led by Chairman and CEO Jeremy M. Jacobs, has made clear that it intends to stay in downtown Buffalo, limiting its choices somewhat and creating a parlor game of sorts for experts predicting where the company will land.
“We’re continuing to explore options for a global headquarters in downtown Buffalo and expect to make a decision in the next few months,” said spokesman Glen White. “We’re reviewing a lot of different options.”
White would not identify any sites and stressed that the company could still decide to keep its 350 employees in Key Center, where it has been for 13 years. It occupies 100,000 square feet on seven floors, from the seventh through the 12th, and the penthouse, plus some space on the sixth floor.
“We’ve generally been in a growth mode,” he said.
No decision is expected soon. “Delaware North is a major corporation. They’re examining all sites, and they’re being very careful with what they’re doing,” said one local development expert, who declined to be identified, as did several others, to avoid straining business relationships. “That’s the process.”
Local development sources said two leading candidates are a property owned by Uniland Development Co., at Delaware Avenue and West Chippewa Street, and the current headquarters building of insurer HealthNow New York at 267 W. Genesee St.
The Uniland property is the site of the Delaware Court Building, a curved two-story building that currently houses entertainment and retail on the first floor and offices on the second floor.
Uniland bought the building in September – after Delaware North had announced its property search – but has not revealed any plans for it. “They were putting it in inventory when they bought it,” said Robert A. Schell, president of Pyramid Brokerage Co. of Buffalo., a real estate firm.
However, sources say the company has proposed a new structure on the site, possibly a tower, with Delaware North as the lead tenant.
Shana B. Stegner, director of office sales and leasing for global brokerage firm CBRE’s Buffalo office, said Uniland is developing plans for a mixed-use building on the property, although no firm decisions have been made. But she noted that “for Uniland to do anything on that site, it would have to have a pretty-good-size tenant.”
“There are a lot of rumors around town about where Delaware North is looking,” Stegner said. “There are probably multiple sites being considered, and that’s probably one of them. There aren’t a lot of places in the city they can go.”
Uniland spokeswoman Therese J. Hickok declined to comment. The developer has not submitted plans to the city.
“They certainly have plans for the site, and I would expect Uniland, like everybody, has an eye on Delaware North, given their statement that they want to look at downtown,” said Brendan R. Mehaffy, director of the city’s Office of Strategic Planning. “Everybody with a site in downtown Buffalo is interested in talking to Delaware North.”
Another option being discussed is the 469,000-square-foot HealthNow building, which is owned by Cole Real Estate Investments of Phoenix. The building – consisting of an eight-story tower, a seven-story atrium and a six-story portion, all connected – sits on 8 acres behind City Hall, and houses 1,300 HealthNow employees. But real estate sources say there has been discussion about HealthNow giving up a portion of its space – 50,000 to 100,000 square feet – for Delaware North, which would also enable the insurer to save on operating expenses.
HealthNow spokeswoman Julie R. Snyder said the company has no plans to shrink, but she wouldn’t comment on whether it might use less space in the building.
“We are definitely not downsizing the company. Our employment is actually higher this year than in recent years, and with health care reform and the exchange, we have no plans to have fewer employees in our corporate headquarters,” Snyder said.
Some other options include:
• One HSBC Center – With both HSBC and law firm Phillips Lytle LLP pulling out of Buffalo’s tallest building, and the Canadian Consulate now closed, the tower will be about 90 percent empty by the end of next year.
• Tishman Building, Main Street and Lafayette Square – Hamister Group just completed its purchase of the 21-story building at the end of last year. Current plans call for a boutique hotel and Hamister’s headquarters in the building.
• A 40,000-square-foot parking lot on Court Street, across from Main Place Mall – This site is owned by Carl P. Paladino’s Ellicott Development Co. CEO William A. Paladino confirmed that Ellicott “put that in front of [Delaware North’s] brokers,” but “we haven’t heard back,” adding that “they’ve been pretty coy about everything.”
Landing Delaware North as a tenant would be a jewel for any landlord in the city.
“If you’re that big of a tenant and you’re shopping the market, you’re going to look at any existing building and new construction,” a local broker said. “They had to look at as many things as they could to decide even if they would stay at Key Center.”
For now, Ciminelli Real Estate Corp., which manages and leases Key Center for its out-of-town owners, is focused on retaining Delaware North.
“We’ve enjoyed a wonderful relationship with Delaware North, and we continue to discuss renewal options,” said Robert G. McDonnell, senior vice president at Ciminelli.
“It’s been a wonderful home for them, and we hope that they continue to stay.”