I don’t know about you. But this taxpayer is in no rush to rescue an out-of-town owner who overpaid for a building, took out a huge mortgage, put too much faith in the permanence of the namesake tenant and soon will be left holding a big bag o’ debt.
I am talking about HSBC Tower, the tallest building in Buffalo – soon to be the tallest empty building in Buffalo.
Experts from the Urban Land Institute recently suggested that taxpayers “partner” in the tower’s resurrection as hotel/office/residential space. With all due respect to the ULI folks, I noticed that they left town without grabbing a piece of that action. For good reason.
I know the tower looms over the blossoming Canalside neighborhood. I know a vacant icon will be – at least temporarily – a civic black eye. I know that refilling the place will likely empty other downtown buildings. But the misplaced notion that the HSBC Tower is Too Big To Fail does not mean taxpayers should jump headlong into this financial sinkhole. Particularly when a couple of prominent developers who understand the downtown market think that letting the HSBC Tower mess run its unassisted course is better, in the long run, for all of us.
New York City investors soon will owe $75 million on a building that real estate experts say is worth less than half that much. If taxpayers stay on the sidelines, the bank will either rework the HSBC Tower deal, or foreclose and put the building up for sale.
That is precisely what Rocco Termini, the developer who has led the downtown residential revival, thinks should happen.
“Why should taxpayers bail out a New York City [owner] who did a dumb deal?” Termini wondered.
He and developer Paul Ciminelli, who specializes in commercial real estate, told me in separate conversations that HSBC Tower’s fall and re-rise will ultimately help downtown.
The way they see it, if the tower is sold, its upper-end office space will become available at a reasonable rate. That will lure remaining tenants out of obsolete, already-emptying downtown office buildings. Those buildings eventually will find a second life as lofts, apartments and condos. Basically, HSBC’s metamorphosis will fast-forward the offices-to-apartments transition that already is happening.
“There is no other use for these buildings, no one wants them as office space anymore,” Termini told me. “That is what is already playing out, and HSBC [coming on the market] will prime the pump.”
Termini and Ciminelli said there is a demand for the upscale office space in HSBC Tower, with its large floor plates, panoramic views and underground parking. The surrounding Canalside development pumps up its appeal.
“There will be some instability for a while,” Termini conceded. “But we need to clear the decks.”
“I saw the same thing happen in Manhattan,” said the CEO of Ciminelli Real Estate. “The office market got soft, and a lot of those buildings were converted to residential. … If the tower comes back on the market, it will force some of these obsolete buildings into a change of use.”
It may not, they conceded, be swift or painless. Fast-forwarding the future seldom is.