An $8.1 million project to turn the decaying Spaghetti Warehouse building into apartments and commercial space won the support Thursday of a key Erie County Industrial Development Agency panel, which backed nearly $260,000 in tax breaks for the renovation.
The IDA’s policy committee also gave its support for more than $1.1 million in tax savings for a $31.7 million project to convert the former F.N. Burt Co. factory into a mixed-use development that would include a job training center and Class A office space.
The committee recommended approval of the tax breaks for the Spaghetti Warehouse project because of its location, 141 Elm St., is in an economically distressed part of Buffalo. The IDA generally does not provide tax breaks for market-rate apartments, except in downtrodden areas.
While Deputy County Executive Richard Tobe expressed reservations about providing incentives for a housing project that its developer, TM Montante, expects to generate a double-digit return even without tax breaks, other members of the panel said the tax breaks would encourage the renovation of a deteriorating building that has been vacant for more than a decade.
Christian Campos, TM Montante’s chief financial officer, said the tax breaks are an essential piece for a project that has proved difficult to finance. TM Montante has yet to close on a construction loan for the project, and he said potential lenders have raised concerns about the project’s ability to meet its debt payments comfortably. Campos said the project would not advance without the tax breaks through the IDA.
“We really do have to look at whether they can achieve financing, I’m concerned that they can’t,” said James J. Allen, the executive director of the Amherst Industrial Development Agency and a member of the ECIDA policy committee.
Tobe, however, cast the lone vote against the recommendation supporting the tax breaks for the project.
Tobe noted that TM Montante has estimated that the project will earn a 10.8 percent return without the tax breaks and an 11.5 percent return with them.
The project is projected to create one new job at C&S Engineering, which plans to move its current, 19-employee office at 90 Broadway to the Spaghetti Warehouse building.
“This is sort of at the high end of the return on investment for projects we’ve approved and at the low end on the number of jobs,” he said.
TM Montante plans to convert the three-story building into 22 one- and two-bedroom apartments, with commercial space on the ground floor. Rents for the one-bedroom apartments are expected to range from $900 to $1,600, while two-bedroom units will cost $1,200 to $1,900 a month, said John Cappellino, the IDA’s executive vice president.
The panel also recommended that the IDA’s board of directors at its meeting next month approve $1.1 million in tax breaks for the plan of Savarino Development Corp. and Frontier Cos. to renovate the F.N. Burt factory, which has been empty for more than a decade.
The developers plan to turn the complex at 500 Seneca St. into 300,000 square feet of Class A office space, with a job training program operated by three local nonprofit agencies using 22,000 square feet of space.
The tax breaks cover only the renovation of the building and not any upgrades to the space required by future tenants, IDA officials said. Even with the tax breaks, the project is expected to generate more than $410,000 a year in new tax revenues for the City of Buffalo and Erie County.
“This is a net gain for the area,” said Samuel Savarino, Savarino Development’s president and chief executive officer.