The owner of Key Center at Fountain Plaza is threatening legal action over some of the incentives that the Erie County Industrial Development Agency may provide to Uniland Development Co. for a proposed 12-story office tower in downtown Buffalo.
The tower would become the new headquarters of Delaware North Companies, a current Key Center tenant. But New York City-based Key Success LLC, which has owned Key Center for 13 years, wants to block incentives specifically for 94,000 square feet of office space in the Uniland Development project that Delaware North would not immediately use.
Erwin Zafir, Key Success’ managing member, contends that it is “illegal” for the ECIDA to provide incentives for office space without a tenant committed to it. Zafir also contends that such incentivized office space would create a competitive threat for Key Center’s other tenants, and a challenge for the twin tower complex to fill the 22 percent vacant space that it already has, plus the space that Delaware North would leave.
“You don’t need to throw (94,000 square feet) on top of all the other vacancies” downtown, he said.
Zafir contends that Uniland or a representative has tried to lure at least one of Key Center’s other tenants to the proposed new building. “One was a serious negotiation, because we had to fight back” to re-sign the tenant, he said. Zafir said he was “not at liberty” to identify that tenant.
Uniland was blunt in its assessment of the threatened legal action.
“It sounds like a landlord who is upset that they are losing a tenant,” said Jill A. Pawlik, Uniland’s senior marketing manager.
The proposed building at Delaware Avenue and West Chippewa Street would enable “Delaware North to maintain a world headquarters in Western New York,” Pawlik said in an emailed statement.
“Approval of this project by the ECIDA will ensure Delaware North’s seat in this community for at least the next 20 years, will create a new stream of tax revenue, will retain and create new jobs, and clean up an environmental hazard.”
The project has become controversial, with debate over providing incentives for a high-profile existing tenant to move just a few blocks. Delaware North says the 110,000 square feet it would move into at the new building will allow the company to meet its current requirements, while adding 65 jobs and retaining 350 others. The Uniland project would also include a hotel, parking ramp and retail space.
In its application to the ECIDA for tax breaks, Uniland said the 94,000 square feet of “expansion space” is “required to satisfy Delaware North’s critical needs.” The developer also said the additional space “will be leased to Delaware North for future growth or to other companies to help attract and/or retain new businesses.”
Zafir sees it differently: “It is not expansion space, it is speculative space.”
Eli Feit, a New York City-based lawyer for Key Success, sent a letter this week to the ECIDA outlining the property owner’s objections to incentives for the expansion space. The letter argues that Uniland’s incentives application should “not be approved to the extent it includes any incentives based upon the expansion space.”
Feit also says that if the ECIDA board approves Uniland’s application in its current form, Key Success “has authorized us to further pursue this matter and to seek to enforce all of its legal rights in such venue as it deems appropriate.”
Christopher Johnston, the ECIDA’s interim chairman, said that he believed the letter from the lawyer for Key Success contained “inaccuracies” about the incentives but that documents and public hearing transcripts about the project should speak for themselves.
The ECIDA’s policy committee last week voted, 11-2, to approve tax breaks totaling $8.42 million for the proposed office tower. The ECIDA board is scheduled to vote Monday.
A payment-in-lieu-of-taxes agreement, or PILOT, would apply for a full 10 years for the space Delaware North would use, but the 94,000 square feet of unused space, as well as a parking ramp, would only get the benefit for seven years, because the ECIDA determined that it did not qualify as having a significant economic impact under its rules.
Feit said the policy committee’s recommendation to provide any incentives for the expansion space was “completely inconsistent with the purpose and policies of the agency, and will have an adverse (and potentially devastating) impact upon Key Center specifically and (perhaps even more importantly) upon the entire Buffalo downtown commercial market.”
“It is difficult, if not impossible, to understand how Uniland’s stated intention to leave approximately 100,000 square feet of pristine, brand new, Class-A office space empty will contribute to either the creation of jobs or the economic development of the downtown Buffalo area,” Feit wrote.