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Developer Nick Sinatra’s plan to convert the former Phoenix Brewery Co. building downtown into loft apartments is taking a new and unique twist, after he partnered with a New York City hedge fund manager and Buffalo native to share profits from the real estate venture with Say Yes Buffalo.

The unique partnership represents a novel form of community charity that capitalizes on the surge in redevelopment activity in downtown Buffalo. It also demonstrates the increased priority that many in the business community are placing on improving education for Buffalo students to ensure the city’s revival is sustainable.

“We’re making big bets on Buffalo. You also have to make big bets on the children in Buffalo, because you can’t have a successful city without a successful school system,” Sinatra said. “We want to make sure the next generation has access to education, so they can stay here and be part of the workforce.”

The new arrangement with Daniel Lewis, founder and managing partner of Orange Capital LLC, calls for Lewis to join Sinatra and Matt Connors, vice president of real estate for Sinatra and Company Realty, as owners of the Phoenix project at 835 Washington St. The building, which Sinatra acquired in April for $1.78 million from Joseph Parlato, is located at the corner of Virginia Street, on the Buffalo Niagara Medical Campus.

The trio plans to redevelop the 55,000-square-foot warehouse building into 35 to 40 high-end loft apartments, aimed at doctors, researchers or other campus workers. The $5 million historic renovation also calls for retail space to serve tenants, as well as indoor parking.

In turn, the partners have now agreed, in writing, to contribute 10 percent of their monthly profits to the Say Yes Buffalo Scholarship Fund, the educational initiative which pays college tuition for Buffalo high school students. Those proceeds, from rents or other revenues, could amount to hundreds of thousands of dollars over 20 years, Sinatra said. “We want to have a big impact on the community,” Sinatra said. “That’s a way to give back in a sustainable way.”

And both Lewis and Sinatra hope that will provide a model for other developers and business leaders to follow as well.

“This is something I’d love to replicate,” Lewis said. “We want to get other people to think similarly and invest with us in similar types of projects.”

Say Yes was formed to encourage high school students to get a college education by providing scholarships to public and charter schools graduates. The Buffalo Scholarship Fund, established in 2011, has grown to $19.2 million, mostly from local individuals, families, businesses and other organizations.

Last year, the fund helped pay for 1,015 students to attend college, and officials expect that number to increase significantly this year. But backers hope to raise even more, with an interim target of $30 million, but a long-term goal of $60 million to $100 million to last 20 years.

“Daniel Lewis has been one of our earliest and continues to be one of our most generous supporters of the Say Yes initiative. He is always thinking, always coming up with new ideas about how we can support the initiative,” said Say Yes Buffalo Scholarship chairman Alphonso O’Neil-White. “One of our goals is to create a college-going culture in Buffalo and that takes time and a commitment from the community to sustain this initiative.”

The developers will apply for construction permits from the city, and will seek approval from the Planning Board. They also hope for state and federal historic tax credits to offset up to 40 percent of the renovation costs. Sinatra said he hopes the building will be finished and open by late spring 2015.

Meanwhile, during construction, the team wants to use the building itself as a billboard of sorts for Say Yes to promote the initiative and raise community awareness. “We’ve looked at other things, but this just seemed like a really good, high-profile project that made a ton of sense,” Lewis said. “What you’re hoping for is a positive cycle of growth and development for the economy, but all starting with the idea of helping a child.”

The project continues a high level of engagement for Sinatra and Lewis, both of whom wear their Buffalo pride on their sleeves. “It’s a unique feeling that everybody can feel but it’s hard to express,” Lewis said. “It’s very much who I am, and I feel really proud to be from the area, and I want to do my part.”

Lewis, the son of two retired Buffalo-area teachers, graduated from Cornell University before pursuing a career on Wall Street, where he rose to become a director with Citigroup’s Global Special Situations Group. In 2005, he and Russell Hoffman founded Orange Capital to invest in undervalued firms and push for change.

Sinatra, a Yale University graduate and former Republican political operative, returned to his hometown in 2009 to invest in real estate, focusing on historic renovations. Backed by deep pockets within the Pritzker family that founded the Hyatt hotel chain, he began snapping up property in Kenmore, Tonawanda and North Buffalo. More recently, he ventured into Allentown, the Elmwood Village, the medical campus, and downtown, where he is buying the Market Arcade Building.

But it’s their community commitment to Buffalo and education that brought the duo together, and attracted Connors. Lewis set up the Lewis Family Foundation in 2009 at the Community Foundation to support Western New York nonprofits, and worked with Clotilde Dedecker of Community Foundation for Greater Buffalo to bring Say Yes to Buffalo as one of its angel investors. He now serves on both the Buffalo Scholarship and national boards of the group, and has donated over $1 million to the local and national efforts.

So when Lewis came up with the idea of combining real estate investment and economic development with support for Say Yes, and asked Dedecker for help in finding a partner, Dedecker suggested Sinatra, and “it didn’t take much convincing,” Lewis said.

“Nick has built a terrific track record in real estate development,” said Lewis, “but what I admire most is his commitment to the Western New York community.”

email: jepstein@buffnews.com