The effort by the owner of Key Center at Fountain Plaza to block Delaware North Companies’ move to a new building on Delaware Avenue fell short Thursday after a state court ruled in favor of the Erie County Industrial Development Agency.
State Supreme Court Justice John A. Michalek, in a ruling he read from the bench, rejected the entire lawsuit by Key Success LLC, which had sought an injunction to overturn the $8.42 million in tax breaks that the ECIDA granted to Uniland Development Co. in December.
Uniland has said the tax breaks are an essential piece of the $93 million project to build a 12-story office and hotel tower at 250 Delaware Ave., at the corner of Chippewa Street. Uniland has already demolished the century-old Delaware Court Building at that site, and is preparing the site for the new tower.
The ruling by Michalek, at the end of an hour-long hearing, followed oral arguments by the two sides, ends the legal challenge by New York City-based Key Success. It also represents a vindication of the actions by ECIDA, which had been under intense scrutiny for several months in the fall, while the incentive applications by Uniland and Delaware North were under consideration.
“The agency acted within its legal authority, and the judge agreed,” said Richard T. Sullivan, an attorney at Harris Beach, who argued the case for ECIDA.
Key Success managing member and owner Erwin Zafir said he hadn’t seen the written ruling yet, “so we’ll reserve our comments on anything until we see the full ruling.” He said he has not decided whether to appeal.
Zafir has owned the Key Center since 2000, when he built the South Tower specifically to house Delaware North. He later bought the adjacent Bank of America Building in 2007, and has invested millions of dollars in both buildings for improvements and renovations. The buildings are managed by Ciminelli Real Estate Corp.
“We were disappointed in the judge’s decision, and it’s a matter that we’re going to take up in detail with our client to determine what, if any, action we may take in regard to an appeal of the decision,” said Thomas J. Casey, a Williamsville attorney who was part of Zafir’s legal team.
Delaware North plans to move its corporate headquarters and 350 jobs to the new 472,320-square-foot building from Key Center, where it has been housed since 2000. The hospitality giant will occupy about 109,000 square feet at 250 Delaware, roughly the same as what it now holds a few blocks away, and will create 65 new jobs.
The new building will also feature a 119-room hotel that Delaware North will manage, in part as a training facility, and a four-level, 380-space parking ramp for employees and hotel guests.
But the departure of the company from Key Center means that complex’s South Tower will be 80 percent vacant, and the overall facility will be half-empty. That poses a threat to its viability, Key Success has said, although documents have shown it was already trying to re-lease the space last summer.
Key Success had sought an order “vacating and annulling” the ECIDA’s Dec. 16 vote to approve the property, mortgage and sales tax breaks. The investor had asserted that the ECIDA had acted illegally and in violation of its purpose and policies, but Michalek didn’t buy the argument.
“It was evident that the ECIDA staff and board acted within the accordance of the law and our policy, and took all the right steps in performing due diligence and made all the right decisions,” said ECIDA President and CEO Steven Weathers, adding that the agency had been “very confident in how this would turn out.”
“This was probably one of the most diligent projects that’s ever been reviewed by the staff and the board, and discussed in public,” he said.