Buffalo’s Rand Building and four other major office buildings in the heart of downtown are suddenly for sale, as their longtime owner seeks to retire from the real estate scene.
David Sweet, a fixture downtown since the early 1970s, is selling his commercial real estate holdings along Main Street. That includes such well-known properties as Rand at 14 Lafayette Square, the Main Seneca Building at 237 Main and the Main-Court Building at 436 Main, as well as two smaller adjacent office buildings at 241 and 251 Main, the Roblin and Stanton buildings.
Buffalo’s commercial real estate market has been heating up, driven by new development at Canalside and the Buffalo Niagara Medical Campus, historic renovation and adaptive reuse projects, and the state’s Buffalo Billion initiative.
But much of the new activity involves housing, retail, medical office, culture and entertainment.
By contrast, the downtown office market has been more slack, with little new growth, significant vacancies in certain areas or buildings and the looming uncertainty over the future of One Seneca Tower, the city’s tallest building.
Still, “for the right buyers, it’s probably attractive,” said Shana Stegner, a broker at CBRE in Buffalo. “Buffalo for the most part is a stable market. We don’t see the big swings and dips that other large markets do.”
It’s the first time in decades that some of the buildings have gone on the market. Sweet bought the first of them over 40 years ago.
“I discovered the other day that I was 84 years old. It came as a surprise,” Sweet said wryly. “Nobody in my family is interested in taking over this five-building group, so I’m looking into it.”
Sweet has three daughters – Kathleen, Susan and Laura – who co-own the properties with him, but they work in other fields and are not interested in managing them.
The oldest building, the Stanton, was built in 1873, while the Main Seneca Building dates to 1902 and Rand to 1929. Main Court and Roblin were built in the 1960s.
The five office buildings have 760,137 square feet of rentable space on 64 floors in total, but they are not fully occupied. The Rand Building, the flagship of the group, is about 80 percent occupied, while Main Court is “nearly that,” and the others are “a little less,” Sweet said. “We’re keeping our nose above water.”
Sweet won’t disclose the selling price, but the five buildings are assessed at $12 million in all. He confirmed that “we’ve got somebody that’s looking” at them but wouldn’t disclose the potential buyer’s identity.
Sweet’s Main Seneca Corp. and Carl and William Paladino’s Ellicott Development Co. are the two biggest owners of “Class B” office space in downtown Buffalo and often end up trading tenants back and forth. Sweet and the elder Paladino “are great friends,” said William Paladino, Ellicott’s CEO, but his firm isn’t interested in buying Sweet’s properties because it already has enough in that price range.
Nevertheless, he said, Sweet shouldn’t have a hard time finding a buyer. “He’ll get a lot of interest in them. He’s got some nice properties. I think he’ll do all right,” Paladino said. “I think there’s a lot of interest in downtown right now.”
Sweet has played a major role in solidifying downtown Buffalo, managing his buildings through a difficult era when the Main Street corridor lost some of its marquee tenants, and city landlords battled for clients with suburban office parks.
“He’s very well-respected, and he has been a long-time building owner and developer downtown,” Stegner said.
His low-key and affable style has often distinguished him in a fiercely competitive crowd of developers and landlords. Even in today’s technological time of email, social media and texting, he prefers to send handwritten notes or typed letters.
A lawyer by training who practiced general law for 20 years, he learned real estate investing from his father, who bought and sold properties and grocery stores in Western New York and Florida for many years. Among his father’s holdings were 150 acres at Main Street and Transit Road in Clarence that he acquired in pieces for about $18,000 in all.
He eventually sold it for a total of $1.7 million. It’s now Eastern Hills Mall.
Sweet got his first chance when Marine Midland Bank built its 38-story office tower – the former One HSBC Center, now One Seneca Tower – in 1973 and moved much of its operations out of 237 and 241 Main.
The bank put the mostly empty buildings up for sale for $5 million. Sweet was interested, but the price was too steep. Marine sold them three years later for $2.2 million as part of a larger deal involving a big office tower on Park Avenue in Manhattan.
The buyer was more interested in the Manhattan site, so he sold the two Buffalo buildings to investors from the Bronx for a much lower price. But the assessment and taxes on them were much higher than the investors wanted to pay, so they sold the buildings to Sweet for $500,000.
He said he and his family then “just hit it very lucky and got a number of good tenants in a hurry” over the next few years, but they were still struggling to fill the buildings.
Then Marine ran out of room in the tower and leased a whole floor in its old building at 237 Main, followed by more floors in that building and also in 241 Main. Sweet then bought the old bookstore building at 251 Main, and the bank leased the entire structure.
He continued buying and selling other buildings, eventually reaping a big short-term profit on one deal. So he looked for another building to buy so he could postpone the tax bill on his gain and found that the Rand Building was available. He bought the mortgage on it for $3 million, foreclosed on it and took possession of the building.
Finally, the Main Court building came up for sale after Delaware North Companies – which was the biggest tenant and also held the mortgage – vacated the building and also foreclosed on the loan after the landlord refused to cut a deal on the lease.
On the day of the foreclosure sale, Sweet and one of his daughters went to look at the building on a spur-of-the-moment suggestion just an hour before the auction, and “I decided to bid on it.”
He heard bidding would start at $2 million, figured it would go for less than $3 million and took out enough money from the bank to cover the 10 percent deposit.
The price ended up exceeding that, so he scrambled to get some extra cash from the bank after winning the bidding.
“We got some pretty good tenants,” he said. “We had it lucky for a while ... We’ve managed to survive.”