Developer Nick Sinatra is getting almost $75,000 in tax breaks from the Erie County Industrial Development Agency to convert a dilapidated building at 1526 Main St. into eight market-rate apartments and ground-floor commercial space.
The 135-year-old building at Main and West Ferry streets, which has been virtually empty for a decade and has a leaky roof, already has been gutted back to its original brick interior. Sinatra & Co. plans to put apartments, which are expected to rent for $1,200 to $1,350 a month, on the top two floors, with about 7,000 square feet of commercial space on the ground floor.
“It requires significant work to restore,” said John C. Cappellino, the IDA’s executive vice president.
While the Erie County IDA does not generally provide incentives for market-rate housing projects, the agency agreed to subsidize the $1.6 million project because it will restore a long-vacant building and is located in an economically distressed part of Buffalo.
“It’s a fantastic development for that part of Main Street,” said Dottie Gallagher-Cohen, president of the Buffalo Niagara Partnership and an IDA board member. “It will help stabilize that neighborhood. It’s exactly the kind of development we should be supporting.”
The project did generate some discussion earlier this month among members of the IDA’s policy committee, who noted that Sinatra representatives had indicated that the developer was likely to proceed with the work even if it did not receive tax breaks. Ultimately, however, the policy committee unanimously backed the tax breaks as a way of making the project more financially viable.
Without incentives, the project is expected to generate a negative return on investment of 0.4 percent. With the tax breaks, the return jumps to about 9.2 percent, noted Christopher Johnston, the agency’s interim chairman.
The IDA tax breaks include only sales and mortgage tax breaks, with the sales tax savings limited to costs associated with upgrades to the building’s core and shell. Sinatra is expected to seek property tax breaks through a separate program administered by the City of Buffalo. He is expected to begin work on the project shortly, with the apartments targeted for occupancy during the fall, Cappellino said.
The developer is in discussions with two potential retail tenants – a juice bar and a wellness center – to fill the first floor retail space by the end of the year, IDA officials said. The IDA also put off a vote on naming a new chairman and other officers until its June 18 meeting at the request of County Executive Mark C. Poloncarz, who was out of town and did not attend the meeting.
That vote would determine who will be the agency’s chairman for the next year. Johnston has held that role on an interim basis since the resignation of John J. LaFalce last year, but his resignation last month as president of the World Trade Center Buffalo Niagara has raised some questions about his potential reappointment as chairman.
The agency, in the first test of its year-old clawback policy, also said it had visited with executives from Niagara Blower Co. after the Town of Tonawanda specialized industrial heat transfer and air-conditioning systems fell too far below its job projections following cutbacks as its market softened last year.
Niagara Blower, which had 110 employees when it received $61,250 in sales tax breaks in March 2013 for a $5.4 million expansion of its Sawyer Avenue factory, had reduced its staff to 94 by the end of last year. That dropped the company below the threshold requiring companies receiving tax breaks to maintain at least 85 percent of their jobs at the time the tax breaks were granted.
Niagara Blower executives blamed the cutbacks on softness in the natural gas processing industry, which led to a drop in orders. Since the end of the year, Niagara Blower has rehired many of the workers, boosting its work force to 105 full-time employees as its backlog of orders has increased.
As a result, IDA officials said the agency will contact the company again after June to update the status of its work force, but took no action to claw back the tax incentives.
“They’re now rebuilding their employment,” said Deputy County Executive Richard M. Tobe. “We don’t see the need to do anything more than close monitoring.”