A pair of longtime friends-turned-real estate developers, fresh off their first joint purchase, are about to make a huge splash in the waters of Buffalo’s affordable housing market.
Buffalo natives Aaron Siegel and Brett Fitzpatrick are buying 13 apartment buildings on 10 sites in the city – including the historic but neglected Red Jacket Building on Main Street directly across from the Buffalo Niagara Medical Campus. The $16.5 million deal, which has been in the works for more than a year, includes 295 residential units in all, with 246,787 square feet of space. The units range in size from studios to four bedrooms.
The purchase also covers 10,000 square feet of commercial or retail space on the first floor of the Red Jacket at 12 Allen St. and additional space in another building at Grant and West Ferry streets. Besides the Red Jacket, the transaction includes the Buckingham at 87 Mariner St. and affordable senior housing at 333 Linwood Ave., at Utica Street.
All are owned through an entity called Braco by the same out-of-town investor, a former Buffalo resident who bought them in the 1970s but now lives in Florida. Word that they will be acquired and managed by local owners once again has been well-received among city officials. The long-suffering Red Jacket, whose dilapidated presence in a prime redevelopment area has made it a highly visible sore point for community leaders, has been the subject of rumor and speculation.
“This is an out-of-town owner that has owned these properties for quite some time. They’re not in great condition,” said Brendan R. Mehaffy, executive director of the city’s Office of Strategic Planning. “We would hear from the community frequently about when is something going to happen. This was on our radar.”
All of the buildings “are in need of substantial repairs and are located in the heart of the city’s revitalization efforts,” according to a letter to the Buffalo Common Council from Mehaffy, who is also vice chairman of the Buffalo Urban Renewal Agency.
Siegel and Fitzpatrick, through Linwood-Allentown Preservation LLC, also plan to “undertake an extensive renovation,” Mehaffy wrote, for a total expenditure of $42.2 million. That’s $143,050 per unit and includes not just the physical needs of the apartment space, but also upgrades to lease out commercial space at the Red Jacket and at 76 Grant St. The project will likely benefit from both historic and affordable housing tax credits, except perhaps for the commercial space.
“The acquisition by a local company that is planning to do significant renovations to these buildings in strategic areas is great news for the City of Buffalo,” Mehaffy said.
All of the units currently have Section 8 housing assistance from the U.S. Department of Housing and Urban Development, and plans call for the buildings to remain as subsidized affordable housing under HUD.
Sixty percent of the units – 177 apartments – are expected to be reserved for households with incomes at or below 50 percent of the area median income. The Buffalo-Niagara Falls area median is $50,269. The remaining 118 units will be for households earning no more than 60 percent of the area median. The Linwood Apartments are for senior citizens.
So any redevelopment would be complicated by having to ensure that residents don’t lose access to their lower-cost living, as required by the federal agency.
The buyers have been approved for financing through the state Housing Finance Agency, with the support of a “strong letter” from the city, and are also working on bond financing, Mehaffy said. Closing on the deal is expected shortly.
This is the second major purchase for the duo, who acquired the 202-unit Amherst Gardens Apartments on East Amherst Street for $8.57 million. They plan to invest $1.2 million to improve the complex. Combined with the newest purchase, they will manage over 500 units in Buffalo.
“We’re very happy about this,” Mehaffy said. “These are properties that we have heard about and have sought some type of solution on, in terms of their condition in particular, and to have this local development team come along now and present a solution for a dozen properties is great news and continuing the momentum. Securing affordable housing in strategic locations in the city of Buffalo is critical during this time of significant investment.”
There are no plans for structural changes, so no site plan approval is required from the city. However, at Mehaffy’s request in his letter, the Council did approve a city payment-in-lieu-of-taxes (PILOT) for the project under the city affordable housing program, in order to keep taxes stable so rents will remain low. The 15-year PILOT calls for the new owners to pay 3 percent of revenues in the first year, with the payment increasing in three percentage-point increments every year. The same PILOT was approved by Erie County as well.
“It allows them to maintain that affordability and predictability,” Mehaffy said, noting that the Red Jacket in particular is in a “hot” real estate area near the medical campus where prices are otherwise soaring. “People have to understand that you have the full range of employees at the Medical Campus. You have people who are parking cars and people who are doing brain surgery. To provide housing for everybody who is working on or near that medical campus is a strong objective.”
Mehaffy also stressed that these are not public housing projects and that the residents have income and are paying rent, although at below-market rates. “So many people say affordable housing is the poor. These people are working. They have rent to pay, and if they’re not paying their rent, they get evicted just like anybody else,” he said. “We’re talking about quality housing for people who are working and have an income. This is part of the balance.”