Carl Paladino has Albany in his cross hairs.

    And a lot of its money in his cash register.

    Paladino is state government's biggest landlord in Western New York, holding half of the 52 leases the state has taken out on offices in Erie and Niagara counties, a Buffalo News analysis shows. Albany's rent payments to Paladino this year will total $5.1 million.

    His companies will collect another $5 million in rent from the federal and local governments, including his two most lucrative leases that net him $1.7 million for an office that houses some operations of the Erie County Department of Social Services and $1.5 million for FBI offices behind City Hall.

    Paladino's business transactions with government don't end with leasing office space, a Buffalo News investigation found.

    He owns an estimated 20 properties that have received tax breaks -- including property and sales taxes -- that amounted to at least $12 million since 2003, The News calculated.

    Paladino also bought at least two large buildings from the government for next to nothing. A state economic development agency spent about $1 million to buy the former United Office Building in Niagara Falls that it then sold in 2002 to Paladino for $10. Buffalo city officials in 1999 sold him the former L.L. Berger building for $1 and tossed in a parking lot and $385,000 to help repair the building.

    Paladino's extensive dealings with government -- coupled with at least $452,000 in political contributions in recent years to scores of politicians -- are in sharp contrast to the rhetoric of his campaign for governor, in which he has railed against government spending and portrayed himself as an outsider dedicated to taking on the ruling elite.

    Paladino is seeking the Republican nomination for governor and has the support of the local Tea Party movement.

    Paladino secured lease deals with the state by submitting lower bids than his competitors, The News analysis of government documents found.

    Paladino refused to comment for this story, but some businessmen who dealt with him say he has saved taxpayers money.

    "If he is a low-cost provider to the government, isn't he doing the taxpayer a service?" said Jim Militello, owner and principle broker with J. R. Militello Realty, who has had extensive dealings with Paladino.

    Paladino's use of tax breaks is commonplace among local developers, although he has gone further than some in lobbying public officials to draw the boundaries of the state's major economic development program, Empire Zones, to include his properties.

    While Paladino bought the United building in Niagara Falls and the Berger building in Buffalo for a total of $11, he also brought the abandoned buildings back from the dead, although the Niagara Falls project involved extensive tax breaks.

Extensive holdings

  Paladino is a self-made real estate magnate. The son of an Italian immigrant, raised in the city's Lovejoy neighborhood, he went from practicing law at the Ellicott Square, to managing it, to putting together an investor group to buy it in 1978.

    In an interview for a profile in Buffalo magazine in 1994, Paladino said that at the time he purchased the Elliott Square, he had only a $500 line of credit from MasterCard and had to borrow money from the other investors in his group to purchase his share.

    Paladino, 63, estimates his net worth today at $150 million, thanks to holdings with an extensive network of partners of office, retail and residential space, as well as hotels, parking lots and vacant land.

    Many of his holdings are located downtown and in the Buffalo area, but they extend throughout upstate and into western Pennsylvania. Office space in downtown Buffalo accounts for a significant share of his holdings. He's also developed more than 100 Rite Aid drugstores located all over upstate.

    Two real estate brokers who have dealt with him extensively over the years characterized Paladino as a tenant-friendly, cost-conscious landlord.

    Militello, the real estate broker, described Paladino as a "very, very good landlord. Very good on the tenant service end. He keeps his buildings clean; he keeps them well run."

    Arthur Judelsohn, senior executive director of Pyramid Brokerage Co., who has dealt with Paladino on retail space, described him as "a very aggressive deal maker (and) part of a small fraternity which has the motto, 'when we give our word, we keep our word,' and I don't say that about everybody, believe me."

    Paladino has his share of critics in the business world, however.

    James T. Sandoro, a downtown business owner and a parking lot competitor of Paladino's, said Paladino has used political influence to help win government contracts.

    "Carl appears to have used his donations to elected officials over the years to create his empire," Sandoro said.

Leases to government

    Companies that Paladino owns -- he has operated under some 30 corporate umbrellas the past decade -- have 37 leases with government entities that call for rent payments this year of $10.1 million, The News determined, based on public records.

    New York State is Paladino's biggest government customer with 30 leases, including 26 in Erie and Niagara counties, most for downtown office space.

    New York has 52 leases with private landlords in Erie and Niagara counties. Paladino companies hold 26 of them, according to state records.

    The oldest dates to 1994, but most were originally awarded earlier this decade while George E. Pataki was governor. About one-third have been renewed or awarded since Eliot L. Spitzer, and then David A. Paterson, became governor.

    The leases average about $13.75 per square foot, a price associated with "B" office rates.

    The state Office of General Services solicits Requests For Information from commercial landlords when it's looking to lease space. The process doesn't require the state to accept the lowest bid, as factors other than price come into play. But leases are generally awarded to landlords who submit the lowest price, said Heather Groll a spokeswoman for OGS.

    The News obtained information on five of the six largest leases Paladino holds with the state, which account for more than 60 percent of his annual rent revenue from Albany, and found that the proposals he submitted offered a lower price per square foot than any of his competitors.

    Paladino's companies hold eight other leases with local and federal agencies that will yield another $5 million in rent this year.

    Paladino rents space to the FBI in Buffalo and Niagara Falls, with lease payments this year of $1.65 million. The Erie County Department of Social Services rents two offices on Main Street with a collective rent of $2.33 million. Elsewhere, Paladino rents to the Buffalo Board of Education, the Census Bureau and the county's water authority and control board.

    The News found that the Ellicott Square, which remains the flagship of Paladino's real estate empire, is home to 14 government tenants, all but two affiliated with the state. Rent this year on those 14 leases comes to $1.5 million, for a building Paladino and his partners purchased for $3.5 million.

    Paladino, like most if not all large local developers, has taken advantage of tax break programs available through the federal, state and local governments. But he's gone a step further than many of his colleagues in lobbying government officials to draw the boundaries for the state's major tax break program, Empire Zones, to encompass his buildings.

   Millions in tax breaks

    Paladino, in 2003, told The News that he was among the downtown business leaders who persuaded then-Mayor Anthony M. Masiello to designate the downtown business district as the heart of its Empire Zone.

    "We convinced them to put all the properties on Main Street in the zone," he said.

    The program was initially designed to promote investment and job creation in economically distressed areas, such as inner-city neighborhoods and abandoned industrial sites. But a News investigation in 2003 found that the program in Buffalo created few jobs, most of which paid low wages, and failed to attract many new businesses to the city or promote entrepreneurship among minorities or business activity in down-and-out sections of the city.

    Who benefited? Downtown business interests, which reaped big tax breaks. Paladino has been once of the largest beneficiaries.

    After successfully lobbying the mayor on the boundaries of the zone, Paladino got busy certifying his many businesses as eligible to participate in the program. In 2007, the last year for which complete data is available, he had 30 certified. Only one business operator in the state had more.

    A News review of state records determined that a dozen of Paladino's companies received $3.38 million in sales and property tax breaks from 2003 to 2008 under the program.

    Those figures don't include another Paladino project, Waterfront Place, a high-rise condominium building at Erie Basin Marina. He won the right to develop on what had been a city-owned parcel without competition and, once he acquired it, won city approval in 2006 to designate the land as an Empire Zone.

    As a result, he got an abatement of about $875,000 in sales taxes on construction material and the buyers of the 53 condos and adjacent townhouses will enjoy property tax breaks that will come to $5.3 million over 10 years. The condo buyers will also receive a 12 to 15 percent discount in their electricity rates because they live within an Empire Zone.

    Paladino companies have participated in several other tax break programs:

    A state program that reduces property taxes on improved properties will save buildings he owns in the city an estimated $1.9 million over 10 years. That same program will save him $2 million in property taxes for the redevelopment of the former United Office Building in Niagara Falls.

    His redevelopment of the Haeberle Plaza in Niagara Falls involves a $2 million federal tax deduction because it is located in a federal Renewal Community. The strip plaza also is making payments in lieu of taxes that will save Paladino's company $1.26 million over 10 years.

    The Erie County Industrial Development Agency has assisted six Paladino projects over the years.

    Three deals are currently on the books: the construction of a Family Dollar store on Niagara Street, the Tapestry Charter School in North Buffalo and the renovation of the former Baker Shoe Store on Main Street, the latter of which was approved last week. The full tax savings have not been calculated for the three projects. The ECIDA calculates the known savings at $506,750, and anticipated property tax savings could easily double the savings.

    Three of the deals have run their course, and records of the tax breaks no longer remain on the public record.

   Buying on the cheap

Over the years, Paladino and his partners have added to their holdings in part by purchasing distressed properties through foreclosures and at public auctions. Much, if not most of the time, buildings and land were bought at their assessed value.

    But in at least two instances, Paladino bought large buildings from the government at well below cost.

    Most recently, USA Niagara, a subsidiary of the Empire State Development Corp., purchased the United Office Building in downtown Niagara Falls for about $1 million, including legal fees, and sold it to a Paladino company for $10 in 2002.

    The building had been vacant for some 20 years years and Paladino redeveloped it to include a hotel, apartments and offices. He obtained Empire Zone benefits that saved him $64,083 in sales tax and $2 million in property taxes, according to records.

    In addition to selling Paladino the building at a deep discount, USA Niagara also signed on as a tenant for $57,300 a year.

    In 1999, Buffalo sold Paladino the former L.L. Berger building on Main Street for $1. The building had been vacant for eight years and was in disrepair.

    The city also spent $385,000 for related development costs, including installation of a new roof, and gave Paladino an adjacent parking lot for use by tenants of the building, which was converted into upscale apartments and offices.