News for the Hospitality Executive
|By Sharon Linstedt, The Buffalo News, N.Y.
Knight Ridder/Tribune Business News
April 20, 2006 - Owner Gerald Buchheit says there are other parties interested in buying the 73-year-old landmark Statler Towers.
A local developer who was eyeing downtown Buffalo's Statler Towers for conversion to a hotel/office/condominium complex has decided against buying the landmark.
Samuel J. Savarino, president and CEO of Buffalo-based Savarino Companies, confirmed Wednesday that he let a $7.5 million purchase contract for the building expire as of midnight on April 18.
"We decided to let it lapse," Savarino said. "It's a significant Buffalo building that needs to be dealt with in a meaningful way. Maybe we'll get another bite at the apple under more favorable conditions."
Savarino, who has had the building under contract since last fall, had planned to partner with Cendant hotels and another unnamed investor to overhaul the once-grand Hotel Statler from a tired office building to a vibrant mix of hotel use, offices and residences.
"We still think its a viable, exciting concept that would be great for that building and great for downtown Buffalo under the right circumstances," Savarino said.
Savarino and his investment partners had estimated that interior and exterior renovations of the Niagara Square landmark would have run in the $50 million to $70 million price range. If their deal would have consummated, they planned to employ a mix of private capital and various tax credit programs to fund the ambitious redevelopment.
They also hoped the City of Buffalo would aid the project by building a parking garage to service the building on a nearby surface parking lot at South Elmwood Avenue and West Mohawk Street.
Statler owner Gerald Buchheit said he's not dismayed by Savarino's decision. Buchheit, who bought the 73-year-old hotel-turned-office building through a foreclosure auction in 1992 for $2.25 million, said the building is now officially back on the market.
"I want to sell and there's other people out there who have expressed interest. Sam's contract prevented us from talking to other parties and now we're in a position to do that," he said.
James Militello, of Buffalo's JR Militello Real Estate, said he considers the once-elegant building a very viable acquisition target.
"In the past we've had people who were interested in it, and I have no reason to think they wouldn't still be interested. We'll be getting in touch with them and let them know it's available," Militello said.
George Hamberger, a broker with Hunt Commercial Real Estate, said he has an international investor who toured the building and remains extremely interested.
Built in 1923 by Ellsworth Statler as his flagship hotel, the 18-story, 1,100-room hotel played host to U.S. presidents, national entertainers and scores of other dignitaries. The Statler chain sold it to the rival Hilton Hotel group in the 1950s, which continued its run as a hospitality property.
In 1973, a local investment group, led by Robert Zugger and William D. Hassett bought the building and initiated its conversion to an office tower. A Kuwaiti consortium acquired it in 1981, followed by additional title transfers that ended with foreclosure action against Niagara Square Associates and its eventual creditor-forced foreclosure auction.
Buchheit had floated the idea of reintroducing a hotel operation to the building soon after he bought it, and had secured $15.5 million in financing from the Erie County Industrial Development Agency to aid the effort, but later scrapped the project.
Over the past decade, the building has seen a laundry list of tenants depart, leaving the Statler with a 40 percent vacancy rate. Three floors - 9 through 11 - sit completely idle as mothballed hotel rooms.
In the past few years, the Statler was eyed by the Seneca Nation of Indians as a part of a casino development, but that possibility faded away when the Senecas turned their attention to a Cheektowaga site, and later landed in the city's Cobblestone District.
In June 2003, chunks of decorative facade fell from the top of the structure tumbled down onto Delaware Avenue, prompting emergency repairs. Meanwhile, tenants have continued to complain about lack of building maintenance, particularly the tower's frequently malfunctioning elevators which run on an antiquated 25-cycle electrical system.
Buchheit has made no secret of the fact that in its current condition, the Statler Towers is a money-losing operation. He has gone to City Hall seeking property tax reductions on more than one occasion, and in 2004, the Statler ended up on the list of properties slated for auction due to non-payment of 2002 and 2003 taxes totaling $348,642.
An 11th-hour payment "under protest" saved the Statler from the auction block, but the building will be heading back to auction this fall if Buchheit doesn't pay outstanding 2004-05 taxes, sewer rent and penalties totaling $189,222. The building's current tax bill of $155,654 also remains unpaid.
Earlier this month, the Statler's second largest tenant, the
General's Buffalo office gave notice that it will depart when its lease
expires next February, further draining its future revenue stream.
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