Sources tell The Chronicle that Mayor Byron Brown and Common Council President Darius Pridgen are considering a sweeping privatization of the Buffalo Urban Development Corporation (BUDC) and the Buffalo Urban Renewal Agency (BURA) that could raise upwards of $100 million in cash.
The political leaders are considering two privatization options: 1) rechartering BUDC as a private corporation to offer the entire entity for sale to a major investment bank or institutional private equity fund; or 2) liquidating each parcel of the corporation’s real estate assets individually, in either an auction or listing.
The first strategy would have the added benefit of luring a major institutional investor to Western New York. That would amount to the capital markets placing a very large bet on emerging real estate markets outside of the nation’s hyper-dense coastal metros, and it would create a potentially vast pool of new capital that could accelerate the development of BURA’s wide ranging vacant land holdings.
The second strategy would have the benefit of a localized sale process that would enable local investors to acquire ownership of BUDC’s real estate holdings, thereby retaining local control of those projects. Under that strategy, BUDC as an entity might continue to exist and could be repurposed with a new mandate from the Common Council.
The City of Buffalo faces a budget deficit that some expect to reach $100 million this year — as a result of lost economic activity attributable to the coronavirus pandemic. A privatization of the city’s real estate holdings could close the gap and get the City through the financial crisis.
BUDC is currently Co-Chaired by Brown and Dennis Penman, whose expertise as a local real estate executive could help structure privatization deals in ways that accelerate the city’s redevelopment.
Sources close to Penman tell The Chronicle that a privatization of 12 acres of parking lots immediately adjacent to the Erie Basin Marina could fetch the City some $20 million at auction. A sale of the Marina itself — which BUDC does not own — could raise another $5 million.
BUDC also owns a $700 million factory on South Park Avenue that is currently being leased to Tesla Motors for $1 per year; the Northland Corridor Workforce Training Campus; the Lakeside Commerce Park along the Union Ship Canal; and many other parcels across the city.
Selling off the family jewels