by Frank Parlato
Hamister's Falls Hotel Not Shaping Up As Planned
Is this déjà vu?
In 2002 politically connected developer Mark E. Hamister, Chairman & CEO of the Hamister Group, LLC, was chosen the designated purchaser of the bankrupt Buffalo Sabres—even receiving a standing ovation at a Sabres game as the soon-to-be new owner.
But after outbidding billionaire Tom Golisano, Hamister failed to meet purchase deadlines from the NHL, deadlines that were extended for him four times. It turned out he didn’t have the money to buy the team. He had a partner, Todd Berman, promising to put up $20 million and expected taxpayers to pay for most of the rest. When Berman pulled out and public money wasn’t coming, Hamister folded his tent and went away, no doubt with a tearful memory of his standing ovation. (A couple years later Berman got a five-year sentence to a Pennsylvania prison after pleading guilty to fraud and stealing $3.6 million from his company Chartwell Investments.)
Now it seems Hamister is playing the same game in Niagara Falls with a very valuable piece of public property. It goes like this: make a big promise, win an important bid through political connections, get tons of media attention, then deliver nothing.
History of the project
It was in October 2011, when Empire State Development (ESD), and its subsidiary, USA Niagara, announced plans to develop an acre of land 300 feet from the entrance of the Niagara Falls State Park in Niagara Falls, NY. The state put out its Request For Proposal (RFP) in conjunction with the City of Niagara Falls, which owns the lot.
The lot at 310 Rainbow Blvd. was described in the RFP as “the ‘front door’ to downtown Niagara Falls...” and the RFP specifically called for an “upper upscale hotel,” with apartments for the downtown workforce, and “active ground level uses,” such as restaurants and stores. The hotel should be built higher than 10 stories and larger than 300,000 square feet—the RFP said, and the state was prepared to bridge “funding gaps” with taxpayer subsidies.
The RFP defined “upper-upscale hotel” as, “The second-highest chain scale (below ‘luxury’) and includes many brands... of the highest-quality properties available in most major metropolitan areas. Examples include Hilton®, Hyatt Regency®, Marriott®, Sheraton®, and Westin®.”
By December 2011, seven developers responded to the RFP. In February 2012, the Hamister Group’s proposal was accepted over the others.
Controversial Pathway to Approval
After he was selected, ESD, USA Niagara, and Niagara Falls Mayor Paul A. Dyster issued a press release announcing Hamister would build a $22.4 million “upper upscale hotel” with apartments and stores. Best of all, the February 22, 2012 press release stated, the Hamister project would create 130 permanent jobs, a bonanza for the local workforce.
From February 23, 2012 until July 1, 2013, Hamister quietly worked on his plans, very, very quietly. Suddenly, after a 16-month silence, during the holiday week of the 4th of July, 2013, Niagara Falls Mayor Paul Dyster informed the Niagara Falls City Council that Hamister was ready, and the five-member council was asked to approve the sale of 310 Rainbow Blvd to Hamister for a price of $100,000.
Dyster presented them with a 10-page contract on July 3rd, the day before the holiday weekend and asked them to approve the contract at the Monday council meeting.
$22.4 million project was now a $25.3 million project, with a $2.75 million state grant. Construction was to start by the end of 2013 with completion targeted for the fall of 2015. And, by the way, the hotel would not create 130 permanent jobs, but, rather, 70 permanent jobs. Still a hefty number for economically disadvantaged Niagara Falls.
The council was expected to vote for the sale of the land on July 8, but Councilman Glenn Choolokian had some doubts. When he told USA Niagara President Chris Schoepflin the city should get more money for the land, Schoepflin said, “Go ahead then, and chase a developer like Mark Hamister out of town!”
But Choolokian, along with councilmembers Sam Fruscione and Robert Anderson Jr.—who, combined, constituted a majority on the council—decided to vet the proposal and voted to table the Hamister contract. During the next two weeks a debate raged over the Hamister hotel.
Dyster expressed distress about the council tabling the deal. He described the hotel on his Facebook page as the “game-changer” and the “tipping point” for the development of Niagara Falls.
“If they [the council majority] are going to kill the largest development in downtown Niagara Falls since the casino,” Dyster told the Niagara Gazette, “they are going to have to explain it to the people who would be getting jobs here. I don’t get it. I just don’t get it.”
Anderson, Choolokian, and Fruscione said they wanted more money for the property. Council member Kristen Grandinetti said the three councilmen were acting with “irresponsible ignorance.”
City Assessor James Bird, when asked his opinion, wrote, “Based on what market data is available, I would estimate current market value for (310 Rainbow Blvd.) to be between $1.5 million and $2 million.” An appraisal by Real Property Services, L.L.C., of Williamsville, appraised the property at $1.53 million.
Grandinetti argued the land should be given away, since the Hamister project “is a turning point for our city. If we blow this deal we will frighten away any further development of this quality and any further developers of this stature.”
Fruscione said Hamister should “make an offer on the property that sounds fair.”
On July 24, the council majority again tabled the proposal.
“We have enough hotels,” Choolokian said. “We need something do to when (tourists) leave the hotel...this deal is driven by a need to help Hamister.”
July fell into August, and the Hamister hotel became a campaign issue for Fruscione running for reelection against three Dyster-sponsored candidates for three open seats on the council. If voters defeated Fruscione, the city would have the Hamister hotel, and Dyster would control the council in 2014.
Media Jumps in
Covering the Hamister deal became a fascination for local media. From the time the council chose to table the deal in July until the election, 150 news articles and two dozen TV stories appeared.
A U.S. senator, a congressman, the state senator, the state assemblyman, the entire 15-member Niagara County Legislature, the mayor and two city council members—and the governor of New York State—went on record saying the upscale Hamister hotel was vital to the city. People were half expecting Obama to weigh in.
Sen. Charles Schumer, D-NY, said the Hamister project is “exactly the type of work that Niagara Falls needs.” Rep. Brian Higgins, told the media that Hamister’s project is “absolutely essential to the revitalization of downtown.” What was not reported was that Hamister donated $4,400 to Higgins and $2,000 to Schumer shortly before they endorsed his project.
Press coverage was not flattering to the council majority who questioned the deal. Channel 2 News said the council members were “making a bone-headed” decision.
The Buffalo News editorials referred to the council majority opposing Hamister as the “three blind mice,” the “three stooges,” and “council clowns,” “likely to be an ongoing source of lunacy” while commenting, “We have no idea what they are inhaling on the Niagara Falls City Council, but it must be something bad.”
Paul Wolf, writing for Artvoice, noted the vehemence.
He wrote, “The over the top response by the media because three Council members are saying no to the deal being presented to them is amazing. Why is it so outrageous for Council members to question the sale price? .... Why is it impossible to negotiate a different sale price for the land?.... Why do taxpayers have to donate anything to wealthy developers?”
As for Hamister, the delay made him less than pleased. “We are going to try and stay patient ... while the appropriate elected officials work out the issues that they have,” Hamister said.
Days before the primary an anonymous mailer arrived at households saying that “’Developer Mark Hamister is running a con game on the city of Niagara Falls ... and he just got caught!” The flier praised Fruscione for “fighting for us in Niagara Falls.” Hamister, calling it “libelous,” announced at a press conference that he planned to walk away from the project. Gov. Cuomo intervened. He called Hamister and asked him to “postpone any decision” until after the primary.
“After those discussions with the governor,” Hamister announced, “I have agreed to provide the governor and his people the time and the opportunity to see if they can bring this to a positive resolution.”
On September 10, 2013, the primary was held. The three winners for three council seats were Dyster’s slate. Fruscione came in a distant fourth and was out. After Fruscione’s dramatic loss, Empire State’s Hoyt persuaded Councilman Anderson to change his vote.
On the morning of September 13, three days after the primary defeat of his colleague, anti-sale Anderson in a move almost straight out of A Clockwork Orange, One Flew Over the Cuckoo’s Nest or George Orwell’s 1984 announced, “I’ve done my due diligence and believe that the Hamister project is good for our community. I am proud to throw my support behind this much-needed development.” That same day, a new council majority—Grandinetti, Walker, and Anderson—voted to sell Hamister 310 Rainbow Blvd. for $100,000.
The next day, Cuomo came to Niagara Falls and held a press conference before an adoring media.
“Mr. Hamister,” Cuomo said, “I can’t tell you how grateful we are that you gave us the benefit of the doubt and you hung in there with us.” Cuomo also thanked Anderson. “You did a gutsy thing,” he told Anderson. “You did the right thing.”
The groundbreaking was slated for the second half of 2014 and the new hotel would be nothing less than a Hilton, a Marriott or maybe an Intercontinental brand.
None of this, of course, was to occur.
In mid-November 2013, EDS officials announced the agreement with Hamister was signed. At 155 pages, the contract provided that Hamister would apply for his hotel franchise agreement by January 11, 2014, have financing in place by May 11, 2014, and start construction by August 17, 2014.
None of that happened.
A curious clause in the agreement gave Hamister time to change his mind—until Spring, 2015. Another clause extended his site control potentially until 2017, without having to build. But, at the time the contract was signed, Hamister told Sophia Smith for WNY Papers, “We... expect shovel in ground by the second half of 2014.”
That didn’t happen either.
Instead, in July, 2014, Hamister announced he was not going to build a Hilton or a Marriott after all, but a Hyatt Place, a brand of business hotels usually located adjacent to off ramps of freeways leading to airports that serve business travelers.
With the Hyatt Place came the elimination of the market rate apartments the state said were vitally needed and of which Hamister justified his $2.75 million grant, saying, “Most importantly, we will be providing ... high-end rental housing in the project that would not be otherwise affordable without the state grant.”
The design downgraded the height from eight stories to six (it was supposed to be 10 or more), and the hotel rooms dropped to 128. Yet, inexplicably, while the hotel shrank, Hamister announced his costs rose again—this time from $25.4 million to $35.7 million, and Empire State Development—as a consequence—increased the taxpayer gift to Hamister from $2.75 million to $3.85 million.
Then, a surprising event occurred. In October, WGRZ‘s Dave McKinley asked Dyster, “Has (Hamister) got financing, are you confident of that?”
Dyster responded, “Uh... yes.”
“Is that a resounding ‘yes?’”
“Yes. Yes that’s a... Mr. Hamister volunteered to me that the... the... you know, the banking end of this thing was, was fine and not an issue.”
But it wasn’t fine at all. 2015 arrived and Hamister did not have financing. When Hamister made his application to the Niagara County Industrial Development Agency, on January 26th, 2015, his company was asked to identify what bank would make the mortgage loan on the hotel. Vice President Daniel Hamister declared the Hamister Group was “In preliminary talk with multiple and institutional lenders. We have not progressed to the ‘Term Sheet’ stage as of the date of this application.”
Then came another surprise.
Hamister declared on his IDA application, under penalty of perjury, that the project will not create 130 permanent jobs as first promised, and not even 70 permanent jobs that had been later promised, but only six full time and 29 part time jobs.
Hamister got his IDA tax incentives approved nonetheless.
Driven by subsidies?
Those incentives from the IDA were worth $4.2 million in tax discounts over 10 years. This was on top of the $3.85 million subsidy from Empire State Development Corp. and the City of Niagara Falls agreement to sell 310 Rainbow Blvd.—a lot appraised for $1.5 million—for $100,000. Combined, Hamister was slated to reap $9.4 million in taxpayer help for a 128-room Hyatt Place hotel, an unusually rich taxpayer subsidy for a midscale hotel.
There was worse to follow.
To recap: After winning the right to build a luxury hotel in February 2012, the cost jumped from $22.4 million to $25.3 million by July 2013. In November 2014 the cost jumped again to $35.7 million to build the planned hotel. As the price climbed, so did the Empire State subsidy, since it is tied directly to the cost of the project.
Yet the hotel got smaller. Hamister downgraded to a smaller than average Hyatt Place business hotel. There are no market rate apartments as promised. As for “active ground level uses,” as called for in the RFP, only 8,000 square feet of retail space is planned—the equivalent of three small stores.
As for total square footage—at 106,688—the project is a third of the 300,000 square feet the RFP said site was to achieve.
The promised 130 permanent jobs dropped to 6 permanent jobs and 29 part time jobs.
And at six stories, the Hamister Hyatt Place will miss the view of the Niagara River rapids, the brink of the Falls, and the gorge below—which could be seen if the hotel was several stories taller as the RFP called for.
Selected by Empire State Development on one premise—that he had the best proposal, Hamister downgraded again and again, and was planning to create a mundane midscale hotel—of which Niagara Falls has abundance—and now it’s not clear he has the money to build it.
Most Curious of All
What makes the Hamister deal most curious is the money Hamister says his company will invest to build this Hyatt Place hotel. Empire State Development’s subsidies are based on construction costs. The higher the price, the more the subsidy. Hamister claims his 128 room Hyatt Place will cost $35,607,509 to build.
That comes to $278,183 per room, or “per key,” as they say in the hotel industry, “Select service hotels”—like Hyatt Place—as industry reports consistently show—cost half what Hamister claims he will spend.
According to HiltonWorldwide.com, construction costs for Embassy Suites are $105,000—$115,000 per key. Embassy Suite is a full service or “upper upscale” hotel, superior to Hyatt Place. And Hamister claims his hotel will cost $278,183 per key? But these are nationwide prices. One might argue it costs more to build locally. Not really.
During the three years and eight months since Hamister announced he would build a hotel in Niagara Falls, three similar upscale hotels have been announced, built and opened, without the benefit of vast amounts of corporate welfare.
The $27 million DoubleTree by Hilton in downtown Niagara Falls, also, like the Hyatt Place, an upscale hotel, has 194 rooms. That’s 66 more rooms than Hamister’s Hyatt Place and $8.7 million cheaper.
The DoubleTree is not only larger but is superior in amenities to Hamister’s planned Hyatt Place, featuring a nine-story hotel overlooking the Niagara River, 16,000 square feet of banquet facilities (compared to 7,500 for Hamister), a 550 person ballroom, indoor pool, gym, restaurant, and an outdoor patio facing the Niagara River. For half the price per room Hamister claims his build will cost.
Then there is the $10.2 million, 110 room, Wingate by Wyndham at 333 Rainbow Blvd.—just a stone’s throw from the proposed Hamister hotel. Completed in 2015, Wingate by Wyndham cost $92,727 per room—less than $100,000 per key and about 1/3 the claimed cost of Hamister’s Hyatt Place—but with most of the same amenities.
HVS-Global Hospitality Services publishes Hotel Development Cost Surveys. In HVS’s 2013-2014 survey (www.hvs.com/content/3355.pdf.) the company writes, Hyatt Place “properties are characterized by lower construction costs, lower labor costs and higher profit margins than those of full-service hotels.”
As final evidence that the price for a 128 room Hyatt Place is not, as Hamister claims, $35.7 million, one need only look at the nearest, most recently built Hyatt Place in the area. A Hyatt Place, nearly identical to the one Hamister proposes, was built in Amherst in 2015, near the 290 thruway ramp off Main St. It is the first Hyatt Place built in the Buffalo Niagara market.
Both hotels are six stories, though the Amherst hotel has 137 rooms as opposed to 128 for Hamister. Both feature pools, spas, and fitness centers. Both are similar in design, construction materials, amenities and room sizes. The only real difference between the proposed Hamister Hyatt Place and the newly built Hyatt Place in Amherst is the cost.
The Amherst Hyatt Place Hotel was built by Iskalo Development at a cost of $18 million, while the Hamister Hyatt Place carries a projected price tag of $35 million, nearly twice the price.
Why would a six-story Hyatt Place hotel in Amherst cost $18 million to build and open when a nearly identical six-story Hyatt Place proposed for Niagara Falls by Hamister will cost an estimated $35.7 million? The answer almost certainly lies in the subsidies.
Will the Hamister Hotel Be Built?
The Hamister deal has yet to close. It is scheduled to close September 20, just 10 days after the primary election in Niagara Falls and before the general election where Mayor Dyster is facing an unusually stiff primary challenge from his former opponent on the Hamister deal—Choolokian and perhaps a tougher general election against a well known Republican businessman, John Accardo.
And on the home page of the Hamister Group, (www.hamistergroup.com), the company announced on June 25, 2015, that they selected R&P Oak Hill Development, LLC as general contractor for the massively inflated $35 million hotel, adding that the project will start in the summer of 2015.
Which it has not.
Meantime, Hamister appears unable to secure financing. His challenge is that anyone who knows the cost of building hotels knows what it costs to build a Hyatt Place hotel and no knowledgeable finance person believes his $35 million claim for building costs.
But Hamister is getting a grant from the state that requires him to invest $9 dollars of his own money and the state invests $1. In order to get a gift from the state of $3.85 million, which Hamister needs for his financing, he has to claim he will build a $35 million hotel. The problem is a 128 room Hyatt Place doesn’t cost $35 million. It costs $18 million.
We tried to reach Hamister to ask him these questions. Unsurprisingly he did not return our calls.blog comments powered by Disqus
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