An insider describes how Bashar Issa’s renovation came to a halt

In June 2006, British real estate developer Bashar Issa purchased the 86-year-old Statler Towers, stoking great optimism in some and skepticism in others. I was hired by BSC Development, Issa’s development firm, in July 2007, and I worked through both good and bad times until April 11, when the project came to a standstill. During my employment with the firm, I was close enough to the project to understand the many challenges that the Issa’s company has experienced, and how certain missteps led to the current break in work.

The company’s irregularities were apparent to me from the outset. Six months after graduating from the University at Buffalo with a bachelor’s degree in English, I applied for a position as material buyer on Issa’s restoration of the Statler Towers. My interview lasted about three quarters of an hour, and I was left alone in an office for 15 minutes. I was asked little about my resume or prior work experience. At the end of the interview, I was offered an opportunity to shadow the previous material buyer for a day or two and decide if I wanted to accept a position.

Keith Szczygiel, who worked as a package manager at the company, shared a similar experience. “The first day the HR representative made me sit in her office for 40 minutes before the labor manager showed up,” he recalled. “I still didn’t know my exact position at that point.”

All of this seemed highly unusual—nothing in my education or my past work experience suggested that I was suited to the job. Still, I was intrigued by the opportunity. Not only was this potentially the beginning to a career, but the company expressed good intentions: to help restore the city of Buffalo to its legendary past glory by reviving the iconic towers, with additional plans for a 40-story tower across the street. What more could a hometown guy ask for?

Emily Littler, who worked for a brief period as a material buyer, said, “It seemed very exciting. An interesting project. It seemed fast-paced.” Littler recalled her interviewer telling her, “The sky is the limit in this company.”

I was excited to be working for an out-of-towner who had taken an interest in Buffalo. I began to learn more about my new boss, through fellow employees who had met and worked with him and through online sources. His credentials were stellar. According to an August 24, 2006 article in Buffalo’s Business First, Issa had already completed the restoration of a small bank in Manchester, England, which he converted into apartments, and was working on several new-builds around that city. Learning that he had succeeded in one restoration and was conducting several other projects gave me confidence that Issa was the real deal.

About three weeks into my new job, I met Issa for myself. A small man, he stands at approximately 5’3”. Despite his stature, he exudes great confidence. He is cool and collected, speaks intelligently, and has the candor and accessibility of a great politician. All new hires were offered the opportunity to sit down one-on-one with him to discuss the goals of the company, and how each felt that he or she fit into Issa’s vision. The way he spoke of development reminded me of a professor giving a lecture on Le Corbusier or Mies van der Rohe. He did not consider specifics. In describing his plans for the building, he spoke of grandness, beauty, efficiency, and, above all, respect for the building’s history. There was a concise quotation on the back of our business cards from William Clough-Ellis that embodied his theories on development: “Cherish the past, adorn the present, construct the future.” I left Issa’s office feeling as though I were about to be part of something exciting.

“The most rewarding part was the idea of restoring that amazing building to its potential along with being partly responsible for making that happen,” Keith Szczygiel said.

Issa’s original plan for the Statler Towers was to convert the building into a mixed-use property, with residential, hotel, office, and retail space. The top five floors were originally set aside for condos and corporate apartments. (The residential component is now up in the air, as Wyndham Hotels plans to take the top 11 floors for hotel space.) Issa envisions Buffalo as the home of secondary offices for companies headquartered in big cities nearby. Buffalo is within an hour and a half by plane of New York, Boston, Chicago, and Philadelphia, cities with outrageous real estate costs. Companies in these business epicenters spend millions on office space for work that could be done in virtually any city. Buffalo offers plenty of available space at a very low cost, as well as lower salary costs, as Buffalo has the least expensive housing in the Northeast. These advantages amount to a great opportunity for businesses to increase profitability by decreasing overhead.

The feasibility of Issa’s vision made me optimistic about both my own future and Buffalo’s. But as ideas were put into practice, they never seemed to pan out the way that they had been imagined.

The problem with the Statler project, as far as I can see, is not conceptual. The problem has been in the operations. Issa’s managerial style is to look for new, more efficient ways of doing things and bypassing standard, proven methods. This approach has seldom worked in practice, and has in fact wound up costing the company money.

An assignment that I was given early on directly from Issa was one of the first instances that gave me doubts about the company’s ability to turn the dilapidated and neglected building into a luxurious center of commerce and residence. He wanted to save money on gas over the winter, so he asked me to research electric resistor coils to be placed in the air-conditioning ducts. He thought that he could eliminate gas heating altogether on certain floors by placing these units in the ducts and blowing air over them and through the vents. I did some research and had a heating and cooling specialist come to the building to make an estimate. From the outset of our tour of the building to visit the air-conditioning units where the coils would be installed, I detected great confusion on the part of the man doing the estimate. It would cost just as much, if not more, in electricity to heat the building. The coils suck massive amounts of energy, and to heat adequately all the areas that were currently occupied, 19 to 21 coils would have to be installed at an enormous cost.

When I informed Issa of the cost, he didn’t seem to believe me. I had to show him the paperwork. I spent 20 hours of a work week researching and getting estimates, and he then decided that we would stick with what we had originally.

Here is another example, and a telling one.

I personally worked on the procurement of a rolling service door to be installed at an entrance to a storage room in the building. The door was needed to provide easy access into the building for receiving materials. I spent several days researching different companies that produced the doors and had a local company come out to give an estimate. I thought it best to have the lowest-bidding local company install the doors, even though it was more expensive than an outside firm. This way we could hold them accountable for any mistakes in the installation or any service that the door needed in the future. But Issa told me the price was too high. Furthermore, he was confident that our laborers could install the door themselves. So I found a company in Long Island that gave a better price, even after delivery, and I placed the order. Upon the door’s arrival, the laborers read the installation instructions and realized that they did not have the proper tools to complete the job. As of the last day that I was employed on the Statler Towers project, the steel service door still sat in its box in the very storage room to which it was meant to give access.

Szczygiel described similar experiences working with Issa. “I think we did everything we could to prevent this and gave him ample warning of the consequences of his decisions,” he said. “It’s like the old saying, ‘You can lead a horse to water but you can’t make him drink.’”

As time went on, I noticed other aspects of the operation that seemed contrary to reason. For example, my boss was the same age as I. David Rycyna was also 24 and had recently graduated from Georgetown University’s McDonough school of Business. That might be a good business school, maybe a great one, but a freshly printed diploma hardly qualified Rycyna to be project manager on a construction project of such magnitude. An established construction company would normally require the lead project manager on such a large assignment to have at least a decade of experience in construction management, and Rycyna had none.

The sense of frustration that comes with a learn-as-you-go experience became evident in Rycyna’s demeanor. After only a few months he moved on to another company and left the position to Kyle Raczka, who previously had been working as a package manager at BSC Development. Raczka was also 24 and graduated from the University at Buffalo with a BA in psychology. He served as project manager from the time Rycyna left until the project came to a standstill. He recently moved on to be a project administrator for an ongoing construction project in the area.

As I met more of my coworkers and greeted new hires as they came through the door, I began to recognize a distinct pattern in their age and experience level. Almost every person in our office was under 30 and had graduated with a four-year degree. Despite our lack of practical experience, we all derived confidence from the virtue of the mission. “We all took the job for the same reason, to help renovate Buffalo,” Raczka told me.

This is not to say that there was no experience in the company at all. John Gingher has been working in the Statler for 35 years and has been property manager for the past 21 of those years. His ability to rattle off information regarding the ancient structure is uncanny. However, Gingher has no experience in overseeing a construction project. When renovation began, he remained property manager and maintained all his prior responsibilities, while taking on the new task of full-time consultant. Gingher is the property manager now, and presumably will remain so until his retirement.

Without seasoned leadership it is hard to imagine any group of people being able to manage the renovation of such a gargantuan structure. The building is a fortress. It is 18 stories tall with 800,000 square feet of space. Beyond its massive size, the building presents other problems. It has a history, and the visual, external history has to be preserved. Issa respects the history of the building. In fact, its great historical significance is one of the main reasons that he purchased the property. The current plan for the hotel part of the project is to franchise it as a Wyndham Historic Hotel. Wyndham has done excellent work with historic properties elsewhere and has strict guidelines that require maintaining a great deal of authenticity in order for the flags on the front of a building to bear the Wyndham name. To maintain the historic integrity of the building, measures need to be taken to repair or refurbish existing elements of the building, or to find suitable retrofitted products to take their place. This is neither cheap nor easy.

Issa has never had to deal with the challenges that such a renovation presents. He completed that one small renovation in the UK, but most of his projects in Manchester are new-builds. Unlike a new-build, the improvements necessary to transform an old structure into a five-star hotel must conform to all the quirks that come with the planning and building methods of the past. For instance, no two hotel closets are the same height, width, and length. Because of this, they must be demolished or any sort of added features (shelves, hanger rods, etc.) must be custom-made. Issa was unaware of the scope of problems that we would unearth.

As the months went on, and we strove to accomplish as much as we could, our resources diminished. Money began to come in less frequently and in smaller amounts. I found that suppliers were having trouble giving us further credit, as we had bills that were two or more months overdue. I found myself less useful around the office, as my productivity was limited by the amount of credit or cash that was available. Issa had run his resources too thin and was having trouble keeping up.

A major source of internal strife for the company was communication between the three international offices, particularly when receiving packages from our manufacturing plant in China. It was my responsibility to act as a conduit between the BSC employees in China and our customs broker. I found myself on the phone for hours some days trying to provide the customs broker with everything that she needed to get the packages cleared through customs, often in a last-minute effort to avoid incurring demurrage charges—penalties for extra days of storage while the container waits to be cleared. This was most often a result of not being provided with all the necessary information from the Chinese office.

In one such instance, a container was held in demurrage for so long that it was in danger of being seized by the government, a result of our inability to pay the fee that customs required. We owed the shipping yard more money than the contents were worth. Eventually, however, the debt was paid and the package was received. The day that it arrived, we had to pay the truck driver extra for the hours he sat and waited for us to unload it. From beginning to end the shipment was a disaster.

Beyond operational problems, the project faced the same economic difficulties that are currently squeezing so many people. The current economic funk has affected nearly every aspect of American financial life, but it has hit the housing and development industries particularly hard. Banks and other lending agencies have realized the foolishness of irresponsible lending and are now much more rigorous in their loan requirements. Unless a developer has enough capital to fund it himself or exquisite credit, a development project is in trouble.

Several additional complications led Issa to take a step back and reevaluate the restoration of the Statler. First, in order to receive the state historic preservation tax credits that he needs to continue work, he has to provide more information to the State Historic Preservation Office, the board in charge of granting those credits. It will be approximately three months before he hears back from New York State regarding the tax credits. Second, he and Wyndham are renegotiating the size of the hotel, which will affect his original plans for the upper floors. “This is a regrouping effort,” Raczka told me. “Things need to be rethought before we take further steps.” The pause in work, he explained, will give Issa time to get the project in order and to reconsider some of the business practices that have yielded him poor results in the past.

From the top floor of the Statler Towers, one can see for miles on a clear day. Directly across the street the steel is being erected for the new federal courthouse. A few blocks north on Delaware Avenue, the new curtain wall is beginning to wrap around the Avant (formerly Dulski) building. On the waterfront Carl Paladino’s high-end condominiums are being completed at a steady pace. While all these projects move forward, the project that had everyone talking last summer now sits stalled, stagnant, and uncertain. People continue to shuffle in and out of the building. Niagara Square is still busy. The building that can be seen from anywhere downtown remains, but for how much longer will it go largely unused?

Although the stop in work looks discouraging, it appears as though Issa has every intention of returning to the project as soon as he can. The question remains, however, what he will do differently when work starts again to ensure that the finished product provides the amenities a modern hotel and office building require while preserving the building’s historical design, and to ensure that the project is completed in a timely fashion. If Issa is willing to seek help and advice from experienced veterans in Buffalo’s construction and development industries, this project could turn out to be one of the most impressive and important renovations in the city’s urban renaissance.