June 04, 2014
By: Tom Precious and Jonathan D. Epstein
Source: The Buffalo News
ALBANY – About 500 new jobs that IBM Corp. previously promised to create in downtown Buffalo, as part of a state economic development initiative, will take up a big portion of the Key Center office building that is otherwise being vacated in a year by Delaware North Cos.
Gov. Andrew M. Cuomo today will announce the selection of the Fountain Plaza site as the planned new home of his proposed information technology “hub” that envisions everything from training new workers in the field to developing cutting-edge software.
The announcement ends weeks of speculation about where IBM’s new software research facility and jobs would be located, as more than 15 city sites and multiple developers vied for the high-profile project.
In an unusual transaction, the state will spend $15 million to purchase a portion of the building and build it out for IBM, while the rest of the building would remain in private hands. Details of the final contract are still being finalized.
Another $40 million will go for the purchase of equipment and software that IBM, and potentially others drawn to the center, can use. This structure – in which the state retains ownership of the facility and equipment that the tenants can use – is based on a model of the state’s successful nanosciences center in Albany.
Besides IBM having access to the equipment and software at the Key Center technology hub, state agencies will also be able to use the facility for their IT offices.
The IT “hub” proposal, formally known as the Buffalo Information Technologies Innovation and Commercialization Hub, is part of Cuomo’s vow to invest $1 billion in state money on job creation efforts in the Buffalo area. Similar hubs are being developed for clean energy and medical research.
Cuomo, in a written statement provided to The Buffalo News on Tuesday, said the movement of IBM into the Key Center is “cementing Buffalo as a focal point of advanced research and commercialization.”
Cuomo and IBM in February announced that the technology giant would commit 500 jobs to Buffalo as the first part of the IT “hub” to develop software and innovations to be used by everything from the energy and health sectors to defense industries and genomics. The $55 million would be steered to the project through the State University of New York’s College of Nanoscale Science and Engineering in Albany.
IBM, which has operations in 170 countries, has a significant employment base downstate in Westchester County, where it is headquartered in Armonk. But both the company and the state have previously called the Buffalo jobs new positions that are not being moved from elsewhere.
The state and IBM previously said the company would locate the new workers in a 100,000-square-foot space in the city but didn’t say where. The SUNY school, which is running the hub center initiative, conducted a highly competitive bidding process, managed by the McGuire Development Co. as the local project manager, to find a location. The list, which began with all potential sites that could handle the space, was narrowed to seven applicants and then to three finalists, who were interviewed separately Friday.
Other buildings whose owners responded to the bidding request included the Bank of America Building at Fountain Plaza, Main Place Liberty Group’s Main Place Mall and Tower, Uniland Development Co.’s 250 Delaware, Krog Corp.’s 701 Seneca, Krog’s Trico Building and Savarino Cos.’ 500 Seneca, according to sources with knowledge of the selection process.
All three finalist facilities had access to public transportation, such as Metro Rail, and “met the visionary components of what the school is looking for,” said McGuire Development President Jim Dentinger, who declined to identify the finalists. Ultimately, he said, the decision came down to pricing, “the quality of the building and the setting,” and the potential to expand into additional space if the initiative grows. Any additional space would also be purchased by the state.
“This anchor will drive a lot more tenancy into the building they’re going to be going into,” he said. “There will be a lot of investment in and around this project once it’s operational.”
The selection of Key Center and the 500 jobs IBM has pledged to bring also offsets the loss of Delaware North as a major tenant in the center. The hospitality giant is relocating its headquarters and 350 jobs a few blocks west to the new 12-story hotel/office tower that Uniland is building at 250 Delaware Ave.
Without IBM as the hub’s first commercial tenant, Key Center’s South Tower would have been 80 percent vacant.
“The school understood the impact this will have on the building they’re occupying, as well as the surrounding neighborhood and the downtown core, so we wanted to make sure the site we selected took into account all aspects of that decision,” Dentinger said.
In February, state officials told The News that the 500-job target will not happen immediately and could take as long as five years to be realized. They said IBM will put an emphasis on hiring software engineers, research graduates and others out of area colleges. The idea is to try to stem some of the “brain drain” from the region, as area college graduates leave for better jobs elsewhere.
The state previously said the site is expected to open early next year, but Dentinger said officials are now aiming to at least start with about 25,000 square feet of temporary space by this September or October. The facility will grow from there, possibly encompassing a significant part of what Delaware North will abandon in a year.
The “hub” concept envisions an anchor tenant like IBM luring other companies interested in information technology as part of a broader program that also will involve such interests as the state’s own sprawling data center, the nanosciences college in Albany and the University at Buffalo. The state believes IBM’s presence and reputation will help attract other companies to Buffalo so they can be closer to a center that educates future IT industry workers and works on new software innovations.
The model is based on a theory that private companies will be lured to a facility if the state pays for the cost of the structure and equipment that many companies otherwise might not be able to afford on their own. The model calls for no direct cash subsidies to a company that wants to participate, but indirect financial incentives, such as the equipment or building, that they can use while bringing new jobs to a region.
The IBM announcement is one of a number that can be expected this year as Cuomo duels against his Republican gubernatorial opponent, Rob Astorino, who has questioned if Buffalo will ever see the full $1 billion in promised aid.