By JAMES FINK
jfink@bizjournals.com | 716-541-1611

A recent spate of failed attempts to sell prominent local office buildings is considered a sign of the times by commercial real estate insiders.

The issue has come to the forefront in recent weeks:

• Attempts to find a buyer or developer for the Power City Building in Niagara Falls failed to attract a single bid.

• An online auction to sell Olympic Towers in downtown Buffalo attracted a fair amount of attention, but the top bid was still $1 million less than the reserve (minimum bid) sought by the building owner.

• Add to that the real estate and legal saga surrounding downtown's Statler Towers, which was shut down and awaits a developer willing to pour millions into the crumbling structure.

Clearly, buyers are skittish.

"It is a sign of the times," said James Militello, president and founder of J.R. Militello Realty in Buffalo. "But it is not specific to Buffalo. It's a national trend that's happening all over. In this economy, the ability to put together a deal has become increasingly difficult."

Some blame banks and other financial institutions, which remain cautious about making commercial real estate loans, especially for speculative office and multi-tenant deals.

Banks have seen the number of foreclosed commercial properties rise since the national financial meltdown began in 2008. Elizabeth Warren, chairperson of the Congressional Oversight Panel that's monitoring the nation's financial bailout, warned earlier this spring that she expects to see $1.4 trillion in new commercial real estate debt hitting the books in the next three years. Warren is a Leo Gottlieb Professor of Law at Harvard University.

The issue is coming to a head as several major buildings across the region now have, or soon may have, a "for sale" sign placed on them. With the current economy as the backdrop, sale prices may be far less than some envision.

"Everything today is bank- and appraisal-generated," said Dorothy Stahlnecker, M.J. Peterson Commercial Real Estate vice president. "It's a very testy marketplace right now. There are a lot of buyers and decisions that are still in a holding pattern because of the national economy,"

That translates into buyers waiting and looking for bargains.

Two years ago, Olympic Towers changed hands for $8.46 million. The 10-story, 143,000-square-foot Pearl Street landmark has a healthy tenant roll anchored by two federal agencies: U.S. Bankruptcy Court and the U.S. Trustees Office. The building is 76 percent leased and carries little debt.

Yet the online auction, which ended May 20, drew a high bid of $2.9 million.

Niagara Falls' Power City Building, meanwhile, is a four-story, 41,000-square-foot structure on Third Street that is a century old. It attracted lots of tire kickers but no bids when USA Niagara Development Corp. issued an RFP seeking development proposals for the building. USA Niagara Development and building owner Anwal Properties LLC are mulling their options.

Some say potential buyers are playing an economic-development waiting game, hoping prices and commercial real estate values will continue to plummet, opening the door for bargain-basement deals.

"It's all a matter of timing," Militello said.

Any deal, especially locally, is usually tied to a potpourri of public-sector incentives. New York's Empire Zone credits are due to sunset at the end of June. Gubernatorial candidate and current state Attorney General Andrew Cuomo is proposing a revamped program that offers incentives tied to jobs created - especially if it involves the hiring of those who are unemployed.

The Erie County Industrial Development Agency offers a variety of incentives, including those for the adaptive reuse of older properties. The Amherst Industrial Development Agency also offers special incentives if projects take place in older neighborhoods of the town.

Incentives help with post-sale development plans, noted Militello, who at one time was Buffalo's community development commissioner and economic development pointman.

Then there's the Statler.

The Buffalo landmark has been mothballed since bankruptcy court ordered the building closed as efforts to find a buyer fell short. Some developers have continued to express interest in the Statler but, to date, no one has submitted a formal plan to building trustee Morris Horwitz.

"What happened to the Statler isn't so much the economy as the way it was butchered by its former owner (British investor Bashar Issa)," Militello said. "That building could have stood on its own two feet for a while, but not now. In this economy, the Statler is too big for the market."