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

After months of scouting a number of downtown development sites, it appears that Phillips Lytle LLP has pinpointed the vacant Gen. Donovan State Office Building as the preferred location to move its offices.

In conjunction with Benderson Development Co., the law firm is expected to submit a proposal to Erie Canal Harbor Development Corp. to take over the eight-story building that sits on the northeastern edge of the 20-acre Canal Side property on lower Main Street. It's expected to lease about 85,000 square feet on four floors of the building, which will be renovated by Benderson.

The Phillips Lytle lease has been among the most coveted by landlords and developers. It gives a landlord a top-level tenant and a long-term lease while providing a massive influx of critical mass. The firm has more than 300 workers downtown.

Erie Canal Harbor Development, which owns the building, is accepting bids from prospective developers for the Donovan site through June 30. It's expected to name a designated developer by mid-July.

That time frame would work for Phillips Lytle, whose lease at One HSBC Center expires in late 2013.

It's one of the main anchors in the 38-story tower. Another is HSBC Bank USA, which occupies 653,000 square feet spread on 22 floors. HSBC's lease also expires in late 2013; the bank is reviewing options as part of a global strategy to reduce $3.5 billion in  debt. HSBC's long-term future in the building and in Western New York remains the subject of speculation.

David McNamara, Phillips Lytle managing partner, said while the Donovan site has emerged as the leading contender, it's not a sure thing.

Said McNamara: It's not a fait d'accompli."

A final decision must be voted on by the partners. They have not scheduled a meeting as of yet.

Besides the Donovan site, Phillips Lytle's short list includes occupying a proposed building in a parking lot off Delaware Avenue and South Elmwood Avenue behind the New Era Cap Co. headquarters, as well as the corner of Main and Swan streets, where the long-vacant Bernstone's Cigar Store stands.

"The Donovan site is one that we are very interested in pursuing," according to McNamara.

It is likely the firm's partners will gather before June 30 and make their vote. The Donovan site could be selected, but only on a contingent basis if Benderson is awarded the development proposal from Erie Canal Harbor Development.

At least two other groups may submit their own development plans for the Donovan building, sources said.

Canal Side is expected to have more than 1.5 million square feet of office, hotel, restaurant, retail and entertainment tenants in a series of buildings - all surrounded by public space, including courtyards and a network of Erie Canal replica canalways.