Investing In his own backyard

Mark Croce, owner of the Buffalo Development Corp. and Buffalo Chophouse is planning a high-end luxury hotel in downtown Buffalo. We caught up with him recently to talk about his plans.

THRiVE!: Where is your new hotel going to be built?

Croce: Convention center area right on the Corner of Franklin and West Huron. The address is 210 Franklin Street. It is a couple of different parcels that have been coupled together. One of them is the Curtiss Building on the corner of Huron and the other is the continental night club and the parking lot that came with, so that is all part of the parcel.

THRiVE!: When are you looking to have it complete by?

Croce: In a perfect world we would like to have it completed by next spring or early summer because the National Trust is holding their annual convention in Buffalo next year in 2011 in the fall. We’d like to be open for that because it is a historic preservation project as well. It is one of the things that we have to do as well to close the financing gap was to get it listed in the national registering. We’ve been successful in doing that and we’ve gone through part 1 and part 2 of that process and now we are just waiting on final department of interior approval on all our plans and modifications so we can get tax credits to help offset the capital cost of this project.

THRiVE!: Is this your first hotel build?

Croce: Yes this will be my first hotel, but like with everything else, every time you get into a new area its your first, I mean the first time we did a nightclub it was my first, first restaurant was a first, and when I delved into the parking business there had to be a first, and now with the hotel, it seems like a natural progression of the hospitality business. From the folks I talked with that I know in the business say, “If you can run a full service restaurant successfully then a hotel should be no problem, because they are a lot less labor intensive than running a restaurant operation.

THRiVE!: How many restaurants do you own now?

Croce: I have three restaurants and 2 nightclubs right now in the same area of Franklin street to the north, starting with Laughlins on the corner of Franklin and Tupper Street and then halfway down the block headed south, the Buffalo Chophouse, Darcy McGee’s Irish Pub.

THRiVE!: Is this hotel going to be a chain hotel?

Croce: We are doing this as a stand alone independent property, it will be locally managed. I am putting together my own management and marketing team and I will not be attaching any flag to this property. That comes with high cost not only with upfront franchise fees and being constrained to do things that are dictated by the franchise company, they tell you what color wallpaper to use, what kind of carpet to use, this gives me a lot of creative freedom to create a unique property that is very high end and very special yet not constrained by a national flag or franchise. Besides that there are a lot of programs you have to buy into when you affiliate with a flag, loyalty points, and marketing programs and the royalty and overrides they get on your gross sales regardless of your profitability. So, it comes with a heavy price, for some people that model works but I have always been an independent type of person that would rather do things in a local marketplace, local trends and I really don’t feel like having my operating policies dictated by an outside company.

THRiVE!: Why are you investing in the city like this?

Croce: Buffalo is my home town and there is just as much opportunity here as in other cities. If anything what has been demonstrated with this latest credit crunch is that these major cities you see what people thought was the land of promise you look down south at some of these big cities, you look at Atlanta, Las Vegas, and some of the other city’s that have had explosive growth, now they have explosive decline because its not sustainable. Those markets have actually had negative growth, they are going backwards. Buffalo is kind of plodding along, it hasn’t gotten to far ahead of itself, there are opportunities here, there are unique niches here that need to be served and that have either not been served, or not been served fully. This is the landscape that I know and understand, this is where I was born and raised, I would rather invest in my backyard where I know the local landscape and the folks that are part of the process versus having to starting over in another market. My family and friends are all here. Money is only one factor, its tough to give up everything to go to another market just to make more money.

THRiVE!: So all your businesses are in Buffalo?

Croce: Everything. I enjoy where I am at. I live down here and work down here and frankly I am not interested in looking elsewhere.

THRiVE!: When building a hotel, what data do you look at to make sure the market is ready for it?

Croce: Couple of things. There is not a lot of inventory at the high end of the market. There is not a lot of opportunities where people can get a high end experience in Buffalo, save the mansion. So I already know it is an underserved market. Number two I am creating a niche market, I am going after something its going to be very high end, very specialized, and very small and manageable. There are 4 different components to the hotel project. Beside the 57 hotel rooms and suites. There is also a full service 20k sq. ft. banquet facility that is going to have three different meeting rooms, a board room, and a large ball room capable of sitting between 400-450 sit downs and so total we will have banquet capabilities of up to 750 at one time which is pretty large. Then there is a restaurant and lounge component on the ground level which if I can play off my experience with the Buffalo Chophouse there seems to be a large market for upscale dining in downtown. We have proved it with the Chophouse, we’ve seen other restaurants come along like Tempo and done well, there is a market for fine dining in the city and we are going to continue to capitalize on that. Then lastly we are adding a salon and spa component to the property to have a local draw. We are teaming up with a local spa We are going to be putting in a 7,000 square foot spa that is very unique to this area, very high end.

THRiVE!: What has been the biggest hurtle so far?

Croce: The biggest hurtle is just finalizing the plans. Believe it or not it is a very complicated reuse business/adaptive reuse project. There is a lot of moving parts. You have four different revenue centers. You have small property constraint, you have an adaptive reuse trying to find a new use for an old building, you have the historic preservation piece- trying to keep those folks happy with your design so you can qualify for the tax credits. Then pursuing all the potential public benefits that are associated with this project. Without financing and funding from different programs it would not have been feasible to do this to make it make economic sense without some of the pieces that came together from the public sector. They were all necessary to help us close the financing gap. Most hospitality projects in other major markets are having a hard time getting financed right now and the ones that are, are in a 55-60% value range so unless you can close that gap you won’t be able to make it off the starting blocks. The budget has grown to about 22 million dollars. Its pretty unique, It is capital intensive project, It’s a large investment in a small property but it will be spectacular when it is completed, it will be one of a kind. It will be on the national register of historic places, so it will be a national landmark that people come and see just for the preservation of the Terra Cotta, the original windows, and historic corridor and some of the other elements that make this property eligible for historic funding.