Student-housing developer seeks $9M in tax breaks for $83M project at Muir Woods

Mar. 3—The developer behind a proposed $83.3 million student-housing development at Muir Woods in Amherst says it needs nearly $9 million in tax breaks to make the project financially viable.

The Austin, Texas-based real estate developer, Aspen Heights Partners, also is seeking an unusual property-tax arrangement to support the project, which includes nearly $5 million in infrastructure improvements for roads and utilities that it says go beyond the basic development.

Aspen is planning to construct a residential complex of cottage and townhouse-style units on a 46-acre site, aimed at students at University at Buffalo. It's ultimately designed to accommodate as many as 1,800 students.

However, Aspen noted, "the project involves extraordinary costs to undertake," and the infrastructure needs are unusual. So the developer said it needs the tax breaks from the Amherst Industrial Development Agency "for the student housing project to be economically viable."

Aspen is seeking sales tax breaks of up to $2.263 million on construction materials, a mortgage tax exemption valued at $406,000, and a 10-year payment-in-lieu-of-taxes estimated at $6.507 million.

It says the PILOT would be limited to the unusual infrastructure expenses, not "typical on-site improvements" or toward the student housing itself, which Sean Hopkins, an attorney for the developers, said would be fully assessed.

And while the total incentive award far exceeds the cost of the infrastructure improvements, Hopkins said that's because the benefits are calculated over 10 years, based on a 6% annual discount rate over time.

"The notion is to compensate them dollar for dollar on the infrastructure costs," Hopkins said. "It's a little bit different than most IDA deals. Without this, we can't make the project work."

The PILOT also deviates from the uniform tax exemption policy because the proposal by Aspen would relieve it of a higher percentage of the taxes than the standard package — 70% per year in the first three years, 60% annually in the next three, and 50% each year for the final four years, before full annual taxes take effect. The IDA must approve the deviation.

"The student housing project cannot be competitive in the market in the absence of the requested AIDA assistance," Aspen officials noted in the application."The project site has been designated for development for decades, and the infrastructure improvements ... are required for any development of the project site," Aspen officials said in the application.

Student and market-rate rental housing are both considered commercial projects and are eligible for tax incentives under state law and the uniform tax exemption policies adopted by local IDAs. However, such projects are not often granted such benefits locally unless they are part of an adaptive-reuse project designed to preserve and convert an older building, as opposed to new construction on vacant land.

IDA Executive Director David Mingoia defended the agency's willingness to approve the tax breaks in this case, citing the uniqueness of the project's extra requirements on a site that has been challenging to develop for more than two decades.

IDAs in other counties across the state "have done dozens of these projects," Mingoia said, but "we haven't seen a need to until this one."

"This particular project has extraordinary offsite infrastructure, which is necessary for anything to be built on the site," Mingoia said. "We were brought in by the town to help end the 20-year saga of Muir Woods."

The first phase of the project at 1081 North French Road would consist of 220 units and 866 beds, as well as a clubhouse area and 685 parking spaces.

A second phase would add another 295 units and 925 beds, with another 13,012-square-foot clubhouse and 740 more parking spaces. The cost of that phase has not yet been determined, but would likely be comparable, Hopkins said.

The project would also include an extension of John James Audubon Parkway as a public street to be dedicated to the town. And it would be laid out to allow for the potential extension of the Metro Rail line in the future, with a terminus and a park-and-ride lot.

Plans for the Class A housing call for a diverse mix of unit sizes, ranging from two to five bedrooms in each cottage or townhouse., while the 12,000-square-foot clubhouse would include study rooms, fitness and entertainment areas. Each bedroom would be fully furnished with televisions in the common areas and high-speed Internet.

The project had previously been announced, and has been under environmental and other municipal reviews since April 2019. It's pending before the town Planning Board.

The incentive request from Aspen's York Acquisitions — equal to more than 10% of the project's value — would help pay for a host of public works, totaling $4.95 million. Those include:

— $2.05 million to extend the water and sewer lines to the main at Dodge Road;

— $876,169 to extend John James Audubon Parkway with a roundabout;

— $1.198 million to extend the National Grid power line to Dodge Road;

— $350,000 for a roundabout at John James Audubon and the I-990 or Lockport Expressway, as required by the state Department of Transportation;

— $275,000 to widen the exit ramp lanes for the 990;

— $145,733 for a paved secondary emergency access and recreational trail connecting to Dodge; and

— $50,000 for design and engineering work by the state DOT.

Additional project costs include $4.5 million for the land purchase from Ciminelli, more than $63 million for construction, $2.5 million for furnishings, and the rest for furnishings and professional expenses. Aspen expects to invest $29 million in equity, with the rest coming from bank loans.

The project is expected to create nine full-time and two part-time positions, with a total annual payroll of $539,660. But Aspen argued that it will still produce significant benefits for the community, including the infrastructure improvements.

The firm also noted it had prepared its project budget more than a year before the Covid-19 pandemic hit, driving costs up and creating uncertainty in the student housing market.

"The impact of the project is a positive one on the community, as it will promote job opportunities, general prosperity and economic welfare for the residents of Erie County and the Town of Amherst," Aspen said. The project is expected to pay more than $1 million in annual taxes after the abatement period.

The AIDA will hold a public hearing on Aspen's request on March 4 at 8:30 a.m. Any written comments are due that day as well.

The project has the backing of the town, whose board already approved a special-use permit in November 2019 to allow dormitory use on the property. The town also issued an amended environmental findings statement in August 2019. Work by general contractor Christa Construction is expected to begin in November 2021, with completion by July 2023.

Aspen is a national multifamily and student-housing developer, with over $1.6 billion in development since it was founded in 2006.

The Aspen proposal is part of the larger redevelopment of 326 acres of land just north of the intersection of Dodge Road and John J. Audubon Parkway, along Interstate 990, or the Lockport Expressway. The site — owned by Ciminelli Real Estate Corp. — is bordered by Sweet Home Road, North French Road, Campbell Boulevard and the I-990.

Ciminelli bought the land more than 20 years ago, and has proposed various development ideas over the years — envisioning millions of square feet of office space and hundreds of apartments. But it always met opposition from the community, particularly over environmental concerns. Over two-thirds of the property — totaling about 215 acres — is considered wetlands and will be designated as permanent open space that cannot be developed.

However, the remainder of the land is being divided into four pieces, with three different projects planned by three different developers.

Besides Aspen Heights, Ryan Homes is taking 46 acres to create 133 single-family homes, for its $50 million Preserve at Muir Woods development. Already, 86 homes have been sold, of which 50 are done, 26 are under construction and 10 will start in the spring.

And family-owned custom homebuilder Severyn Development is planning Sawyer's Landing, a $48 million investment that would bring 202 new residences to 17.42 acres on the southwestern corner of Muir Woods. The proposal envisions two five-story apartment buildings, 45 duplex town house buildings and two patio-home style buildings with six units in each. It's expected to be completed by 2025.

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