Last week we offered readers the news that we had something more to say about the Hamister Hotel deal in downtown Niagara Falls.
Normally we would not care about a small, limited service hotel now being built except for the fact that it has been subsidized by taxpayers and appears to have more than the usual dose of fraud.
The major method of fraud is in inflated construction costs.
Hamister doubled the cost of his hotel to get more taxpayer money.
Empire State Development spends state taxpayer money offering subsidies to various developers. The Hamister deal was contracted with Empire State to provide $1 in taxpayer money for every $9 Hamister spent building his hotel.
Hamister claims his 128 room Hyatt Place will cost $35.6 million.
That’s $278,183 per room – which is ridiculous.
Anyone can build a Hyatt Place for $135,000 per room.
The DoubleTree by Hilton, at 401 Buffalo Ave., with 194 rooms, cost $139,175 per room (half of Hamister’s $278,906 per room price.)
Wingate by Wyndham at 333 Rainbow Blvd is $92,727 per room.
HVS – Global Hospitality Services’ Hotel Development Cost Surveys claim “Hyatt Place (is) characterized by lower construction costs, lower labor costs and higher profit margins than those of full-service hotels.”
According to HVS, average costs for a Hyatt Place, is $126,400 per room.
Hyatt claims “(the) cost-per-key … is competitive with other major brands in the upscale select-service category.”
Hamister claims he will spend double the industry average to build his hotel.
Niagara Falls Hotel developer and operator Michael DiCienzo told the Reporter he could build the same Hyatt Place Hotel Hamister is building for $17 million – less than half the cost.
He offered to do it too when Hamister could not get the funding. (Before Cuomo stepped in and participated in the lie that this hotel costs $35 million.)
It is a lie.
The cost to build the Hamister Hyatt Place is about $17 million not $35 million.
The $278,000 per room cost is a lie.
Gov. Andrew Cuomo and Mayor Paul Dyster either ignored or were complicit in the scheme to get Hamister more taxpayer subsidies after Hamister doubled the price of Hyatt Place hotel.
Perhaps, the next US Attorney, or New York Attorney General Eric Schneiderman, or US Attorney Preet Bharara will take a look at this inflated hotel.
By inflating the price, Hamister got $3.85 million from Empire State and then for good measure the state-run agency kicked in another $1 million.
Hamister also got a prime parcel of land from the city which was valued at more than $1.5 million, sitting about 300 feet from the entrance to the Niagara Falls State Park.
Hamister paid $100,000 for it.
Hamister also received from the Niagara County IDA property tax abatements.
While Hamister picks up $4.85 million from state taxpayers, Gov. Cuomo arranged with Cuomo campaign donors at Goldman Sachs to lend Hamister $24 million against his hotel.
This means Hamister picks up $28.85 million between subsidies and the loan.
Since Hamister claims the hotel is costing him $34 million, on paper it appears Hamister is putting in $5 million as a down payment.
But the true cost of a 128 room Hyatt Place Hotel is $17 million based on industry standards.
But Hamister gets $24 million loan from Goldman, and almost $5 million from taxpayers.
That’s $29 million.
Through the use of shell companies, Hamister picks up $12 million in cash and has a $24 million mortgage from Goldman Sachs.
Since the hotel is property tax free, it should be able to pay the mortgage.
Even if it can’t, Hamister can transfer the property to another shell company and let it go into foreclosure.
He is still up $12 million.
The Hamister deal failed by every honest measurement.
Even the selection process was crooked.
Empire State and its subsidiary, USA Niagara, made the recommendation to choose Hamister over other developers who also wanted a free hotel.
Hamister was unanimously selected and construction started a full four and a half years after he was named preferred developer in February, 2012.
Almost all of the conditions the initial RFP required and which Hamister promised, such as building an upscale hotel, with apartments, and retail, were scuttled as Hamister downgraded the project as the price went up.
Back in February, 2012, Empire State Development, USA Niagara, and Niagara Falls Mayor Paul Dyster issued a press release announcing Hamister was selected and that he would build a $22.4 million building, with 104 upscale hotel rooms, 24 apartments and 8,000 square feet of retail space.
The press release stated that Hamister would create 130 permanent jobs.
Later that was downgraded to 70 permanent jobs.
Later still, Hamister told the IDA his project would create six full time and 29 part time jobs.
If anyone wanted to prove fraud in the Hamister hotel deal, all they would really have to do is determine the true cost of building a Hyatt Place.
Then examine the entities that owned the land, the construction company and the holding company and review the contracts between them.
Next they should look at the bids from the subcontractors working on the hotel.
And that includes the management company fees and other soft cost expenses.
Buried in there is $18 million in phony costs.
Start with two plus two equals four: It doesn’t cost $35 million to build a 128 room Hyatt Place.
It costs $17 million.
That can be proven. Hyatt Places are the same all over the nation.
They also cost the same: except Hamister’s Hyatt Place.
Then understand that the higher the price – the more the subsidy for the developer Hamister.
It pays to inflate the hotel cost.
An agency with subpoena power could easily prove this fraud against the taxpayers.
Subpoena the contracts, the bank accounts and the vendors’ bids for starters.
This is an easy one.
Then interview the selection committee that gave the nod to Hamister.
That Cuomo and Dyster (and Empire State officials) all knew the price was inflated to get Hamister more money ought to offer investigators another tip.
Finally, the way he was selected, the conspiracy to select Hamister, is no laughing matter.
Not only did he inflate the price to get more taxpayer money, he was selected based on a promise to build something far different than what he will deliver.
To do this on the best undeveloped parcel in Niagara Falls – only a few feet from the falls – is a travesty.
Hamister was selected through a secret process; he was allowed to downgrade from what the property needed to a low end version of what the city already has in abundance – low service hotels.
The fact that he got it for free through a potential conspiracy of the governor, the mayor and the dubious developer himself bears some scrutiny.
Many officials at Empire State and USA Niagara know this full well.
Whether they will speak right off the bat remains to be seen.