Hamister wants more: How the politically connected developer gets a free hotel and $10 million in his pocket

USA Niagara officials have recommended that state taxpayers give developer Mark Hamister an additional $1 million for his downtown Niagara Falls Hyatt Place hotel project.

That money supplements the $3.85 million the state-run agency has already committed to the project.

The $4.85 million represents a 14% public subsidy for the purported $34.4 million hotel development deal.

In addition to the millions Hamister will get to build a midscale hotel, Hamister also got a prime parcel of land valued at more than $1.5 million, sitting about 300 feet from the entrance to the Niagara Falls State Park, for $100,000 from the City of Niagara Falls.

Hamister also received from the Niagara County IDA years of property tax abatements worth millions more.

In order to pull off the deal, Hamister artificially inflated the cost of his hotel  – he is really building, based on a true comparison of other Hyatt Places, an $18 million hotel.

He is claiming it will cost him $34 million.

This inflating of the price gets him more taxpayer money, since the greater the cost, the higher the taxpayer subsidies.

In the end, he is getting a free hotel.

Here is how it works.

While Hamister picks up $4.85 million from state taxpayers, and Gov. Cuomo arranged for Goldman Sachs to lend Hamister $24 million against his hotel.

This means Hamister picks up $28.85 million between subsidies and the loan.

Because Hamister is claiming his 128 room midscale Hyatt Place hotel is costing him $34 million, on paper Hamister appears to be putting in $5 million of his own money as a down payment.

Actually he puts in nothing.

The true cost of a 128 room Hyatt Place Hotel is $18 million based on every industry standard and based on what every other Hyatt Place is built for in America. (Hyatt Places are built the same and the construction costs vary only marginally from one to another).

Since Hamister is actually only paying $18 million to build his hotel, but is getting almost $29 million in loans and subsidies, in reality he is overfinancing the deal.

Here’s how it works. 

The hotel costs $18 million.

But he gets company “A” to claim it costs $34 million.

He then gets $24 million from Goldman, and almost $5 million from taxpayers. That’s $29 million.

Company “B” builds it for $18 million, and sells it to Company A for $34 million.

Company A pays B as follows: $24 million from Goldman Sachs, $5 million from taxpayers and $5 million from Hamister as his down payment.

Company B takes in $34 million but pays out $18 million, which leaves a profit of $15 million for Company B out of which $5 million was Hamister’s down payment.

But since Hamister owns both Company A and Company B, after he pays himself back his paper $5 million down payment, Hamister pockets $10 million, has an $18 million hotel with a $24 million mortgage. Since it is property tax free, the hotel should be able to pay the mortgage.

Even if it can’t, it doesn’t matter. Hamister can transfer the property to Company “C”, which he also owns, let it go into foreclosure, and he is still up $10 million.

It’s a glorious and beautiful thing when you are so marvelous that you can call elected officials up and donate to them so much money that they fall over themselves finding ways to do you favors, like getting you a free hotel.

When you do such nice things for politicians, you can do what non-donors can’t, or if they did they would go to jail.

The Hamister deal failed in every honest measurement. It is a midscale hotel in a city with too many midscale hotels.

USA Niagara staff made the recommendation to choose Hamister over other developers who also wanted a free hotel.

Hamister was unanimously selected and the development comes a full four and a half years after he was named the preferred developer in February, 2012. Almost all of the conditions the RFP required and for which Hamister promised, but failed, to accomplish, won him the prize, such as building an upscale hotel with market rate apartments, and retail, have been scuttled as Hamister downgraded the project as the price mysteriously went up.

Of course if he wasn’t politically connected he could never get away with this. But then again, if he wasn’t politically connected he never would have been selected in the first place to get a free taxpayer-funded hotel.

What took so long was him figuring out how to get an extra $10 million in his pocket.

Good things take time.