The New York State Insurance Fund abruptly — and without public explanation — canceled plans to build a $59 million headquarters in Latham, a decision that shocked the developer and will result in a lawsuit to recover millions of dollars in damages.
“It was totally out of the blue,” said Kevin Bette, president of First Columbia LLC, one of the Albany region’s largest developers. “Somebody just changed their mind.”
Bette and his team had worked for a year on plans for the energy-efficient, state-of-the-art 175,000-square-foot headquarters after the Insurance Fund’s board approved a contract in May 2021 for the purchase and development of the property at Riverhill Center at 1201 Troy-Schenectady Road (Route 7).
That included legal, insurance, financing, engineering and design services; getting site plan approval in Colonie; lining up subcontractors; sourcing materials and equipment; moving out a few commercial tenants; and preparing for the scheduled June 1, 2022 groundbreaking.
“We undertook an enormous amount of work to do this whole project,” Bette said.
As recently as April 11, representatives of the Insurance Fund gave no indication they were going to back out of the deal, according to a notice of claim First Columbia’s attorneys prepared but haven’t filed yet in the New York State Court of Claims to recover at least $12.2 million in damages. Bette said the claim will be filed this week.
On April 20, the Insurance Fund’s board of directors went behind closed doors during its regular monthly meeting.
After the executive session, a fund representative said the board will “terminate negotiations” regarding the proposed purchase of the Latham property, according to a video recording of the meeting. Staff was also authorized “to take appropriate actions to recover any costs” related to the negotiations.
Bette learned about the decision from the Insurance Fund’s attorney on May 9 — just a few weeks before construction was scheduled to begin.
“It really bothers me because you just don’t do that to someone,” Bette said. “That’s what I said to their chief counsel.”
The Albany Business Review wasn’t able to reach representatives of the Insurance Fund for comment.
It appears the Insurance Fund is searching for alternate locations. During its July 20 meeting, the board again went behind closed doors and then emerged to say it authorized “the continuation of services on a month-to-month basis with Jones Lang LaSalle brokerage services for real estate professional services.”
Jones Lang LaSalle (JLL) represented the Insurance Fund in its dealings with First Columbia LLC.
The insurance fund provides workers’ compensation and disability insurance to more than 200,000 employers in the state. It financially supports itself and competes against private insurance carriers.
The fund’s offices are currently at 1 Watervliet Avenue Ext. in Albany and 15 Computer Drive West in Colonie.
Both sides had agreed to a final “term sheet” in October 2021 outlining the details of the agreement to design and construct the building. As part of that negotiation, the Insurance Fund agreed to drop a provision giving it the right to terminate the agreement “for convenience,” according to the notice of claim.
But that’s what the Insurance Fund ended up doing, Bette said.
“It wasn’t Covid,” he said. “It wasn’t because they didn’t have the money or any problems with the design or the team. It turns out they just changed their mind.”
While there wasn’t a final written agreement for the new headquarters, Bette said NYSIF and its representatives actively pursued the project, including spending $500,000 on outside vendors to review materials prepared by First Columbia.
The $12.2 million in damages that First Columbia will be seeking in the notice of claim includes out-of-pocket expenses and depreciation of the property since commercial tenants were moved out of a building at Riverhill Center to make way for the construction of the Insurance Fund’s headquarters.
“I’ve been doing this a long time and never had a private company do this to me,” Bette said. “This is not normal.”
“We’re just getting the shaft from these guys,” he added, “and it’s just not right.”
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