SCHENECTADY — Fifty years ago next week, one of upstate New York’s largest developers made a quiet debut in the Capital Region, closing on the purchase of an idle Army supply depot in Guilderland.
A half-century later, Francesco Galesi’s various ventures span the nation -- from East Coast to West Coast and the Gulf of Mexico almost to Canada. But nowhere are his properties more concentrated than in the Schenectady area.
Among five counties of the Capital Region, the Galesi Group owns 116 buildings that are valued at $693.5 million, total 11.5 million square feet, pay $12.5 million a year in taxes and are home to 213 tenants with 9,600 employees.
Its headquarters has been here the whole time, though in a nondescript Rotterdam warehouse for 49 years. It finally moved into plusher surroundings at Mohawk Harbor in 2018.
There have been mistakes and even some failures along the way, CEO David Buicko said last week. But the successes outnumbered and far outvalued the failures.
“Anybody that bats a thousand isn’t taking any risks,” he said. “We took risks.”
Francesco Galesi grew up one of six children of Italian immigrants in northern New Jersey. After serving in the Marine Corps and earning a degree at Princeton University, he went into real estate, his father’s profession.
His first ventures in upstate New York, with brothers Vincent and John, were a shopping center in Binghamton and conversion of a Buffalo-area helicopter factory into an industrial park.
In partnership with Vincent, Francesco looked east in 1969, to another former military property — the Guilderland component of the Schenectady Army Depot, a sprawling campus built to supply the Allied war effort during World War II. Later in 1969, they bought the second half of the Schenectady Army Depot, in Rotterdam. The total expenditure was $4 million, much of it borrowed money.
This would become a pattern: Buy properties with great potential at bargain prices. But another turning point came in 1969: Vincent Galesi’s terminal illness left Francesco Galesi alone at the helm.
The “Group” in “Galesi Group” refers to a group of ventures, not a group of owners.
The operation grew and did well enough that Francesco Galesi was appearing on lists of the wealthiest Americans by the mid-1980s — but generally without any commentary or details, as he avoided publicity whenever possible.
The few profiles published in that era describe him not as personable but private. He enjoyed his wealth but was not interested in discussing it, or himself.
Similarly, a third of a century later, he asked Buicko to speak for the company for this story.
At age 88 with snow-white hair, Galesi is handsome and smiling in recent photos from his winter home in Florida. He is physically active and remains involved in setting the strategy for the Galesi Group, though he sticks with the formula he long ago settled on: Hire the right people and let them do the day-to-day work of running the company. He even lets them overrule him, at times.
“Sometimes he doesn’t do what I recommend; sometimes I don’t do what he wants,” said Buicko, the Galesi Group’s top employee since 1986.
THE CAPITAL REGION
In the Galesi Group’s widespread operations, there is no single concentration of properties like there is in the Capital Region.
It’s where the company is based and where most of its leaders live. More importantly for a real estate developer, it’s where the institutional knowledge is.
Real estate is local, Buicko explains: Local people know about the opportunities that exist nearby and know whom to rely on as partners to make a project work. If you parachute into a region you know nothing about and find a deal, it quite possibly already was passed up by people more familiar with that region.
(So why the dozens of apartment complexes in seven other states totaling 11,000 units? They were targets of opportunity. The Savings and Loan Crisis 30 years ago put a large number of properties in foreclosure and simultaneously reduced the capital available to local investors to buy them out. Galesi had capital available, so it picked out good properties at good prices.)
The keys to success in the Capital Region have been knowing the market and approaching projects with the right partners. Galesi Group isn’t vertically integrated: It doesn’t do construction and sometimes doesn’t even manage the construction, though it usually manages the finished property.
Galesi Group’s niche is finding the unlikely project and/or making the numbers work through tax and finance strategies.
“We’re more focused on financial creativity,” said Buicko, an accountant by training. “We tend to do things that are a little out of the box.”
The two Army depots were early examples: They might seem like white elephants, but for 66 cents a square foot, they offered huge amounts of space within a day’s drive of a large swath of the U.S. population. Nearby interstate highways and direct rail access connect the depots to all of North America.
For the same reason, Galesi Group later acquired parts of the Scotia Navy Depot.
It also bought more white elephants in downtown Schenectady (Center City and the old Schenectady International factories), built an industrial park on the long-vacant site of the old Ford plant in Green Island and turned a former railyard into a 110-acre warehouse/distribution campus in the South Bronx.
Most notably, it demolished the former American Locomotive Co. factory, which had sat crumbling along Erie Boulevard for a generation, and built Mohawk Harbor on the site.
Galesi closed on the purchase of the Army depot in Guilderland on Jan. 30, 1969, just days after Alco announced the end of locomotive production in Schenectady. Buicko’s new office sits near where the largest Alco assembly building stood, about as far above the ground as some of Alco’s gantry cranes would have been.
When Buicko joined the company in 1982, it was pursuing a strategy of diversifying away from the real estate industry. Galesi Group moved into telecommunications, restored the landmark Equinox Resort in Manchester, acquired five manufacturing companies and entered the oil and gas business. Even an Italian manufacturer of home pasta makers entered the portfolio.
All were good ventures for at least a while, but some didn’t hold up, Buicko recalls.
Telecommunications was the most notable exception to Galesi’s pattern of success.
In a rare 1990 interview, Galesi explained simply that he pursued telecom ventures because the industry excited him. Unfortunately, his interests wound up entangled in WorldCom, which in 2002 would collapse into what was then the largest corporate bankruptcy in U.S. history.
A lengthy 2002 Los Angeles Times retrospective on Galesi’s 20-year odyssey in telecommunications noted that no wrongdoing by Galesi himself was proved during extensive legal battles over WorldCom and the billions it lost. (WorldCom’s ex-CEO was later sentenced to 25 years in prison for conspiracy and fraud.)
Opposing attorneys called Galesi “gracious” and “cooperative” or, at worst, “naive,” the Los Angeles Times noted.
The telecom ventures broke ground (first commercial direct satellite broadcasts) and in some cases were very profitable, but ultimately, they were done with the wrong partners, Buicko said.
Put another way, Galesi didn't follow his own formula for success: Have the right team in place.
Galesi Group is completely out of telecommunications. It also exited manufacturing.
Broadly speaking, it now operates in three sectors: Oil and gas, logistics and real estate.
- Oil and gas might seem like another potential pitfall for a real estate developer, but it hasn’t been. Galesi Group bought E&B Natural Resources in the late 1990s, when the company was bankrupt and oil was running $14 a barrel. The firm put a skilled industry veteran in charge, and its production has grown from 1,000 barrels a day to 13,000.
- Galesi Group’s logistics business — Distribution Unlimited — got its start in 1969, when Francesco Galesi found himself with 6 million square feet of space in Guilderland and Rotterdam. Distribution Unlimited manages movement and storage of goods and materials to reduce costs and increase efficiency for clients.
- Real estate was the beginning of Galesi Group and remains its core component: Industrial parks, resorts, office buildings, municipal sites and more than 11,000 residential units in seven states.
Galesi Group has done better with the narrowed focus.
“There is no money-losing part of the portfolio now,” Buicko said.
Buicko, now 65, grew up on the east side of Rome, New York, in a house converted from his grandfather’s bakery.
His father would walk through the backyard to work at the Revere Copper and Brass factory, and his mother would drive a mile to work at Griffiss Air Force Base. Buicko’s first job also was in the neighborhood, delivering the Utica newspaper in the morning and the Rome newspaper in the afternoon.
He started off in college as a history major but saw a better career path in accounting.
He stayed in the Capital Region after graduating from Siena College, working first for Marvin and Company CPAs, then Southern Cable Systems. He took a pay cut and went to work for Galesi Group in 1982.
Buicko said he benefits from not having to show growth every quarter, as investors in a public company expect. Francesco Galesi still requires results, he said, but he is willing to take the longer view and see returns in years rather than months.
There were two tight stretches for the company under Buicko’s watch: Right at the start in the mid-1980s, amid tax law changes and high interest rates, and again in 2000, after the dot-com bubble burst. He recalls telling Galesi he didn’t know if he could make payroll at times.
“We won’t be in that position again,” Buicko said.
Aside from blind misfortune, there are a few sure ways to get in trouble with real estate development, he said: Buying in the wrong location, paying too much, and financing too much of the project.
Getting backed into a corner is another losing strategy.
“Where do people get hurt? When you have to sell or have to buy,” Buicko said. Either way, the terms won’t be favorable.
Galesi Group avoids these traps.
Here and elsewhere, Galesi Group has numerous projects in the works as it starts its 51st year in the Capital Region:
- It is building a new headquarters for Ayco on the site of the old Starlite Theater in Latham and is deciding what to do with the surrounding acreage.
- The $500 million first phase of Mohawk Harbor is complete, and approvals are in hand for additional residential and office space, though no decision has been made to build it.
- It is constructing a 180,000-square-foot building in Rotterdam Corporate Park on speculation. If Mexican pharmaceutical company PiSA BioPharm gains the needed approvals, the structure will house its newest factory. If not, Galesi will use it for something else.
The company’s track record is such that Buicko is willing to make a roughly $10 million investment like that without a tenant. Thus far, when he builds it, they have come.
It’s a step up on the old strategy to have the site “shovel-ready” so construction can start as soon as the tenant is signed.
“We’re not shovel-ready, we’re building-ready,” Buicko said.