Redeveloping the HSBC tower in downtown Buffalo will take significant public sector investment before it can be converted into a mixed-use building and an anchor for waterfront redevelopment.

Those were the findings of a high-powered panel of national real estate experts from the Urban Land Institute, who were brought into Buffalo over the last three days to review the prospects for the city's tallest building and to create a path for its reuse.

The panel agreed with the overall proposal by the building's owners for converting the tower into a "stacked" layout of office space, apartments or condominiums, and a hotel, perhaps with a restaurant and observation deck on the top two floors and retail at the base.

But it questioned the financial viability of those options without big public dollars to support the conversion, based on what could be justified by local market demand, rates and costs. The financing gap, between the cost of the conversion and the initial revenues, could total tens of millions of dollars.

"You're not going to see this happen without public assistance," said panel member Michael Reynolds, principal of the Concord Group, a real estate planning and analysis firm in California. "It's going to have to be mixed-use, and it's going to have to have public support."

The recommendations may face strong opposition from taxpayers, many of whom are tired of spending tax money to support the private sector, and from rival developers, who are often angry at any special use of government money to prop up other buildings.

Even Mayor Byron W. Brown, who was at Thursday's news conference after getting briefed earlier, would not commit.

But the six panelists stressed they are not suggesting a government bailout for One HSBC Center or a financial subsidy that would make other downtown buildings noncompetitive.

"We're not talking about making a gift of public funds. We're not talking about putting money down a rat hole," said panel chairman Charles Long, an Oakland, Calif., developer.

Rather the panel said the government has to be a partner in redeveloping an asset that is critical not only for downtown Buffalo but for the entire region.

Given the owners' need for cash flow, a public-sector fund infusion may be necessary in the short term, along with tax abatements, followed by other tax credits, condo incentives and a second loan or state money for the long term, said Steve Spillman of Pacifica Cos. of California.

The partnership could even involve the city or other government entity taking an ownership stake in the property, sharing the risks and the rewards with the New York City investment group that currently owns it.

That way, taxpayers would benefit from the investment, either through sharing the rental income or splitting the proceeds when the building is eventually sold. The private owners would still demand an acceptable market return, while the government would likely have certain expectations, such as additional construction or permanent jobs.

"It is not a gift. It is not a bailout. It's a partnership," said Ron Gerber, economic development manager for Walnut Creek, Calif. "It's not unusual. It gets complicated, but it can be like an annuity for the city. You're getting a return from the project."

Without such a plan, the 38-story building, which faces a $75 million one-time "balloon" payment on its mortgage in January 2015, would likely wind up in foreclosure or bankruptcy, with a new owner possibly unwilling to make the investments and only interested in slashing rents to lure tenants. That, in turn, would empty other buildings downtown and leave the overall market worse off.

"The do-nothing alternative is that the building gets sold at auction, and there is a considerable likelihood that the new owner will cannibalize the market," Long said. "The do-nothing alternative is worse."

Citing the "importance of this building," Brown praised the panel's "tremendous work." But he cautioned against depending only on the public sector. "We are certainly going to do our part to support this process on the community's side, but this is going to involve some reciprocity on the owners' part," he said.

The Urban Land Institute panel, which involved architectural, development, land-use and asset management experts from California, Texas and Indiana, was convened to provide outside insight and advice into what Long called a "knotty problem" facing Seneca One Realty, the owners of One HSBC Center. The 850,000-square-foot tower is now more than 90 percent occupied but will be 95 percent vacant by the end of the year after HSBC Bank USA and law firm Phillips Lytle LLP move out. The No. 3 tenant, the Canadian Consulate, closed last year.

The panel urged Seneca One to bring a developer into the mix, learn more about real estate finance, polish the plans, test and validate them, and create a partnership with the city.

But with the 10-year loan due, the loss of rent means the owners need a new source of cash flow by year-end or they can't afford payments and can't refinance. So the panel said the first priority is to deal with the balloon payment, by negotiating with the "special servicer."

"If you don't solve that, you won't know who you're going to deal with, because that special servicer may put the property up at auction," Long said.