Tower Center Cleveland
Companies tied to Michigan billionaire Dan Gilbert, the founder of Quicken Loans and majority owner of the Cleveland Cavaliers, bought the mall at Tower City and the parking underneath it Tuesday. The purchase price was $56.5 million, according to a Wednesday morning news release.
The sale could bring some clarity about the future of the 366, 000-square-foot shopping center, originally lined with lofty tenants and now home to a motley mix of local shops, blank storefronts and the rare national retailer.
And the transaction marks the end of a long dance between Cleveland-based Forest City, now called Forest City Realty Trust, and Gilbert's Bedrock Real Estate Services. The parties came close to concluding their deal a handful of times over the last six months but, for one reason or another, stalled out just short of the finish line.
"We are early in the planning stages of a unique, new design for this centrally located, landmark piece of real estate, " Jim Ketai, chief executive officer and managing parter at Bedrock, said in a news release. "Our vision for both this exciting property and the Ritz-Carlton hotel will be announced in detail in the coming months."
At the time, Gilbert seemed like a logical suitor. Through various companies, he already owned large chunks of Tower City.
Since 2011, Rock affiliates have acquired the Higbee Building, home to a Gilbert-owned casino on Public Square; the Ritz-Carlton on West Third Street; and the 250 Huron offices space tucked beneath the Ritz.
The mall, at the heart of Tower City, provides a physical link between the casino and the Ritz. But the mall isn't on the short list of downtown Cleveland properties where gaming is allowed, under a state constitutional amendment that voters approved in 2009. A spokeswoman for the Ohio Casino Control Commission confirmed this week that Gilbert cannot extend gambling from the lower floors of the Higbee Building into the mall.
In the past, though, the casino group and executives at Forest City have talked about cutting through the mall - possibility through the movie theaters or food court - to connect the Higbee Building to a 16-acre riverfront site that Gilbert bought from Forest City in 2011.
That land, paved and covered with parking spaces, was one of the gaming sites written into the state constitution. A few years ago, the land was earmarked as a construction pad for a larger, built-from-scratch casino. But executives at Jack Entertainment, Gilbert's recently renamed gaming group, say there isn't enough demand to support another casino project.
They've shifted to looking at the property as a mixed-use development site.
"Over the past decade or so, we have continued to increase our investments and commitment to the long-term future of downtown Cleveland, " Gilbert said in a news release. "This latest acquisition is strategically connected to our other significant Cleveland investments. The Avenue shops provide us with a unique opportunity to build upon the connectivity to our other downtown investments and create a one-of-a-kind urban shopping, dining and entertainment destination that will make all Clevelanders proud."
Since 2011, Forest City has continued to operate the parking lots behind Tower City and to collect the revenues. As part of Tuesday's transactions, the company sold those contractual parking rights to Gilbert, as well.
A map shows the Avenue shopping mall and thousands of parking spaces controlled by affiliates of Dan Gilbert's Bedrock Real Estate Services. Gilbert acquired much of the parking - 16 acres - behind Tower City several years ago. This week, he bought the mall, some additional parking and the contractual operating rights for the parking lots he already owned. Forest City Realty Trust had been operating those parking lots and collecting the revenues.Bedrock Real Estate Services
Now Forest City, which fashioned the three-level mall out of the Depression-era Cleveland Union Terminal and bookended it with new buildings in the early 1990s, owns just two pieces of the sprawling Tower City Center complex.
One is Terminal Tower, the iconic office building where Forest City has its headquarters. The other is Post Office Plaza, where recent and possible departures of office tenants have complicated Forest City's sale efforts. Forest City also held onto parking beneath Terminal Tower and kept a small sliver of parking near the Renaissance Cleveland Hotel.
The publicly traded company still owns other Northeast Ohio real estate, including suburban apartment buildings and much of Scranton Peninsula, a large - and largely barren - former industrial site in the Flats just outside of downtown.
Founded in Cleveland nearly a century ago, Forest City now focuses on major cities such as New York, San Francisco, Boston, Dallas, Los Angeles, Denver and Washington, D.C. Over the last few years, in the run-up to its recent conversion into a real estate investment trust, Forest City sped up its efforts to unload buildings and investments that didn't fit its pared-back profile.
Gilbert, meanwhile, has built a substantial Rust Belt portfolio. Affiliates of Bedrock, his real estate business, own or control more than 90 properties in downtown Detroit.
In Cleveland, he's grabbed the centerpiece of a downtown undergoing an identity shift. Residents have filled long-empty downtown office buildings, transformed into apartments. And Public Square, at Tower City's front door, is being remade as a much greener, more unified park.
The question is whether timing, and the nationwide resurgence of cities, will give Gilbert and his partners a better chance of success where Forest City struggled.
The Avenue opened in 1990 with a tenant lineup that included Barneys New York, Fendi, Gucci, Versace and other high-profile names.
Today, Brooks Brothers is the only original retailer left. At the food court, McDonald's recently closed. The anchor tenants are Cleveland Cinemas, where the Cleveland International Film Festival will kick off next week; the Hard Rock Cafe; and Morton's the Steakhouse.