By Michelle Jarboe, The Plain Dealer | Jan 10, 2017
CLEVELAND, Ohio - An out-of-town real estate company is buying up a trio of buildings off East Ninth Street in downtown Cleveland, in what might be an early step toward establishing a substantial local portfolio.
On Dec. 29, Alto Partners paid $1.53 million for the half-empty 55 Erieview Plaza office building, according to property records. The company also has a deal to buy the adjacent 65-75 Erieview Plaza complex, at an undisclosed price, in a transaction that could close this month.
"We feel Cleveland is a growing market going through a strong renaissance," Michael Sabracos, Alto's chief executive officer for U.S. operations, wrote in an email. "Alto really likes the Cleveland area and is committed to acquiring and developing a few million square feet in that market."
A privately held business with roots in Turkey and past projects in Kazakhstan, Russia and Iraq, Alto cropped up in Cleveland in July. That's when the company emerged as a potential buyer for the troubled John Hartness Brown complex on Euclid Avenue. That property still is tied up in court, so it hasn't changed hands.
"We hope to close as soon as we can get clear title," Sabracos wrote this week.
Meanwhile, Alto is pursuing other Cleveland-area opportunities.
The three Erieview buildings comprise roughly 280,000 square feet. They last changed hands in 2011, when the buildings were somewhat distressed and the surrounding district - a longtime financial center - was awash in vacancy.
Property records show that Alto bought 55 Erieview from the Stafford brothers, well-known divorce lawyers who paid $700,000 for the building six years ago. The seller for 65-75 Erieview is an investor group tied to Broadvox, a tech company.
Sabracos said Alto expects to recombine the buildings, once linked, into a project called the Fives at Erieview Plaza. The company's renovation plans involve a shared rooftop deck for tenants, revived ground-floor retail, a cafe with a tenant lounge and more activity on the plaza that runs between East Ninth and East 12th Streets.
"What Alto is bringing to the table is really capital to make this office space cool and edgy again. It has been a little downtrodden and kind of neglected," said David Wagner of Hanna Commercial Real Estate, who represented Alto on the Erieview acquisitions and who will handle leasing at the buildings.
"I've been working that Erieview neighborhood for the better part of 20 years," Wagner added, "and it's nice it's coming back, because that's a wonderful neighborhood."
Another out-of-state buyer, Somera Road, Inc., purchased the neighboring 45 Erieview Plaza office building and garage in December and is planning renovations. And RAIT Financial Trust is exploring plans for a partial apartment conversion of the Tower at Erieview, the 40-story office building that abuts the Galleria to the south.
Wagner alluded to preliminary talks about obtaining historic-district status for Erieview, an urban-renewal area established in the 1960s between East Sixth and East 17th streets north of Chester Avenue. Such a designation could help older buildings in the district, such as 55 and 65-75 Erieview, qualify for valuable redevelopment incentives including historic tax credits.
But, Wagner said, "we're not going to wait for that, because that could take a while."
He wouldn't identify the other local properties that Alto is eyeing.
It's unclear whether and when the company will be able to proceed with a mixed-use redevelopment proposal for John Hartness Brown, at 1001-1101 Euclid Ave. The property is in foreclosure and receivership. Five months ago, a Cuyahoga County judge approved Alto's $9.1 million bid for the empty buildings, which had been earmarked for a Le Meridien hotel.
The case now is snarled up in appeals court litigation involving the current owner - the would-be hotel developer - and a court-appointed receiver responsible for preserving the value of the property.
"We're working our way through the appeals process," Mark Dottore, the receiver, said Tuesday. "We're confident we'll be successful. ... My goal is to get this thing closed so that this moves forward for the city."
The state awarded $11 million in preservation tax credits to the project years ago. The Ohio Development Services Agency has granted several extensions on the credits, which don't actually flow to a property owner until a project is complete.
On Tuesday, a spokeswoman for the agency said that the most recent extension period runs through April 1.