Independence Engineers $100 Million Realty Growth Plan
This article is by Stan Bullard, a Senior Reporter/Real Estate at Crain's Cleveland Business
The city of Independence is taking steps to create a $100 million mixed-use development on municipally owned land in a proposed deal with a joint venture formed by high-profile developers Industrial Realty Group of Los Angeles and Industrial Commerce Properties of Solon."
According to a news release issued on Wednesday, Oct. 11, Independence City Council authorized Mayor Anthony Togliatti's administration to negotiate terms with the real estate developers for construction of a planned unit development on the site that fits the city's master plan. The developer's vision is for a project with a hotel, office and retail space on the 33-acre site.
The city has owned the property at Patriot's Way and Oak Tree Boulevard since 2014. The site is several hundred feet north of Rockside Road and is behind several restaurants on the main street.
The IRG/ICP proposal comes two years after the city and Fairmount Properties began pursuing redevelopment of a city-owned site on Brecksville Road as well as the Rockside Road area parcel, which came to naught.
Togliatti said in an interview that the city and Fairmount parted ways in the prior administration. He said his administration had hit the restart button for the parcel.
Although Stuart Lichter of IRG and Chris Semarjian of ICP are best known for redeveloping former industrial plants and corporate headquarters for multitenant use, the duo has undertaken ground-up projects in the past associated with such purchases. IRG has developed other mixed-use properties in other markets, according to Peter Goffstein, IRG's senior vice president for development.
"It's going to be mixed-use. In today's environment, mixed-use is what drives the success of projects. You have a great location for office, retail and hospitality, with little new product for a decade," Goffstein said in a phone interview. "It will be largely an office-driven project, but the retail and hospitality give it activity 24/7. Downtown (Cleveland) still has a lot of vacancy, but not very large floor plates of modern space with sufficient parking to meet the need of every office user."
He said IRG believes the site can accommodate three office buildings with about 100,000 square feet of space each, another 100,000 square feet of amenity retail space, some of it in freestanding buildings, and a business-oriented hotel of about 120 rooms. Those plans could be accommodated with surface parking, he added, but could be increased if a parking garage goes into the mix.
The project would be developed in phases based on how well each part leases. Goffstein said IRG and ICP will carefully assess the hotel market, although there are hotel brands that are not yet represented in the market. The caution stems from Independence already gaining two new hotels in as many years.
The letter of intent authorized by the council calls for the developer to pay $2.5 million for the land and for the suburb to foot the cost of building streets and infrastructure in the project, according to the city's news release. The proposed $2.5 million is the same price as the city paid Duke Realty Corp. of Indianapolis for the parcel in 2014.
Togliatti said the IRG/ICP team surfaced as the developer of the site because the council was comfortable with the company's size and scope as a national developer.
"I feel comfortable as well," the mayor said. "they bring a wealth of experience and a network of business contacts to the table."
Missing from the plan is residential housing, especially the real estate industry's love for apartment development nationally and even locally in Northeast Ohio.
Togliatti said that if residential were included as a use in planned unit development of the site, it would require a vote to approve the addition of multifamily zoning to the property. He said the suburb requires all multifamily zonings to go to referendum under its city charter.
The mayor said negotiations with all prospective developers for the 33-acre site were conducted in executive session. He refused to say how many developers the city interviewed about the property or identify any of the other prospects. Ohio law allows municipalities to hold such meetings in private if they concern real estate matters.