Ohio City, Tremont Apartments Push Up Land Prices
By Stan Bullard, Crain's Cleveland
The apartment-crazed Ohio City and Tremont development scene has reached an unexpected pace. The rash of recent deals has pushed land prices for sites suitable for such projects to the lower rung of those in downtown Cleveland, long the region's high-water mark.
That's the upshot of a just-released study by Newmark Knight Frank of the more than a half-dozen recent or pending deals in the two neighborhoods just west of the Cuyahoga River from downtown Cleveland.
Terry Coyne, an NKF vice chairman who shared the firm's research study, said, "The going rate for (apartment-potential) land in Ohio City and Tremont is $1 million an acre." That's also the price per acre that the Parking REIT of Las Vegas paid on a per-acre basis for the 300-car surface parking lot at 1200 W. Ninth St. in the downtown Warehouse District.
However, other parts of downtown far outstrip it. For example, the ground under the proposed nuCLEus retail-apartment-office complex at East Fourth Street and Prospect Avenue is valued at more than $9 million an acre in documents that Stark Enterprises of Cleveland and partner J-Dek Investments of Solon filed for a pending $12 million city loan for the $300 million proposed project.
Even so, the prices achieved in the long-suffering neighborhoods now commonly seen as beacons for redevelopment are show-stoppers.
The going price NKF discussed also isn't the highest price in the study. That was the January purchase of Market Square Shopping Center near the West Side Market by Chicago-based Harbor Bay Advisors for a price that amounts to $2 million an acre. That deal involves razing the 20-year-old strip center for two proposed 11-floor towers — one for offices, the other for apartments.
The $1 million-an-acre land price also is the figure used by Cuyahoga County's appraisal for its search for a buyer for the site of its bridge garage at West 25th Street between St. Malachi Catholic Church and the Veterans Memorial Bridge in Ohio City. However, that figure already has been surpassed by four bidders vying for the site in the county's pending (and still private under state sunshine laws that cloak real estate deals) offering.
However, real estate developer Chad Kertesz of Cleveland said he was part of a group that submitted a bid of $3.4 million for the 2-acre county site, which is home to a 1964-vintage building smaller than 10,000 square feet in size. The county and its agent, Allegro Realty Investors, have informed his group they have accepted a higher bid and are negotiating with another party.
Kertesz said he's not upset over being passed over for the site. He said he and his investor-partners have other projects in the planning stages. He and his partners also have reason to celebrate because last Monday, May 13, they sold the 11-suite Columbus Roads Lofts, at 2019 Columbus Road, for $2.13 million to an Oakland, Calif.-based investor. The investor used the names Columbus Road Lofts and Fred's Investments Ohio LLC for the purchase, county records show.
The suites, installed in 2017 in a small commercial building dating from 1911, garnered a value of $212,000 a unit, an eye-popping price in Northeast Ohio for a rehabilitated rental property. The quarter-acre site also garnered an imputed value of $933,000 per acre, based on the property's sale price.
However, that is for an admittedly small developed property, not an untouched one.
The NKF study was produced for Coyne by Frank Camardo, an NKF associate director, and Nate Hoover, an NKF research coordinator. Camardo said he does not believe the marked for apartment-zoned land in Cleveland is overheated, because more land and building redevelopment deals are continuing to be made.
Coyne said he is surprised by the run-up in Ohio City prices. When the Chagrin Falls-based Snavely Group acquired eight properties for its The Quarter mixed-use project on the west side of West 25th Street at Detroit, it paid $818,000 an acre just three years ago.
Tom McNair, executive director of Ohio City Inc., said he has not seen the NKF study, but the staff at the local development corporation has been watching the sale prices jump in the area.
"We don't view it as something that is going to end the investment around here," McNair said. "One thing we're cognizant of is that as people pay more and more for land, they have higher expectations for what they will get out of the land. We are trying to grow smartly, but Ohio City can't solve all the world's problems. Even if developers pay more for land, that does not mean we should allow them to do things outside the zoning code."
In other words, the building heights will need to be constrained by the city's zoning code, which permits some areas, such the county's bridge garage site and Market Square to be no more than 11 stories. Other parts of the neighborhoods, including sections of Detroit and Lorain Avenue west of West 25th, are one-third that size. That's in keeping with nearby residential districts that are limited to two-story houses immediately behind the commercial districts.
McNair said the real estate development is producing positive benefits, but it's also having a negative one in that it's increasing property values of long-term residents with limited incomes. That is why Ohio City Inc. and Tremont West Development Corp. have asked the city to review its tax abatement policy. A measure to order a study of the tax abatement policy is pending before Cleveland City Council.
Asked if the soaring land prices should curtail tax abatements granted by the city, Coyne answered, "That's beyond our capacity to answer."