Demand continues for new apartments in old buildings

 

First the Standard Building, then the Leader Building. Which old downtown Cleveland office building is the next likely target for an apartment redo?

 

None other than one of the city’s most famous, the Halle Building, thanks to its role as the Cleveland department store in Drew Carey’s old TV show and the Christmas-time home of Mr. Jingeling.

 

K&D Group is in the leading role to land the 1228 Euclid Ave. building, according to two sources familiar with the situation. Another source said the paperwork is not executed, though building owner Forest City Enterprises Inc. has settled on K&D as the prospective buyer in a deal to close by year’s end.

 

None of the sources would be identified by name because they are not authorized to discuss the bid or are not affiliated with either principal. The Halle Building, like Leader, would remain as offices until K&D feels the time is right to convert it to apartments, but with a surprise twist: One source said K&D may move first on converting part of the Halle Building garage between Huron Road and Prospect Avenue to apartments while keeping lower floors for parking.

 

http://www.crainscleveland.com/article/20140719/FREE/140719789/demand-continues-for-new-apartments-in-old-buildings

Wow ... K&D Is on a roll... But if they really are going to at least partially save the Halle Parking Garage from its current bombed out appearance then that is fantastic news

^^Well that came out of nowhere. The last we heard FCE was considering a Halle conversion. Guess someone reminded them that they don't invest in Cleveland. A surprise about the Halle garage, that's great news. Please put some windows in those openings asap. Someone do the same over at the May co. garage...

Believe nothing until Michelle J. McFee reports it!

Believe nothing until Michelle J. McFee reports it!

 

Crain's is pretty reputable too. :) And frankly this move doesn't surprise me at all.

 

BTW, don't assume that K&D is done buying downtown buildings, especially if they can keep finding some good deals. They have the resources to flip the entire region's rental market (in terms of investments, value, change in inventory, age/quality of product, etc) from suburban to urban. How? They are the largest apartment building owner in Northeast Ohio and all of their properties were in the suburbs until they converted 668 Euclid only five years ago. Consider this....

 

Until recently, K&D focused on the suburbs around Cleveland, eschewing the downtown because rents were low. But in 2008, after seeing some growing demand from young renters, the company bought 668 Euclid, a mostly-vacant office building that had once been a department store. K&D converted the building to 236 luxury apartments aimed at young professionals who work downtown. At the time, the economy was reeling and Mr. Price braced for a slow reception. Instead, the building leased up quickly. "We were moving people in as fast as we could finish the units," he says. "We built it—they came."

 

In 2011, the partners turned their sights on the Hanna Building Annex, a modest eight-story office building on the east end of downtown that they converted to 102 apartments. That, too, leased up rapidly and now has a waiting list of six to nine months.

 

While working on the Hanna project, K&D became intrigued by the East Ohio Gas building, which had lost its largest tenants more than a decade earlier. Mr. Price liked the configuration: Its small floors with large windows make for good apartment layouts. In 2012, he agreed to buy the 1950s-era building for $12 million. Crews worked three shifts during the winter to complete the conversion and the building is scheduled to open in July.

 

K&D says the federal tax-credits for historic preservation, as well as other incentives, can cover as much as half of the cost of a job. The conversions have been so profitable, says Mr. Price, that K&D is now selling properties in the suburbs to focus on downtown and is in talks to buy at least two additional office buildings that it plans to convert.

 

SOURCE: http://online.wsj.com/news/articles/SB10001424052702303626804579506073419741570

Off topic but I like 668 except for the ground floor, I think they missed the ball on that and left a large ground floor as a virtual dead zone.

K&D's first dip into downtown was Stonebridge if I'm not mistaken.

K&D's first dip into downtown was Stonebridge if I'm not mistaken.

 

K&D owns it now, but it was constructed through a development partnership between Doug Price and Bob Corna. And to nitpick, it's not downtown. :)

 

BTW, I created a separate thread for this project. If the Leader Building and the Standard Building each deserve their own threads, than the Halle Building and its annex (which was built to add extra showrooms but was later converted to parking) certainly justifies its own thread.

^I thought Corna was a partner in K&D when Stonebridge was developed, no?

 

The Halle annex is exactly the type of building that should get priority in the state tax credit allocation. That part in particular would be awesome if K&D pulls it off. 

^I thought Corna was a partner in K&D when Stonebridge was developed, no?

 

Could be!

 

The Halle annex is exactly the type of building that should get priority in the state tax credit allocation. That part in particular would be awesome if K&D pulls it off. 

 

Yep. That annex is such an eyesore. Question is (and folks are gonna be shocked hearing this from me) but where would the parking be relocated to? Perhaps a new deck just west of the US Bank parking deck on Prospect?

 

EDIT: some streetviews, for the record.....

 

East view on Huron with main Halle Building to the left, Annex to the right. Love the bay windows on the main building!

 

West view, with a little closer look at the Annex (including the great little diner on the first floor)

 

BTW, how many of you knew that you could drive "through" the Halle Building? Try it sometime, especially in the evening or night. Fun!

 

This is where you come out of the "drive through" onto the Euclid Avenue side of the Halle Building, which has less street frontage on Euclid as it does on Huron. The CAC Building is the reason why.

"but with a surprise twist: One source said K&D may move first on converting part of the Halle Building garage between Huron Road and Prospect Avenue to apartments while keeping lower floors for parking."

 

If this is right, I'd guess that they know exactly how much parking they will need, and are just converting some excess here.

Maybe K&D will put up the never-built skywalk between the main building and garage (just kidding)

(from http://images.ulib.csuohio.edu/cdm/singleitem/collection/press/id/565/rec/119)

That is a skywalk I wouldn't mind seeing built

 

great find. i love those olde skywalks.

I remember something about a tunnel that exists or had existed under Huron between Halle's and the annex. I've never seen it though.

^ Yes, there is a tunnel.  There are signs in the garage that direct you to it.  I haven't been in it either.

Just take the elevator to the basement in the Halle bldg. and follow the hallway under Huron to the garage. Used to do it all the time.

The Halle building parking deck is one of the worst decks I've ever been in.  I'm guessing since it's super old there are columns in nearly every single parking space that you need to avoid hitting, the whole place has peeling paint and tons of rust, and the elevator to the tunnel was the slowest most shoddy old elevator imaginable.

Like someone mentioned in the Leader building forum I believe, I'm all for apartment conversions but at what expense? With both the leader building and Halle building having office tenants that will (mostly) have to vacate the building in favor of apartments, how many can afford downtown? Hopefully everyone can stay downtown but you are now starting to run the risk of losing downtown office workers in favor of more residents with the new trend of buying occupied buildings. I'm just being paranoid right now and preparing for the worst but I do hope this works well for everyone.

 

In a more positive post, the street wall on Huron is very impressive, and would make for a very good clothing retail district with restaurants here and there.

Was the annex always just for parking when originally designed?

Was the annex always just for parking when originally designed?

 

No. It was for store/warehouse overflow. Almost like a factory showroom. My father shopped in there for furniture a few times in the 1940s. I don't know when it was converted for parking.

Was the annex always just for parking when originally designed?

 

No. It was for store/warehouse overflow. Almost like a factory showroom. My father shopped in there for furniture a few times in the 1940s. I don't know when it was converted for parking.

 

Close, it was menswear and home furnishings until the 1950s, when it was converted to parking and warehousing. It followed a larger trend of department stores adding parking garages, with the May Co. garage as well. The building itself is clearly not designed for parking, with structural columns regularly placed throughout and a central egress/entrance ramp (I hate parking in it).

 

(http://departmentstoremuseum.blogspot.com/2010/05/halle-brothers-co-cleveland-ohio.html)

You got your sources. I got mine. :)

I've said that Halles should be housing before and I knew it would happen.

 

They also had the warehouse sale there until Halles closed.

 

 

Like someone mentioned in the Leader building forum I believe, I'm all for apartment conversions but at what expense? With both the leader building and Halle building having office tenants that will (mostly) have to vacate the building in favor of apartments, how many can afford downtown? Hopefully everyone can stay downtown but you are now starting to run the risk of losing downtown office workers in favor of more residents with the new trend of buying occupied buildings. I'm just being paranoid right now and preparing for the worst but I do hope this works well for everyone.

 

 

Why are you paranoid?  I would think that the developer would help with relocation cost for any existing tenants.

 

One thing we need to build shared office spaces for entrepenuerrs and new business owners who do not need traditional office space.  This balances things out.

MTS, dude's allowed to be paranoid if he wants to. We all have our paranoias and phobias.

MTS, dude's allowed to be paranoid if he wants to. We all have our paranoias and phobias.

 

I didn't mean it in a condescending manner.  I'm asking what his concern is?

 

I didn't mean it in a condescending manner.  I'm asking what his concern is?

 

A concern shared by many here: that housing is squeezing out office users from the least expensive buildings downtown. Not surprising since the office rents for Class C are less per square foot than residential rents. So if the office users are squeezed out, will they relocate downtown or move to the suburbs?

 

It's a real concern and I hope we can discuss these trends and market conditions here....

http://www.urbanohio.com/forum2/index.php?topic=4266.msg717172#msg717172

 

....and leave threads like this to discussing specific construction/redevelopment projects. Thanks!

Maybe K&D will put up the never-built skywalk between the main building and garage (just kidding)

(from http://images.ulib.csuohio.edu/cdm/singleitem/collection/press/id/565/rec/119)

 

 

Yes, please

K&D Group buys Halle Building, garage from Forest City, plans 240-unit apartment conversion

By Michelle Jarboe McFee, The Plain Dealer

on December 04, 2014 at 4:18 PM, updated December 04, 2014 at 4:19 PM

 

CLEVELAND, Ohio -- A Northeast Ohio apartment developer has paid $20 million for downtown Cleveland's Halle Building and the nearby Halle garage, setting the table for yet another office-to-apartments conversion in the central business district.

 

The K&D Group, Inc., continued its downtown buying spree Thursday by purchasing the Halle properties from Forest City Enterprises, Inc. A publicly traded company, Cleveland-based Forest City has been trying to shed real estate here in favor of investments in major cities including New York and Washington, D.C.

 

The Halle Building is a longer-term play for K&D, the largest privately held owner of apartments in the region. The company, based in Willoughby, is wrapping up a residential conversion of the old East Ohio Building on East Ninth Street and planning an apartment project in the Leader Building on Superior Avenue. Work at the Halle Building wouldn't start until late 2018.

 

MORE:

http://www.cleveland.com/business/index.ssf/2014/12/kd_group_buys_halle_building_g.html

Obviously trivial, but couldn't the person who chose the picture for the article chosen one that's a little more current?

Obviously trivial, but couldn't the person who chose the picture for the article chosen one that's a little more current?

 

Seriously, they really dug deep here.  This was pre-2008.

Seriously, they really dug deep here.  This was pre-2008.

 

They probably did a search of their photo file under "Halle" and that's what came up. They don't have a big photography budget anymore. In the 1990s, we had a staff photographer for each of the six Sun Newspapers offices, plus money for stringers, plus a dark room for them, etc. By the time I stopped working full time for them in 2009, all the photographers were laid off, the stringers budget was eliminated and they weren't even giving money to buy our own digital cameras. We had to take them using our cameras/phones.

 

In the last couple of years, there's been a few situations where I (as the reporter's informational source), supplied the reporter with the photos.

 

So don't be surprised to see that same Halle's photo be used in the coming years. Most people won't notice the difference.

 

Crain's at least has a slightly more recent photo......

 

 

Halle Building sold to K&D Group for $20 million

By STAN BULLARD

December 04, 2014 4:47 PM

 

The Halle Building — a famous downtown Cleveland department store turned into an office building in the 1980s — is positioned to start its next transformation after Willoughby-based K&D Group purchased it for $20 million on Thursday, Dec. 4.

 

That’s the word from Doug Price, K&D Group CEO, who told Crain’s Cleveland Business about the acquisition during an interview on another topic late Thursday afternoon. The 13-story building is at 1228 Euclid Ave.

 

The seller was an affiliate of Cleveland-based Forest City Enterprises Inc., which has been marketing the half-empty office building for more than a year.

 

MORE:

http://www.crainscleveland.com/article/20141204/FREE/141209889/halle-building-sold-to-kd-group-for-20-million

$20 million is surprisingly high considering the Standard sold for $4+ mill and the Leader for $6+ mill.  Although roughly half vacant, the property must be cash flowing somewhat nicely to justify that sales price.

I don't know how they do it but ForestCity always gets top dollar for their holdings. They fleeced Gilbert a couple of times. Would be nice if they would dump some of that back into Cleveland and not NY/San Fran/ DC etc.

$20 million is surprisingly high considering the Standard sold for $4+ mill and the Leader for $6+ mill.  Although roughly half vacant, the property must be cash flowing somewhat nicely to justify that sales price.

 

Halle came with a parking garage and had a major rehab in the 1990's, unlike Leader or Standard.

Thats what I was going to say.  FCE doesn't seem to let their holdings fall into disrepair.

I wonder when the apartment conversion will be started in the Leader building, since they want to get that finished before the Halle.

 

The Halle garage is the most beautiful parking garage I have ever seen!  Sad that it will stay a garage but at least it's purrdy!

There was speculation when this thread started the garage would be converted to apartments. Now we have official word that isn't gonna happen. In fact they are adding parking spaces in the basement.

 

K&D expects to renovate the Halle garage, adding 80 basement spaces to the existing 600-space property. The garage improvements will start in 2016.

 

Price said K&D will begin adding about 60 parking spaces on the first floor of the Halle Building garage, which K&D also purchased. He confirmed the company looked at installing apartments on the top two floors of the garage but decided the 600-space garage would not have enough parking for the Halle Building’s apartments if it reduced the size of the garage.

 

Reduced by a couple floors, it would be, what, 350-400 spaces? That's not enough for <300 apartments?

I hope they aren't squeezing those extra 60 spaces out of the first floor of the garage by converting the retail space facing Huron.

Is that the basement?

^The Crain's piece said first floor (see Mendo's quote box), but, yeah, I forgot Michelle's piece said basement. Hopefully nothing changes at ground level.

There was speculation when this thread started the garage would be converted to apartments. Now we have official word that isn't gonna happen. In fact they are adding parking spaces in the basement.

 

Well, they're not aiming to do the conversion till 2018, and a lot can happen in 3 years.  Hopefully they'll change their plans.

From Twitter

 

‏mjarboe[/member]

RNC picks #CLE's Halle Bldg as convention HQ. Roughly 40K sq ft, K&D CEO says. @AndrewJTobias noted last week: http://www.cleveland.com/rnc-2016/index.ssf/2015/04/local_rnc_organizers_working_t.html … #CRE

 

mjarboe[/member]  ·  2h 2 hours ago

Doug Price of K&D says changes afoot w/ Halle conversion: 1. More office than originally planned. 2. Redo could be 2017 instead of 18 or 19.

Hearing that a 'Yours Truly' restaurant is slated for the NE corner of the Halle bldg. , Euclid side. Don't know time frame.

That is an awesome daily breakfast option for downtown!  Great breakfast meeting spot, and perfect location! 

Also a family friendly place. Weren't we just mentioning that downtown was lacking in that option?

That's awesome. That side of Euclid Ave. is quickly filling up... Heinen's, Geigers etc

Great news! I hope Huron Square Deli will survive it. Love the old-school diners downtown.