Getting an education
The auction for the Cleveland school district headquarters was held yesterday. The building sits right across the street from the new $485 million medical mart and convention center. For the Cleveland region, the listing had the highest number of hits on LoopNet last month, more than triple the next closest listing. Recent appraisals estimated the value as high as $8.5 million and the county estimated the value to be $18 million. But at an open auction, money talks. And yesterday, it said the value was $4.85 million.
I don’t know for certain – only the prospective bidders can answer that – but I shockingly have some thoughts.
Snap, crackle, pop. The building’s exterior is a classic style, dating back to the 1920s. But the building’s infrastructure isn’t much newer and includes a mish-mash of various heating systems and air conditioning units, a maze of electrical service, dated plumbing and aging elevators. Any type of redevelopment will almost certainly include a total replacement of the building systems.
What could it be? Several potential uses have been mentioned for the building. A hotel is one of the most obvious and is in fact the proposed use by the high bidder. But there is plenty of existing competition in the immediate area, including a Weston hotel that is in the process of a $70 million conversation and rebranding right across the street. A conversation for the school headquarters would likely have a similar price tag. Residential has also been a popular thought – ditto on the redevelopment cost. Office is an obvious use and, while the cost may not be quite as much, Cleveland’s office market certainly has plenty of vacancy within its existing inventory (although I personally think the building would make a spectacular headquarters for several of the city’s high-profile law firms a ‘la the Calfee’s Building). Whatever the end use, a key to any re-development is pressing the initial acquisition cost as low as possible.
Diet parking. The building has a very small number of associated parking spots, around 75. This is a serious issue, especially given the recent tightening in the parking sector downtown. Captive parking is critical to hotel and residential uses and very important to office uses.
Proof in the pudding. Recent sale prices of properties in the area paint a fairly consistent picture of pricing. 800 Superior sold for $16 psf and included a 325-car garage. 65-75 Erieview sold for $13 psf and had no garage. The Leader Building did not sell but garnered a high bid of $23 psf late last year. And the capper – the Euclid Arcade sold for $7.7 million or $20 psf, 10 years after undergoing a $60 million renovated and conversion to a Hyatt Hotel.
The school board is reviewing the high big and will make a decision next week. They have a lot to consider and it will be very interesting to see the result.