MIDDLE MARKET HIGHLIGHT, MARCH 2009

OHIO MIDDLE MARKET HIGHLIGHTS
Kevin Jeselnik

Columbus

NATIONWIDE REALTY INVESTORS BECOMES PARTNER IN NORTHSTAR COMMUNITIES

Columbus, Ohio — Locally based companies Nationwide Realty Investors and The Robert Weiler Company have become equal partners in Northstar Communities in Columbus. Located near Interstate 71 and US 36-37, the 1,727-acre mixed-use project already includes a 400-acre, 18-hole resort golf course, which was not included in the deal. Future plans for the development call for 832 single-family homes, two condo projects, 1.5 million square feet of retail and office space, and 810 acres of green space. The Robert Weiler Company will continue to manage the day-to-day operations of Northstar Communities. Nationwide Realty Investors will work with the company with regards to all strategic planning decisions. Additionally, Nationwide Realty Investors will lead the development efforts for the retail and office components of the project.

KENCO SIGNS 1.17 MILLION-SQUARE-FOOT LEASE

Obetz, Ohio — Kenco Logistic Services has signed a lease for approximately 1.17 million square feet of industrial space within KIRCO’s Centerpoint Business Park located in Obetz. Kenco will move into an existing 701,808-square-foot building within the multi-phased development this month, with plans to complete a 464,207-square-foot expansion of the facility by June. The building includes 32-foot clear ceiling heights, parking for 300 trailers and 115 dock doors. Dan Wendorf in the Columbus, Ohio, office of Jones Lang LaSalle and Dan McGillicuddy in the Chicago office of Jones Lang LaSalle represented Kenco in negotiations. The landlord, KIRCO, was represented in-house in the transaction.

CAPITOL SOUTH DEMOLISHES CITY CENTER MALL FOR MIXED-USE PROJECT

Capitol South Community Urban Redevelopment Corporation is overseeing the redevelopment of an 8.9-acre site in downtown Columbus, Ohio, where the City Center Mall once stood.

Columbus, Ohio — This summer, the city of Columbus and Capitol South Community Urban Redevelopment Corp. are demolishing the City Center shopping mall in downtown Columbus to make way for Columbus Commons. The 8.9-acre project will feature a mix of office and retail uses anchored by a city park.

In December 2007, New York-based The Georgetown Company was selected by Capitol South to serve as the project’s development manager. MSI was retained as the land use planner for the multi-phased project. With the help of consultants from CB Richard Ellis and input from local community members, Capitol South decided that demolition was the best option for the site.

“Our goals were to avoid excess costs and examine all possibilities for reuse of the building before considering demolition,” explains Amy Taylor, chief operating officer of Capitol South. “After looking at the site from many different perspectives, we found that attempting to reconfigure the current structure was vastly more expensive than simply starting over.”

Demolition of the 1.2 million-square-foot mall is slated for completion in less than a year. By 2010, the site — which is located south of the Ohio Theater, the Fifth Third Center and the Hyatt on Capitol Square — will be transformed into a park with seating and common areas. The initial phase of the project is expected to cost approximately $15 million to $20 million, including the demolition of the current structure and the creation of green space.

“By investing in the basic infrastructure and green space on an existing site downtown, this project will help combat urban sprawl, while improving the quality of life and transportation efficiency,” Taylor says. “Over time, private investment will greatly surpass the initial stimulus investment and the 200 construction jobs it immediately produces.”

While the source of financing for the initial phase of the project has not been disclosed, Capitol South is applying for federal stimulus funds. For future phases, the non-profit group is expecting a private investment of more than $100 million.

Future plans for the project call for the restoration of a 900-space underground parking garage. The plan announced on February 4th anticipates multiple phases, starting with residential units above street-level retail on High Street. Over time, the area will include office buildings and entertainment venues on a pedestrian-friendly street grid. Given the economic climate, Capitol South has recognized that the additional phases of Columbus Commons will be completed when the market is ready.

“There are no great cities without great downtowns that have parks, recreation and cultural amenities,” Taylor explains. “The empty, cavernous [mall] building will be gone and a beautiful new park will be available for the community to enjoy by the fall of 2010.”

Akron and Canton

The Akron and Canton, Ohio, markets have experienced many of the challenges facing the rest of the country’s commercial real estate market. However, there are more than a few bright spots to be found within each cities’ borders.

In Akron, the clogged credit markets have stalled the area’s largest pending endeavor. Goodyear is embarking on a $900 million, 600-acre corporate headquarters development in partnership with Los Angeles-based Industrial Realty Group (IRG) and various local municipal entities. The project has secured a significant amount of public funding, enabling the developers to begin infrastructure work at the site, but due to the difficulties in obtaining private loans, construction is on hold until money is flowing again.

“The public financing is there; it is the private funding that they are having trouble with,” says Michael Stacy, SIOR, a vice president with NAI Cummins Real Estate in Akron. “This is not a project that has been cancelled; it has simply stalled until the credit crunch is straightened out.”

The Goodyear project will retain approximately 2,900 jobs in the Akron community. Los Angeles-based IRG, which has a history of adaptive reuse projects in Ohio, plans to acquire Goodyear’s existing buildings and lease them back to the tire manufacturer. A hotel, conference center and spa are also planned components of the new mixed-use project that will be built around the new Goodyear facilities.

Another tire company with ties to the community, Bridgestone, has preliminary plans for a $68 million, 248,000-square-foot R&D facility. The city is providing funding to jump-start Bridgestone’s effort, but the final commitment to the development has yet to be made.

InfoCision, a telemarketing firm, is planting roots in Akron, recently buying two properties and planning to break ground on a 90,000-square-foot building on its existing campus. The company has also acquired naming rights to the University of Akron’s new football stadium. InfoCision Stadium is under construction now on the schools campus adjacent to downtown Akron.

First Energy Corporation recently completed a $30 million, 208,000-square-foot office complex at White Pond Drive and Interstate 77. Healthcare has provided a spark for many markets experiencing little construction, and, according to Stacy, Akron’s three healthcare organizations have each launched expansion efforts in the past year that are ongoing.

Both Akron and Canton are benefiting from the Akron-Canton Airport, which has spurred significant development in the surrounding areas in Stark County. According to Brian Spring of NAI Spring, a Canton-based firm that joined NAI Global in February, in the past year, four hotels have been developed around the airport, and two existing hotels have been renovated.

Also near the airport, Kenan Advantage has purchased the former Seiple Lithograph building and converted it into a 75,000-square-foot, Class A office facility.

According to Spring, there are some significant projects underway in Canton in 2009. IRG is redeveloping a former Hoover plant, which spans 1 million square feet over 28 acres, into a mixed-use property with office, industrial and retail components. The industrial space is being filled quickly, and the owner recently signed a call center to a lease in the office component.

The strongest submarket for the office sector remains the Belden Village area in Jackson Township, which is in northwest Stark County. Spring notes that there is a surplus of office space of 10,000 square feet or less, as well as medical and Class B facilities, available for attractive rental rates.

“In this economy, we expect to see office and warehouse tenants shopping and negotiating their lease opportunities,” Spring says. “We will see some tenant movement due to the perception that there is lots of space available and that owners are willing to negotiate.”

In downtown Canton, Cormony Development is converting the former Hercules Enging Plant into a mix of convention space, retail storefronts and office product. The total project cost is estimated to total approximately $178 million, and it is scheduled for completion in 2010.

“Canton experienced an excellent fourth quarter 2008,” Spring says. “We, like all markets, are a little quiet this year, and the biggest challenge will be financing.”

But the company has recently closed two deals that illustrate the type of activity that will keep the industry moving this year. Spring recently sold a 30,000-square-foot office building near the airport for $3.6 million. The two-story building was 50 percent occupied, and the buyer plans to utilize the other half of the building for office space. The company also recently brokered the sale of a 60,000-square-foot industrial property in Bolivar, Ohio, for approximately $1.5 million. A plastics company sold the building to Ohio CAT.

“In the last 18 to 24 months, we have had more major announcements, as far as large deals closing and large projects launching, in our area than we had seen in the previous 5 to 10 years,” says Stacy, illustrating the opportunities available even in these dire economic times.

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