Forest City Enterprises maintains its headquarters in Cleveland, but to confine the scope of its operations to the company's hometown would be overlooking the big picture.

With large projects in Chicago and Detroit, as well as a number of projects on the national level from coast to coast, Forest City's diversity remains the key to its prolific accomplishments.

Engaged in the ownership, development, acquisition and management of commercial and residential real estate throughout the United States, the company's four strategic business units are its commercial, residential, land development and lumber trading groups.

The company has two investment real estate groups. The Commercial Group is responsible for the office and retail aspects of business and the Residential Group is responsible for multifamily rental properties.

The Residential Group owns, develops, acquires, leases and manages residential rental properties, including luxury and middle-market apartments in urban and suburban locations, adaptive re-use developments in urban locations and supported-living facilities.

"We are a national company with a substantial presence in Cleveland," says Ron Ratner, executive vice president of Forest City Enterprises Inc. and president of Forest City Residential Group.

Ratner reports that Cleveland multi-family occupancy rates are down approximately 3 percent overall, but that rent is stable and expenses are on a modest incline. A key to prospering in a slow economy is a company's overall diversity.

Forest City, traded publicly since 1960, has benefited from diversity of product and region.

Taking The Windy City By Storm

A demonstration of Forest City's diversity is its exciting new development in the heart of downtown Chicago.

"One of our main projects is Central Station in Chicago. The South Loop location is terrific and going through a true resurgence," says Ratner.

The 80-acre mixed-use development is located at the south end of Grant Park and extends from Roosevelt Road on the north to McCormick Place on the south and from Michigan Avenue on the west to Lakeshore Drive and the city's new Museum Campus on the east.

Central Station permits the development of over 14 million square feet of office, retail, hotel and residential uses. At present over 500 residential units are occupied, 800 are under construction and another 1,000 units are under development.

Already completed are two new parks totaling more than 2 acres of space.

Working together with Fogelson Properties, Inc., a Chicago-based real estate firm, Forest City completed the planning and entitlement of Central Station in the early 1990s and decided that the residential elements would be a great way to get started in the mid-1990s, Ratner explains. Prairie Place, a 250-unit townhouse complex developed by MCL, was the first component and has been extremely successful, says Ratner.

A new addition under construction is Prairie House, a high-rise condominium with some adjacent town homes. The project, developed by BEJCO Developmenet Corporation, will provide 183 units, of which 75 percent are already sold.

Running south from 13th stereet, in the area between Indiana and Lakeshore and Columbus Drive, Central Station has already experienced impressive occupancy and sales in the 850-unit Museum Park, developed by Enterprise Development Company. Museum Park's visual highlights are its impressive towers. Tower I has 220 units and is 99 percent sold and about 50 percent occupied; Tower II is under construction and it has 170 units and is about 70 percent sold.

Forest City is just starting on Tower III (208 units) and Museum Park Lofts, a new building with 150 units. Closer to 18th Street, Legacy Development Corporation is constructing a 177-unit condominium tower and 49 town homes slated for completion in the spring of 2003.

"Chicago has been a tough market in which to build rental projects because, while rental rents and occupancies have been very strong, it's a high cost market with a particularly burdensome real estate tax for rental development," says Ratner.

"We believe that the great track record of the condominium and townhouse sales at Central Station and the long term quality of the community and market create the right conditions to expand Central Station with this first rental project," Ratner says.

Back Home On The Lake

Regardless of the massive expansion Forest City has enjoyed throughout the Midwest, it's good to know there are always reliable business partners just around the block.

As a national company, the bulk of Forest City's work is outside Cleveland, though its partnerships in the city are definitely an asset in its portfolio.

In fact, Forest City has maintained its portfolio in the Cleveland area across generations.

"We've had a large multifamily presence in this area, a lot of long-term partnerships," Ratner says. "Some of these partnerships began before World War II and, in some cases, we're still dealing with the children and grandchildren of its founders and building new product with them. In Cleveland, our multifamily business with these groups remains strong, as we've built between 500 and 600 units in the past few years."

"The Cleveland market has never been subject to the tremendous fluctations that other higher profile markets have seen," he says. For example, 3 years ago, the company's rent increases in Northern California were higher than the average rent in Northern Ohio, but a lot of that increase has disappeared recently.

Northern Ohio has much more modest rent cycles, according to Ratner, who says, "It's become suddenly softer now, but, historically, we've been sheltered by the steadiness in the market and protected by the fact that it is very hard to receive approval to build new multifamily product." Ratner explains that over time, Cleveland has remained a high-cost multifamily construction area while the substantial supply of existing product has retrained rental and even sales prices. This makes Cleveland a great place to find housing and an easy market to attract employees to, but a tough place to be a developer.

Entitlement constraints, high costs and modest rents leave little margin for errors, so Forest City does selective projects carefully and well. A good and steady, but modest return is the key in this market, and that's generally true of Midwest cities more than other areas.

Forest City's real estate developments in its Midwest region start in Pittsburgh with its new Station Square project and swing through its historic base in Cleveland to Detroit where it has a number of assets, and on to Chicago.

Ratner describes Forest City as a long-term investor looking for long-term value. He adds, "Multifamily in the Cleveland area might be under a bit more pressure than other parts of the country. We are not naive about the Cleveland market, but its underlying fundamentals as a great location remain sound, and established product can continue to prosper."


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