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Published: Saturday, 6/16/2001

Short on flash, long on vacancy

BY MARY-BETH McLAUGHLIN
BLADE REAL ESTATE WRITER
Fiberglas Tower, Owens Corning's former headquarters, needs asbestos removal. Fiberglas Tower, Owens Corning's former headquarters, needs asbestos removal.
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They're easy to spot - abandoned factories and other empty commercial buildings with forlorn For Sale signs that appear to have been there for years.

Sometimes harder to pinpoint are the reasons that some buildings - from a towering downtown office building to an out-of-the-way factory to a department store in an area mall - sit on the market for years.

“There's either some sort of physical [problem] with the building, the location is an issue, and, as many times as not, it's also an owner issue because he refuses to price it reasonably,” said Harlan Reichle, of CB Richard Ellis, Reichle Klein in Springfield Township.

And frequently, a tenant may no longer be occupying a building but is still paying on a lease, so an owner is in no hurry to find a buyer or a tenant, say local commercial real estate agents and building owners.

“It may look to the non-real-estate person that there's something wrong with the building, but there is still a revenue stream,” said Stephen Welly, president of Rudolph/Libbe Properties in Toledo, a commercial developer.

“From an investment-property standpoint, you want a building that's well located with a decent tenant mix. If you've got that, it's going to sell in a reasonable time frame, say 30 days to four months.”

With nearly one-third of downtown Toledo office space empty, long-vacant buildings such as the former Owens Corning headquarters can be a tough sell. Despite its strong location on St. Clair Street and Jefferson Avenue, the Fiberglas Tower has been empty for five years and is in need of asbestos removal and changes to meet requirements of the federal law on accessibility for the disabled.

Dave Long, a sales associate with Zyndorf/Serchuk, Inc., a Toledo commercial real estate firm, said potential buyers are often leery of a building where renovations would cost more than the property's market value.

Buildings with problems do sell, however, if the buyer and seller are willing to negotiate, said Harvey Tolson, a longtime investor who has a portfolio of nearly $20 million in buildings in the Toledo area.

The owner of Tolson Enterprises in Toledo said of an industrial property he toured four years ago on Telegraph Road: “I knew I'd have to stick half a million bucks into it to attract tenants, so I structured that into my overall plan to purchase the property. I did [the work], and it's turned into a wonderful property.”

Anne Frej, an expert on office and industrial space at the Urban Land Institute in Washington, suggests flexibility to attract tenants for empty buildings that can mar a city's landscape. Adapting the building for a different use and being willing to consider different options and perhaps lower lease rates are critical, she said.

A tear-down would be the absolute last resort, she said, especially because of the cost demolition would add to the project.

As a building owner, Mr. Tolson said, he has had to be flexible. When he was readying a vacant 22,000-square-foot building, also on Telegraph Road, for rent, he was told by a commercial real estate agent that the property needed an extensive facelift, including a paint job, lighting, and power-washing of the floors to attract tenants.

“It was all done within 30 days,” he explained, and the building was rented in three months.

A former steel factory in North Toledo has been empty for years. A former steel factory in North Toledo has been empty for years.
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Industrial buildings can be especially tough sells if they don't have exactly what a buyer is seeking, like high truck bays, or they have a specific design feature that limits their appeal, said Rob Gemerchak, a partner with Michael Realty. That's the case with the 40,500-square-foot Heidtman Steel Co. building on Matzinger Road, which has heavy cranes built into its design.

The 218,000-square-foot warehouse on Angola Road leased by what was the Lion Stores and is now Dillard's is finally drawing interest after months of being empty because potential tenants can choose to sublease from Dillard's or buy the building from the owner, said Bob Mack, the Zyndorf/Serchuk agent handling the deal.

The lease terms have been dropped from nearly $3 a square foot a year to $2.10, he added.

An unrealistic asking price is often the reason buildings sit empty, said local commercial real estate agents. “If a property hasn't sold, it's usually the price, in my opinion,” said Pete Shawaker, a partner with Michael Realty Co., a Toledo commercial real estate firm.

The most stubborn owners are often the ones with retail sites, he said. If a store is in decent physical shape, even in a poor site, it can be sold at a lower price, but an owner sometimes won't be realistic on the price, he added.

Owners of stores often dig in their heels on a certain type of desired tenant or buyer, so the building could sit idle for years.

For example, the 104,000-square-foot BJ Wholesale Club on Telegraph Road near Alexis Road in Toledo has been empty for nearly a decade, even though Mr. Shawaker had interested clients at one point who were not the traditional retailers sought by the owner.

Finding such a retailer could be difficult, he said, because the building is not visible from heavily traveled Alexis Road and is across from North Towne Square, a largely empty mall where the Elder-Beerman and Montgomery Ward anchor stores are shuttered.

Some issues beyond the control of owners, buyers, and real estate agents can keep a property empty for a long time.

For example, it seems baffling that the former Pizza Hut on Monroe Street near the area's premier mall, Franklin Park, has been abandoned for several years. Developers have paid nearly $700,000 for a nearby site in the city's most-sought-after retail area.

The problem: The company that holds the lease is in bankruptcy. “Legally, it's almost impossible to do something with it while it's in bankruptcy court,” said Mr. Long.



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