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HOT-SHOT young investors who seemed to have solid financial backing.
A historic warehouse in the heart of downtown Toledo.
A plan to create New York-type loft apartments in a largely abandoned industrial area that seemed ready for residential development.
It looked like a winning combination.
What could go wrong?
Just about everything.
Five years after the Bartley Lofts, at Washington and Ontario streets, wowed Toledo with its rooftop swimming pool, gleaming balconies, and the possibilities for downtown reinvention, the lead developers are preparing to step away.
With 75 percent of the 52 units now sold, Joseph Swolsky and Robert Gersten are about to transfer management of the seven-story complex to a homeowners association on April 1.
In an interview on the eve of the hand-off, Mr. Swolsky, 58, talked about the experience.
“We are going to lose a lot of money here,” the developer lamented as he sat on a sofa in the Bartley lobby that still carries reminders of the original tenant. Undisturbed in the tile floor of the 1913 building is the name of the original owner, the R. A. Bartley Co. grocery wholesaler.
“It has been a very painful experience, but a labor of love,” reflected Mr. Swolsky, of RL West Properties. He and his business partners spent about $8 million to retool the building for residences.
Despite difficulty selling units because of overly optimistic expectations for the downtown housing market, a housing crash that began in 2006, and headline-grabbing financial problems experienced by members of the original development team, the project has won praise for its aesthetics and contributions to helping revive the area around Fifth Third Field baseball stadium, which opened three years before the Bartley.
Diane Keil-Roe, president of the nonprofit Toledo Warehouse District Association, said the Bartley was among the most ambitious housing developments created in downtown Toledo in the past decade.
“This was a big one for sure,” she said.
Hopes were high for the Bartley Lofts project when it was proposed in 2004.
The development would build on momentum created by other condominium and apartment projects in downtown Toledo, including Commodore Perry Apartments, LaSalle Apartments, and River West Townhomes.
The development group behind the proposal combined experience and youthful exuberance.
On the one hand was Park West Realty LLC, led by Mr. Gersten and Mr. Swolsky, who grew up in the retail industry as the son of the founder of the Toledo-born Bargain City discount chain that was hugely successful in the 1960s.
Mr. Swolsky and his business partner own and manage about three dozen shopping centers across northwest Ohio, southeast Michigan, and northeast Indiana.
Signing on for a 50 percent stake in the venture was the year-old Timberstone Group Inc. in Springfield Township.
It was led by a pair of ambitious men then in their 30s who would come to be identified with high-profile — and risky — shopping center construction and redevelopment projects including Talmadge Town Center near Westfield Franklin Park and DeVeaux Village in West Toledo.
Daniel Sandwisch and Michael Denman made no secret of their practice of paying top dollar for top commercial parcels that they thought could fetch premium rents.
When plans for Bartley Lofts were being drawn up, Mr. Swolsky figured he might like to live in the complex. A marriage and children would disrupt those plans, however.
Announcement of the Bartley project was well received.
And before construction crews went to work, the newly formed Bartley Lofts Investors LLC sold more than two dozen units.
But, as the building neared completion in late 2005, the Toledo real estate market began to head south.
Buyers of the lofts were unable to sell their homes and began “The bottom fell out of the market as we came on,” Mr. Swolsky recalled. “We probably had a chance when we first started of selling out if we would have taken houses in trade.” But that would have added risk that developers were unwilling to take on.
The biggest blow was yet to come.
Real-estate bets made by Timberstone partners began to go bad.
Mr. Sandwisch, Mr. Denman, and another original investor, Jerry Batt, would later file separate bankruptcies, each listing more than $60 million in debts. Prospective buyers and lenders feared that Bartley Lofts would be dragged into the problems, the developer said.
The firm has since closed, and documents in U.S. Bankruptcy Court in Toledo show the bankruptcies of Timberstone's partners concluded late last year without making any claims on Bartley Lofts.
The dozen Bartley units that remain are priced at $119,000 to $273,000, said Alishia Monasmith, an agent at Loss Realty Group who is spearheading sales.
Before asking prices were reduced from as much as $425,000, there was a perception that the lofts were overpriced, Ms. Monasmith acknowledged.
“We're right in line now,” she said.
But Ms. Monasmith conceded that finding buyers won't be easy. “It's slow all over,” she said.
Some people entertaining the idea of renting in Toledo's historic central business district are more reluctant about purchasing properties.
A survey by the Toledo commercial real estate agency CB Richard Ellis/Reichle Klein found that apartment vacancies downtown were 9 percent in the last quarter of 2009 compared with 11 percent for the Toledo market overall. Rents also were lower in the city core, said Harlan Reichle, managing partner of the agency.
One of the biggest selling points at Bartley Lofts, said Ms. Monasmith, is tax abatements lasting through 2016 that discount property taxes to minimal levels for the next five years.
Mr. Swolsky estimated that current selling prices of $130 per square foot of space are about $50 a square foot less than construction costs.
The only interest that Mr. Swolsky and Mr. Gersten will have in the project once the homeowners association takes over is as owners of the dozen unsold units.
Mr. Swolsky predicted that once developers turn over project supervision to the homeowners group, buyers will have less difficulty getting banks to lend for purchases of lofts in the building.
The project also will benefit from other planned residential developments nearby including the Triangle and Berdan buildings, he added. He and his business partner own the Berdan but are in negotiations to sell to another party interested in redevelopment.
Mr. Swolsky said if he could redo the project, he would not include a swimming pool, which he described as costly and troublesome.
Developers continue to defend themselves in Lucas County Common Pleas Court against a lawsuit filed by a resident who says the pool leaked into her loft and caused mold. The case is scheduled to go to trial next year.
Not everyone regrets the decision to include a pool.
On summer evenings, Karen Hakel, president of the homeowners association, enjoys wading in the pool with a cocktail in hand.
Ms. Hakel has no complaints about Bartley Lofts. “It's terrific,” she said.
“The challenge is downtown Toledo,” she said. “I would like to see a whole lot more people out on the street walking around and not just when there is a baseball game.”
She isn't sure whether monthly maintenance fees, which average about $140, will have to increase when the association takes over.
Ms. Hakel bought a two-bedroom unit on the seventh floor in 2008.
Originally from Minnesota, she spent several years in Washington as a civil rights lawyer for the U.S. Department of Education. When she decided a few years ago to retire in Toledo to be near a brother and his family, she knew she wanted to live downtown. She toured several developments before deciding on Bartley.
Bartley Lofts wasn't Mr. Swolsky's first project in Toledo's downtown. He also renovated an office building in the Library Square area near the main Toledo-Lucas County Public Library.
“I've always had a love/hate relationship with downtown,” he said. “I've done other projects. But with all of them, we didn't make any money. We keep hoping.
“This has been a learning experience. I'm not a residential guy at all. And all the residential people keep reminding me of that.”
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HOT-SHOT young investors who seemed to have solid financial backing. A historic warehouse in the heart of downtown Toledo. A plan to create New York-type loft apartments in a largely abandoned industrial area that seemed ready for residential development. It looked like a winning combination.