Article published April 27, 2008
Downtown falls short of expectations
Residents lament lack of amenities, uncertain market
Jessica Bosworth, 23, who moved to Toledo after graduation, says downtown living lacks convenient shopping.
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THE BLADE/JEREMY WADSWORTH
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By JC REINDL
BLADE STAFF WRITER
Opinions on what downtown Toledo needs have been as bountiful through the years as vacant storefronts are today.
For Jessica Bosworth, a 23-year-old college-educated professional, downtown worker, and apartment dweller, the answer is simple: grocery stores.
The Fort Wayne native said necessity forces her to shop as though she lived in the suburbs: hopping in the car and driving to a supermarket for items as simple as skim milk or fresh fruit. And sometimes these trips are even to the suburbs.
Errands aside, Miss Bosworth, who has lived in the Commodore Perry Apartments since graduating last year from Ohio Northern University with a degree in accounting, said her experience downtown has been fine.
But, she admitted, the entertainment and social options are not entirely what she had hoped.
"It leaves something to be desired - I can say that for sure - even if I can't put my finger on what it is," she said recently.
Lorran and Eric Upchurch, who live in the LaSalle Apartments, a department store converted into apartments, are pleased with their high-ceilinged, 1,200-square-foot unit on the eighth floor.
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THE BLADE/ANDY MORRISON
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From frustrations with the lack of daily amenities to anxieties over apartment building balance sheets, downtown Toledo apartment renters and landlords say they have experienced unfilled expectations recently.
While the number of people living downtown has grown in the past decade, the real estate market has not taken off in the ways that some urban pioneers anticipated.
Two of the downtown area's largest apartment projects - Commodore Perry and Hillcrest Apartments - are in foreclosure. Several others are losing money as property owners face the crucible of rising utility and debt costs joined with an intolerance in the downtown market for higher rent prices.
"Income levels in the city of Toledo have not increased at a rate that one would have expected … so they've not been able to escalate rents to keep up with escalating costs," said Kathy Steingraber of Danberry Co. Realtors and former director of the Toledo Warehouse District Association.
Meanwhile, downtown restaurants and shops are closing, condominiums remain unsold, and plans have slowed for new housing units as property owners and managers collectively hold their breath until the scheduled opening of the $105 million downtown multipurpose arena in fall, 2009.
"I know it gets depressing when you hear of all these places closing," said Cheryl Reed, manager at the Commodore Perry for Wallick Properties.
The 156-unit, mixed-income Commodore building could be put up for a sheriff's sale this year. "I honestly think with the new arena it's going to be 100 percent better. We kind of look at this as the calm before the storm."
Downtown investors once held similar hopes for the 2002 opening of Fifth Third Field, home of the Triple-A Mud Hens.
There was talk of how the new ballpark would help lure a "critical mass" of people whose dollars would then support a host of new amenities such as cafes and restaurants. Those new businesses, the theory goes, in turn would attract more people to set up residence downtown.
City officials said they have no recent data on how many people live downtown that would reflect the housing units built since the 2000 census. Yet based on the number of housing units, downtown's residential population is well over 1,000.
Anthony Jones, a city development specialist, said city hall keeps no specific goals or benchmarks for reaching the critical mass of downtown residents. He insisted that things are moving in the right direction.
Nevertheless, more downtown businesses have closed than opened in recent months.
Quizno's Subs on Madison Avenue and Diva Restaurant on North Huron Street both shut their doors this past winter, and the fate of Monat Market in the LaSalle Apartments building, the last remaining downtown shop for buying fresh produce, is unclear after last month's electricity outage.
Not everyone is waiting for things to improve. Luke Welch, 22, said that three years ago he and a roommate moved to a market-rate apartment at New Cheney Flats apartments on Adams Street in the UpTown area. A year later, they moved out.
"We said, 'Downtown - that sounds exciting. There should be coffee shops, and there are art galleries, and we should be right where the action is,'•" Mr. Welch recalled. "And as soon as we moved in, we realized there pretty much was no downtown action. We didn't have any problems or break-ins, but it was just super boring; there was just more to do in the suburbs."
He added: "Once we moved downtown, we actually started driving more."
An early wave of residential redevelopment swept through the downtown area in the late 1990s with residential transformations of the old LaSalle's department store and former Commodore Perry and Hillcrest hotels, along with the opening of the Museum Place apartment and townhouse development.
All four apartment projects made use of federal or state tax credits and involved loans backed by the city in hopes of jump-starting downtown living. With tax credits came the pledge to mix "affordable" housing units for moderate-income tenants in with the market rate, which generally involved higher rents.
At the time, other medium-sized cities were experiencing a movement of residents - generally singles and young professionals - back into downtown areas.
This trend was a reversal of the post-World War II flight of the middle class to the suburbs that exacted a visible toll on central Toledo during the 1960s and 1970s.
Anticipating a downtown resurgence in Toledo, first-wave developers such as the Alexander Co. of Madison, Wis., which today operates its 106-unit Hillcrest, formulated business plans that called for annual rent increases and low vacancy rates in both residential and ground-floor commercial space to gain profitability.
The resurgence and cash flow didn't happen to the extent planned.
Today, the Hillcrest is facing imminent foreclosure for reneging on loans, and even with a nearly 88 percent residential occupancy rate, it's still losing tens of thousands of dollars a month, said Joe Alexander, vice president of Alexander Co.
The 156-unit Commodore Perry has been losing upward of $30,000 a month in operational expenses despite its reported 83 percent residential occupancy rate.
All vacancies are in the building's affordable units, whose one-bedrooms begin at $415 a month for individuals with incomes under $25,260, Ms. Reed said. A one-bedroom market-rate apartment is $530.
Even though the building needs a 95 to 98 percent occupancy to keep revenues ahead of expenses, management is prohibited from renting vacant affordable units to market-rate tenants and does not wish to lower its affordable rates further.
"We think that they're low enough," Ms. Reed said.
The Riverfront Apartments on North Summit Street also has experienced difficulty filling all of its 113 affordable-rate units and presently has a 75 percent occupancy rate.
The Commodore's situation could be a counterexample to a sentiment shared by some landlords and real-estate agents that mixed-income apartment buildings, at least in less tight markets such as Toledo, have trouble luring market-rate tenants.
"You can't mix low-income people with high-income people, unless they're the same education level," said local businessman Manos Paschalis, who owns a nine-unit market-rate apartment complex on Adams Street.
Since backing the first-wave projects of the late 1990s, the city of Toledo has been paying about $1 million a year on loans that were the primary obligation of the Commodore Perry, Hillcrest, and Museum Place projects.
The 131-unit LaSalle, which boasts a 94 percent occupancy rate, is the only one of these four redevelopments not behind on its payments to the city.
City Housing Commissioner Michael Badik said that despite their cash-flow problems, the first-wave projects - and the city's investment in them - were not mistakes.
The redevelopments not only saved historic architecture from the wrecking ball, but served as catalysts for future investment, he said.
"Those projects inspired other developers to take risks," Mr. Badik said. "They created the sense that [downtown] was a place where residents could live, and there has been a growth in the number of residents downtown in that time. … We've not had a great economy since those have been built, and still people came downtown."
The city keeps no formal tally on the number of downtown housing units, although one recent city count found that more than 700 units have been created in and around downtown since the late 1990s.
Toledo as a whole has lost an estimated 15,000 people since 2000, according to the U.S. Census Bureau.
Another downtown count by commercial realty firm CB Richard Ellis/Reichle Klein found 872 units of multifamily rental housing in the central business district for its 2007 end-of-year report.
Average asking prices were $542 a month for a one-bedroom, 773-square-foot apartment, $697 for a two-bedroom, 1,070-square-foot unit, and $839 for a three-bedroom. Their vacancy rate was 11 percent.
Vacancy rates for downtown retail and office space were both about 22 percent, according to the firm's data.
A market study in 2004 by Zimmerman/Volk Associates Inc. of Clinton, N.J., said downtown Toledo should be able to support 293 new housing units a year, or about 1,500 over five years.
Building, however, has since not even approached those estimates.
Proposals for putting residential spaces into Toledo Edison's former downtown steam plant have been discussed for years with little progress.
While a pair of investors last year purchased the seven-story Triangle Building at 34 South Erie St. with plans to fill it with as many as 75 market-rate, loft-style apartments, the project is still waiting to line up financing.
In the condo market, Bartley Lofts at 745 Washington St., has sold only 31 of its 52 units.
Harlan Reichle, managing director at CB Richard Ellis/ Reichle Klein, said he believes downtown Toledo has yet to reach the so-called critical mass of people.
"I don't know that there's a bright line demarcation point where you get that critical mass - but we're not there," Mr. Reichle said. "We wouldn't all be wringing our hands if we are there, if we were there."
Laurie Volk of Zimmerman/Volk told The Blade this month that larger economic trends could be to blame for downtown Toledo's woes.
"Obviously it is more difficult and more challenging in those older Northeastern and Midwest cities that have lost a lot of population over the years," Ms. Volk said of downtown revitalization. "There is going to be a fairly substantial gap between what it costs to build those units, and where the market is."
Businessman Mr. Paschalis attributed much of the financial troubles facing the large late-1990s projects to out-of-town developers, who, unfamiliar with the Toledo market, set out with narrow and unrealistic margins for success.
"I would never start a business where I have to have 100 percent business at all times to make a profit," he said.
Yet it often takes those deep-pocketed, out-of-town developers to get things rolling, Ms. Volk said.
"Typically local developers have so little confidence in the market that they're reluctant to take any risks. So nothing happens, and nothing changes."
Finding and keeping ground-floor commercial tenants, who generally pay more per square-foot than residents, have been especially challenging for these first-wave apartments. The Hillcrest lacks an anchor tenant, the nightclub space in Commodore Perry is only open on special occasions, and the LaSalle building recently lost Bellacino's Pizza & Grinders.
LaSalle resident Lorran Upchurch said she and her husband, Eric, are pleased with their high-ceilinged, two-bedroom 1,200-square-foot apartment on the eighth floor, for which they pay about $800 a month.
The 22-year-old University of Toledo student said one of the greatest benefits of downtown living for her has been the proximity to the social service agencies where she has internship jobs. The biggest drawback is the lack of amenities and year-round activities.
For others, downtown offers an amenity seldom found in the suburbs: DUI-free nightlife.
"It's like, 'Oh man, I can just walk to the bar,'•" said Ryan Agee, property manager for Museum Place apartments. "That is a big factor for a lot of people."
Contact JC Reindl at:
jreindl@theblade.com
or 419-724-6065.
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