A plan to renovate the historic and long-vacant Berdan Building in Toledo’s Warehouse District has fallen apart after attempts to secure a $10.2 million federal loan for the project failed and the developer pulled out, city officials said.
Executives for Cleveland-based Landmark RE Management LLC did not return numerous calls last week requesting information, but Toledo Deputy Mayor Tom Crothers confirmed that the company had walked away from the project.
“Under the current funding scenario, it just wasn’t possible,” Mr. Crothers said. “It’s not that we’re pulling the plug on the project. We’re trying to figure how to do the project, but we can’t do it in the way we were contemplating before.”
Landmark RE Management’s exit is a blow to the administration of Toledo Mayor Mike Bell, which had worked with the developers for over a year in trying to secure federal funds for the renovation.
The company – which has had multiple a successes in developing historic renovation projects – had planned to turn the 110-year-old building across from Fifth Third Field into upscale, loft-style apartments.
The loan, which would have come from the U.S. Department of Housing and Urban Development with backing from the city, was a crucial component in the $22 million plan.
Landmark RE Management hoped to obtain the loan through a HUD program called Section 108.
The city had to guarantee the loan using money it receives annually from the federal government called Community Development Block Grant funds. Up to 30 percent of those funds can be used to combat blight, and the city and developer contended that the Berdan Building project would do just that.
However, when the loan application passed to HUD headquarters in Washington for review, the agency questioned whether the project met the federal funding criteria, the city reported.
On further inspection of the numbers, officials from Toledo’s Department of Neighborhoods concluded the city could guarantee only between $2 million and $3 million for the project, not the $10 million Landmark had requested, deputy director Kathleen Kovacs said.
It’s unclear why it took the city so long to realize it did not have the funding it needed for the project. City council had approved the loan application. Ms. Kovacs suggested some confusion may have arisen because the department handling the application doesn’t receive the block grant funds.
“This project had been done through Economic Development, but the Department of Neighborhoods oversees the CDBG and the federal funds,” the deputy director said. “[Economic Development] may not have been as aware of the CDBG process and restrictions as the Department of Neighborhoods would be.”
Landmark RE Management has been involved in many successful building rehabilitation projects in recent years, primarily in the Cleveland area but also in Indianapolis.
Developer John Carney told The Blade in December, 2010, as he walked through Cleveland's warehouse district, that "tear down is not our mentality."
Mr. Carney - along with business partner Bob Rains - planned to start doing the same in downtown Toledo at the vacant Berdan Building. At the time, company officials said Toledo and Cleveland were "the same vintage" and had the same kind of potential.
In Cleveland, the company's renovated Bridgeview Apartments, also a former grocery warehouse, consists of 247 apartments ranging from 630 to 2,000 square feet, of which about 94 percent are occupied.
The rents are from $795 for a one-bedroom of 630 square feet to $2,400 for a large three-bedroom of about 2,200 square feet. Rents at the Berdan were eyed to start about $695.
Landmark's initial project was the relocation of the downtown Cleveland City Mission and the redevelopment of the mission's previous headquarters into 54 luxury apartments and 8,000 square feet of street-level retail space. The $6 million project took two years to complete. Mr. Carney said it was the first significant redevelopment project in Cleveland's historic Warehouse District.
Mr. Carney and Mr. Rains are attorneys who in the mid-1970s began real estate development with a tennis club in Strongsville, Ohio. Since then, they have developed, owned, and managed projects including shopping centers, office buildings, recreational centers, condominiums, and apartments. Since 1990, they have focused principally on redevelopment of national historic landmark structures.
Toledo city councilmen had mixed reactions to the demise of the Berdan Building plan. Landmark RE Management first approached council with its proposal in August, 2010, and the legislative body held numerous hearings on the issue before it approved submitting the loan application late last year.
Councilman Rob Ludeman, a strong advocate of the plan, hadn’t heard about the problems with the loan and said he was disappointed.
“I was hoping it would go through because I felt the developer and the architects were top notch,” Mr. Ludeman said.
But Joe McNamara, who along with councilman Adam Martinez, had opposed the financing plan, said he was relieved the loan didn’t go through. Both councilmen had expressed concern that the developers — who said they could not guarantee payback of the federal loan — did not have enough of their own money at stake. The councilmen feared the proposal could leave the city on the hook to repay the loan if the developers defaulted.
“This project was extremely risky to the City of Toledo, and I was always uncomfortable with the level of risk the city was taking compared to the level of risk of the developers,” Mr. McNamara said. “I was pretty confident it was going to fall apart somehow anyway — but I really didn’t know how — because the numbers weren’t making sense to me.”
Mr. Martinez said the loan application’s failure is a chance for the city to seize on a new type of financing plan. The strategy, already approved by council, allows the city to increase the amount of Section 108 money it has available by leveraging it in a complex procedure through the Toledo-Lucas County Port Authority.
“The opportunity to develop that building is still there,” Mr. Martinez said.
Deputy Mayor Crothers said the city still wants to see the Berdan Building renovated and may look for another developer to carry out the project.
Bill Thomas, chief operating officer for the newly formed Downtown Toledo Development Corp., said he’s optimistic about the future of the building.
“If one developer is not able to put their financial package together it may just make it easier for another developer to step in,” he said. Landmark’s exit “doesn’t mean the Berdan is any less well off than it was.”
Contact Claudia Boyd-Barrett email@example.com or 419-724-6272