Toledo leaders had hoped the renovated 107,000-square-foot Jefferson Center in UpTown would be a bustling hive of technology workers and programming classes by now.
Instead the historic building, which just underwent a $38 million overhaul, is sitting empty, with paper covering some of the windows. It's been two months since the California-based tech firm Bitwise Industries imploded, leaving the building with no tenant and 18 of its local employees out of work.
The company had planned to hire 378 people to fill the Jefferson Center — to be known as the Toledo Innovation Center — plus operate a separate downtown co-working space and a daycare. But then it suddenly laid off its entire nationwide staff of 900 on Memorial Day and within weeks had filed for Chapter 7 bankruptcy in U.S. Bankruptcy Court in Delaware. Chapter 7 allows a trustee to liquidate a company's assets and distribute the proceeds to creditors.
ProMedica recently said it spent about $1.8 million on the project, and has 23 percent ownership. The health care organization is now leading an effort to figure out what to do with the building after its project partner Bitwise collapsed. The building has not yet been listed for sale or lease.
In the project's financial documents, Bitwise is listed as having the remaining 77 percent equity, even though it only sunk about $200,000 into the project upfront. The documents show that Bitwise was expected to make a $970,000 lease payment for the building this year, with the payments rising gradually to more than $2.3 million annually by the early 2050s.
ProMedica, in a statement late last month, confirmed the building was intended to be managed and operated by Bitwise, and primarily occupied by the company. ProMedica said it only planned to have a small presence in the building, and those specifics had not yet been determined.
Now, the health care organization acknowledged it would "have to step up to help move the project forward in a meaningful way."
"While we are one of the many victims of Bitwise’s downfall, we recognize the loss of Bitwise and the business it committed to bring to the Jefferson Center creates a significant vacuum for this important project in our community," ProMedica said. It added, however, that it is glad that the building was rehabilitated before Bitwise collapsed, "which avoided the demolition of another iconic structure connecting our past with our future."
When contacted for an update this week, ProMedica spokesman Tausha Moore said the company continued to work with others to find a new purpose for the building, and that the group didn't have any updates.
Numerous financial tools and programs were involved in making the renovation deal work, documents show.
They included the Toledo-Lucas County Port Authority and the Development Finance Authority of Summit County putting in a combined $17.5 million worth of bond financing. JobsOhio provided a $1.5 million grant, a $3 million loan, as well as a short-term $3 million "bridge loan."
And more than $10 million in combined state and federal historic tax credits were approved, as well as $13.2 million worth of Federal New Market Tax Credits, which incentivize certain development projects in distressed communities.
Toledo Economic Development Director Brandon Sehlhorst said ProMedica has taken the lead in finding new tenants for the building, but added it would take creditors some time to unravel their rights and responsibilities under their financing obligations.
The city had agreed to several tax breaks if Bitwise followed through on its promises, but had only paid out a $40,000 Facade Improvement Grant by the time the company imploded. It is also currently reconstructing a section of 13th Street adjacent to the Jefferson Center, which is partly being paid for by the Ohio Department of Transportation.
"Bankruptcy makes everything harder," said Lucas County Commissioner Pete Gerken. The county had pitched in $1 million to the project using its federal American Rescue Plan Act funds, money that Mr. Gerken maintains was well spent because it helped bring an old building back to life.
But the challenge remains of finding a new tenant that can start making rent payments soon, he said. The project's complicated financing details mean that multiple entities — from the Toledo-Lucas County Port Authority to JobsOhio, to private firms — are either already owed debt payments, or will be in the coming weeks.
John Szuch, chairman of the finance and development committee of the Toledo port authority's board of directors, previously said there was still some funds leftover from construction that could be used for building maintenance and a few loan payments in the short term. He said this week he was unsure how much of those funds remained.
The ProMedica spokesman did not answer a question about how it would be able to continue upkeep of the property or keep making payments if it takes awhile to find a new tenant.
Those who have been inside the remodeled building — a former post office and alternative school — describe it as purpose-built for a single-tech company like Bitwise, with a large, open central area that includes a cafe and some offices on the outer edges. The airy design means it would not be easily subdivided like a traditional office space might be.
Mr. Sehlhorst said he didn’t expect the building to open until ProMedica could find enough tenants to cover the maintenance and operating costs of the center going forward.
Mr. Gerken, who toured the building more than a month ago, said the interior had been redone "to the highest quality," and that it "restores the historical feel of the building," and has easy access to modern features throughout. He said it would be best suited to a single tenant.
While Toledo is about to apply for a designation as a state and federal innovation hub — which could mean a windfall of money to build out the area's tech and advanced manufacturing capabilities — the vacant Jefferson Center, or Toledo Innovation Center, won't be part of that application.
The ownership of the building needs to be clearly established first following the demise of Bitwise, said Jim Hoffman, the recently retired president of KeyBank Northwest Ohio Market and current chairman of the Regional Growth Partnership.
“All the legal entanglements need to be straightened out,” he said, adding that the building could still be included in later tech hub grant requests.
The massive new building also hits the market at a time when the Toledo area already has a glut of open office space. The Reichle Klein Group, a Toledo real estate company, said in a recent report that the Toledo area currently has about 19 percent office vacancy, with especially high vacancy rates in the downtown area, where the Jefferson Center is located.
Rep. Elgin Rogers, Jr. (D., Toledo), who represents the area where the center is located, said it's important the building doesn't sit too long and slip back into disrepair, to a point where it invites vandalism, as the structure had in prior decades.
"Now we have to find a use," he said, adding that he is hopeful it can still become some sort of hub for growth and development that leaders had initially envisioned Bitwise would bring to town.
As local leaders sort out the future of the Jefferson Center, Bitwise's bankruptcy case — which involves more than 1,000 creditors — has been moving forward in recent weeks. One recent filing lays out how the company's now-former CEOs "deliberately misrepresented the financial condition and profitability" of the company, including to its board.
The filing says the CEOs’ “scheme” came to an end on Memorial Day, when the former executives told the board that checks issued the prior Friday were going to bounce. By that evening, the company's entire workforce was furloughed.
The list of creditors listed in the bankruptcy filing includes the Ohio Department of Taxation. A department spokesman said he could not say how much the company owed, citing tax privacy. He said a lien had been filed against the company in Franklin County.
Also on the list is Toledo's Connecting Kids to Meals. President and CEO Wendi Huntley said her group had paid Bitwise to develop "customizable software (and a mobile app) that would help us to gain efficiencies and reduce paperwork associated with our meal programs where we increase access to healthy meals for kids in our area.
"We were in the midst of the process when this happened and now are looking at alternative ways to get this software developed," she added.
Ms. Huntley declined to say how much her organization is owed.
First Published July 30, 2023, 3:30 p.m.
