Lakewood Center North, a key anchor in the Downtown Lakewood district, suffered a setback earlier this month when its ownership group surrendered the property to their lender in order to stave off foreclosure.
In addition, according to a report in the latest edition of Crain’s Cleveland Business, the United Transportation Union — the building’s largest tenant in terms of square footage — will relocate its headquarters to North Olmsted in June.
UTU is an AFL-CIO labor union affiliate that represents 125,000 active and retired railroad, bus and mass transit workers in the United States and Canada.
“It’s a big loss,” said Nathan Kelly, Lakewood’s director of planning and economic development, after Monday’s city council economic development committee meeting.
Kelly explained the UTU exodus was prompted by Lakewood Center North management’s inflexible position on the terms of lease renewal in relation to the depressed commercial real estate market. They were asking for “numbers out of this world,” he said. Ultimately, UTU got a “great deal” elsewhere on a standalone building with a surface parking lot, according to Kelly.
A UTU employee familiar with the situation who spoke on the condition of anonymity because he was not authorized to comment publicly, said approximately 80 employees work in the Lakewood office.
He said the headcount at UTU has gradually decreased over the years, and the organization found itself with more space than it needed, and could afford. He indicated the leasing agent was “not interested” in offering more favorable lease renewal terms to UTU.
Biggest employers in the city for 1999 and 2008
|Employer – 1999
|Lakewood Board of Education||923|
|City of Lakewood||667|
|Lake Erie Screw||310|
|United Transportation Union||175|
|Advanced Ceramic Corp.||155|
|United Readers Service||150|
|New York Life Insurance||120|
|Employer – 2008||Employees|
|Lakewood Board of Education||1,033|
|City of Lakewood||553|
|New York Life Insurance||230|
|Lakewood Senior Health Campus||225|
|First Federal of Lakewood||147|
|Advanced Energy Tech||124|
|U.S. Postal Service||101|
(Source: 2008 State of Ohio Audit of the City of Lakewood)
Here today, gone tomorrow
Believe it or not, this is the second time in the 36-year history of the building that it has been forfeited to a lender. It last happened in 1993, when the commercial real estate credit market dried-up.
What is a little alarming about the most current incident is the swiftness in which the situation deteriorated.
A German investment group doing business as The Tomorrow Fund bought the building from a New Mexico-based investment group in January of 2007 for $14.45 million, with a loan of $8.5 million.
It seemed like they were on the right path. They successfully renewed the lease of New York Life Insurance, the largest employer in the building, and upgraded the facilities.
The building is, in fact, 96% occupied, according to the Crain’s Cleveland article.
However, things were not as they appeared. Kelly, who was quoted in the article, said building management did not respond to tenant demands, and “was not competitive.”
The building is now essentially bank-owned, so don’t expect to see any kind of fantastic developments there. If the city is lucky, a local ownership group will snap up the property at a bargain price, give it the attention it deserves, and attract a top notch tenant to replace UTU. More likely, though, it will be acquired by another out-of-state investment company, but with hopefully better end results than the previous owners.