January 06, 2014 –
Construction will start this week to transform the five-story Fairmont Creamery building in Cleveland’s Tremont neighborhood into apartments, offices and other commercial space. Real estate records show that the building changed hands last week, as a local developer trio closed on a complicated financing deal. (Plain Dealer file)
A developer trio has purchased the Fairmont Creamery building on Willey Avenue for $450,000. Real estate records show that the sale, part of a $14.9 million redevelopment deal, closed Dec. 30th.
In a testament to the strength of the rental market, Ben Ezinga, Josh Rosen and Naomi Sabel say they have a waiting list of more than 85 people for 30 apartments. That’s after just two weeks of casual marketing on Facebook and Craigslist, for a project that won’t open until October or November.
“There’s clearly a very strong residential market in Cleveland right now,” said James Patchett of Goldman Sachs, which agreed to participate as an equity investor and lender on the project.
“The demand is out of control,” he added. “It’s very unusual to go to multiple buildings and to be told, essentially, to go away because there’s no room. It made us feel confident that there was a pent-up demand for additional supply.”
The developers, a team called Sustainable Community Associates, already have plans for most of the commercial space in the 100,000-square-foot brick building, which sits in a quiet pocket between busier stretches of Tremont and Ohio City.
LaunchHouse, an organization that invests in and works with start-up companies, is branching out from its home in Shaker Heights to a second location – on the West Side. The business accelerator expects to operate an incubator and shared office space at the creamery, which also will house a small café and a gym called the Tremont Athletic Club.
Executives at LaunchHouse did not respond to a request for comment.
Like many historic restoration projects in Northeast Ohio, the creamery renovations required a complex array of public and private financing. The deal marks a foray into Cleveland real estate for Goldman Sachs, a giant investment-banking firm with a division focused on urban projects.
Patchett, a vice president with Goldman’s urban investment group in New York, said the bank originated a seven-year loan for the project and generated equity by investing in federal tax credits awarded to the creamery. And Goldman kicked in a short-term loan to cover the cost of environmental work until clean-up money from the state trickles in.
The global investment bank and Cleveland Development Advisors, an affiliate of the Greater Cleveland Partnership, contributed allocations of federal New Markets Tax Credits to the project.
The development also involves federal and state tax credits for historic preservation; a tax-credit investment from Nationwide Insurance; loans from Cleveland Development Advisors and Enterprise Community Partners of Cleveland; and partially forgivable loans from the city and Cuyahoga County.
“It’s a lot of paperwork,” Ezinga said of the financing. “I feel really lucky to be done with that and onto the construction side.”
Rosen and Sabel noted that the team raised more than $1 million in equity from a dozen or so small investors, including a few people who bought condominiums at the team’s first project. The three entrepreneurs, who graduated from Oberlin College, cut their teeth on a residential-and-retail makeover of a contaminated site at the eastern edge of downtown Oberlin. The creamery, another challenging deal, marks their second act.
Apartments in the building will range from 800 to 1,900 square feet and will rent for $900 to $1,800 a month. The largest, priciest apartments are penthouses with roof access. Six of the units will be subsidized, to comply with financing requirements.
The Fairmont Creamery Co. built the Tremont plant along a railroad line and operated it from the 1930s to the early 1980s. The five-story building has been largely empty since then, though the most recent owner operated a nickel-chrome plating business out of the basement.
Rosen expects interior construction to start Wednesday, once the worst of the early January chill is over.