Another one bites the dustWritten by Jim Harpen | | firstname.lastname@example.org
As I write this column it looks like another curtain is falling on Downtown Toledo. Or, looked at another way, a page is turning on downtown Toledo. The Nicholas Building — known by most Toledoans as the former Fifth Third Bank building, or to older Toledoans as the First National Bank building — is closing for the most ignominious of reasons: The landlord didn’t pay the electric bill.
“We received notice from Toledo Edison that power would be turned off if payment is not received” the building’s assistant manager told me. “And payment will not be received.”
The tallest building in Ohio when it was constructed in 1906, this feature on the Toledo skyline will be empty by the time most of you read this column. It’s happening that fast. There was little notice for the tenants to make the move. Fifth Third Bank, which has (had) its main Downtown branch on the ground floor of the Nicholas Building, sent out a news release that it was closing that branch exactly 24 hours and 39 minutes before they locked the doors for good. For the rest of the tenants, it was like scrambling for lifeboats on a sinking ship. Some tenants filed court motions to keep the power on through the weekend so they could get their belongings out. Commercial realtors were getting panicked calls from tenants on the top three floors who needed to move and move fast before power to the elevators was cut off.
The owner/landlord is the Ergur Real Estate Group out of San Francisco. It bought the Nicholas Building in January 2008 for the relatively paltry sum of $313,600 — that’s 17 floors of Toledo history for less than you’d pay for a single-family residence in Stone Oak. Before you jump to the conclusion that this is just another absentee landlord scarfing up cheap Toledo real estate and milking it for all the cash they could, consider what Ergur Group’s plans were: A $200 million renovation of the Nicholas Building and the adjacent 10-story Spitzer Building, also owned by Ergur.
Those were the plans. But then came the credit meltdown. The banks quit lending on commercial real estate projects and that financing was the lynchpin to the redevelopment of the two buildings. Owning two renovated, classy buildings on adjacent corners a couple hundred feet from the main entrance to the new arena would have been a real gold mine. But owning two old buildings with less than 50 percent occupancy and no bank financing for renovation is dead weight.
“The Nicholas Building is only 10 percent occupied,” said Bill Thomas, Ergur Real Estate Group’s Toledo manager. “That’s not enough [rent] to cover our daily needs.” Nor, apparently, enough to cover the FirstEnergy bill.
With the banks refusing to lend, the Ergur Group started months ago looking for private financing near and far, including the Middle East. “You look at these private equity groups” said Thomas, “… they hold all the cards.” And the private investors weren’t playing.
It might be tough to see a silver lining in such a debacle, but let’s try. In the short-term, there’s an instant increase in demand for Downtown office space as Nicholas Building tenants are racing to relocate. One week ago, the suggestion that there would be a spike in demand for space Downtown would have been answered by a nervous laugh and maybe a recommendation to see a psychologist.
I caught up with Nancy Lehman, vice president of CB Richard Ellis commercial real estate brokerage, after she spent Wednesday afternoon showing a Nicholas Building tenant five places where they could relocate. All Downtown.
The good news is those businesses will be, or are trying to stay Downtown. The bad news is that this is a case of musical chairs. The same number of Downtown workers in fewer buildings and another landmark emptied out.
Refilling it will take time. Perhaps, a lot of time.
“Its gonna be a year minimum,” said Germano Bressan of Signature Associates, a commercial real estate firm. “That’s an expensive building to run. Somebody’s going to buy it for nothing, so they can make money with just a handful of tenants.“
E-mail columnist Jim Harpen at email@example.com.