CLEVELAND, Ohio – The Buckeye State’s tallest building is back in local hands.

Tuesday, the Millennia Companies of Valley View bought the 57-story Key Tower office building and an attached hotel and parking garage. The $267.5 million acquisition was a colossal commercial real estate deal for Greater Cleveland. And the purchase was a coup for Millennia, a privately held family of companies focused on the apartment business.

“That’s a mammoth transaction,” said Alec Pacella, managing partner at the NAI Daus brokerage in Beachwood. “To think a local buyer’s behind that, pulling the strings – especially a local buyer who’s not on the radar screen, when you think about office buyers – that’s pretty amazing. Pretty amazing. That’s real estate, right? Never a dull moment. Always a surprise.”

Now Millennia controls a 1.3-million-square-foot office complex, a 400-room Marriott hotel and nearly 1,000 parking spaces in an underground garage. And the new owner plans to make significant investments, to upgrade public spaces and ready office floors for new tenants.

Millennia expects to move its headquarters and hundreds of employees from Rockside Road to Key Tower this year. And all signs point to Forest City Realty Trust, Inc., a publicly traded real estate company now based in Terminal Tower, following suit in 2018.

Those leases – totaling 193,000 square feet – will tip occupancy at the office tower over 95 percent. Forest City hasn’t publicly announced its moving plans. Millennia alluded to the increased occupancy in a news release late Tuesday but didn’t provide details about incoming tenants.

“I am honored to be a part of such an iconic asset and one with such a rich history of excellence,” Frank Sinito, Millennia’s chief executive officer, said in the news release.

Sinito bought Key Center from Columbia Property Trust, Inc., a publicly traded company that put the complex on the market in late 2015.

“Key Center is the most recognizable icon on the Cleveland skyline, and we were determined to take a patient approach in order to identify the right buyer for this significant asset,” Nelson Mills, president and chief executive of Atlanta-based Columbia, said in a news release after markets closed Tuesday. “Our diligence has now been rewarded, allowing us to exit the Cleveland market at a price within our expectations and accelerate our focus on high-barrier markets.”

Other potential buyers, including former Willis Tower owner American Landmark Properties and an investor group led by real estate developer Scott Wolstein, kicked the tires, but ultimately didn’t proceed.

Now it seems as though the collapse of other deals and a long closing timeline accrued to Sinito’s benefit. He paid less than prior suitors offered and, meanwhile, improved the upside of the deal by aggressively courting office tenants to fill empty space.

As of Dec. 31, Key Tower was 82 percent occupied, Columbia said Tuesday.

Cleveland-based KeyCorp, with 13.5 years left on a lease, is the largest tenant even after downsizing its offices, which bleed into the 1880s Society for Savings building that’s linked to the tower’s lower floors. Other large tenants include law firms BakerHostetler, Squire Patton Boggs and Thompson Hine.

In an October investor document, Columbia put Hilbet the value of Key Center – the company’s largest single property, by square footage – at $342.6 million.

The $267.5 million sale price seems like a good deal for the buyer, Pacella said.

And it’s still a striking figure for the region, where Pacella tallied $805 million worth of investment sales spanning 124 properties for all of 2016.

“I’m sure it’s going to be one of the biggest sales, certainly in the second tier [of cities], this year,” he said. “I can’t think of the last time we’ve had a sale that big.”

A three-member bank group, led by Citigroup, provided first-mortgage financing for the purchase and renovations. Bank of America and Deutsche Bank were the other participants.

Apollo Global Management, a publicly traded private equity firm based in New York, is the mezzanine lender, bridging the gap between the bank loan and equity Millennia raised.

Mark Vogel and Dan Geuther of Berkadia Commercial Mortgage, which assembled the financing, said Key was a challenging undertaking because of its size, location and complexity.

The blend of office and hotel – a turn-off for some out-of-town buyers and institutional investors – made the property tougher to market and understand. Worries about overbuilding of hotels, including the taxpayer-financed, 600-room Hilton Cleveland Downtown that opened in mid-2016 next to the convention center, also were a hurdle.

Lenders had to get to know Cleveland while also becoming comfortable with Millennia, which owns more than 20,000 apartments – a very different product than a trophy office tower and a Marriott.

“The asset shows so well,” Vogel said of Key Center. “These lenders we were trying to convince, when we brought them to the asset, it alleviated their concerns.”

Sinito initially approached Key Tower as a potential tenant, not a buyer. Millennia began looking for downtown office space in 2014, with a preference for being an owner-occupant. The company bought the empty Garfield Building on East Sixth Street for an apartment conversion and later purchased the 75 Public Square office building for another redevelopment project.

But Sinito missed out on other, larger historic buildings that might have accommodated Millennia’s growing workforce. Meanwhile, Key Center hit the market, and investors eyeing the property started approaching Millennia about moving in.

Ultimately, Sinito decided to wear both hats: Buyer and tenant.

“It took a collaborative effort to complete this transaction,” he said in a news release, mentioning Columbia and the BakerHostetler and Benesch law firms. “My heartfelt thanks go out to everyone involved on both sides of this deal.”

Completed in 1991, Key Tower was the brainchild of developer brothers Dave and Dick Jacobs, who also owned the Cleveland Indians until 1999. The brothers died in 1992 and 2009, respectively. Jacobs Real Estate Services, an affiliate of the Richard E. Jacobs Group of Westlake, still manages and leases the tower and will continue to oversee daily operations for Millennia.

In 2005, Columbia bought a 50 percent stake in Key Center from the State Teachers Retirement System of Ohio, a pension fund. Jacobs sold Columbia the remainder in 2008.

Now, nine years later, an iconic building with Northeast Ohio roots has come full circle – in an outcome nobody predicted when Columbia signaled its intentions to sell in 2015.

“It’s something,” Pacella said of Sinito’s acquisition. “Normally, you wade into office – up to the knees, see if [you] like it. He’s jumping in with both feet. Bahis siteleri And then some.”

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