The Axis at Ansel is next to University Circle which was named by USA Today in 2021 as the “Best Arts District” in the country. The district continues to be recognized as a prestigious, yet accessible, community to live, work and play (Colliers). CLICK IMAGES TO ENLARGE THEM
Offers success of University Circle-area investment
If there’s any building that shows the strength of the housing market in Cleveland’s University Circe, it’s the Axis at Ansel which is now for sale. Despite starting with two strikes against it, the developer hit a leasing home run. And now Signet Real Estate Group of Akron hopes to close out the game by selling the 163-unit apartment building and possibly use the sale proceeds for its next project in the booming area.
The first strike the project overcame was its site. Although building next to University Circle is a strength, building in Hough meant overcoming history and a lack of comparable products and precedents. There was only one market-rate precedent nearby. The Finch Group in 2015 built market-rate housing in the Hough neighborhood with its Innova development on Upper Chester. That building was constructed across the street from the Cleveland Clinic campus.
Signet was building a medium-sized, market-rate apartment building farther north — on Hough Avenue, a street known nationally for urban decline that began years before the 1966 race riots. But the $35 million project managed that risk by having an address on Ansel Road and even using that street in the building’s name.
The second strike came in early 2020 as construction at the Axis at Ansel was nearing completion and leasing was just beginning. The pandemic hit in March, shutting down the nation’s economy and sending home all students at nearby Case Western Reserve University (CWRU) — a large source of potential tenants for Axis at Ansel.
At the southwest corner of Ansel Road and Hough Avenue, the Axis at Ansel added market-rate apartments on the neighborhood’s namesake street for the first time in nearly a century (Colliers). CLICK IMAGES TO ENLARGE THEM
The project was finished in the summer of 2020, in time for CWRU’s 2020-21 school year. Although students continued to remote-learn, some still moved into the new building. On the other hand, Cleveland Clinic, the region’s largest employer, indefinitely put on hold several of its major expansion and construction projects and limited new hiring.
Despite that, leasing activity at the Axis at Ansel was robust, offering units ranging from 540 to 1,305 square feet at monthly rents starting at $1,150. Ninety percent of the apartments leased out in less than one year and a 1,000-square-foot ground-floor retail space leased to South Euclid-based smoothies shop Fawaky Burst. New buildings are considered stabilized when they reach 90 percent occupancy. And they are considered a success when they stabilize in two years or less.
However, some real estate developers don’t want to be real estate owners. So when their real estate development stabilizes, they sell it. And that’s what Signet is doing with the Axis at Ansel. The building was put on the market last week by commercial brokerage Colliers International.
It should be noted that the building is for sale — not the land. The New Village Corp., a development-oriented subsidiary of the nonprofit Cleveland Neighborhood Progress Inc., owns the land. The owner of the Axis at Ansel pays a ground-lease to The New Village Corp. with annual payments of $25,000 in each of the first two years but rising by 5 percent every five years thereafter, according to the building’s offering memorandum. The land is not for sale, said Peter Grealis, a senior associate at Colliers in Cleveland.
Resident amenities in the Axis at Ansel include residents enjoy a complimentary coffee bar in the lobby (shown here), a 24-hour fitness center, collaborative work spaces, bicycle storage with workshop and a pet-friendly environment (Colliers).
“Axis at Ansel is a jewel in the crown of the University Circle neighborhood and the team is super excited to tackle the assignment,” Grealis said in a written statement. “We expect a flurry of activity from a diverse range of buyers across the country.”
The offering memorandum also shows that, given the building’s projected revenues, expenses and property taxes, even with 13 years remaining on the 15-year tax abatement from the city, the Axis at Ansel should fetch nearly $46 million from a buyer. That assumes a capitalization rate of 5.35 percent at the time of the sale.
That rate can be affected by the national inflation rate which grew 7.9 percent from February 2021 to February 2022 and by median incomes in Greater Cleveland that grew 6.5 percent during the same period. Submarkets like the fast-growing University Circle area are seeing more economic activity and causing incomes and rents to rise faster than the metro area’s average.
Rent.com recently reported that apartment rents were rising faster in University Circle than anywhere else in Cleveland. Price may also be affected by complementary apartment buildings and competition from new, neighboring developments including the proposed renovation of a 10-story apartment building at 9410 Hough and other projects nearby.
Spacious and bright apartments at the Axis at Ansel offer high-end finishes, carpet and faux-wood flooring, kitchens and baths with quartz countertops, stainless steel Energy-Star appliances and Shaker-style cabinetry (Colliers).
Signet may use funds from the sale to support another development after construction of its Foundry Lofts, 7220 Euclid Ave., is completed this year. A real estate industry analyst recently told NEOtrans that many developers are refinancing or selling properties right now so that they can prepare permitted projects before the city’s tax abatement program expires later this year.
Prior to construction of the Axis at Ansel, David Fumi, managing director at Signet Capital LLC, said lease payments from the owner of the apartment building to The New Village Corp. will provide additional funds for the nonprofit organization to create a neighborhood land trust and will result in additional real estate development projects. When asked if the sale of the Axis at Ansel might help Signet finance a new development nearby, Grealis had no comment.
But for real estate investors who want to get into the University Circle housing market with a new building but without having to construct anything, one of Grealis’ colleagues at Colliers said the Axis at Ansel is worth a good, hard look.
“Apartments provide investors with adequate protection and preservation of capital,” said Gary Cooper who leads Colliers’ Cooper Multifamily Services Team. “In uncertain times, there is always a flight to quality and Axis at Ansel is a perfect example. Quality construction aside, the location is widely coveted and will remain a true people magnet for years to come.”