Through its owners rep, National General Insurance announced today that it will not seek a renewal of its office lease with an Allstate affiliate that owns the 23-story 800 Superior building. Allstate owns National General and is putting the building up for sale. It’s the latest shake-up of the office market in Downtown Cleveland and nationwide in the wake of the pandemic that introduced many to remote working (CBRE Cleveland). CLICK IMAGES TO ENLARGE THEM.
More office market turmoil in pandemic’s wake
ARTICLE UPDATED MAY 31, 2024
Today, CBRE Cleveland announced that is listing the 23-story 800 Superior office tower in Downtown Cleveland for sale and said one of the property’s largest tenants, National General Insurance likely will not renew its lease at the building when it expires in two years. Meanwhile a spokesman for insurer AmTrust Financial, which is the building’s other large tenant, said it intends to stay at the building. Both companies have naming rights on the building.
The 800 Superior building is currently 77 percent leased. AmTrust Financial of New York and National General Insurance of Charlotte each occupy about 150,000 square feet. Both tenants’ leases have a simultaneous expiration date of Dec. 31, 2026, according to a sale offering summary e-mailed to potential buyers by CBRE.
National General is owned by Allstate Corp., based in suburban Chicago. An affiliate of Allstate, 800 Superior LLC, owns the Downtown Cleveland office building, according to Open Corporates. Principals of AmTrust acquired the property through 800 Superior LLC in 2011 but later sold the limited liability corporation.
“Current ownership expects to terminate its current lease and vacate the premises upon completion of a sale, but is willing to stay through the end of its lease term in order to facilitate a transaction if it drives incremental sale proceeds,” said CBRE in its e-mail.
The e-mail didn’t identify to where National General would relocate or if all of its employees would work remotely. A National General spokesperson could not be located for comment. By contrast, an AmTrust spokesman said their company intends to stay at 800 Superior when it’s lease is up.
“The building was purchased by Allstate several years ago and AmTrust is currently based at 800 Superior under the terms of a long-term lease,” said Hunter Hoffmann, chief marketing officer at AmTrust Financial in an e-mail exchange with NEOtrans. “We don’t have any plans to conduct a site search and are happy with our current lease agreement at this location. We have not made any announcement around this.”
The sale offering for 800 Superior isn’t limited to the office tower. It also includes the 328-space parking garage seen here in the foreground at the corner of East 9th Street and Vincent Avenue. But the garage is closed due to its poor condition and may have to be substantially rebuilt or demolished (CBRE).
“We are not involved in the any future sale of the building and intend to fulfill the terms of our current lease,” he continued. “AmTrust has a long history as a company and employer in Cleveland and are committed to maintaining our presence in the metro area.”
AmTrust Financial consolidated more than 1,000 jobs from Cleveland’s suburbs and North Carolina to the 587,118-square-foot office building and later acquired other insurance firms, moving their jobs to the tower as well. It was considered quite jobs coup for Downtown Cleveland at the time. AmTrust employees told NEOtrans that at least several hundred people work at AmTrust’s downtown offices currently.
National General continues to advertise for new job openings in Cleveland, including three entry-level sales positions currently. According to job-rating Web site Comparably, 57 percent of National General’s employees work fully remote while 14 percent are employed under hybrid/flexible work policies. At parent Allstate, “75 percent of employees will remain primarily home-based, with access to local offices if they so choose,” job search site The Muse reports.
It’s the latest office tower downtown to go on the market in the post-pandemic era of remote working. But it’s not the last time this building was left for dead. The building was nearly vacant in 2011 when Allstate’s affiliate 800 Superior LLC acquired it and the associated parking garage for $7.46 million.
KeyBank Investments had previously owned and occupied 800 Superior until leaving for a new building at Tiedeman Road and Interstate 480 in suburban Brooklyn. Before that it was called McDonald Investment Center. The 305-foot-tall building was built in 1969 at Superior and East 9th Street by Jacobs Real Estate Services for Central National Bank. The 23-story height of the building includes two mechanical room floors.
But its current challenges in the post-pandemic era are unlike those of the past. Remote working appears to be a structural change whereas past downturns in office leasing were cyclical. All office buildings, be they downtown or suburban, are struggling to retain tenants, or at least as fully as they had in the past.
Almost right across East 9th Street from 800 Superior is the Ohio Savings Plaza — an office building of similar age and size. It reportedly has a buyer who wants to convert half of the two-tower office property to residential (Google).
That will not only negatively affect the ultimate sale price for the property but depress the ensuing real estate tax revenues. The sale amount would certainly be far less than its current value of $29,690,600, as appraised by Cuyahoga County for property tax purposes. CBRE acknowledged that possibility.
“Guidance is in the $15 million range,” the CBRE e-mail continued, noting that a buyer could enjoy a strong return based on a high potential capitalization rate. “Based on in-place NOI (net operating income) this equates to a high-teens cap rate. The property is being offered free and clear with no assumable debt in place.”
As always, the sale price will be affected by other recent downtown office building sales. The most recent one was earlier this year — the 45-story 200 Public Square skyscraper which sold earlier this year to a Long Island, NY-based partnership called Public Square Nassim LLC Et Al. Nearby, the 21-story 1100 Superior Ave., built in 1972, is up for sale after its top tenant Oswald Companies left for the Flats East Bank tower which now bears Oswald’s name.
Another property which may be more relevant due its proximity, size and age is the 17-story, 1969-built Ohio Savings Plaza, 1801 E. 9th. NEOtrans has learned from two sources who spoke on the condition of anonymity that the two-tower property has a potential buyer who wants to keep one of the buildings as offices and convert the other to apartments.
What could further depress the sale price of 800 Superior is the condition of the building’s associated 328-space parking garage. NEOtrans reported in March that the building’s garage, located at East 9th and Vincent Avenue, was closed due to its poor structural condition. It’s a situation facing other downtown parking garages, requiring significant reconstruction work or demolition.
“(The) garage is currently out of service and needs to either be repaired or torn down and re-built,” CBRE said, adding that it is an “Opportunity to raze (the) existing garage and build a new garage podium style to develop a phase two or to sell the air rights.”
Located in the heart of Downtown Cleveland’s central business district since 1969, 800 Superior has had four major functions in its life — all borne by financial-related firms. It was built as the offices for Central National Bank, then became the McDonald Investment Center, was renamed as the Key Investment Center and has been home to AmTrust Financial and National General Insurance since 2011 (CBRE).
The condition of the office building’s façade has been an issue, too. Exterior decay of the garage and office building warranted temporary repairs last year. Cleveland-based Osborn Engineering and Broadview Heights-based Ram Construction Services of Cleveland LLC were hired by CBRE Group to make $356,800 worth of repairs to shore up conditions with the garage and office tower.
Brian Hengle, director of structural restoration at Osborn Engineering, wrote in a Dec. 8, 2023 letter to Cleveland’s Chief Building Official Tom Vanover that the temporary repairs are done but that a larger renovation is due.
“At this time, OE (Osborn Engineering) can confirm that the ‘make safe’ work has been completed by RAM and that the façade is considered stable and safe,” Hengle wrote. “It is understood that follow-up full façade renovation program will commence within the next year and OE is confirming herein that the façade will remain stable for the expected timeframe until the start of the next full program.”
CBRE said the building was last renovated in 2013. It noted that the building, set at the intersection of two of downtown’s busiest streets, is eligible for numerous pots of public financing and incentives for office renovations or a possible full or partial conversion to residential and/or hotel uses.
“Located within a Qualified Opportunity Zone with several local, state, and federal incentives available, 800 Superior is a strong candidate for a redevelopment to an alternative use or is also a candidate as a new development site as it measures approximately 1.64 acres on a hard corner,” CBRE said. “It is a contributing asset to the Historic Erieview District.”
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