Downtown Cleveland’s second-largest building, as measured in square feet, is 925 Euclid. A court-appointed receiver of this foreclosed property declined to seek a stalking horse bidder prior to a scheduled auction in November (Google). CLICK IMAGES TO ENLARGE THEM.
Bids due by Oct. 24 for scheduled auction
A court-appointed receiver of Downtown Cleveland’s second-largest building has opted not to select a stalking horse bidder prior to a scheduled auction to satisfy a foreclosure action.
But the decision to not seek a pre-approved, baseline bidder was made after the receiver got input from prospective suitors of the old Union Trust Building, 925 Euclid Ave.
The receiver, John Lane, CEO and managing partner of Mentor-based Inglewood Associates LLC, had requested the stalking horse bidder option as part of a sale process that was approved in June and monitored by U.S. District Court – Northern District of Ohio Eastern Division Judge Charles Fleming.
“Following a comprehensive marketing effort and ongoing discussions with prospective purchasers, the receiver has not selected a stalking horse bidder at this time,” per a written statement jointly issued by Inglewood Associates and Boston-based investment firm and auctioneer Gordon Brothers.
“While (the) receiver and his advisors have had detailed discussions with numerous interested parties, the potential bidders have specifically indicated a preference to participating in a subsequent auction as opposed to submitting a stalking horse bid,” the statement continued.
Once one of the world’s largest bank lobbies, 925 Euclid is both blessed by its scale and beauty and cursed by its difficulty in repurposing to new, revenue-producing uses that can offset the large costs of repurposing the property (Gordon Brothers).
A stalking horse bidder had to be selected by Sept. 15. A stalking horse bidder is the first pre-approved buyer who makes an initial offer on a distressed asset. This bidder establishes the minimum baseline price so other competitors cannot underbid the asset.
Although it seems as if selecting a stalking horse bidder would benefit lender Deutsche Bank AG, New York Branch who brought the foreclosure case, it could have the opposite effect. The identity of a stalking horse bidder would become public record and could provide insights as to its plans.
In foreclosure auctions, bidders often don’t want to be publicly identified in advance. Based on the written statement provided, it appears that enough of the potential bidders declined to be a stalking horse bidder that it wasn’t worth pursuing further.
Lane declined to add more information to the written statement. Not surprisingly, he also declined to provide any substantial insights as to the identities of the bidders, including whether 925 Euclid’s owner was among them.
Fleming is overseeing the foreclosure case brought last year by Deutsche Bank against 925 Euclid’s owner, an affiliate of Cleveland-based Millennia Companies. HH Cleveland Huntington, L.P. defaulted on loans and unpaid Cuyahoga County taxes totaling $40.1 million, court records show.
When it opened in 1924, 925 Euclid’s rooftop was equipped with a 30-million candlepower spotlight that could be seen from more than 100 miles away. Some said it was for advertising purposes while others said it was for a never-used airship station on its roof. It was ultimately donated to Cleveland Municipal Airport by 1930 (CPL).
“The marketing process continues to generate substantial interest from both local, national and international investors, developers, unique users and other capital sources,” the joint statement explained.
“Gordon Brothers and Inglewood Associates remain encouraged by the level of engagement and believe the property continues to attract significant attention from parties seeking a transformational redevelopment opportunity in downtown Cleveland,” they added.
The deadline for qualified bids for the 1.45-million-square-foot, 102-year-old building is Oct. 24. Bidders will be notified Oct. 28 if an auction will be held. An auction, if necessary, will be Nov. 3. Deadline for objections to a sale to be submitted to the court is Nov. 10.
Millennia also owns downtown’s largest building, the 1.5-million-square-foot Key Tower. Millennia and its partners won extra time from Fleming in an attempt to secure financing to pay its debts in full and stop the auction. But Fleming cut off the extensions at a Sept. 1 deadline.
Ownership recently altered its redevelopment plans to achieve a mixed-use, integrated technology campus. It would have 200+ residential units, about 420,000 square feet of office space, retail space, advanced technology space, a hotel, and a restored bank hall that would also serve as convention and event space.
The hulking 925 Euclid, formerly known as the Union Trust Building, Union Commerce Building, Huntington Building or The Centennial, waits patiently for its future to be decided (NEOtrans).
“Tenant discussions and project details are still pending, and the technology component is intended as an innovation and R&D facility that would support a potential anchor tenant,” said a Millennia spokeswoman.
She declined to identify the tenant. But a letter from a potential new lender submitted by HH Cleveland Huntington to Fleming identified Hyperscape Digital of Sheridan, WY. On its Web site, Hyperscape Digital describes itself as a developer, owner and operator of AI infrastructure.
The written statement from Gordon Brothers and Inglewood Associates said their decision not to designate a stalking horse bidder does not alter the court-approved sale timeline.
“Interested parties continue to conduct diligence and evaluate potential acquisition opportunities, and the receiver remains focused on maximizing value through a transparent and competitive process,” the statement added.
“The sale procedures provide for the submission of qualified bids and, if appropriate, a competitive auction process designed to achieve the highest and best outcome for the property,” it concluded.
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