CLEVELAND, Ohio – The strong downtown apartment market and brisk business at the Metropolitan hotel made it possible last month for the Geis Cos. to secure an early refinancing of portions of The 9 complex on East Ninth Street.
Property records show that JP Morgan Chase & Co. closed Nov. 23 on a $77 million loan covering the hotel, 104 high-end apartments upstairs and the project’s main parking garage on Ninth. The deal pares risk and locks in low interest rates for Geis. And it’s a further testament to high demand from people who want to live, dine, drink and visit downtown.
The transaction did not include the Heinen’s grocery store in the Cleveland Trust Rotunda or the apartments and offices in the neighboring building, to the east, at 1010 Euclid Ave.
The loan is being bundled with other commercial mortgages and used to back bonds sold to investors, said Mark Vogel of RiverCore Capital, a Cleveland mortgage-banking firm that arranged the financing. Money from the refinancing paid off construction loans from a Huntington Bank-led group and a bridge loan – short-term financing – from Cleveland Development Advisors, a real-estate-focused arm of the Greater Cleveland Partnership, the local chamber of commerce.
“We are happy to get this done, and [it] shows the success of the project as a whole,” developer Greg Geis wrote in an email. “We thank the lenders that helped get the project completed and look forward to a successful relationship with our new lender.”
Apartments on the upper floors at the Marcel Breuer-designed tower are full. “Sometimes lenders and ratings agencies would come, and we couldn’t let them into an apartment because nothing was vacant,” Vogel said.
The 156-room hotel downstairs boasts an occupancy rate of 69 percent and charges an average daily rate of $212, based on its first year of operations.
Income from the Vault nightclub, in the Rotunda’s basement, and Azure, a rooftop lounge at the 1010 Euclid building, also factored into the refinancing because they’re considered to be hotel functions.
Kevin Brokaw, director of development for Streetsboro-based Geis, wouldn’t get into details about the property’s health, beyond saying that the Metropolitan is topping the competition.
“The apartments and the hotel are certainly performing to a point where it put us in a position to refinance out of the construction loan perhaps a year earlier than we had scheduled – which is a great indicator for the market,” he said.
“With each new project,” Brokaw added, “the market is gaining more credibility toward what I would say are loftier goals for the future. … And I think our ability to deliver the project in a short period of time put us at the front end of the market.”
Brothers Fred and Greg Geis bought the Ameritrust complex from Cuyahoga County in February 2013 and launched into a $170 million revamp of long-vacant historic buildings at the key intersection of Ninth and Euclid Avenue. Most of the project debuted in September 2014, though Heinen’s didn’t open until early 2015.
It made sense to leave Heinen’s and the 1010 Euclid building, which includes lower-priced apartments, out of the refinancing because those projects involved federal New Markets Tax Credits, which complicated a transaction.
The refinancing also omitted a smaller parking structure, the old Oppman garage at 1016 Prospect Ave. That garage could be part of a future development site, though Greg Geis won’t discuss potential plans for that property.