AP NEWS

Tower at Erieview, Galleria sell for $16.7 million

August 2, 2018

Tower at Erieview, Galleria sell for $16.7 million

CLEVELAND, Ohio - The 40-story Tower at Erieview and the adjacent glass-topped Galleria have sold to Cleveland parking lot operator and longtime real estate owner James Kassouf for $16.7 million. 

Kassouf heads an investor group that purchased the property at East 12th Street and St. Clair Avenue, from lender-owner RAIT Financial Trust of Philadelphia. The deal closed late Wednesday. 

“I remember when the tower was built when I was a young kid. We are a local business and operator that has personal ties to the property and the community and truly want this project to be successful and restored to its former glory,” Kassouf said in an emailed response.

The former owners spent more than a year exploring a partial conversion of Cleveland’s fourth-tallest building to apartments before the property was marketed for sale at an undisclosed price last August.

Kassouf said his group intends to renovate the property. Plans include converting 12 vacant office floors into 220 luxury apartment units; renovating the tower lobby; updating existing tenant suites, elevators and other mechanical features; converting the former Stouffers Cafeteria in the Galleria into 90 additional parking spaces in the garage; adding access to the garage off East Ninth and East 12th streets; and providing about 100 spaces of valet parking for tenants and residents.

He said it’s too early to estimate the cost of the renovation. 

“The idea of bringing something to Cleveland that hasn’t been done before is compelling. We are striving to deliver a Class A office tower that has residential, fitness, retail, dining, entertainment and parking components all in one project,” Kassouf said. 

The property also includes a 421-space parking garage underneath the complex. The Kassoufs have a nearly 40-year history operating parking lots in downtown Cleveland.

The tower and particularly, the Galleria have been tough properties for past owners to attract and keep tenants. Nobody has figured out a way to make the building feel vibrant, or cohesive.

But Kassouf sees opportunity in the Cleveland hallmark and hopes to revitalize what he referred to as “one of the most recognizable properties in my hometown of Cleveland.”

His group was able to purchase the buildings for roughly $10 million below what the Cuyahoga County Fiscal Office has estimated that the property is worth.  

The high-vacancy Galleria, now includes several office tenants, local businesses, restaurants and a YMCA.

The YMCA of Greater Cleveland took over one corner of the 1987-vintage mall and opened its new downtown branch there two years ago. The largest tower tenants are Walter Haverfield and Weston Hurd, two law firms.

Last summer, the tower was only 45 percent leased, according to HFF’s listing materials, while the Galleria was 60 percent leased.

The group plans to use public incentives and tax credits to help with the cost of the conversion. Kassouf expects the financing and tax credit structure to be in place by early next year. Investment bank Brown Gibbons Lang & Company, which has experience in multi-tier capital structures and historic tax credits, will assist with the conversion. 

The purchase of the Tower at Erieview and the Galleria gives Kassouf’s team a stronger foothold in that area of downtown. The group already owns the nearby building that houses the regional headquarters for the FBI, as well as five additional acres of land. 

Kassouf’s group includes his wife, two sons and four daughters; Canadian, Lebanese and French investors; Brown Gibbons Lang & Company; and tax advisors RSM US LLP. His son, Joe Kassouf, who lives in Cleveland, will handle the day-to-day operations of the property. 

Plain Dealer reporters Marcia Pledger and Michelle Jarboe contributed to this story. 

AP RADIO
Update hourly