Development Magazine Winter 2013

Development - Ownership

U Square @ The Loop: Public-Private Collaboration Revitalizes Cincinnati

The piazza at the heart of U Square @ the Loop separates the project’s two blocks while providing the urban neighborhood with much-needed green space. Photos courtesy of Al. Neyer

Situated just across the street from the University of Cincinnati campus, U Square @ the Loop buzzes with activity. The two city blocks of LEED-certified, mid-rise, mixed-use development house students and young professionals; provide a welcome array of restaurants, shops and gathering spaces; and are home to several university offices. The development — which fits into its setting so well that it looks as though it has always belonged there — complements one of the world’s most attractive college campuses.

The development’s road to existence was a long and harried one. An eminent domain dispute, failed attempts by one developer and the economic downturn now known as the Great Recession could have spelled the end for this fledgling development before shovels even hit the ground. But collaboration eventually proved to be the cornerstone of success for U Square @ the Loop. At its grand opening in August 2013, many speakers addressed the importance of that collaboration. Reimagining this urban corridor required the talent of dozens of individuals and a collaborative effort among many partners that was more art than science. Those partners included the following:

  • The Clifton Heights Community Urban Redevelopment Corporation (CHCURC), which guided the project from “what if” to “we did it”;
  • Towne Properties, the developer that recognized a unique opportunity for a world-class development in a location that comes only once in a lifetime;
  • Al. Neyer, the co-developer that Towne Properties needed to move ground, which also envisioned and navigated the complexities of the project’s financing; and
  • Supporting cast members Uptown Consortium, Cincinnati Development Fund and the city of Cincinnati, all of which provided funding that filled the gaps in the project’s financing.
aerial view of the U Square mixed-use project

The cleared site — shown in January 2012, just before construction began — is located across the street from the University of Cincinnati, which Forbes magazine has rated one of the world’s most beautiful campuses.

The project allowed the partners to see just how powerful their collaboration could be. Each entity understood what it brought to the table and recognized the assets of its partners. The project ultimately worked because the development team shared similar values for urban redevelopment and maximized each partner’s strengths.

A Plan to Restore Vigor

In April 2001, the University of Cincinnati (UC) and the city of Cincinnati put forth a study, the Clifton Heights/UC Joint Urban Renewal Plan. It examined the “spine” just south of UC’s campus, bordered by Calhoun and McMillan streets, which separated the higher education institution from residential properties by a lackluster business district. According to the study report, the business district was “dominated by fast food drive-thrus, parking and deteriorated housing stock.” It lacked vigor and critical mass, but planners saw the possibility of revitalization within the area known as Clifton Heights.

aerial view of the U Square mixed-use project

By June 2013, the two-block U Square @ the Loop — with offices and apartments above ground-floor retail space, centered on a piazza and flanked by garages at its eastern and western ends — is almost complete.

During the planning process, the Clifton Heights Business Association, Clifton Heights – University Heights – Fairview (CUF) Neighborhood Association and UC established the Clifton Heights Community Urban Redevelopment Corporation (CHCURC), a nonprofit dedicated to revitalization of the Clifton Heights neighborhood. CHCURC proposed that the blighted, outdated business district between Calhoun and McMillan streets would be replaced by McMillan Park, a $100 million condominium/townhouse and retail development. CHCURC would be responsible for aggregating the necessary plots of land to begin development and would implement the urban renewal plan.

With project funding to come from UC and Uptown Consortium, a nonprofit community development corporation committed to the five Uptown Cincinnati neighborhoods including Clifton Heights, CHCURC took its first step of many: land acquisition.

Land Acquisition Lingers in Litigation

In 2001, CHCURC began to assemble the parcels of land, many occupied with operating business establishments, between Calhoun and McMillan streets and stretching four city blocks from Ohio to Clifton avenues. But according to Matt Bourgeois, director at CHCURC, land acquisition took much longer than anticipated.

“It took us about four years to acquire all the property necessary to do the development,” Bourgeois told WLWT-TV, a Cincinnati TV station, in 2012.

While some property was acquired without issue, other tenants whose businesses occupied the corridor did not wish to sell. Clif Cor Co., which owned two lots that were home to fast food chains, became the center of an eminent domain case. The city of Cincinnati used eminent domain to acquire the parcels of land in 2003, and Hamilton County Judge Thomas Crush sided with the city in 2005, ruling that a “public purpose is served” by CHCURC’s effort to revitalize the corridor. But Clif Cor held strong and in January 2007, the Hamilton County First District Court of Appeals struck down a portion of the city’s eminent domain, preventing the city from securing the parcels of land. In 2008, Clif Cor finally signed a contractual agreement to sell the land.

retail at the U Square mixed-use project

U Square retailers include several fashion boutiques. Altar’d State sits beneath the development’s second- and third-floor office space, which is located in the project’s eastern block.

The extended time span for land acquisition was a blow to the project’s main funding source, UC. In October 2005, UC officials had agreed to a $7 million loan that would fund the construction of a sales center where prospective condo buyers could look at sample units. The university had used endowment funds to finance off-campus development projects, and the project known as McMillan Park had become a drain on funding without an end project in close view.

The sales center construction was set for spring 2006, but by summer 2006, the anticipated start date had passed and a new date was not in sight; while the site was finally cleared, the project had stalled. Faced with rising costs and continued uncertainty, UC froze its $7 million loan. The university had already loaned roughly $32 million to CHCURC so the nonprofit could obtain the required property. In December 2006, UC urged its board of trustees and CHCURC to seek a new developer and alternative plan for McMillan Park.

Following UC’s strong recommendation, CHCURC invited developers to submit proposals for the Calhoun corridor in late 2007, hopeful that a new partner would breathe life back into the project.

Uptown Commons

In January 2008, CHCURC announced Cincinnati-based Towne Properties as the new site developer. For the roughly four-acre site, Towne had proposed 100 apartments, a 695-car parking garage, a 125-bed hotel, 78,000 square feet of office space and 65,000 square feet of retail uses. The plan reflected the needs of the neighborhood and elicited positive reviews from both UC officials and CHCURC.

With Towne Properties on board, CHCURC and Towne needed to negotiate a partnership agreement, refine the development plan and determine a financing strategy. Towne agreed to invest significant equity into the project and pledged a generous share of the project’s cash flow to CHCURC so the nonprofit could repay more than $30 million in UC endowment loans.

Towne Principal (and former Cincinnati Mayor) Arn Bortz knew the financing elements would be complex and readily took to the challenge. Bortz said the project, now known as Uptown Commons, could be financed by a variety of sources including tax increment financing (TIF) revenue, New Markets Tax Credit (NMTC) allotments from the Uptown Consortium and capital from the city of Cincinnati.

2008 Financial Crisis Stalls Lending

Towne Properties signed on for Uptown Commons right as the economic downturn was hitting its stride. Towne had hoped to finance 50 percent of the project with conventional debt but banks were not lending. While Bortz was on the hunt to secure financing through all avenues — NMTC dollars, investment partners, government subsidies, TIF revenue, abatements for green construction and more — the search proved problematic.

CHCURC had mandated that Towne Properties break ground by February 2010. Realizing stark economic circumstances were at play, CHCURC provided a one-year extension for Uptown Commons.

apartments at the U Square mixed-use project

Apartments on the second, third and fourth floors of U Square’s western block overlook the piazza.

In November 2009, the city of Cincinnati, which had considered Uptown Commons a key development project, hoped to prod the development along. The city offered Uptown Commons TIF district revenue, tax abatements and construction of two garages. In turn, Towne agreed the city would receive revenue from the garages. But even with this backing from the city, Uptown Commons remained stalled.

Looping in Al. Neyer

Towne Properties needed another partner to make Uptown Commons come to fruition, and the developer found one in Al. Neyer, one of Cincinnati’s oldest commercial real estate development companies.

In July 2010, Towne Properties signed a joint venture agreement with Al. Neyer to co-develop the property. With its new co-developer came a new name, University Square @ the Loop, also known as U Square. CHCURC, the UC-funded nonprofit that had spearheaded this effort for almost a decade, remained intimately involved in the project, and served as a 50 percent equity partner of U Square LLC. Towne Properties and a private equity group, which served as a silent partner, constituted the other 50 percent.
With the project team finally set, Towne and Neyer laid out its financing plan and sought proposals from several lenders for the now $78 million mixed-use project. As Bortz had predicted in 2008, the financing for the development would be complex. 

The project used funds from the CUF Neighborhood Association TIF district to help finance the public improvements required — a net benefit of $19.3 million. The project also used an allocation of NMTC from the Uptown Consortium, the Cincinnati Development Fund and PNC Bank, the lead lender of the project. NMTC provided a total net benefit of $12 million to the project. The public investment leveraged almost $60 million in private investment.

By the end of 2011, the plans for U Square @ the Loop had solidified: the 4.2 acre strip of land running from Ohio and Clifton avenues to the east and west, bordered by Calhoun and McMillan streets on the north and south, would be a mixed-use development complete with 161 apartments, 40,000 square feet of office space, 80,000 square feet of retail space, a public piazza, two parking garages and room for a future hotel.

table giving a project summary of U Square mixed-use project

Breaking Ground and Becoming Reality

On January 25, 2012, co-developers Towne Properties and Al. Neyer alongside CHCURC, the city of Cincinnati, Uptown Consortium and UC held a ceremonial groundbreaking for the project. At the time of the groundbreaking, the development team had secured four retailers to occupy 12,700 square feet of retail space and UC had committed to lease the 40,000 square feet of office space.

Through their joint venture, Al. Neyer and Towne provided design-build construction services to the project. Architectural design services were provided by Neyer Architects Inc., working with CR Architecture. Design-build delivery allowed the site to be developed while final aesthetic and structural decisions were still being made, compressing the construction schedule and maximizing the project budget. Al. Neyer also developed and managed a complex construction schedule that executed multiple construction phases — not to mention dozens of subcontractors.

Towne Properties focused its energies on marketing the entire development as an ideal place to live, work and play. To that end, Towne developed a website, www.usquareattheloop.com, and built a presence on social media channels including Twitter and Facebook, encouraging young professionals and students to consider leasing the project’s modern, first-rate apartments. Towne ensured the U Square apartments would match the appeal of the overall project. Apartments feature top-of-the-line amenities, including granite countertops, stainless steel appliances, a washer/dryer, generous closet space and nine-foot ceilings.

While leasing the apartments captured Towne’s time, the project’s leasing agent was busy lining up the best retailers for the up and coming urban project. Jeffrey R. Anderson Real Estate was charged with recruiting a mix of nationally recognized restaurants and shops and locally owned merchants as tenants, with a focus on fast casual eateries and fashion brands. The leasing team delivered; almost every available retail space was leased and open for business by the project’s grand opening in August 2013.

In the span of 575 days — from the ceremonial groundbreaking to the official development grand opening — U Square @ the Loop went from a barren, underutilized lot to a mixed-use development in very high demand. The prime location of U Square, just south of the UC campus and a stone’s throw away from downtown Cincinnati, set the development apart.

“From the beginning of Towne’s involvement, we knew this location was unique,” said Bortz. “This corridor connects UC to the community and vice versa. It needed to have a premier destination and we delivered just that. This is an area that people will enjoy for decades to come. This kind of transformation is at the heart of Al. Neyer’s business philosophy. The company intentionally looks for projects like U Square through which they can transform blighted, distressed and underutilized urban properties into valuable neighborhood assets,” Bortz added. “It was a no-brainer to partner with an organization that holds the same values and respect for urban communities as Towne Properties does.” 
 

From the Archives: Development Ownership Articles from the Previous Issue

Amazon.com phase 3

Developer of the Year 2013: Vulcan Real Estate's Bold Vision 

Microsoft co-founder Paul G. Allen’s real estate development company, Seattle-based Vulcan Real Estate, is leading one of the largest urban redevelopment efforts in the U.S. Vulcan’s ability to articulate a vision; collaborate with multiple public and private entities; obtain expensive infrastructure improvements; and finance, design, deliver, and fill office, scientific, medical, residential, and retail structures turned around an underused, aging industrial neighborhood just south of Seattle’s central business district.

exterior of South Jordan Medical Center

South Jordan Health Center: Developing a Sustainable Medical Facility 

When the University of Utah and Kennecott Land decided to build a new health center in the rapidly growing planned community of Daybreak in South Jordan, Utah, they had ambitious goals: to provide the community with a facility that would offer the best in health care services and state-of-the-art medical technology while also limiting the building’s impact on the environment. Most full-scale medical facilities use an enormous amount of energy, which makes obtaining LEED certification a challenge. But by implementing sustainability features into the building from the earliest design stages the development team was able to exceed its expectations.