CLEVELAND — A lender is poised to take control of two riverfront buildings at the Flats East Bank project, after making the only offer to kickstart an auction Thursday morning.
A handful of potential buyers showed up for the in-person event at the former Jade Steak & Sushi restaurant off Old River Road. But not one of them ultimately raised a hand.
At the start, auctioneer Mike Berland of Hanna Commercial Real Estate told the small crowd that a $14.4 million offer came in late Wednesday, setting a minimum price that any bidder would have to beat.
RELATED: Riverfront retail buildings at the Flats East Bank project are up for auction this week
That amount, it turned out, was more than anyone else was willing to pay.
The offer came from the Cleveland International Fund, the lender on the buildings, said Tim Collins, the court-appointed receiver overseeing the sale. It’s his job to manage the real estate while a lawsuit plays out over troubled debt.
Now, Collins will ask a Cuyahoga County Common Pleas Court judge to sign off on the ownership change. The sale is likely to take place in the spring.
The Cleveland International Fund essentially bid what it’s owed on the property, a pair of three-story retail buildings overlooking the Cuyahoga River.
“We’re going to work to both make that building a very active place and to increase the value of it over time,” Steve Strnisha, the fund’s CEO, said in a phone interview Thursday afternoon.
The side-by-side buildings are the third and newest phase of the much broader Flats East Bank development. They opened on the heels of the pandemic and are only half-full.
The Cleveland International Fund provided construction financing for the project by purchasing bonds issued by the Cleveland-Cuyahoga County Port Authority. The buildings tipped into default because of tricky timing, volatile construction costs, supply-chain challenges and the 2022 death of Flats East Bank developer Scott Wolstein.
Court records indicate that the property wasn’t bringing in enough money to cover the debt payments. In August, the Cleveland International Fund filed a lawsuit over missed payments, setting the stage for the receivership and this week’s auction.
Now the private equity fund will have to decide how long to hang onto the buildings — and if it’s willing to sell them at a lower price.
“We can spend time on this. And we will,” said Strnisha, pointing out that the fund is based in Cleveland Heights, has a small portfolio and isn’t raising new money.
“We’re not long-term owners,” he acknowledged, “but we’re also patient owners to get the value that our investors want to get.”
That means bringing in new tenants.
“There’s spaces down there that we’re going to work to fill to complement what’s already there,” Strnisha said. “We’re very optimistic on the Flats overall.”
The existing tenants — four restaurants and bars that are part of Forward Hospitality Group — aren’t going anywhere. “The auction doesn’t affect our businesses at all,” Bobby Rutter, the group’s chief operating officer, wrote in an email to News 5 early this week.
Those businesses are Welcome to the Farm and I Hate Cowboys, a pair of country-themed bars; a sports bar called Hi 5; and Glamper, a seasonal nightspot.
The 23-acre Flats East Bank project also includes the Oswald Tower office building, the Aloft Cleveland Downtown hotel, apartments and additional restaurants and bars.
