A New York-based developer plans to relaunch a shelved hotel in Midtown Cleveland, in the first project ready to take advantage of a National Historic District created this year.
Crimson Rock Capital plans to transform the University Hotel & Suites at 3614 Euclid Ave. into a 189-room Delta by Marriott. Refurbishing the abandoned building could represent a $ 35 million business, according to a project document filed with the Ohio Department of Development.
The hotel opened as a Holiday Inn in 1965, as an expanding road network and increased car travel spurred housing construction across the country. Half a century later, however, the once glittering 10-story building east of Interstate 90 is a curse near a key intersection.
“We are very excited about the potential to transform this property,” said Richard Barga, vice president of economic development for the nonprofit MidTown Cleveland Inc. “It has been an eyesore for some time.”
Crimson Rock, a private equity firm specializing in hotel transactions, acquired the property in 2019 in a sale process orchestrated by a court-appointed receiver. The hotel had been the subject of a repeated foreclosure struggle for eight years, and Crimson Rock took the place of the lender by buying the distressed debt for an undisclosed price.
From the outset, the company viewed the university hotel as a turnaround game.
But the formation of the Midtown Historic District, added to the National Register of Historic Places in February, allows for a more robust renovation – and keeps the project alive as the hospitality industry recovers from the pandemic.
“Without the Historic District, we wouldn’t be having this discussion right now,” Dionis Rodriguez, founder and CEO of Crimson Rock, said in a recent interview. “The project could not work, at least not in the short term.”
The historic Midtown district extends approximately from the inner belt to East 55th Street, bounded by Perkins Avenue to the north and Carnegie Avenue to the south. It spans 190 acres and more than 180 buildings, including 114 significant structures that, like the University Hotel, are now eligible for federal and state tax credits for preservation.
In September, Crimson Rock requested $ 3.92 million in historic tax credits to help fund the overhaul of its hotel, which will include a full-service restaurant. The development department will announce the prices – the results of a competitive process where demand still far exceeds supply – in December.
Other local projects pursuing great awards include a planned apartment renovation of the art building, in the upper arts area; a residential reinvention of 45 Erieview Plaza, an empty downtown office tower; and the restoration of the former Phantasy Entertainment Complex, a Lakewood property that is the centerpiece of Studio West, a new social and entrepreneurial hub for the area’s lesbian, gay, bisexual, transgender and queer communities.
Crimson Rock also plans to use historic federal tax credits, which are not competitive, and is studying the city’s possible incentives, Rodriguez said. He was reluctant to put a firm price or schedule on the project, although he said the renovated hotel could open in 2023 or 2024.
“If we can start construction in six to 12 months, I think that would be ideal. But we still have a lot of pieces of the puzzle to solve,” he said.
Rodriguez confirmed that Crimson Rock has a franchise agreement with Delta Hotels, a relatively new member of the Marriott family of brands. Marriott International Inc. bought the Canadian hotel chain in 2015 and introduced the flag to the United States the following year.
The upscale and flexible brand lends itself to building conversion projects, said Eric Hansen, director of LW Hospitality Advisors at Westlake.
“They tend to be more designed with a local touch than a business type,” he said.
As development stretches east of downtown and west of University Circle, accommodation needs to be placed in between, especially along the HealthLine bus rapid transit route. on Euclid Avenue, said Hansen.
A glitzy hotel project is on the drawing board right in front of the University Hotel, next to the historic Masonic Temple. In May 2020, New York’s Dream Hotel Group and developer Beaty Capital Group, owner of the temple, announced an agreement to build a 207-room Dream Hotel and a 400-space garage in a parking lot.
The pandemic has delayed this project, which was originally scheduled to open in 2022. The Dream Hotel Group website now lists an opening date of 2024. The hotel company and Lance Beaty, chairman of Beaty Capital Group, did not respond to inquiries. development inquiries.
Rodriguez sees plenty of room for growth in the neighborhood, which he described as the connective tissue between the city’s “two inner cities”. Location is a factor that attracted Crimson Rock to the city. The company also jumped on a deal.
The purchase price for the hotel was $ 3.2 million, but it was an offer of credit – not a cash payment – based on outstanding debt. The Cuyahoga County Tax Office puts the value of the real estate, which includes a large parking lot, at just under $ 2 million.
When Crimson Rock stepped in, the hotel was limping, a low-rent address on the outskirts of downtown.
For nine months last year, the building served as overflow housing for the homeless through the Lutheran Metropolitan Ministry, which used the rooms to provide social distancing at its men’s shelter on Lakeside Avenue. This contract ended in December.
Preservation consultant Wendy Naylor said the hotel’s rooms and common areas have been changed several times. But the exterior of the building remains largely intact.
After its debut as a Holiday Inn, the hotel became a Sheraton, which went bankrupt in the 1970s. In 1982, Taiwanese investors bought the building and renovated it into Shangri-La Inn, with a restaurant. Chinese on the first floor.
The property later became a Travelodge, University Square Hotel, and Best Hotel & Suites, according to Naylor research.
“It has been in continuous use as a hotel since its construction,” said Naylor, who works with Crimson Rock. “And it’s really wonderful from a historical point of view, because they are reusing the building in its historical use.”
His company, Naylor Wellman LLC, worked with the city and MidTown Cleveland Inc. to get the historic Midtown area listed on the National Register. Naylor hopes the Crimson Rock proposal is a sign of things to come in the neighborhood, which is home to an eclectic mix of architectural styles.
“We believe placing this hotel in this specific location will serve as a catalyst for other businesses,” Rodriguez said, adding that Crimson Rock is open to pursuing other projects in the neighborhood. “We see it just as one of the many things going on in the city, in this specific area.”