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K&D Group Regains Lost Flats Office Building

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The largely empty Stonebridge Center office building in the Flats has a new owner that’s really the old owner after it languished two years in a lender’s hands.

K&D Group of Willoughby won an online auction for the 60,000-square-foot building at 2019 Center St. for another go at the property, this time through Stonebridge Viaduct LLC, which paid $1.5 million for it on Dec. 12, according to Cuyahoga County land records.

K&D surrendered the structure two years ago to special servicer LNR Partners of Miami Beach to satisfy the remaining $2.9 million collateralized mortgage referred to in county records as CSFB 2004-C3 COMPLEX 2019 LLC.

In 2015, K&D CEO Doug Price said the building, which was mostly empty after losing Cuyahoga County as its largest tenant in the county’s office consolidation plan, had to go back to the lender because the special servicer was unable to negotiate a discounted sale. That was the only way to satisfy requirements of the securitized financing with multiple investors. Price vowed to win the property back at that time.

However, that turned out to be more difficult than expected, as interest in downtown and Flats investments has mushroomed the past few years.

During the online auction by Ten-X.com that started at $400,000 on Oct. 31, K&D bested at least three other bidders over a 24-hour period.

“I’ve never done one of these before,” Price said. “Each time you bid, it resets after two minutes in case a higher bid comes in. You think you’ve won it but find you have to keep going.”

Price said K&D will try to retenant the structure as office space, but if that does not gain momentum in a year it has a back-up plan to convert it to 40 apartments. The building houses Luca Italian Cuisine, its sole tenant, on the building’s top floor, where it has access from the Superior Viaduct, a bridge stub on the West Side of the Flats.

Price said K&D wanted to maintain control of the building because of its lease with the city of Cleveland to maintain the top of the stone structure as a public park. K&D developed Stonebridge apartment and condo buildings on most of the bridge’s eastern end.

Price said K&D retained Rico Pietro, a Cushman & Wakefield | CRESCO Real Estate principal, to market the office space.

Pietro said he will market the property with an asking rate of $15 a square foot to technology-oriented tenants or to businesses owned by millennials.

The property now benefits, he said, from its proximity to the revitalization of Ohio City and the northern part of West 25th Street the past few years.

Price said the reduction in the amount of low-cost office space in downtown Cleveland due to conversions of old buildings to apartments also has reduced competition for office tenants.

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