The Insane History of Desperation at 5th & Race

Let’s say you’ve found the perfect lot to build your dream “investment” at the perfect location and the current owner is willing to sell it to you with a few conditions.  Would you sign this contract?

1.  The seller receives $6,000,000 cash for the lot.  

2..  The seller will be the developer of your project and be paid to do all design & construction.

3.  You have to take the majority of the financial risk and put up almost $32,000,000.  The seller throws in the lot proceeds, $12, 500,000 in cash, and takes out a $10,000,000 loan.

4.  The seller will then lease your project, paying a minimum rent of less than 1% of your investment for 5 years, slightly more for the next 5, and $1 a year thereafter plus percentage rent if the space stays full and profitable.  

5.  Oh yeah, one last little minor detail – the deed to the property includes a “right of re-entry” so that after 50 years the seller can require demolition of the entire project and you have to sell the property back to the original owner for $1.   

A FRIGGIN’ DOLLAR!!!!!!!  Put in 32 mill, get back a dollar.  A $55,000,000 project designed for obsolescence before the  first shovel of dirt was turned, to be replaced by a bigger and better office tower.   It’s insult to injury after also giving up rights to property and sales taxes.

5th

The original plan was to renovate the building. But Western & Southern demolished it and turned it into a parking lot for the next decade.

Would any sane, financially literate human being with half-a-brain sign this contract?  Not unless they were desperate.

And yet my fellow citizens, these are the exact terms City Council signed off on in an Emergency Ordinance on January 7,1998 regarding the development of 5th & Race.  Western & Southern was the seller.  They had an agreement to sublease the retail space to Maison Blanche, a subsidiary of Mercantile Department Stores – the old parent company of McAlpin’s. But the world changed.  Maison Blanche pulled out of the deal.  In fact, they don’t even exist anymore.  This is now the site of the new Dunhumby headquarters and 3CDC is in charge.  

In all fairness to the Council members who voted unanimously for this ordinance, 1998 was a different Cincinnati with long blocks of empty storefronts and steady population decline.  There weren’t a bunch of developers standing in line to help us create a different future and Western & Southern was in a unique position to negotiate extraordinarily favorable terms.  

Why even care about this old contract?  First, it’s good to remind ourselves how quickly the world changes these days.  A mere 16 years later nobody’s talking sky walks or department stores anymore.  People actually live downtown in the spaces Shillito’s and McAlpin’s used to occupy.  And of course we know that Western & Southern finally got to build that giant office tower they always wanted, just a few blocks further east on Fourth – also on nauseatingly favorable terms – and in spite of the clear trend for shrinking corporate office staffs.  

“Those who do not study history are doomed to repeat it,”  are wise words for a city to remember. With so much interest in the Cincinnati Renaissance right now, this is the perfect time to re-evaluate what kind of returns we expect on our development dollars and to make sure our Development Director doesn’t give away any more stores.  

Advertisements

6 thoughts on “The Insane History of Desperation at 5th & Race

  1. Kevin J. Hines

    I used to work at the Fifth & Race Tower (Downtown Council) — probably one of the nicest high-rises downtown at the time — built in ’72, I believe — and I’ve been screaming about what happened to it since it was demolished for — YES — a parking lot (after the other B.S. fell through). I’m VERY GLAD you are bringing to light the crap that has facilitated where we’re at now with Fifth & Race…

    Reply
    1. executivedreamer Post author

      If the 5th & Race Tower was built in ’72, I must have the wrong picture. Even though I’ve lived in Cincinnati forever, I can’t remember what it looked like. If you find an image of the building, it would be great to have a more accurate representation.

      Reply
      1. Kevin J. Hines

        Not sure what corner your picture is of (something late-1800s, it looks like), but I’ll try to find a photo of the Fifth & Race Tower. I worked there in the late 80s and I know how nice the offices and board rooms were. It really wasn’t that old when it was demolished! As far as I know, it was also the only downtown office tower that has a private concierge specifically for the building’s tenants. Not sure why it’s so hard to locate a photo of it on the web (I’m looking), especially since it housed the Chamber of Commerce/Downtown Council and several large law firms, among many other well-known tenants…

      2. executivedreamer Post author

        Twitter is magic. A friend who writes Building Cincy had a photo and I updated the image. Now I remember it. — Glad to hear you liked working there. Other comments have been low ceilings and poor design. — What concerns me is that we are building for such a short shelf-like these days. All this money for 30, 40, 50 years?

  2. Marie Harrington

    This is dreadful! Oh, how I wish I had a head for better understanding of the financial ins and outs! I just hope the right people with the right intentions and the right knowledge and the right of way, take the lead!

    I am so Cincinnati oriented! I loved it the way it was with the department stores and smaller business owners and all the charm. So much more!

    Reply
    1. executivedreamer Post author

      Hate to tell you, Marie, but I have a pretty good feeling for finance – and this still hurts my head. It’s complicated stuff. But together we can learn. And together we can help the city make better decisions. Thanks for reading. (Kathy Holwadel)

      Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s