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.
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.