The legal logjam involving a pair of distressed properties in Garfield Heights, Ohio is starting to clear, after more than eight years of litigation and stagnation.
Recent legal filings show that something is stirring at Interstate 480 and Transportation Boulevard in this inner-ring suburb of Cleveland, where two troubled shopping center sites have been tied up in court since 2009. That's no small milestone for this bedroom community, where the hard hit of the housing crisis lingers and vacant retail boxes are reminders of unmet promises.
On Aug. 23, a court-appointed receiver in charge of Bridgeview Crossing asked a judge for permission to sell the 70-acre unrealized development to the note-holder, a California retail investor who has been trying to gain control of the land since 2011. The receiver's motion notes that key parties in a long-running foreclosure lawsuit finally have reached a settlement.
And filings made on Aug. 30 in a separate court case revealed that a mysterious buyer group has purchased the severely distressed debt on City View Center, a failed 50-acre shopping center where the only tenants left in more than 500,000 square feet of space are Giant Eagle and Applebee's.
The note sale follows settlements of claims in at least two lawsuits related to City View. And it could be an early step in the laborious process of reviving a project where environmental concerns snowballed into an economic crisis and an eyesore for the city and Cuyahoga County.
"It's been an up-and-down deal," Garfield Heights Mayor Vic Collova said of watching both properties, which flank I-480, languish in court. "But this, right now, this is the closest I've been to having something really good happen -- on both sides."
Built on former municipal landfills, City View Center opened in 2006 and quickly ran into problems. Walmart, then an anchor tenant, started complaining about methane leaks that year. The Ohio Environmental Protection Agency sounded alarms. And the state sued, leading to changes including installation of a better monitoring and control system for methane on the site.
Walmart left, followed by neighbors including PetSmart, OfficeMax and Bed Bath & Beyond. An $81 million loan on the project landed in default.
This week, a group identified only as 6807 Farnsworth LLC bought the note on City View, positioning itself to step into the prior lender's shoes in a receivership case filed in 2009. A filing identified George Simon, an entrepreneur and attorney who has a relationship with Cleveland-based law firm McCarthy, Lebit, Crystal & Liffman, as counsel for the buyer.
Simon wouldn't identify the investors during a phone conversation. And he said it's premature to talk about their plans for the troubled, but prominent, property.
"In a week or 10 days, we'll be able to give you a lot of information," he said. "Right now, it's still a little sketchy. There's a number of investors. They're from all over. And we've just got to put it together."
He confirmed that the buyers bought the debt at "a substantial discount," though
Simon wouldn't say what they paid. The property's owner, City View Center LLC, owes more than $132 million between principal, interest and fees, based on a 2012 foreclosure judgement. By buying the note, the Farnsworth group positions itself to push for a sale of the property -- and to either purchase the real estate or attempt to turn a profit on what's likely a modest investment so far.
Donald Shapiro, a Chicago-area real estate executive who has been the court-appointed receiver in charge of City View since 2009, didn't have much to say.
"I haven't heard anything," he said. "I'm not privy to note sales. My responsibility is the property, and I got the same filing as you saw in the federal court. We'll find out in the future as the new noteholder decides how they're going to move forward. But I don't know anything."
Shapiro said he believes the property is safe, without lingering environmental concerns. But he still hasn't been able to secure new tenants during his eight-year run as receiver.
Loan records compiled by Trepp, a company that tracks commercial mortgages that are bundled and used to back bonds sold to investors, show that City View has been losing money. It's unclear how much the property is worth. A 2016 appraisal referenced in the Trepp records lists a shocking figure of only $200,000 -- down from $103.4 million a decade ago.
The vacant Walmart has been stripped. Other buildings appear to be in better shape, but the entire center radiates an air of abandonment.
Trees wind skyward through the skeletons of unfinished stores. The parking lot, which has settled over the years, ripples, cracks and pulls away from the buildings. Rear stairs that used to touch the ground now dangle, hanging over asphalt that has dropped a foot or more.
When Collova ran for mayor in 2009, he campaigned, in part, on a promise to clean up the City View mess. He admits that he was naive. "It's eight years later," he said. "It's worse. Because you don't realize that once it gets into court ... we couldn't do anything."
In March, Morgan Stanley & Co. and Bank of New York Mellon Corp. settled a complex fight in New York federal court over who bore responsibility for troubled mortgage. Terms of that settlement weren't disclosed.
And in July, Shapiro reached a settlement with Walmart in a long-running argument over whether the retailer's departure was legitimate. Terms of that deal also are under wraps, though neither party accepted any fault and Walmart paid $100,000.
Soon after, NAI Global Capital Markets solicited buyers for the note, through a sealed-bid process. Reached early this week, Gisella Haidar of NAI Global wouldn't discuss the sale.
"To hear that it got to this point ... just gives us hope," Collova said. "And I know it's still years down the road before we can probably see something really great. But at least there's an opportunity now."
Across I-480, where more than 150,000 cars swish by each day, prospects appear even brighter at Bridgeview Crossing. A dingy sign perched over the freeway reminds passersby of pre-recession plans for the property, where JCPenney, Target and Lowe's were meant to anchor a $90 million office-and-retail project.
Building frames barely started rising from the ground when construction stalled in late 2008. Banks failed. Retailers pulled back on expansion plans. And the financial crisis kicked in. Developer Snider-Cannata Interests ended up snarled in litigation, including a foreclosure suit filed by Panzica Construction Co. and Independence Excavating based on unpaid bills for work at Bridgeview.
Now a hearing has been set for Sept. 13 on receiver David Browning's request for the authority to turn the property over to an affiliate of Craig Realty Group, the California-based outlet-mall developer that purchased the note on Bridgeview six years ago. In a recent filing, Browning's attorney wrote that Craig and Panzica have resolved their differences.
There are other parties to the case, so it's unclear whether the receiver's request will hit roadblocks.
Browning, managing director for the CBRE real estate brokerage in Cleveland, declined to comment. Steven Craig, president and chief executive officer for Craig Realty Group, didn't respond to inquiries, and neither did a marketing representative for his company.
Originally, Craig was eyeing the Bridgeview site for an outlet mall. But he pivoted away from those plans at least a year ago. Rumors are flying about other potential retail uses -- chief among them, the possibility that Swedish furniture and housewares retailer Ikea might bite off 20 or so acres of the site.
Joseph Roth, an Ikea spokesman, said the company hasn't committed to any Northeast Ohio site. "We continue to be interested in opening a store there," he said, "but it continues to be a challenge to find the perfect location."
Asked specifically about Bridgeview, Roth said "I think it's fair to say that any available piece of land that is rumored for sale, that is potentially for sale, that's bigger than 15 acres on 480, 490 or 77, we've looked at. We have a very, very comprehensive list."
Collova is watching his words. "That's probably a good rumor," he said in response to a question about Ikea. "But that's all it is, is a rumor. That's about all I can say on that. I'm hoping that an announcement will be coming out in the not-too-distant future."
The mayor said he expects whatever happens at Bridgeview Crossing to include a mix of retail and other uses, with the potential to support 900 jobs. Construction is scheduled to start later this year on a $5.2 million road-widening project that will touch Transportation Boulevard, the I-480 ramps and Granger Road -- to accommodate anticipated traffic to the site.
That construction will be paid for through a mix of federal highway money and private funds, according to an online project summary from the Northeast Ohio Areawide Coordinating Agency, a transportation and environmental planning organization. That project summary and meeting records don't identify potential tenants for Bridgeview.
"We believe that the project will be a go," Collova said, adding that Craig Realty has spent millions of dollars and waited patiently while the foreclosure case sat in court, with little apparent momentum. "But what the project's going to end up being, we're not 100 percent sure. And I mean that sincerely.
"We certainly are hopeful that it's going to be what we're hoping for," he added, somewhat cryptically. "But it could be anything."
