UNIVERSITY HEIGHTS, Ohio – Amid tenant departures, ownership shifts, unpaid bills and litigation, the University Square shopping center has been in limbo for more than three years.
But the next few months might bring some clarity about the future of the financially distressed, vacancy-plagued property, at Cedar and Warrensville Center roads in the East Side suburb of University Heights.
Bond investors who control much of the multi-level complex – everything but the Target and Macy’s stores – are working on a debt-restructuring deal to make the property appealing to developers.
After selective demolition, the site could accommodate 289 apartments or 376,000 square feet of new offices flanking Macy’s and Target, cleaned-up structured parking and a smattering of smaller stores and restaurants, according to conceptual plans posted on the city’s website.
“Everyone loves the corner. That’s pretty universal,” said Kjerstin Hatch, founder and managing principal of Lapis Advisers, the majority bondholder on University Square. “Nobody likes the current configuration. That’s pretty universal.”
But before any redevelopment occurs, whether it’s residential, commercial or both, the bondholders and other parties with a say over the project have to fix a daunting debt dilemma. Between vacancies and expenses, the project is in the red. There’s still $33.8 million in principal outstanding on $40.5 million in bonds issued for the original development in 2001 – along with interest, fees and overdue property taxes on the land underneath the buildings.
Lapis and other bondholders, represented by UMB Bank as their trustee, took over the core of the complex in late 2015 to settle a foreclosure lawsuit they filed early that year. The ownership change got rid of a Detroit-area real estate speculator who swooped in and bought the property for virtually nothing two years before, with no apparent plans to improve it.
Now the people with the most money at stake are in…