Rico Pietro, SIOR has been brokering real estate deals in the Cleveland market for more than 20 years. He was lead adviser for downtown Cleveland’s The Metropolitan at the 9 project, which includes a Marriott hotel, Heinen’s Market, luxury apartments and headquarters for Cuyahoga County offices. One of the keys to making that deal happen was the approach he took with Fred and Greg Geis about developing the former Ameritrust Tower complex.
“We had a very comfortable, very social tour going through the property,” says Pietro, principal at Cushman & Wakefield | CRESCO Real Estate. “I think it gave us an opportunity to put our hair down and really understand what the asset could be and really dream through the evaluation of the property.”
Smart Business Dealmakers spoke with Pietro about the evolution of real estate dealmaking in Cleveland and the role that the Ohio Historic Preservation Tax Credit Program has played in revitalizing downtown properties. What follows is a transcript of the above video, edited for readability.
Bring discipline to the process
When you’re looking at a real estate transaction, some of the things you need to think about when evaluating the transaction as a whole is really being disciplined to the process. Individuals need to think about what the company needs and really ask all the right questions. Being incredibly informed at the front end allows you not to miss anything and really take advantage of opportunities as they present themselves in the market.
In the past, for the last 50 years or so, Cleveland has been somewhat of a slow market, predominantly owner-occupier driven. Most of the purchases have been based upon direct need. Now we have some speculation happening in the marketplace. That creates a lot more pace to the transactions and it requires that you make decisions quickly and you make the right investment into the properties to take advantage of the marketplace.
Be willing to let your guard down
The start of any good sales process is understanding who your audience is. When I was dealing with Fred and Greg Geis with regard to the Ameritrust Tower property, my first tour was on St. Patrick’s Day. So we had a very comfortable, very social tour going through the property. I think it gave us an opportunity to put our hair down and really understand what the asset could be and really dream through the evaluation of the property. I think that’s the first key in any sale and it led to the success of the property, getting the buyer to let their guard down and enjoy what the property could be and really get the motor running.
The sale of Terminal Tower
The Terminal Tower salereally came out of nowhere. I had worked with Doug Price and K&D in the past about buying property. I knew Forest City had an interest in divesting their Cleveland portfolio. It was just one of those whims. I had a good day and I thought it was a day I would reach out and see what other opportunities could be available for a company with a very strong appetite for expanding their footprint in downtown.
I made the call to Forest City, they seemed intrigued and within a few days, we really had the format and the framework for a transaction that ultimately came together a few months later. It was pretty quick.
Leverage your relationships
It’s all in the front end. It’s all about the plan. When people get stuck in real estate, I think it’s because they rush to judgment. They were pushed into a decision. They just thought that something could not go wrong. I think going through the fundamental steps, doing a comprehensive evaluation of the decision, leveraging your relationships to make sure you come up with an informed decision and then being deliberate and not being stuck in your ways.
I can tell you in most transactions, you are going to have to take a 90 degree turn. You are going to have to go off the main path. Being able to pivot away from something that’s not going to make you money, being able to make responsible decisions to protect your investment comes with flexibility. Just like any other business decision, being able to know when to make that decision and having the right advisers to help you make that decision will put you on the right track.
Breathe new life into an old property
One of the dynamics of real estate that we haven’t mentioned that comes up a lot is historical tax credits. It’s an awkward conversation because a lot of people don’t know exactly what it is. But ultimately what it does is it takes an old structure in an area like downtown Cleveland that we may not be able to financially underwrite and bring it back into life. Make it a new hotel. Make it a fantastic restaurant, a place to live, a headquarters for a tech company. This program allows for a developer to have a subsidy to be able to deliver the right project at that location. It’s important for that project, for that project’s success to be tied to that program. It will only happen on a go-forward basis if that tax advantage remains. Frankly for downtown Cleveland, I don’t think the success we’ve had to date would have been at the timeline that it’s come to fruition without that type of program.