Carew Tower from Race Street
Muralist Louis Grell completed ten Greek-themed murals for the hotel's original lobby, now the Palm Court
Art deco themes are found throughout Carew Tower Complex, including the light fixtures.
Palm Court restaurant at Netherland Plaza
The Hall of Mirrors at Hilton Netherland Plaza
Carew Tower Arcade
The former Tower Place retail center was converted to Mabley Place garage in a $9 million renovation
The view from Carew Tower.
CINCINNATI - Three weeks after the sale of Carew Tower was announced, real estate professionals are still scratching their heads over the deal and wondering what it means for the future of the historic downtown property.
It isn’t every day that a commercial real estate broker, previously hired to sell a downtown landmark, ends up owning it. But that’s exactly what happened when Greg Power, founder of Power Realty Advisors, acquired a controlling interest in Belvedere Corp., a real estate development company that has owned Carew Tower since 1990.
Carew Tower from Race Street
Power was announced as Belvedere’s new owner in a Nov. 21 press release in which former CEO Alex Warm said he was “passing the honor of controlling and managing the Carew Tower Complex” to the veteran Cincinnati broker and investor. The release said Power would “use the remainder of 2014 to develop his plans for the complex.”
The purchase includes the 49-story office building that is Cincinnati’s second-tallest, along with the 561-room Hilton Netherland Plaza Hotel and the Carew Tower Arcade, a 110,000-square-foot retail complex on the first and second floors.
Carew Tower Arcade
In a brief phone conversation, Power said plans for the property could be announced next month. He denied rumors in the brokerage community that he was acting as a front for other investors.
“I don’t need a partner,” Power said. “I’ve been involved in commercial real estate for 40 years. I understand it very well. We’re going to take care of this property.”
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CINCINNATI -- Three weeks after the sale of Carew Tower was announced, real estate professionals are still scratching their heads over the deal and wondering what it means for the future of the historic downtown property.
“I have a lot of questions,” said James O’Connell, executive managing director and principal of Cassidy Turley Commercial Real Estate Services.
“An unlikely buyer, no new direction communicated to the brokerage community. Yes, it left people scratching their heads,” said Keith Yearout, senior associate in charge of the Private Capital Group at CBRE, a commercial real estate brokerage firm.
It isn’t every day that a commercial real estate broker, previously hired to sell a downtown landmark, ends up owning it. That’s exactly what happened when Greg Power, founder of Power Realty Advisors, acquired a controlling interest in Belvedere Corp., a real estate development company that has owned Carew Tower since 1990.
Built by Cincinnati's famous Emery family at the start of the Great Depression, the Carew Tower was added to the register of National Historic Landmarks in 1982.
Art deco light fixture at Carew Tower
Known for its art deco design and "city within a city" concept that was copied by later downtown properties, the building is known to generations of Cincinnati families as an place to dine, shop, celebrate weddings and work.
Power called it "one of the most unique and special properties in the country, and a jewel in Cincinnati’s crown" in the Nov. 21 press release. “I’m excited to be a part of its history and am looking forward to ensuring it remains a vibrant force in our city.”
One of 10 Palm Court murals
Power is an Indian Hill resident whose 3.6 acre homestead is worth $2.2 million, according to Hamilton County records. He keeps a low profile in a Hosbrook Road office near Kenwood Towne Centre. His company has no website and rarely issues press releases on deals.
“He’s like Alex, a bit elusive,” said Yearout. “You won’t hear his name for a couple of years and all of a sudden he has a couple hundred million in assets for sale.”
O’Connell said Power brokered the $68 million sale of Voice of America Centre in West Chester last month. In March, he was among several investors who acquired the 11-building Central Parke complex for $34 million. It’s a deal that demonstrates his real estate acumen.
Central Parke was developed by Belvedere in the 1990s on the site of a former General Motors plant in Norwood. Power sold it to New York investors for $100 million in 2006. After the property fell into default, Power joined with investors Louis Beck, Harry Yeagy and Blue Ash-based Viking Partners to acquire the complex for one-third its former selling price.
“He’s always had a relationship with Alex Warm,” said O’Connell. “He was peddling the Carew Tower years ago” at a time when Warm denied it was for sale.
“He was adamant about it not being for sale and I had a copy in my hand of a brochure from Greg Power, who had it out in the market,” O’Connell recalled. “They’ve been trying to sell the Carew Tower for years.”
Palm Court restaurant at Hilton Netherland Plaza
Power didn’t address what led to the deal. Warm didn’t return calls and an email seeking comment.
Yearout said Warm turned away a potential buyer a few months ago by saying debt and deferred tax liabilities that date back to the building’s pre-1990 owners would make a sale cost-prohibitive.
“He said, ‘If I get $90 million, then it makes some sense,” Yearout said. “Greg Power bought the company, not the building.”
That means the real estate asset itself hasn’t changed hands and no real estate transfer taxes would come due. While mortgage holder Fifth Third Bank likely would have been asked to approve the sale, Power’s purchase of Belvedere may not have automatically triggered any changes on the mortgage.
How much debt is owed? Neither Fifth Third nor Power would say. A 2012 mortgage document, filed with the Hamilton County Recorder’s office, lists a maximum principal indebtedness amount of $81.5 million and a loan term that runs until 2037. Hamilton County’s auditor values the building at $62.4 million. Public records do not indicate what principal balance remains on the mortgage.
“We don’t discuss confidential customer matters,” said Fifth Third spokesman Larry Magnesen.
Debt could dictate direction
The mortgage allows Fifth Third to require full payment if any portion of the property is sold. It also requires Belvedere to “maintain the property in good order.” Both of those requirements could be in play after recent developments with the building.
Mabley Place Garage
Mabley Place, a 775-space parking garage that replaced the Tower Place retail complex, required a transfer of an easement and other property rights from Carew Realty Inc., a Belvedere affiliate whose name is on the mortgage, county records show. In April, city building inspectors ordered the removal of the property’s corroded flag pole. A slow parade of tenants, including the Greater Cincinnati USA Regional Chamber of Commerce, have left the building in the last few years.
Some real estate sources are privately speculating that the recent ownership changes were a response to pressure from the bank to upgrade the property. Some think Power is negotiating for loan concessions. One source said Warm retained a minority ownership stake in Belvedere.
Again, neither the bank nor its borrowers would comment. Even if the speculation isn’t accurate, the building’s debt load will be crucial to determining what changes Power can make. Many question its long-term viability as an office building, but converting upper floors to residential or hotel use would be expensive.
“The higher floors have smaller floor plates,” Yearout said. “They aren’t big enough to meet the needs of today’s office tenants. If you could move office tenants to lower floors and convert the upper floors to residential, that has some traction.”
Western & Southern Financial Group CEO John Barrett made the same observation in a recent interview with WCPO, adding he would like to be involved in a conversion of Carew Tower to condos. It’s an interesting remark, given that Western & Southern once held a mortgage on the building. County records show the company was owed $40.7 million in 1990, when it agreed to subordinate its debt to another lender as Warm took control of the property. The Western & Southern mortgage was modified in 1996 and terminated in 1999, records show.
“I would love to see that building turned into condos,” Barrett told WCPO. “Or apartments and condos. You could have some great living units.”
Warm scoffed at that idea when he last talked to WCPO in August.
“It is just smoke and mirrors,” he said. “Everybody in the city has an opinion of what should happen. But they just talk about it and it’s not stuff that’s real. These people should purchase it and then they could do what they want.”
Hall of Mirrors at Netherland Plaza
Warm said he expected no major changes at Carew Tower because the hotel was doing well and office tenants were still generating income for the property.
The medical research firm Kendle International has vacated much of its 128,988 square feet after being acquired by Raleigh, N.C. –based INC Research in 2011. But Warm said in August that the new owner is still paying the rent. Records show Kendle’s lease on nine floors at Carew Tower expires in May, 2019.
“It’s not like it’s an empty building,” Warm said. “We’re not going to relocate seven floors of tenants to do apartments. Doesn’t work. If the building were empty, it’d be a beautiful apartment building overlooking the river, but not when you’ve got to move tenants. We’re not going to do something that would displace people who are paying rent long term.”
Carew Tower view
Warm also told WCPO then that he had no plans to sell the building.
“People say, ‘Is it for sale?’ No, but if somebody wants to pay us more than it's worth, absolutely it's for sale,” he said. “So is my house and my car.”
Three months after mocking the idea, Warm sold the property. Why the change of heart?
“I assume he wanted to sell and Greg wanted to buy. That’s usually how these things shake out,” said Jacob Warm, who is Alex Warm’s son and CEO of JDL Warm Construction.
Yearout said Power has a few years of cushion before the expiration of the Kendle lease causes cash flow problems.
That’s plenty of time to develop and implement a new direction for the property.
“In the end, any time you have a transfer of ownership on a property, you’ve got a great possibility of seeing it improve,” said O’Connell. “There’s new blood. There should be new capital to do deals. There’s new forward thinking. That’s what should happen.”