By Adrian Maties, Associate Editor
The historic Arcade building in downtown Cleveland hit the auction block last week, after a two-year foreclosure process. Despite the property’s $7.7 million price tag, it failed to attract a single bid.
The landmark property includes a 293-room Hyatt hotel, restaurants and shops. Foreclosure proceedings were initiated in 2009 by Bank of America, after the property’s owner, Chicago-based Arcade L.L.C., defaulted on a $33.3 million mortgage. Court records show that Arcade L.L.C. owes $14.3 million on that loan, plus interest and fees. Appraised at $11.5 million, the property went up for bid at two-thirds of that.
The Arcade opened its doors on Memorial Day in 1890 as one of the first indoor shopping centers in America. It was designed as a big-city mercantile center by John M. Eisenmann and George H. Smith, who modeled it after the Galleria Vittorio Emanuele II in Milan, Italy. The total construction cost was $875,000, and it was financed by some of Cleveland’s famous businessmen of the late 19th century: John D. Rockefeller, Steven V. Harkness, Louis Severance, Charles Brush and Marcus Hanna.
Located in downtown Cleveland, between Superior and Euclid avenues, the building consists of two nine-story towers, connected by a five-story, glass-and-metal atrium. The atrium is decorated with extensive metalwork and the atrium’s top floor features a row of gargoyles that gaze down on shoppers. Over time, The Arcade began to deteriorate. A $60 million renovation was completed in May of 2001.
The property could go up for bid again, at the same price or lower. Bank of America could also search out potential buyers for a private sale. At first glance, The Arcade may seem a real bargain, but it is actually a complicated property, as any buyer will face the complexities of a historic building and an ongoing requirement to make payments on bonds used to help finance its $60 million renovation.
With a convention center and a new casino waiting to open, The Arcade’s great location will surely attract potential buyers. However, even if Bank of America recovers its investment, it is unlikely that investors including the city of Cleveland and Cuyahoga County will see any money.