Forest City sells its last lingering pieces of Tower City for $16 million to the K&D Group

CLEVELAND, Ohio - Forest City Realty Trust, Inc., passed the torch at Tower City Center on Thursday, selling off its final pieces of the mixed-use complex in the heart of downtown.

With the sale of the Post Office Plaza and a nearby parking lot, Forest City - once downtown Cleveland's dominant landlord - finished a six-year-long exit from property ownership in the center city. The publicly traded company will stick around as a tenant, moving its headquarters and hundreds of workers from Terminal Tower to Key Tower in the spring.

The K&D Group paid $15 million for Post Office Plaza, a 477,000-square-foot office building that is 55 percent vacant. In a separate transaction, K&D paid $1 million for a triangular parking lot next to the Renaissance Cleveland Hotel, west of Public Square.

Doug Price, K&D's chief executive officer, confirmed the details during an interview late Thursday. "We think it's a real strategic purchase," he said of Post Office Plaza, which he plans to maintain as office space. "It's a great building in a great part of town."

Forest City spokesman Jeff Linton also confirmed that the sales had closed but wouldn't comment further. The dispositions weren't significant enough to trigger an announcement from Forest City, but they're likely to appear in the company's next set of quarterly financial filings.

The company sold off its Cleveland properties as part of a broader strategy to prune its holdings to apartments, office buildings and the occasional mixed-use project in a few growing cities: Boston, Dallas, Denver, Los Angeles, New York, San Francisco and Washington, D.C.  Over the last decade, Forest City has undergone dramatic changes, from its real estate portfolio to its underlying corporate structure.

K&D, a Willoughby-based apartment landlord and major player downtown, bought the Halle Building and garage from Forest City in 2014 and is converting parts of the former Euclid Avenue department store into housing. At Tower City, K&D owns Terminal Tower, which also is slated for a partial apartment conversion - after Forest City moves out.

Post Office Plaza debuted as downtown's central post office in the 1930s and has been an office complex since the late 1980s. K&D took over a mortgage on the building from Forest City as part of the purchase.

Price and Cushman & Wakefield/Cresco Real Estate already are chasing large tenants. K&D is among a handful of property owners trying to land Cleveland's police headquarters, a roughly 180,000-square-foot opportunity, Price acknowledged. He wouldn't identify the other tenants that K&D is wooing, though he didn't rule out the possibility of landing a company from outside of the region.

"We don't have to do anything right away," Price said. "This was a long-term play, so we're going to look for the right people, the right tenants. When we find them, and we can get a deal done, we'll do it."

The wedge-shaped parking lot, which can accommodate 43 cars and includes ramps to underground parking at Tower City, was a strategic buy. Price said neither Bedrock, the Detroit-based company that bought the Avenue shopping mall and most of the Tower City parking last year, nor Hertz Investment Group, the California-based owner of Skylight Office Tower in the complex, were interested in the parcel. "We didn't want another party involved," Price said.

A portion of the lot could become a staging area for construction materials when work on the Terminal Tower apartment project starts. K&D is pursuing state historic-preservation tax credits for that project and hopes to begin construction next year. Price said the parking lot also could provide a site for a backup generator for the apartments.