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The 75 Public Square building is the next candidate for an office-to-apartment conversion in downtown Cleveland, where developers have been snapping up empty or under-occupied properties and retooling them to capture residential demand.

(Michelle Jarboe McFee, The Plain Dealer)

CLEVELAND, Ohio -- Another downtown office building is set for conversion to apartments, this time in a deal that plays off the planned makeover of Cleveland's Public Square.

The Millennia Cos. of Valley View purchased the 75 Public Square building Friday in a $4 million transaction, property records show. The acquisition comes as planners are working toward a fall groundbreaking for the Public Square project, which will create more green space in the heart of downtown.

The purchase also builds a center city presence for Millennia, which has a deal to buy the historic Garfield Building on East Sixth Street and is scouting the central business district for another building to house its offices. Nico Bolzan, president of Millennia Housing Capital Ltd., said the 75 Public Square building could become 80 to 100 apartments, with one lower office floor and retail at street level.

"It is going to be completely gutted from top to bottom, completely rehabbed," Bolzan said. "And it needs it. ... It's in the heart of everything. Even though it's not a prominent building or a well-recognized building today, that's something that we're going to change."

Built in 1915, the 75 Public Square office building sits on the north side of Cleveland's Public Square, between 55 Public Square and the Old Stone Church.

Built in 1915, the 15-story building housed the headquarters of the Cleveland Electric Illuminating Co. early on. Hubbell & Benes, an architectural firm that also worked on the West Side Market and the Cleveland Museum of Art, designed the Italianate tower, which is clad in red brick with white accents.

Court records show that 75 Public Square slipped into foreclosure in June, after the building's owner failed to make a balloon payment on a $4.5 million mortgage. As of May 1, the property owner - a company called Northpoint Properties, Inc. - owed more than $3.9 million in principal, interest and fees.

The loan had been bundled with other commercial mortgages and used to back bonds sold to investors. In the foreclosure suit, a representative for the lender asked that an outside receiver be appointed to manage the property and that the building be sold to satisfy the debt.

The sale to Millennia puts an end to the foreclosure fight, but it won't clean up other legal messes involving Northpoint Properties, associated with Northeast Ohio investor Daniel Dzina. Dzina has been warring with Charter One Bank, which sold him the building in the late 1990s, over costs associated with repairs to the property. That argument made its way up to the Ohio Supreme Court, where the case is pending.

Cleveland Retail Group, the company that was marketing 75 Public Square, hasn't responded to requests for comment about the building.

Bolzan estimated that the office space is 60 percent occupied. That makes the property a natural candidate for a residential conversion, in a downtown where apartments are 98 percent full and developers are running out of empty buildings to transform.

Despite the strong apartment market, though, Millennia doesn't plan to gut 75 Public Square right away. Instead, the developer will operate the building as offices while seeking federal and state preservation tax credits and other subsidies. Public money would help make the project, an estimated $30 million investment, feasible, but it's not a sure thing. And the state tax credits are both limited and competitive.

"We are hoping that we can do this within 18 months of the acquisition and no longer than 24 months," Bolzan said, adding that Millennia would love to finish the project in time for the Republican National Convention in mid-2016.

But, he added, Millennia started pursuing downtown projects before any of the recent hoopla - the convention win, foundation funding commitments to Public Square, even the return of LeBron James - put the city in the spotlight.

"We just had a hunch and a feeling," Bolzan said, "that this property, with what's being invested from the city, was going to be a property that in our eyes was very memorable, very valuable in the years to come."