Terminal Tower May 2016.jpg

Terminal Tower rises above the back entrance to Tower City Center on Friday, against a backdrop of blue sky. The iconic building, at 708 feet, is the second-tallest in downtown Cleveland, surpassed only by Key Tower.

(Marvin Fong/The Plain Dealer)

CLEVELAND, Ohio - Terminal Tower, the skyline-defining office building in the heart of downtown Cleveland, is slated to be sold this year for redevelopment, in a deal that could bring 300 high-rise apartments and open a bidding war for a major corporate headquarters.

The K&D Group, Inc., the largest owner of apartments in the region, recently agreed to buy the 52-story building from Forest City Realty Trust, Inc., the publicly traded real estate company that has owned the tower since 1983.

The sale could close in 120 days, said Doug Price, K&D's chief executive officer.

"When someone comes knocking and it's the Terminal Tower, that's once-in-a-lifetime," said Price, who confirmed that he has a purchase contract but would not disclose the price. "You don't take a pass on it."

A Forest City spokesman declined to comment on the potential sale and what it means for the company's presence in the building, and in Cleveland.

During a Friday earnings conference call with analysts, though, Forest City's chief financial officer said the company would consider selling its remaining downtown Cleveland office buildings "for the right price."

Forest City is the largest tenant in Terminal Tower, with corporate headquarters offices that occupy roughly 250,000 square feet on the building's lower floors. K&D hopes to convert that space to 300 apartments, though the company will continue to lease those offices to Forest City until early 2018, Price said.

In some ways, the sale isn't a big surprise.

Forest City has been shedding real estate in secondary markets including Cleveland. The pace of sales accelerated with the company's recent transformation into a real estate investment trust, with a refined focus on income-producing real estate. Forest City started this year with that new corporate structure, in an effort to keep the company's federal tax burden low.

Over the last few years, Forest City has turned over four chunks of the mixed-use Tower City complex, including the Avenue shopping mall, to companies tied to Detroit businessman and Cleveland Cavaliers' owner Dan Gilbert. A California investment group purchased Skylight Office Tower, another piece of the complex, last year.

And Forest City adjusted its accounting for Terminal Tower two years ago, making an on-paper change to the building's value that indicated the company might be willing to sell.

From a sheer business standpoint, the sale makes sense. From an emotional standpoint, it's more complicated. For the last three decades, company's executives and members of its founding families have talked about Terminal Tower with attachment and pride.

Terminal Tower arguably is the city's best-known landmark. It's Cleveland's second-tallest building, eclipsed only by the 57-story Key Tower. Built in the 1920s, it was the tallest building in the world outside of New York City until the 1960s, a symbol of tremendous wealth and, as Price notes, an icon of corporate and - at times - political might.

"If you think about it, Terminal Tower has been the seat of real estate power in the city of Cleveland ever since it was built," he said.

Now, just under half of the 584,000-square-foot tower could be filled with bedrooms, kitchens and other living spaces. Construction could start in 2018, based on K&D's plans. The company expects to compete for a large state tax credit aimed at restoration and renovation of historic buildings. The next such "catalytic" credit award isn't available until 2017.

That timeline puts Forest City on a two-year moving schedule. The company has 700 employees in Northeast Ohio, most of them downtown, and it's no secret that executives aren't thrilled with their current offices. The space is outdated, too chopped up, and too large, since Forest City has cut jobs as part of its corporate restructuring.

In past interviews, leaders including David LaRue, the company's president and chief executive officer, have stressed that they're committed to Cleveland. The company does have local alternatives for its headquarters, including the Post Office Plaza building on the west side of Tower City. Forest City still owns Post Office Plaza, which is grappling with vacancies and is rumored to be losing Quicken Loans, a major tenant that appears likely to move into nearby space controlled by Dan Gilbert, the company's founder and chairman.

Quicken representatives have repeatedly declined to talk about a possible move. On Friday, a spokesman reiterated that the company doesn't comment on rumors.

Relocating to Post Office Plaza might be the simplest option for Forest City. But the $8.8 billion company, with projects and properties scattered across the country, could look at other locations - both within and beyond downtown Cleveland.

"They are going to go for a national search. So the city and the state are going to step up," Price said, alluding to the possibility that Forest City will seek financial incentives to stay put. "We need to keep them in Cleveland. The worst thing is that they move. We don't want that."

In 2014, Forest City took a $42 million non-cash loss on Terminal Tower, to account for the possibility of a sale, the market value of the real estate and the impact on the company's income from a shorter ownership period. Regulatory documents indicate that the building might be worth as little as $14 million, though the Cuyahoga County Fiscal Office believes the tower is worth $24.5 million, based on the most recent tax appraisal.

The building does not carry a mortgage. Price said his acquisition includes approximately 450 parking spaces underneath the tower.

The purchase will be a crowning moment for K&D, which Price and his ex-wife, Karen Paganini, launched in 1984 as a young married couple, after seeing an infomercial about no-money-down real estate investing. Now the privately-held company, where Price and Paganini still share top billing as CEO and president, respectively, owns and manages nearly 13,000 apartments in Northeast Ohio.

K&D owns five apartment buildings in downtown and the Flats, and has become a major owner of office space in the central business district over the last few years. The company has two more downtown projects in the pipeline, with the partial residential conversions of the Leader Building on Superior Avenue and the Halle Building on Euclid Avenue. Both are mixed-use projects, combining apartments, retail and offices. Construction at Leader is under way and scheduled to finish in March. The Halle project could start in early 2017.

Price hopes to hang onto as many of the Terminal Tower office tenants as possible, since Forest City's offices provide ample space for apartments. He sees residential uses as a missing component of the broader Tower City complex, which Forest City refashioned in the early 1990s as a gleaming new centerpiece for downtown. Today, the property includes two hotels, offices, stores, restaurants and a casino, fronting on an almost-revamped Public Square and perched atop the rail hub for the Greater Cleveland Regional Transit Authority.

"It's going to be the address," he said. "You go downstairs, you jump on the train, you go to the airport. I think the residential piece is a natural progression of this project."