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Post Office Plaza is one of two Tower City office buildings that Forest City Enterprises appears likely to sell to an unidentified buyer. The building sits between West Third and West Sixth streets along Huron Road.

(Chuck Crow, The Plain Dealer)

CLEVELAND, Ohio -- Forest City Enterprises, Inc., has landed a potential buyer for its Tower City complex, the cluster of shopping, offices and parking in the heart of downtown Cleveland.

The publicly traded real estate company said Wednesday that it recently struck an agreement to sell Post Office Plaza and Skylight Office Tower to an unidentified buyer. The buyer also is negotiating to acquire a 50 percent stake in the Avenue mall and to purchase parking at the shopping center.

And that buyer has expressed interest in Terminal Tower, the downtown building where Forest City maintains its headquarters. But Jeff Linton, a company spokesman, said the iconic tower is one property Forest City doesn't plan to sell.

Forest City disclosed the pending and potential Tower City dispositions in a second-quarter financial report after markets closed Wednesday. The company took a $129.8 million non-cash loss to account for the likely timing of the sales, the market value of the real estate and the impact on Forest City's income from the buildings.

"During the quarter, we entered into active negotiations with a single prospective buyer for our Tower City assets, excluding Terminal Tower, in Cleveland," David LaRue, the company's president and chief executive officer, said in a news release.

"This required us to recognize these non-cash charges on three of the Tower City assets, including Terminal Tower."

Linton wouldn't identify the buyer. Neither would Bob Nosal of the Newmark Grubb Knight Frank real estate brokerage, which is working with New York investment bankers to market the Cleveland properties.

David Browning, the managing director of the CBRE Group Inc. brokerage in Cleveland, said the buyer is a California-based investment firm that focuses on second-tier cities. CBRE is not involved in the transaction, but the company handles leasing for Forest City at the Tower City office buildings and other properties.

"This is part of a larger trend," said Browning, who would not name the buyer. "We're going through a phase right now where there is a lot of interest in assets in Northeast Ohio and in second-tier markets like Cleveland. There's a whole new cast of investors."

Forest City, meanwhile, has been shedding properties that don't fit with the company's emphasis on apartments, office buildings and regional malls in New York, Los Angeles, Washington, D.C., and other major cities. Last year, the company hired Savills, an international real estate firm, to measure investors' appetite in buying a stake in Tower City or acquiring buildings there outright.

Forest City executives have said the company is committed to keeping its headquarters in Cleveland. But that commitment doesn't necessarily extend to hanging onto real estate here.

Forest City has inked a deal to sell the Skylight Office Tower, on West Second Street in downtown Cleveland, to an unidentified buyer. The same buyer is negotiating an agreement to buy parking at Tower City and a 50 percent stake in the Avenue shopping mall.

According to a regulatory filing, Forest City signed a deal sometime after June 30 to sell Post Office Plaza and Skylight Office Tower.

The company is negotiating a purchase agreement on the Tower City parking and the 50 percent stake in the shopping mall. Those deals apparently are intertwined, so the office buildings won't change hands unless the parking and retail do.

It's difficult to predict what price the properties might fetch.

Forest City shaved nearly $14.4 million off the value of Post Office Plaza on its financial statements.

The 476,000-square-foot building, which was the city's main post office in the 1930s, might be worth roughly $28.6 million, based on regulatory filings. The building's tenant roster includes the Cleveland outpost of Quicken Loans, the Detroit-based company founded by Cleveland Cavaliers owner and Horseshoe Casino investor Dan Gilbert.

Forest City took a $42.2 million hit associated with accounting changes related to Terminal Tower. Regulatory documents indicate that 584,000-square-foot office building might be worth $14.6 million.

The vast remainder of the $129.8 million loss came from the Avenue, a three-level shopping center that has struggled to find an identity and to compete. Once filled with high-end stores, the mall now houses an eclectic mix of local retailers and restaurants, with a few better-known holdouts like Brooks Brothers.

It appears that Forest City is considering a joint-venture redevelopment deal at the mall, rather than a complete exit.

The company has owned the Tower City properties for decades.

Forest City said funds from operations - the key performance measurement watched by analysts and investors - were $53.1 million, or 24 cents per share, for the three months that ended June 30. That compared with $64.1 million, or 30 cents per share, a year before. Stripping out unusual items, operating funds from operations rose 68 percent, to $60.2 million.

The company's losses widened to $93 million, or 47 cents per share, from $34.9 million, or 18 cents per share, thanks in part to accounting for the potential Tower City real estate sales.

Revenues fell 17 percent, to $229.6 million, due largely to a mall joint venture that impacted Forest City's accounting treatment of seven properties.

The company's common shares, listed on the New York Stock Exchange, closed trading Wednesday at $19.24, down 0.16 percent.