Cleveland Clinic Purchases Cleveland Play House Property

Wednesday brought good news to the Midtown area of Cleveland with the announcement by the Cleveland Clinic that it was purchasing the Cleveland Play House and its 12 acres property

This is good news on many levels.

First, it enables the Cleveland Play House to accomplish its goal of consolidating to with Cleveland State University's drama program into the Allen Theatre at Playhouse Square.

Shedding expensive, lower quality overhead, for a higher quality, more popular destination with shared expenses is a good fiscal decision. Activity begets activity and the aggregation of all of the region's theatre companies into one district is good planning and smart business.

Furthermore, the Cleveland Play House seems to have received a hefty price for their property. 300,000 square feet of theatre space likely has little, if any value, to the Clinic, though I would expect them to be more sensitive than any other buyer to the property's heritage. Renovating the property will likely cost more than simply tearing them structures down and building new. However, without taking sides on the merits of keeping the theatres up or tearing them down, the price of $12,000,000 to $15,000,000 reflects a land value of $1,000,000 to $1,250,000 per acre, depending on the final price - which sets a new high water mark for land sales in this area.

Making money in real estate has been and continues to have a simple formula. Acquire property in the path of job and population growth. And as surprising as it may seem to residents of North East Ohio, Midtown and University Circle are experiencing both. And recent sale prices reflect this trend. The Cleveland Clinic has proven itself to be a friendly neighbor. It would be hard to justify the price based on recent, comparable sales. But as they did with Health Space, the Clinic, out of concern for its neighbors perhaps, paid a price which no other buyer would have matched.

The Cleveland Play House won the lottery when the Clinic agreed to their price and they should be thankful that they were so lucky.

Second, the 12 acres form almost a perfect rectangle and are contiguous to the Clinic's main campus. This site enables the Clinic to expand onto a rare large site owned by one seller in the highly fragmented Midtown area. Given that the only sector in the US to add jobs in the first quarter was health care, anything which enables the Clinic or - for that matter - University Hospitals to grow is something we should all support.

Midtown and University Circle are benefitting from the growth in this industry and now the growth gets a boost in the western direction - away from University Circle - creating a new market - normally overshadowed by the more mature and dense Circle area.

One interesting spin off of this sale is the Museum Of Contemporary Art's planned relocation. Hopefully this sale will help the museum - and not hurt it - in its quest for donor's dollars for the construction of its new museum at the corner of Euclid and Mayfield. Initial reports say the relocation will not occur until 2011, giving the Museum time to raise money. Losing the vibrant Museum would be a loss we can not suffer - but I think it is safe to assume all parties in the transaction are aware of its value and will work together to assist in the relocation.