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01/16/2020

a multi-family apartment project in Midtown South. At the time, the company had a vacancy rate of less than 1 percent.

a multi-family apartment project in Midtown South. At the time, the company had a vacancy rate of less than 1 percent.
In early 2012, the company announced a deal to buy an office building in Cleveland for approximately $100 million from the Cleveland Clinic. On April 5, 2012, HVACS paid an “option-to-buy” premium for the office building, the first step in an initial public offering. On April 14, the HVACS press release announced the company announced an option-to-sell transaction to take the property off the market. HVACS purchased the office real estate at a purchase price of $103.5 million.
On February 4, 2013, a deal was announced to sell the property to a private investor for $150 million, but as of last year, the property was still listed as an option-to-buy property with the Cleveland Clinic. The purchase price was less than the $153.9 million it was sold for in June 2012.
The deal called for the Cleveland Clinic to own 25 percent of a joint venture, HVACS Residential LLC. The Cleveland Clinic would own a controlling interest, and HVACS would be the holding company.
HVACS’s plan was to spend $25 million developing the building and other properties on the site, including $4.5 million on an investment fund to fund renovation of the facility. HVACS said they would invest $25 million to renovate and upgrade the facility’s mechanical and electrical systems and to make the building “as modern and energy efficient as possible.”
According to the Cleveland Clinic, they could have made a profit if the plan had been executed properly.
“In hindsight, there were some significant obstacles that we felt would keep us from achieving an additional 30 percent operating profit. I felt strongly there was a significant opportunity here to generate additional revenue for the company with a high-quality, unique, high-technology business,” Dr. Richard J. B. DeSoto, dean of the Cleveland Clinic Lerner College of Medicine, said in a press release in February 2013.
“I’m proud of the way the company developed a robust plan,” Dr. Richard J. B. DeSoto, dean of the Cleveland Clinic Lerner College of Medicine, said in a press release in February 2013. “The plan incorporated the best practices of an institutional real estate investment trust and provided a competitive price to complete all aspects of the purchase quickly. HVACS did an excellent job of delivering the highest degree of service and customer service to their investors.”
HVACS’s decision to sell the office for about $80 million has not gone over well with the Cleveland Clinic. The company now wants all of the deal money back.
“In a statement, HVACS’s president and chief executive, Craig Gentry, said the building, which sits on a plot of more than 5 acres in the mid-city neighborhood near the hospitals, will make the clinic “far more attractive to new and existing patients and residents.”
“We are very disappointed in HVACS’ decision to move forward with plans to pursue an option-to-sell transaction,” said Cleveland Clinic CEO Dr. Richard J. B. DeSoto, who, in December 2012, was named one of Cleveland Magazine’s “40 Most Powerful Thinkers in Healthcare” by