Author Topic: Aspects of the Dayton Arcade: Renovation and Bankruptcy  (Read 410 times)

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Offline Jeffrey

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Aspects of the Dayton Arcade: Renovation and Bankruptcy
« on: June 22, 2007, 07:32:52 AM »

…well, maybe not an afternoon, but how about a little thread on the wheeling and dealing that brought about the renovation.

Downtown Dayton was in trouble.  The first suburban shopping centers arrived in the 1950s, small at first, but getting larger, leading to the first outdoor mall centers in 1960-61, the first suburban stores for Elder Beerman and Rikes in 1962, and the first indoor mall in 1966.

By the 1960s downtown had declined enough to lead to some major urban renewal demolitions and, starting in 1966, a comprehensive downtown urban design and planning effort.  The significance of the Arcade apparently was recognized by the planners and consultants, as both the rotunda and arcade pieces were incorporated into a city planning document…

….and, even more so in this design concept developed by RKTL, the planning consultant to the Downtown Steering Group (which was led by some local movers and shakers). 

This group is who redirected retail planning efforts from a 1st Street “Fashion Square” concept to the Arcade block and Courthouse Square.  The RKTL concept was for an indoor shopping mall including an anchor department store on the Arcade block.  The mall would continue across Courthouse Square and connect up with Rikes Department Store.  As with the city document, a system of skywalks connected to perimeter parking garages was conceived to support the complex.

Also, around this time, Dayton newspaper columnist Marj Hayduck, suggested a redevelopment of the Arcade in her 3rd and Main column. 

The column led to an outpouring of support, including letters to Hayduck which she reprinted in subsequent columns. Hayduck continued to advocate for he rehabilitation of the Arcade via her column, until her death in 1969.

1969 was the year the owner of the Arcade buildings, Robert Shapiro, accompanied Dayton mayor CJ McGee and others on a fateful fact-finding trip to the West Coast. 

This Nov 7 1975 news clipping tells the story:

At last Bob Shapiro keeps our lunch date, three times postponed.

I couldn’t speak freely until word of our Arcade redevelopment project was out”, he explains.  His round, kindly face frames smiles of unsuppressed excitement “You do understand?”

I do understand. For each of us who cherishes the 1904 Arcade, its three enigmatic faces, it’s dizzyingly ornate rotunda, the experience of discovery has been intensely personal, a secret-heart affair.  It is gold in Sutter’s millrace, Ali Baba’s cave, Shangri La.

How much more intriguing, then, the dimmed glories of this architectural mystery must be to the man who reigns over most of it.  Bob owns all but the northeast half of the Third Street structure with Dutch maidens and gargoyles on its fabulous Flemish façade.

Bob admits he’s been increasingly dream-smitten since 1852 when he bought a then-unfashionable Victorian lemon, “And bided my time”

“Will you remember” he asks, “a 1969 trip west Mayor McGee and the city organized to look at renewal and convention center projects?”

Together we recall some other downtown renaissance dreamers in the party—George Huffman, Tom Andrews, John Remick, And Bill Fitzpatrick, the realtor who now, with Shapiro and attorney Al Sealy, has package a new-horizons plan for citizen participation in Arcade rebirth. 

On the west coast we studied new uses developed for decayed but historic landmarks” Bob continues.  “When I saw San Francisco’s’ Cannery-“--he orbits circles with a forefinger held to his forehead---“the wheels in my head went round and round.”

“It threw me!  What a charming and elaborate reclamation of a white elephant, just full of multi-level surprises!  Every conceivable kind of ethnic restaurant in it.  Shops with crafts, antiques, men’s woman’s, and children’s things. Cozy pubs, each different, with nickelodeons and waiters in sleeve gaiters….”

Bob hurried home, imagination on fire.  He paced Third to Fourth streets, the Arcades promenade of shops and its market center, re analyzed the Beaux Arts dome, re-inventoried the apartments , office suites, all three lovingly detailed facades.

He consulted Joseph Esherick, the Cannery architect.  He had an artist make sketches.  Then, hopes high, he made the rounds of center city movers and shakers with his plans.

No takers.  Downtown, then high on glossy glass-and-cement approaches to renewal had no time for the quaint.

In 1972, Bob contacted Research Development Corp, the Chicago firm that had done preliminary feasibility and traffic studies for the Winters Tower and Convention Center projects.

“Wait two or three years” he was told. “When Stouffers Hotel and Court House Square development are under way try again.

“So again I laid low. Finally, last year, I went to Al Sealy, impressed with how he’d put the Stouffers project together.  Al sees far ahead.  He deserves all the credit for the this whole Arcade Square revival program.  Now if the public just went along with us –“….

…and this is the Cannery that made such an impression on Shapiro.  This renovation was the first commercial project by famed Bay Region residential architect Joseph Esherick, and would have been one year old when Shapiro saw it.

Though the article makes it seem that it was this visit to the Cannery that got Shapiro thinking. one can speculate that Shapiro must have been aware of Hayducks’ articles and, as a downtown property owner, knowledgeable about the planning efforts of the mid  to late 1960s.

Though not publicized, plans were already afoot in 1974 and early 1975, because the Arcade was nominated and then listed on the National Register in mid 1975.

One can read between the lines in the old clipping files on the Arcade to see how the local movers and shakers were brought on board. Albert Sealy was a key connection, as apparently Shapiro went to him for help to make his vision a reality. 

According to press reports Sealy was apparently involved to some degree with Courthouse Square and certainly with the Stouffers (Crown Plaza) on Dave Hall Plaza as he modeled the private portion of the Arcade financing on the Stouffer’s deal.  The Courthouse Square involvement is probably what brought Mead on board, and then others joined.

Also note that the 3rd Street Arcade was still a joint venture.  Barney was long gone, but the Gibbons Estate still owned their part of the building.   The trustee for the Gibbons interests was Fitzpatrick Realty, and they partnered with Shapiro on the renovation deal.  Fitzpatrick was not just into property management but apparently had a hand in some suburban shopping center development.  Fitzpatrick was located next door in the Gibbons building, and Sealy, as county GOP chairman, had an office next door to Fitzpatrick, in the GOP HQs on the second floor of the Main & 3rd commercial building.

The Mead connection was perhaps somewhat self-interested, on Meads part. In the 1960s Mead was planning on relocating to a suburban corporate campus in Miami Township and had acquired quite a bit of land for that by 1969.  Mead would have been following two other local corporations to this area, as Huffy and Monarch Marking had already relocated to Miami Township, followed by the NCR training center.

Instead, there apparently was a change of heart, as Mead committed to downtown instead, building a HQ skyscraper on Courthouse square.  So Mead now had a vested interest in downtown property values.   Mead (and other downtown companies) would continue to be a behind-the-scenes player in the Arcade project.

Meads’ Miami Township properties would eventually become the site of Mead Data Central  (Lexis/Nexis) and the Newmark office park...


The Project

The following abbreviated timeline provides a chronology of the renovation of the Arcade.   

I won’t go into the details here, but suffice to say that the project could have died or been downscoped at certain points, due to lack of financing or cost growth.  The project would not have happened without public money, and there is a political tale here, too, on how the city got on board and the political divisions within city commission on public funding.

Relevant to the current discussion about the Banks in Cincinnati is the issue of minority set-asides.  One of the strings attached to the Federal grants was a 10% minority set-aside.  The local black contractors group wanted 40%.  After much back and forth, a lawsuit, and a threat of civil disobedience, the participation was probably between 15%-20%.   

 There are press reports of cost overruns, high bids, re-bids, delays due to change orders, and so forth. These glitches are to be expected of a complicated renovation project with multiple bid packages and construction phasing issues. Also this was an era of high inflation.

In order to control costs there might have been some de-scoping. According to press reports one of the things that came close to being cut from the project was the dome replacement.

Another interesting thing is that the project went under construction before all the money was raised.  Demolition happened, then a delay until funds came for the rest of the job.  Pretty risky. 

I could never find a good cost accounting of the entire project, particularly the public part, as the city was periodically subsidizing bits and pieces of it, plus contributing administrative and project management services.  There is enough, however, to show how the deal was structured and relative contributions.   

There were at least three mortgages on the property.  Some of the larger limited partners held the second mortgage, and they contributed an additional $1M in later efforts to keep the project afloat

The bulk of the project was publicly financed, with the lions share provided by two Federal grants.  Montgomery County contributed $1M in industrial revenue bonds.  The private money came mostly from three institutional investors; two local and one national.

There were two limited partnerships, Arcade Square I and Arcade Square II.  I don’t have the names for Arcade II, but the paper printed the names of the partners (and their contribution) in Arcade I, which opens a window into local participation in the project:

The Arcade I list shows how this was a joint effort by the local business community plus a some wealthy individuals, but also with a hefty chunk of money from General Motors.  Mead was the major locally based limited partner.

Interestingly enough the names of two of the early players, Sealy and Shapiro don’t  appear as investors in Arcade I (perhaps they invested in the other fund).  Fitzpatrick appears twice, as a business (investing  $1,250) and as a private investor (William Fitzpatrick Sr, $2,500).   Shapiro apparently sold the Arcade to the Partnership in 1977, for $1.9M, but he drops from press reports after that.

A note about the involvement of Danis Corporation, who invested $37,500.  Danis was originally selected by the city as the project manager (without public bidding) but yet another string to the Fed grant money required competitive bidding, which nixed this deal (the city ended up acting as PM).  Danis did get one of the large construction contracts as, I guess, the prime (with a minority partner).  During this era Danis was also partnering with the city to develop the Concourse 70/75 industrial park as an urban renewal effort.

The architect/engineer was Lorenz & Williams and the marketing, leasing and retail concept consultant was Halcyon Ltd. of Hartford, Connecticut.   Halcyon had a good track record at this time, having been involved in the retail concept for the then-new Citicorp Building and for a downtown shopping center in Hartford.  Lorenz & Williams was the leading local A/E firm

Some early conceptual renderings of the concept of the project by Lorenz & Williams.  This would have been the first visuals of the renovation made public.

The first look at the retail concept….mixing a market concept with retail and restaurants.  The paper doesn’t credit the drawing, but I suspect this might be from Halcyon.

…and a close-up of the dome area

Prior to this, the original concept in 1976 was apparently more entertainment/restaurant/food based, then shopping was worked into the scheme later.

Initially, while the project was under construction National tenant recruitment was by Halcyon, and local recruitment by Fitzpatrick.


Arcade Square Opens

Though not fully leased or complete, Arcade Square grand opening was May 1980.  The celebrity shopper was Lima, Ohio, native Phyllis Diller. 

Here are the original tenants and their locations:

(one of the more interesting tenants was the Coke Museum, which was a huge collection of Coke epherma and memorabilia, including a soda fountain.  This was later forced out by Halcyon as not contributing to the image or mix they wanted)

And some “Best Wishes” ads from the special grand opening supplement to the DDN.

(I find these ads bitterly ironic given the fate of the project)

The project was nationally recognized as an outstanding renovation design, winning Lorenz and Williams a state AIA honor award and being the cover story in a Progressive Architecture (PA) magazine issue on historic preservation/adaptive re-use.  This was a real coup, as PA, at that time, was the most cutting-edge US architectural glossy; they published the most innovative projects. 

The other Ohio project in that issue was the first renovation of Cincinnati Union Terminal.

Some pix from the PA issue:

The PA had these great little plans showing the various floors and the details of the dome replacement, which was really the construction of a second framework and glazing system above the original framing.

…enlargements, floor by floor


…and an energy analyses .  Energy conservation was a big deal in the 1970s. 

The PA issue was widely read, with architects visiting Dayton from as far afield as Toronto to see the project.  It was influential in Toronto, as it was seen as a validation of mixed used design, zoning and planning efforts in that city.

The project was supposed to include apartment renovations, but this never happened. Interestingly enough the oldsters were living in the upper floors throughout the renovation (I can see this as a big staging issue in terms of keeping utilities going while one is gutting and redoing the lower floors),  but it cost to much to keep utilities and maintenance to the units, so the last tenants were relocated in 1981.

 The upper floors of the Arcade have been silent since, 26 years, a quarter century now.


Operations and the Road to Bankruptcy

The structure of the operation was management via a committee made up of representatives of Mead, Citywide, NCR, and perhaps others (the full membership was never fully reported, as far as I can tell).

Reporting to them was Halcyon, who handled leasing, marketing and tenant relations, and Fitzpatrick Realty, who handled operations and security.  There was some concerns about Fitzpatrick’s involvement due to certain potential conflict of interest issues, though the management committee did sign-off on all expenses.

One of the provisions of the leases was that tenants had to keep 10:00 AM to 9:00 PM hours, similar to a suburban shopping mall.   This became an issue at the end of 1980, as the tenants were quite disappointed with nearly nonexistent nighttime sales. 

Issues also surfaced regarding security.  Tenants complained about the “3 O’clock problem” when school students swarmed the center in late afternoon, intimidating customers (and this would have been a prime time for office workers shopping on their way home).  Severe vandalism destroyed the public restrooms, leading to a controversy over management attempts to control access. 

Initial security seemed tight, though, with camera monitoring, security staff with walkie-talkies, etc (the newspaper supplement had an article that took pains to point out how good security was, perhaps to allay the fears of suburban shoppers).  This was expensive and probably partially accounted for the depletion of the contingency fund.

A timeline of the financial problems that eventually did in Arcade Square

Bad news surfaced only one year after opening, with reports that the partnership wanted to sell to a Venezuelan investor who was involved in financing the remodeling of the old Gibbons Hotel (then called the Daytonian).   

The project never was able to attract enough tenants to pay for itself, or develop a tenant mix attractive enough to draw suburban shoppers  Contingency funds (a pool contributed by some of the larger limited partners)  were depleted the first year by “skyrocketing operating costs”, and the tenant allowance fund shortly after .

Forbearance by the institutional lenders, which was contingent on a $1M cash infusion by some of the larger limited partners, just delayed the inevitable.  A major office tenant was recruited for the third floor, but went bankrupt, which helped nail the economic coffin shut.

…this chart doesn’t show the churn in the tenant mix, as some tenants only lasted one or two years.

By January of 1993 Halcyon was terminated and leasing/marketing handed to Fitzpatrick, who was terminated soon after, and management finally turned over to local businessman George Daoud.  Daoud’s security firm reported banning over 1,200 people from the Arcade in two months, for various infractions, such as carrying firearms, drug use, vandalism, etc.

The major institutional lender, Aetna, had had enough by mid 1984.  Foreclosure actions were initiated, a receiver appointed, and the property sold at a 1 minute sheriff’s sale, October 1984, to the institutional investors. 

The Arcade Square partnership was bankrupt.  Aetna, Society Bank, and Gem Savings now owned the Arcade.   

As you can see from the pie chart unthread a number of locally influential companies and individuals, as limited partners, took a bath on this deal.  The partnership was a tax shelter, with losses written off, but only if the project didn’t go bankrupt.  In the event of bankruptcy the IRS would want a portion of the write-offs reimbursed.   So the partners lost their initial investment, plus a portion of their tax write-off.

Citywide also lost its initial loan.  This was written off before bankruptcy.

The county invested $1M in revenue bonds.  In theory the principle and interest of this type of municipal bond is paid off by the revenue generated by the project.  As the Arcade didn’t break even, presumably there was no revenue to pay off the debt.  There are no press reports on the fate of these bonds or how this debt was retired.

I tried to diagram this project as a system.  A lot of things conspired to keep this from succeeding.  Big things are the outside economic environment, as this project was built and leased during an era of high inflation, and came on line just before and during a severe recession, which kicked-off a few vicious cycles that helped hasten the end.

As an early press report said, “All economic engines needed to be firing at full thrust for the project to succeed”.  That didn’t happen.

Even during good times operating costs were going to be high from the start, given the nature of the building and the security and upkeep issues.  And getting the operation leased out with the right tenant mix to attract shoppers & visitors would also be a challenge.   

The concept was not merely a shopping center.  The upper floors were supposed to include nightclubs and discos and better restaurants and such, perhaps sort of an early version of  Newport on the Levee and 4th Street Live, but the nightclub and restaurant prospects who signed letters of intent never followed through or couldn’t work a deal with management.

Another important missing piece was parking.  Early reports, from 1976, indicated the original concept was to somehow include parking.  This never happened.

Yet maybe the basic premise was flawed, given the track record of similar efforts in Cincinnati (the first Union Terminal renovation, Tower Place to some degree), Indianapolis (Union Station), and Louisville (Bakery Square, Galleria, Theatre Square).

And one wonders if a better approach have been to do just a minimal or incremental improvement of the Shapiro-era Arcade, adding to his businesses and fixing up things here and there, rather than the “grand plan”.

Robert Shapiro’s’ dream of a Cannery for Dayton had turned into an economic nightmare.

Offline Jeffrey

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Re: Aspects of the Dayton Arcade: Renovation and Bankruptcy
« Reply #1 on: June 22, 2007, 08:33:18 AM »
Though bankrupt the Arcade didnt close yet.  I will be posting on what happened after bankruptcy later in the weekend.

Offline ColDayMan

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Re: Aspects of the Dayton Arcade: Renovation and Bankruptcy
« Reply #2 on: June 22, 2007, 12:58:18 PM »
Lawd, what a mess.
"You don't just walk into a bar and mix it up by calling a girl fat" - buildingcincinnati speaking about new forumers

Offline Jeffrey

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Re: Aspects of the Dayton Arcade: Renovation and Bankruptcy
« Reply #3 on: June 22, 2007, 01:41:25 PM »
believe it or not I think some money was made on this scheme by certain players. 


Offline Jeffrey

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Re: Aspects of the Dayton Arcade: Renovation and Bankruptcy
« Reply #4 on: June 22, 2007, 01:43:21 PM »
yeah, and if you look at the players and how much $$$ was down the tubes you can see why everyone wants this go away.

Offline PhillyEngineer

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Re: Aspects of the Dayton Arcade: Renovation and Bankruptcy
« Reply #5 on: June 22, 2007, 06:49:38 PM »
Fascinating, and I remember all of it. I was there on opening day in 1980. Only two stores (plus McCory's) were ready to open. That should have been a sign that it was doomed from the start. It never reached it's full potential because downtown kept losing jobs all through the 80s. I do have fond memories of the place, though. Charley's Crab was very popular in the beginning. The "Overlook" restaurant shown in the 1977 layout did happen as a restaurant called "B.P. Goggs". I don't think it lasted two years. The Coca-Cola Museum was really cool, but it did attract a lot of teens and I think that scared off people. They also made the mistake of allowing food vendors to take over most of the first floor around the dome. In your next installment be sure to mention the absurd change that was made in the mid-1980s - to cut a hole in the floor under the dome and move all the food vendors into the basement.

Offline Hankster65

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Re: Aspects of the Dayton Arcade: Renovation and Bankruptcy
« Reply #6 on: June 23, 2007, 02:28:50 AM »
I well remember the Coke museum.   The entire arcade was so VIBRANT then!   Without the arcade there will never be a real downtown Dayton.   Fantastic job, Jeffrey.   

Offline Jeffrey

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Re: Aspects of the Dayton Arcade: Renovation and Bankruptcy
« Reply #7 on: June 25, 2007, 06:06:22 PM »
BP Goggs was, along with Charlies, one of of the out-of-towners recruited by Halycon.  There was a real "Gogg", (the real name was Goggins or soemthing like that), & he was a sucessfull restauranteer from West Virginia (Morgantown?), but apparently crashed at that Arcade site (which seems like it would be a good location overlooking the courthouse square).

Another out-of-towner being recruited was Casa Grisanti from Louisville, which was a very high-end restaurant at that time.  Grisanti wanted that overlook space too, but apparanetly the tenant allowance was too much for the Arcade to afford.

Without the arcade there will never be a real downtown Dayton. 

The question is can others be convinced of this?