WARREN, Ohio – It wasn’t long ago that the private sector shunned any ideas of putting investors’ money into the 86 acres that once encompassed Warren Western Reserve High School, the Westlawn housing projects and Deemer Park.
Despite ideas that proposed new market rate residential housing over the years, no private developer ever came forward with a viable plan to transform this particularly hard-hit neighborhood in southwestern Warren.
“We looked at it for years,” says Mike Keys, director of community development for the city. “It would’ve been difficult to use for residential. Developers couldn’t make any money and no one had the wherewithal.”
All that will change Aug. 15, when a groundbreaking ceremony is set for the start of the West Warren Industrial Park – beginning with the construction of a 100,000-square-foot spec building that targets modern light manufacturers and distributors.
Sapientia Ventures LLC, a venture capital firm owned by local businessmen Chuck George, Mike Martof and Wiley Runnestrand, has raised private equity financing to acquire the site. The plan is to begin Phase I with the first building and then develop the rest of the site over several years.
Such a development could ignite a wholesale change to a generally neglected part of Warren and lay the groundwork for additional development, Keys says. The site, bounded by Martin Luther King Jr. Boulevard to the west and Nevada Avenue on the east, was carved into more than 100 parcels, requiring ample cooperation from the private and public sectors to put a deal together.
PUTTING THE PLAN TOGETHER
The Westlawn projects – first constructed during World War II to provide temporary housing for workers at the Ravenna Arsenal – was torn down during the late 1990s. Warren Western Reserve High School closed in 1989 and was transformed into a middle school. In 2011, that structure was demolished, opening up potential for a neighborhood renaissance.
Keys says the city had a genuine interest in reclaiming the site and acquired most of the property there. Warren City Schools retained ownership of the former high school property. And there were other lots still privately owned.
The challenge was to shepherd any new development going forward and to ensure that the property was directed to an owner who would put it to proper, productive end use. That could be tricky since any sale from the city to the public sector would have to be put out for bid, thus risking a sale to an unscrupulous buyer.
Some seven years ago, however the city and the Western Reserve Port Authority entered into an agreement that permitted the latter to deal directly with any developer of a potential site. Under this arrangement, the city could sell the land to the port authority without going out for bids and the port authority has the power to then sell to a private developer that was fully vetted and committed to a project.
The Warren City School District faced a similar issue with its property. Under Ohio law, the school system would be bound to first offer the land to a charter school unless it was sold directly to the port authority.
“This project is the epitome of how a cooperative agreement works,” says Anthony Trevena, executive director of the Western Reserve Port Authority. “A lot of great people were a part of this project.”
The planning and development manager of the port authority, Nick Chretian, says the West Warren project took more than a year to put together. Much of the time was devoted to working with Sapientia and cobbling the numerous parcels on the vacant site into a single lot. “There were about 100 parcels there, as well as some cleanup,” he recalls.
Sapientia also acquired additional private lots at the site.
It all came together during a signing ceremony Feb. 15 in Warren City Council chambers. In a matter of minutes, the city and the school system sold its West Warren holdings to the port authority for the appraised value of $195,000. The port authority then completed the transfer to Sapientia for the same amount.
“This was a Herculean effort,” says Sapientia’s Martof.
CHANGING THE NARRATIVE
The premise behind constructing this first spec building was born out of the venture capital firm’s frustrations to locate a site for GreenBoard IT, a Warren-based electronics recycler that is co-owned by Runnestrand, Martof, and George. “It took us nine months, not just looking in the Valley, but all over northeastern Ohio,” Runnestrand says.
Eventually, the partners settled on a building at 817 E. Market St. and began operations there. “There was nothing better,” he says.
The experience led the three to engage with the Youngstown/Warren Regional Chamber and other development specialists to examine the status of Class A industrial space in the Mahoning Valley. They concluded there simply was none, Runnestrand says.
That set in motion the effort to select an appropriate site that could accommodate industrial growth that suited today’s manufacturers. The West Warren location presented a perfect opportunity, Martof says, since the surrounding infrastructure was intact – utilities such as electric, sewer and water already served the area.
“We’re reusing the infrastructure that’s been built in our past to prepare for our future,” Martof says. “We want to do more of that.”
Such industrial space across the region is in short supply – a problem that Martof and others cite as a major factor as to why this region has missed opportunities to retain and attract business. “We’re losing business to other places in the state or across the border because we can’t support it with our building inventory,” he says. “They deserve Class A industrial space and that doesn’t exist right now.”
The idea is to build out an industrial park large enough to accommodate one million to 1.4 million square feet of modern industrial capacity that would consist of several buildings, says Runnestrand. The largest building the site could accommodate is approximately 600,000 square feet, should a tenant require it, he says.
“We’re purposely not doing one giant building,” Runnestrand says. “We’re doing medium-size buildings because it encourages diversity. We don’t want a situation where one large business is there, then it leaves, and that is it.”
Sapientia’s business model is to build concrete industrial buildings that include upgrades vital to modern manufacturers and distributors, Runnestrand says.
Most industrial buildings in the Mahoning Valley that were built during the 1960s and 1970s, for example, were designed with just 14 to 18 feet of “free clear” height – that is height unencumbered by beams or trusses.
“Ours is 32 feet of clear height,” he says. The new building, moreover, will feature modern electrical and safety upgrades that meet the demands of today’s manufacturers.
“The building is highly adaptable,” Martof says, adding that it could be customized for end users looking to supply major employers such as Foxconn and Ultium, advanced manufacturing companies, or existing firms in need of expanding their operations.
Since the site acquisition, Sapientia has received inquiries, Runnestrand says. Several companies informed him that were the building completed in 12 months, then they would have signed a lease.
Site work should begin in September or October and the building finished by the fourth quarter of 2024.
BUILDING THE FUTURE OF WEST WARREN
Martof says the group has raised $2 million in equity and anticipates spending $9 million to complete the initial building. It plans to raise another $15 million to $20 million in equity to finish the rest of the site. In all, the entire build-out of the industrial park could secure $100 million to $120 million worth of construction investment, he says. The park could accommodate up to 500 jobs.
Sapientia has also applied for funding through the Ohio Department of Development’s Rural Industrial Park Loan program, an initiative designed to spur economic development in struggling counties.
“Development has provided 16 loans since the start of 2020 all across the state, providing capital infusion for communities and businesses to undertake improvements and expansion projects,” Ohio Department of Development Director Lydia Mihalik said in an email.
While Mihalik does not specifically address the West Warren project, she says the loan program may be used to finance up to 75% of allowable project costs with loan amounts of between $500,000 and $2.5 million. “A minimum of 10% equity contribution from the borrower is required.”
The state has appropriated $30 million this fiscal year budget for the program. Companies such as IT supplier Vertiv, based in Lawrence County, Ohio, have successfully used RIPL to expand their operations. “Vertiv currently stands as one of Lawrence County’s largest employers,” she says.
Sapientia’s project is the first major investment in southwest Warren since developer Mark Marvin invested $28 million to construct Reinforcement Systems, today Engineered Wire Products, along West Market Street in 2009, the city of Warren’s Keys says.
“This could revitalize the southwest part of the city,” he says of Sapientia’s effort.
The goal of Sapientia is to demonstrate that construction of modern buildings attractive to first-rate companies is a game-changer for development across the Mahoning Valley.
“We hope this proof-of-concept building sparks other investors to invest in other ways,” says Blair Mulholland, private equity real estate associate at Sapientia. “It’s not just for us. We hope we can draw new investors to the area.”
It’s a model that the investment group would like to replicate at other development sites in the Valley.
“This is our first real estate development,” Martof says. “But this is not our last.”
Pictured at top: Mike Martof, Wiley Runnestrand and Blair Mulholland stand at the site of what will become the West Warren Industrial Park.
FULL DISCLOSURE: Sapientia Ventures LLC is the majority owner of the Youngstown Publishing Co.