| Fountain Square |
Only a few years ago, Cincinnati, Ohio’s Over-the-Rhine (OTR) neighborhood was known for having one of the highest crime rates in the city. Today, the area—believed to be the largest, most intact urban historic district in the United States—has been transformed into one of Cincinnati’s most vibrant sectors.
The reason? Cincinnati Center City Development Corporation (3CDC)—a private, nonprofit corporation that not only targeted OTR for a makeover but also refurbished Fountain Square and continues to revitalize Cincinnati’s central business district (CBD).
“What 3CDC is doing in the Over-the-Rhine area is nothing short of remarkable,” says Thomas Murphy, a senior resident fellow, ULI/Klingbeil Family Chair for urban development, and former mayor of Pittsburgh, Pennsylvania. “The area was as depressed as any in the country. Now it is one of the best in America. The quality of development 3CDC is doing and the scale [are] pretty remarkable. 3CDC is not only physically changing the neighborhood but culturally as well and financing it creatively using public/private financing driven by the private sector.”
There are a number of reasons for the success 3CDC has experienced in Cincinnati, says Stephen G. Leeper, a ULI member and president and CEO of 3CDC. “We’ve had substantial corporate support, not only for our operating funds but our capital funds as well. The corporate sector has been terrific. Also, we limited our geographic scope in terms of where we would invest. We targeted our funds and targeted our efforts to areas where we could show visible progress.”
In addition, 3CDC also benefited from the location. “With OTR, we had something spectacular to work with,” he adds. “OTR was still intact, although it was a troubled area. The physical infrastructure, though deteriorated, remained intact, so we had a real asset to work with. Finally, we had great support. The city has supported us all the way. We have a strong financial partnership and a good investment strategy; so we have been able to make visible progress in a relatively short period of time.”
Leeper would advise other cities seeking to replicate the success of 3CDC to focus on a particular neighborhood. “Define an area where investment would make a real difference -- an area that will allow change to occur,” he continues. “Make big plans but don’t expand your scope too far. Oftentimes, some cities take on too much. Think big but go small. Then develop a good strategic partnership with the corporate community and the public sector.”
The most significant lesson 3CDC offers others is that highly focused leadership and capital can begin to solve any problem, no matter how challenging or enduring, says Douglas Bolton, managing principal, Cincinnati and Dayton, at Cassidy Turley—a national commercial real estate services provider—and ULI member. “While most people say there are no silver bullets to downtown redevelopment, the revitalization of Fountain Square is the silver bullet for Cincinnati’s CBD,” Bolton continues. “Without it, no energy would exist today for the continued growth in downtown residency and office occupancy. The new tenants and activities on the square have given office workers a reason to get out of their offices during lunch and stay downtown after work, while giving young professionals a reason to live downtown. There’s more progress that needs to be made, but owners of downtown real estate are seeing the market stabilize and gear up for steady improvement as a result of the investment made in the city’s center.”
3CDC is a “catalyst” real estate development company, says Chad Munitz, a ULI member and 3CDC executive vice president of development and operations. “We were formed as a private, not-for-profit,” he says. “Participating Cincinnati corporations have set up series of revolving loan funds and we have about $200 million to invest. As a full-service development company, we not only acquire and redevelop land and buildings, we also manage the projects once complete. With Fountain Square, for example, we schedule some 300 events a year that bring millions of visitors downtown.”
Every city can learn to draw upon its strengths the same way 3CDC has done in Cincinnati, emphasizes David F. Neyer, president, CEO, Al. Neyer, Inc., a full-service real estate development and design-build construction firm. “3CDC chose Fountain Square as a redevelopment priority and hit a real home run for the city with a catalyst for new development,” continues Neyer, a member of the ULI Public/Private Partnership Council and chair of ULI Cincinnati. “Fountain Square is the symbolic and physical heart of the city of Cincinnati. It badly needed a remake from its 1970s design, and was actually uninviting and unsafe in places. Every city understands the need to leverage redevelopment tools, from new markets tax credits, to tax increment financing [TIF], to urban redevelopment loans that are available.”
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With new amenities, the revitalized Fountain Square has created the right environment for new business investment; the health of the square is critical to the success of downtown. “Visitation to downtown continued to increase in 2010, hotel occupancy rates increased and were higher than the 2010 national average,” Neyer adds. “And, residential growth trended up, with nearly 12,000 residents living in the CBD. During 2010, the entire downtown region saw more than $180 million of development projects completed and over $1.2 billion of under-construction projects.”
Among the lessons to be learned from what 3CDC has accomplished in Cincinnati, says Scott Golan, managing partner of BKD Cincinnati, a CPA and advisory firm, and vice chair of ULI Cincinnati, is that there is tremendous power in public/private partnerships. “3CDC was formed as a private nonprofit development organization, funded in large part by equity contributions from Fortune 500 companies headquartered in Cincinnati with the goal of guiding development in the city to create a built environment that is attractive to recruits to Cincinnati,” he says. “3CDC applied for and received new markets tax credits, which have been leveraged with tax increment financing through Cincinnati to subsidize development of mixed-use, walkable neighborhoods.”
A second lesson is in concentrating efforts and funding strategic, catalytic redevelopments. “Fountain Square is a great example of leveraging 3CDC’s investment in Cincinnati’s main gathering space into private development that thrives from the safe, aesthetically pleasing design,” says Golan. “Similarly, 3CDC has catalyzed significant private development in the OTR Quarter—the multiple-block neighborhood on Vine Street north of Central Parkway. By focusing its attention on impact areas like these, 3CDC has paved the way for the private sector to engage in the redevelopment effort.”
By revitalizing Fountain Square, says Munitz, corporations say: ‘We’re proud of downtown and we want to stay here.’ “Over $150 million in private investment directly around Fountain Square has occurred and none of that needed additional city assistance,” he says. “The commitment of the civic and corporate community as well as the government enables 3CDC to be focused on urban revitalization and to be able to invest in these projects so we can do it on a scale that makes a difference. The backing of the corporate sector has allowed us to stay focused on areas we want to emphasize.”
Supporters say that other communities attempting to replicate 3CDC’s success should be laser-focused on one area. “In Over-the-Rhine, we went building by building, block by block, street by street, instead of trying to take on too much,” says Munitz. “It has been a good idea to create a private, not-for-profit partnership that has resources and structure while continuing to be nimble. Sometimes it’s tough to accomplish these things in a quasi-public/private partnership.”
Hire the best experts, adds Murphy, who notes that 3CDC benefited from an extraordinary team who understood how to do development that significantly affected the market. “With 3CDC, the private sector drove development and the public signed up as a partner,” he says. “3CDC also manages the developments, so it can keep quality consistent. Initially they did a lot of things that were controversial, but the results are pretty remarkable.”
Advises Bolton: “Find significant sources of patient capital. Secure the right day-to-day leadership. And ignore the conventional wisdom often expressed by the daily media’s chase of a potentially controversial story.”
Be sure to get the business community involved early and often, says Golan, “and focus efforts into key areas and don’t be afraid to overinvest.”
“Leveraging corporate leadership and support is also important, says Neyer. “Everyone has to be ‘all in,’” he says. “Establish focus redevelopment areas and do not stray from them. Communicate relentlessly. Be brave. If your first funding pitch is met with something less than enthusiasm, go back with another pitch that presents more statistical impetus for why the project needs to move ahead.”
