The sale of three large Dayton office towers in a two-block area could dramatically change downtown if the right owners acquire the mostly empty space, local developers said.

See which downtown office towers are on the auction block

The sale of three large Dayton office towers in a two-block area could dramatically change downtown if the right owners acquire the mostly empty space, local developers said.

The Key Bank tower, the Courthouse Plaza Southwest building and the Grant-Deneau tower are all headed to the auction block next month. 

PHOTO GALLERY: Three Downtown Dayton buildings on auction block

Three of the largest office towers in downtown Dayton -- Key Bank, Courthouse Southwest and Grant Deneau -- are all up for sale. Downtown Dayton has one of the highest vacancy rates in the country, which could be helped or hurt by whether or not these large office towers are bought by landlords willing to invest in the properties. TY GREENLEES / STAFF
Photo: Ty Greenlees

These three towers that help make the city’s skyline have large vacancies, which dampers the health of downtown Dayton. If the towers had more office tenants, it could boost business at downtown shops and restaurants, add to the income tax collected by the city and further drive demand for Dayton housing.

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New building owners could mean a new direction for the downtown office towers, but real estate experts say that depends on whether the auction winners are willing to spend money to renovate the properties.

“The bottom line is: Anyone who acquires these properties has to figure out how to position them,” said Dave Dickerson, Dayton-market president for Dayton-based real estate firm Miller-Valentine Group.

For now, the Grant-Deneau tower is entirely vacant, the Key Bank tower is more than 35 percent occupied according to its listing. Courthouse Plaza is 36 percent occupied.

Downtown Dayton office real estate is about 28 percent vacant, according to real estate firm Colliers International.

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“We all benefit from a strong urban core. As to the ownership of the buildings, I do think it impacts Dayton, ” said Jerad Barnett, president and CEO of Synergy and Mills Development.

Three of the largest office towers in downtown Dayton -- Key Bank (shown here), Courthouse Southwest and Grant Deneau -- are all up for sale. Downtown Dayton has one of the highest vacancy rates in the country, which could be helped or hurt by whether or not these large office towers are bought by landlords willing to invest in the properties. TY GREENLEES / STAFF
Photo: Ty Greenlees

Both the Key Bank tower and the Leigh Building, at 10 W. Second St. and 100 W. Second St. respectively, are listed together for auction, with the starting bid set at $2.8 million. The online auction is set for Nov. 13-15.

The 27-story Key Bank building is the second largest office tower in downtown Dayton and was once called Mead Tower when it was home to Mead Corp. Besides anchor tenant Key Bank, some of the other tenants include the Downtown Dayton Partnership offices and law firm Hedrick & Jordan.

The Leigh building, with the garage, is an eight-story mixed-use building, offering office, retail and parking with high visibility, a block away from Key Tower. Both properties offer a total of 413,000 rentable square feet.

The property is listed by real estate firm Marcus and Millichap on online auction marketplace Ten-X.

Austin Sum with Marcus and Millichap they have been pitching the potential for redevelopment, and sees the most potential for new life in a redevelopment with a mix of apartments, retail and office.

Three of the largest office towers in downtown Dayton -- Key Bank, Courthouse Southwest and Grant Deneau (shown here) -- are all up for sale. Downtown Dayton has one of the highest vacancy rates in the country, which could be helped or hurt by whether or not these large office towers are bought by landlords willing to invest in the properties. TY GREENLEES / STAFF
Photo: Ty Greenlees

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The 222,164-square-foot Grant-Deneau tower at 40 W. Fourth St. once housed the administrative offices of Premier Health. The building owner Matrix Group had sought to redevelop the building with the help of historic tax credits but the CEO of the real estate firm died in a car accident and the redevelopment project fell apart. 

According to Real Estate Auctions LLC, which is listing the property for auction, the 23-floor building with an attached 360-space parking garage was recently appraised at more than $5 million. The auction is Nov. 9.

A representative with Real Estate Auctions said in a statement that “after several years of trying to find the value of their Dayton tower, the owners, NY-based Matrix Group Of Companies, finally turn to the auction process to execute the sale.” 

Courthouse Plaza, an 11-story tower at the corner of Ludlow and Second streets, will be auctioned by the building owner, Atlanta-basedr Cygnus Capital. 

Cygnus, a private equity fund manager, bought the building after the previous owner was foreclosed on in 2016.  John Lyons of Cygnus said it is not unusual for the firm to hold on to property for a shorter time frame than a typical real estate investor. 

Lyons said buyers should be attracted to the building because it is in one of the newly created “opportunity zones,” which give incentives for private investment in economically depressed areas. 

The building is home to tenants like U.S. Bank, Catapult Creative and the Miami Valley Regional Planning Commission and is 36 percent occupied, according to the auction listing.

Three of the largest office towers in downtown Dayton -- Key Bank, Courthouse Southwest (shown here) and Grant Deneau -- are all up for sale. Downtown Dayton has one of the highest vacancy rates in the country, which could be helped or hurt by whether or not these large office towers are bought by landlords willing to invest in the properties. TY GREENLEES / STAFF
Photo: Ty Greenlees

Courthouse Plaza’s auction listing by real estate firm Colliers International on Ten-X states bidding is from Nov. 5-7.

Dickerson said it’s difficult to say whether the auctions could be a positive opportunity for downtown.

With buildings that need work or have been on the market for extended periods, Dickerson said one key question is: Does anyone have a plan for the properties and the wherewithal to execute that plan?

That could include fixing the buildings up, perhaps bringing an “activated space” to the ground floor and more.

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There’s also the question of how “realistic” the required minimum bids are for the properties and whether anyone is willing to meet those minimums in an auction, he added.

Dickerson noted that the Grant-Deneau building has been on the market for some time and has attracted some interest.

“I would have more confidence in some of the local and regional developers who have looked at that,” he said.

Barnett said coastal investors often look at Dayton as a cheap place to buy real estate, but to be successful it also takes money to modernize the building and draw in tenants. In addition, he it takes patience to invest in Dayton, which doesn’t have the same demand as larger coastal cities.

Three of the largest office towers in downtown Dayton -- Key Bank, Courthouse Southwest and Grant Deneau -- are all up for sale. Downtown Dayton has one of the highest vacancy rates in the country, which could be helped or hurt by whether or not these large office towers are bought by landlords willing to invest in the properties. TY GREENLEES / STAFF
Photo: Ty Greenlees

“It takes an understanding of the Dayton market and how we get deals done and also a willingness to invest in the property,” Barnett said.

He said a property owner’s success as a downtown landlord is not necessarily dependent on whether they are local or out-of-state.

“It doesn’t matter if the owner is in town or out of town. It’s ‘Have they done their homework on Dayton and are willing to invest in it?’” Barnett said.

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Beavercreek-based Synergy invested millions into an office building on South Patterson Boulevard, which is now home to an accounting firm.

Barnett said that while he is interested in additional downtown properties, it is hard to find a property that can be purchased and renovated at a cost that they can earn back when average rental rates downtown remain low.

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