Real estate value capture and the arts

Playhouse Square, looking west, Cleveland, Ohio in the Fall of 1956.

The Cleveland Plain Dealer has an excellent article, "PlayhouseSquare stars in its own real estate revival," about Playhouse Square, the arts complex on Euclid Avenue, and how 30% of its revenue comes from properties (offices, hotels, etc.) located around the district, and how these revenues are used to support the arts functions of the overall organization. The article covers the organization's real estate strategy, which is more focused on revitalization than it is revenue generation specifically.

From the article:

"Area development is part of our mission, and if we don't do it, it doesn't occur," Falco said. "It's been entrusted to us and supported by our board that we should do this. At some point in the future when the market can support itself, we won't have to do this sort of thing."

Playhouse Square at its heart is a complex of five theatres. The revitalization and rehabilitation of the complex was sparked by the recognition that the theatres could be reorganized on the interior by sharing a common lobby.

This story from the Plain Dealer, "40 years ago, a spark helps Cleveland's PlayhouseSquare find its way back to the lights," tells the story of the person who made it happen. And as pointed out in the article, the revitalization of Playhouse Square fostered revitalization of the Warehouse District and other parts of the downtown.

The real estate program of the organization allows for value capture of the public investment. Typically, public investment, such as in transit, leads to great increases in property value, and this value doesn't usually have a lot of spin off value to the public entities that made the investment (other than increased property taxes). Note that the commercial properties owned by the Foundation don't have tax exempt status.

Cleveland at one point was the nation's fourth largest city and has the building stock and square footage of commercial space to show for it. The abandoned May Company Department Store has one million square feet alone--equal to all of the space on H Street NE and Hechinger Mall in DC. Focused development strategies such as these are necessary to revitalization.