The Red Door Church Case Study
Cleveland Heights, Ohio
By Robert A. Simons
S. Subha Vyakaranam
The Red Door Church was originally built as a modest-sized First English
Lutheran Church. It is located on a minor arterial street, on a 1.5 acre lot in Cleveland
Heights, Ohio, an inner-ring suburb of Cleveland. The building has always housed a
Protestant church, until just a few years ago. The original congregation had been
displaced from Chester Avenue in Cleveland due to a street widening project, so they
“moved up the hill” to Cleveland Heights. An 8,000 square foot school wing and daycare
was added in about 1952.
As is common in rust belt metro areas, population declined and spread away from
the core city. In 1950 the church membership numbered 300, but by 2002 fewer than 50
remained. “We had to ask ourselves, ‘Is it better stewardship to close the building or
continue to struggle along?” said Rev. Robert Hanson, the church’s last pastor. The
congregation voted to dissolve the fellowship than had begun 123 years previously. On
September 1, 2002, the faithful of First Lutheran gathered for the last time. Thereafter,
church was offered on the market as a religious facility.
When no church-use buyers emerged, the current developers, led by Josh Simon
and Andrew Brickman, operating as Derbyshire Partners LLC, acquired the property for
about $700,000 for redevelopment into residential condos with the marketing name
Brownstones at Derbyshire. The Pastor came by regularly to see progress of the
construction, and proceeds from the sale were distributed by the church leaders to soup
kitchens, homeless shelters, and social service agencies. The school wing was removed,
and the church itself was converted to 5 condominiums. The balance of the lot was
developed into an additional 15 residential condos. All homes were custom finished. The
developers built the shell up to the plastering, and then allowed buyers to custom-design
their finish. This allowed for substantial interior changes.
The project was built in four phases, and sold out within a year and half. The
prices ranged from $174,000 to $550,000, or from $156 to $188 per building square foot.
This is almost twice ambient market levels. The two units that were confirmed resales
sustained market increases of 5% per year. The $8.3 million project netted the developer
a return in excess of 12%, a handsome profit.
The Brownstones at Derbyshire, which later became known as the Red Door
Church, was originally built between 1932 and 1936 as the modest First English Lutheran
Church. The original stone Tudor church contained about 12,000 square feet, including
worship space, a basement activities room, and a small suite of offices. The sanctuary is
about 35 feet high at its highest interior point and has several beautiful stained glass
The facility is located in a pleasant, 1900s vintage “City Beautified” inner-ring
suburban neighborhood on the corner of Derbyshire Road and Euclid Heights Boulevard
in the western part of part of Cleveland Heights, Ohio. The site is about six miles from
downtown Cleveland and about one mile from the Cleveland Clinic-University Hospital-
University Circle cultural area, a powerful and growing economic driver with over
40,000 jobs. The original neighborhood was designed to appeal to the discriminating taste
of the social, business, and professional leaders of the Cleveland community. First platted
in 1892, this is a neighborhood designed on the principles of Frederick Law Olmsted. It is
a mixture of curving and straight streets with graceful boulevards linking to downtown
Cleveland. The city was so named because it sits on a plateau east of Cleveland. It was
once known as ‘Turkey Ridge’ because of the large number of turkeys roosting here.
The church itself is handsome, constructed from hewed grey granite and
sandstone. The 1.5 acre lot is particularly large, with ample parking and frontage on two
streets. However, as the city’s population declined and spread to outer suburbs, many
parishioners moved away, and the church lost critical mass of membership. Finally, in
2002, it was placed was on the market and offered as a religious facility. A Jewish
synagogue group looked at the facility, but did not buy it, in part because the north-south
orientation of the sanctuary space was incompatible with the east-west needs of
traditional Jewish worship. The building was continuously under non-hierarchical
ownership. Aside from some asbestos floor tile in the basement area, the building was in
good shape when the congregation decided to put bring the property on the market.
Residential market conditions in Cleveland Heights at the time the project was
built were adequate. Aside from a struggling school district, city income and racial
dynamics were stable. However, the population was dropping perilously close to the
50,000 threshold, where communities must compete for federal CDBG dollars, thus
putting their planning department at risk. Until 2000 when the Cleveland Heights
population was clocked at 49,750, city planners had resisted encouragement of denser
multifamily housing. However, this sobering revelation indicated a new willingness to
accommodate denser projects, such as condominiums, especially those marketed to
yuppies and empty nesters that had substantial property values.
From a market standpoint, the project is attractive because it is located on an east-
west commuting route (two lanes each way, plus turn lanes with a divided median) into
downtown Cleveland with moderate but not excessive traffic. The property has
immediate access to the University Circle cultural area, with its museums, non-profit
organizations, Case Western Reserve University, the Cleveland Clinic, and University
Hospitals. The site is also located in proximity to the funky Coventry district, which is an
eclectic mixture of retail and non-chain restaurants. Map 1 shows the general area with
The 8.7 square mile City of Cleveland Heights contains 49,958 people (2000
estimate), or about 3.6% of the County’s population. There was a 5.7% loss of population
from this city since 2000. (SOURCE?) About 27% of the population was in the 18-34
age group and 15% are of age 65 years and over.
The median household (1999 data) income was $46,731, higher than Cuyahoga
County’s ($39,168) and the State of Ohio ($40,956). The population is predominantly
white (52%) with rest of the population being African American (42%), Hispanic (2%)
and others (Asian, American Indian, and others comprise 4%). About 50% of the people
hold a bachelor’s degree or higher, which is much higher than the State average of 21.1%.
The City of Cleveland Heights had only 3.7% unemployment, which is noticeably low
when compared to the Cuyahoga County’s (6.8%) and slightly lower than Ohio (4.0%).
There are 20,913 households in Cleveland Heights, out of which nearly 11% live
below the poverty level. This is about 3% lower than the poverty rate of Cuyahoga
County and about the same as that of the State. The city’s public schools are struggling .
There are several universities near Cleveland Heights, so many professors from
Cleveland State, Case Western Reserve University, and John Carroll University reside
there. Cleveland Heights has an excellent public library system. The violent crime rate
recorded was 0.3 per 1,000 people, which is quite low when compared to the Cuyahoga
This inner-ring suburb had experienced market appreciation rates of about 3% per
annum between the 1990 and 2000 censuses, slightly above average for the Cleveland
metropolitan area. Housing stock is largely brick and colonial style frame homes, dating
from the 1920’s and selling for about $100 per square foot. The project hit the market
window perfectly. In late 2006, the market slowed due to the sub-prime loan fiasco.
Marketing time increased, and housing prices for single-family homes dropped about
In 2000, The City of Cleveland Heights had a 96% housing occupancy rate,
higher than the county rate of 93%. The homeownership rate in Cleveland Heights was
62%, lower than the 63% figure for the County and 68% for the State. The median gross
rent for the year 2000 in Cleveland Heights was $640, much higher than the $541 for the
county. The average sale price of single family houses in Cleveland Heights in 2000 was
$140,575, more than that of $124,827 in the county. The average sale price of two-family
houses in Cleveland Heights was about $130,000, almost double the county average of
$69,000. The sales price of condominiums in Cleveland Heights averaged $66,026, about
10% higher than the county.
The City of Cleveland Heights has a housing preservation office that grants loans
and grants, funded by the Department of Housing and Urban Development. Another very
important resource for Cleveland Heights homeowners is the Home Repair Resource
Center (HRRC), a non-profit organization established to maintain and strengthen the
houses of Cleveland Heights. These aggressive housing maintenance programs make
Cleveland Heights somewhat unique, and are a vestige of its history as being a premier
national example of an integration-maintenance community following passage of the Fair
Housing Act in 1968.
The census tract where the project is located has a higher income, larger
percentage of white householders, higher homeownership, and a substantially higher
average sales price than the city as a whole
The controlling entity prior to redevelopment was the original congregation, the
First Lutheran Church, known locally as the Red Door Church for its distinctive red door.
The congregation had largely moved away, and the building was no longer needed.
When no religious institutional buyers emerged, lead developer Josh Simon,
doing business with Andrew Brickman as the Derbyshire Partners LLC, acquired the
property for $700,000. The developer team combines Florida and local Cleveland talent.
Simon had earned his BA in Business and had spent time with his family’s real estate
company. He had previously done about eight other real estate development deals,
including converting two office buildings to lofts in downtown Cleveland. He was
looking for his next residential project.
He first heard about the availability of the church property from a relative who
was playing golf with the real estate agent representing the church property. The agent
was marketing the property with the assumption that it would remain an ecclesiastical use.
Simon liked the existing church building and big lot and thought it would be “fun and
interesting” to convert the existing church into condos (Simon 2007). The size of the
property also allowed for the development of additional new town homes beyond just
rehabbing the church.
Rezoning was not required because the area was already zoned multifamily and
the proposed project density of about 15 units per acre was well under the allowable
number of about 85 units. The City of Cleveland Heights was helpful in expediting the
approvals, although some friction with inspectors inevitably took place. Neighbors
generally supported the project, with only one adjacent single-family detached property
owner voicing concerns about lack of privacy. The issue was that the rear of the carriage
house units was set back in close proximity to the abutting neighbor’s backyard. The
solution was to install frosted glass on the carriage houses’ back windows, which
maintained the abutting neighbors’ privacy.
The developers requested tax abatement from the City of Cleveland Heights as an
incentive to save the church. Their rationale was that demolishing the church as part of
the development plan made more economic sense than saving the church because of the
higher density allowed on the site by zoning. At one point a demolition permit was
actually pulled allowing the developer the right to demolish the church. Eventually,
though, the city rejected their argument deciding that the abatement was not necessary to
make new housing construction viable in an affluent neighborhood. In the end, the
church was subdivided into five condominiums without the property tax abatement. The
church units are an integral and desirable part of the project.
Richard Wong, of the city’s planning department was a strong supporter and
facilitator of the adaptive reuse. Richard was a solutions guy. The city’s building
department allowed for changes to the floor plan to be approved in the field by the
building inspector without having to submit plans or commence a new review process.
This flexibility saved much time and allowed for the efficient use of tradesmen.
With respect to the design and project visioning process: “Units in the church
building, designed by Scott Dimit who was project architect for Forum Architects, LLC
at the time, are three levels (sub-grade, first floor, second floor) and range from 2,500-
3,200 square-feet…….Some units retain the original 35-foot ceilings with Gothic arches
and windows. Some units preserve carved architectural details, incorporating them into
the interior design. Original leaded-glass, pointed-arch windows along the sides of the
building have been replaced with new, higher efficiency windows. Original doors have
been re-used and eight original light fixtures have been retained.” (Schuemann 2004).
With respect to actual construction within the church itself, the entire interior was
gutted and rebuilt with all new carpentry and interior walls,electrical, plumbing, security,
and HVAC, and wired for new technology based on individual buyers' requirements. The
church's stone façade, roof and red door have all been retained, and new curved balconies
have been added. ”Brand new homes were built within the framework of the old church,’
Simon says.” (Schuemann 2004).
Development Plan for the Property
The development plan remained largely intact, with 20 units proposed originally
and 20 built. The final products included 15 newly constructed units and 5 converted
church units. There are three housing products: 5 prime (but largely new) units in the
rehabbed church itself, 10 townhouse units, and 5 smaller carriage houses with tuck-
under parking. All units have a trademark red door. The design of the new construction
units was inspired by the church building. It matches the steeply pitched main roof of the
sanctuary. The exposed foundation bases were selected to match the pattern and color of
stone on the church.
The 5 rehabbed church units were largely a gut job, with stained glass features
and exterior doors retained. The architects did a fine job of maximixing the space and
converting the church into three-story yuppie lofts, with 3 bedrooms and 2.5 baths and
averaging 2,800 square feet on a 900 square foot footprint. All new construction featured
granite countertops, top of the line bathrooms, and a master suite on the second floor.
Initial marking prices were $450,000, or $192 per square foot. Parking for the units is
located under the adjacent carriage house units.
The 10 townhouses, with wood frame construction and stone fronts, were new
construction on the out lot and site of the former educational wing. The architects
designed two-story plus loft units, with 3 bedrooms and 2.5 baths and averaging 2,600
square feet on a 800 square foot footprint. All new construction also featured granite
countertops, top of the line bathrooms, and gourmet kitchens. Initial marketing prices
were $420,000, or $168 per square foot. Parking for the units is behind the units, mostly
without interior access.
The 5 carriage house units are much smaller, second story walk-up loft units. The
architects oriented the units more toward an entry level, with one bedroom and 2 baths
and averaging 1,100 square feet on a single floor with a patio. The same top of the line
features were available. Initial marking prices started at $175,000, but the units were in
heavy demand and later units sold for up to $300,000, or over $200 per square foot.
Developer Simon said that demand for the carriage house units was unexpectedly brisk
and he wished he had more to sell. Parking for the carriage house units is underneath the
units themselves. Map 2 shows the site development layout for the Brownstones at
Resale activity is highly satisfactory. The two properties that resold both averaged
a 5% annual appreciation rate. This is highly acceptable for an expensive product in a
Financing was difficult to secure due to the novelty of adaptive reuse in the
Cleveland market. Lenders were not familiar with multifamily development in the
neighborhood and consequently could not see the potential financial success of the
project. They wanted to see presales before making a commitment. Financing was
eventually secured through the efforts of a local loan officer of Provident Bank (later
acquired by National City Bank). The loan officer grew up in the neighborhood, and her
local firsthand knowledge provided a sympathetic ear.
Table 1 provides a summary of the financial aspects of this project. In addition to
the site acquisition cost of $700,000, site preparation cost about $410,000, plus there was
a small amount of demolition and asbestos removal. Soft costs (legal, design, engineering,
marketing, etc.) totaled $630,000. Project hard costs (before finish work) were $5.2
million, and the work was completed in four phases. The finish work was deferred until
units were sold, so that buyers had a large role in determining how the $900,000 in unit
interior finish allowance was spent. Construction financing cost $200,000, which was
relatively low (about 3% of project cost) because of the phased approach of development.
No units were finished speculatively. Profit was taken from the project at the end, with no
upfront developer fee. Overall project cost was $8.1 million, or $180 per square foot, all
costs (except sale commissions) in.
Marketing and Absorption
All 20 units sold in 18 months. The original marketing plan was that the units
would be sold to employees of two large hospitals within a mile of the property
(Cleveland Clinic and University Hospitals) and the institutional community of the
University Circle cultural district. However, purchasers actually tended to be
suburbanites that wanted to be closer to the city and out-of-towners that immigrated to
Cleveland. Interestingly, all of the customer traffic came from a development sign placed
on the corner of Derbyshire and Cleveland Heights Boulevard. A marketing arrangement
for web and print advertising was made with Progressive Urban Real Estate, which was
paid a reduced commission rate of 1.5% for each unit sold. Sales were handled in-house
by the developer. The arrangement with the real estate company was that all inquiries,
either by phone or email, were referred to Derbyshire. The arrangement worked for both
parties. In terms of actual buyers, out-of-towners made up half of the purchasers, with
almost all the premium units in the church going to out-of-towners. Only 3 of the 20 units
were sold to married couples.
Total sales proceeds after sales commissions were $8.3 million. Assuming 20%
developer cash in the deal, this works out to a return of $188,000, or 12%.
The project was a success. The property is well-located proximate to employment,
and in a stable, established neighborhood with housing prices comparable to the units
being offered for sale. The site was bought cheaply, and the lot was sufficiently large to
allow for a substantial number of new units to offset the fixed cost of site acquisition. No
rezoning was required because the site was already zoned multifamily, and the neighbors
largely did not object to the development. The city cooperated but offered no financial
inducements. The church construction was a gut job, essentially dropping entirely new
units inside the church, while retaining the attractive outside shell. The developer
indicated that the carpentry construction superintendent was important to the interior
construction of the five church units. His expertise allowed that work to move smoothly
along to completion. The developer and his architect preserved much of the aesthetics of
the church building. Each unit within the church retains a piece of the small church’s
grandeur. Market timing was excellent, and phased development and deferring finish
costs until buyers were found kept financing costs low. A special arrangement with a
knowledgeable local boutique realtor also kept marketing costs in check. This was a
highly successful project.
Brickman, Andrew. 2008. Developer. Personal interview, September 2008..
Brown, Mary. 2007. realtor. Personal interview, July 2007.
Simon, Josh. 2007. Telephone interview, November 2007
Schuemann, Nancy Loyan. 2004. “Sanctuary in Cleveland Heights:
Adaptive re-use project transfroms empty church into luxurious living spaces.” Properties
Magazine, Inc. Cleveland, OH December 2004.
Exhibit 1 Red Door Church Project Development
1.5 acre former church site
Cleveland Heights, Ohio
Development date 2005-6 FACTORS DOLLAR PERCENT OF
AMOUNT PROJECT COST
lot size (land square feet) 65,340
Floor /area coverage 69%
gross building area 45,000
net usable space (100%) 45,000
# current owners 20
# parking spaces 40
DEVELOPMENT COST INFORMATION
land/site acquisition (including option), includes
buildings $10.71 $700,000 9%
Remediation: removal of asbestos $0.25 $10,000 0%
other site preparation incl parking $3.00 $402,000 5%
demolition school building 8,000 SF $4.00 $32,000 0%
rehab, gut church building 3,000 sf $10.00 $30,000 0%
new construction 45,000 SF $114.44 $5,150,000 63%
buyer finish allowance $20.00 $900,000 11%
total building hard costs $135.11 $6,080,000 75%
architect planners, legal, surveying, power, $630,000 8%
market analysis (internal) $5,000 0%
subtotal before construction loan $7,859,000 97%
construction loan/carry one year term 8%, int. only $251,488 3%
subtotal $8,110,488 100%
developer's fee $0 0%
TOTAL DEVELOPMENT COST $8,110,488 100%
TOTAL DEVELOPMENT COST/SF building $180
sales total sales
units price/unit revenues
Units, for sale in church building 5 $490,000 $2,450,000
units for sale row houses 10 $460,000 $4,600,000
units for sale. Carriage houses with tuck under
parking 5 $275,000 $1,375,000
total gross sales $8,425,000
less commissions @1.5% (sweet deal with realtor) $126,375
net sales proceeds $8,298,625
THE FUNDING GAP $188,137
GAP (surplus) AS % OF DEAL 2%
project equity (20%) $1,622,098
return surplus plus developer fee $188,137
developers return on equity 12%