The circumstances of its longtime headquarters in the 10-story Rose Building in downtown Cleveland may prompt Medical Mutual of Ohio to stay put.
The health insurer, which has 1,000 workers stationed in the building at 2060 E. Ninth St., has been searching for nearly a year for a new headquarters, or perhaps to remain in place, which will also plans to combine its suburban and downtown workforce in another location.
The opportunity to buy and stay surfaced in a brief in a Cuyahoga County foreclosure case between its owner, a Los Angeles subsidiary Bentley Forbes Group referred to as MMCO LLC, and the holder of the mortgage on the property.
Court-appointed receiver Donald Green of Cleveland, in a July 27 brief, asked the court to approve a $38 million sale of the building to the insurer. The brief asks Judge Cassandra Collins Williams to approve a motion to authorize the sale by August 28, as Medical Mutual’s offer must be accepted by October 2.
“If Medical Mutual does not have such certainty, it will exercise its other options to locate its headquarters in the greater Northeast Ohio area,” the brief states.
The case was filed after attorneys for the owner, who owns the property through BFG Holdings LLC, argued earlier in July that the receiver needed to be replaced and had no authority to sell the property.
Meanwhile, the mortgagee’s lawyer argued in court filings that if the landlord wanted to challenge the receiver’s appointment, he had plenty of time to do so before this summer. Green was appointed receiver on July 15, 2016, according to court records.
Jared Chaney, director of communications for Medical Mutual, confirmed in a statement that staying in the headquarters building was among the options the company was considering.
“It’s an active option,” Chaney said, though he played down the urgency reflected in court documents. “All options are still open. We have plenty of time to make the right decision. We’re not there yet.”
The mortgage holder is represented by the US Bank National Association as trustee of a securitized loan sold to bondholders named Banc of America Commercial Mortgage Inc. commercial mortgage pass through series 2001 certificates of Torchlight Loan Services LLC of Miami.
The lender filed a lawsuit on June 21, 2016, claiming that BFG Holdings failed to repay a nearly $58 million mortgage when it fell due on January 1, 2016.
Bentley Forbes did not return a phone call or email until Thursday, July 27.
When Medical Mutual acknowledged it was pursuing a potential head office move and office consolidation last December, it said it needed 380,000 square feet, the same as the Rose Building. Medical Mutual also has 700 workers in offices in Beachwood, Copley and Strongsville that it could consolidate in a way to be determined.
All of Medical Mutual’s leases expire within 2020, which could allow it to consolidate disparate operations into fewer or different combinations with a clean slate. In an interview last year, Chaney pointed out that the company could stay in its current building, but also wanted to set up its offices to operate efficiently using current technologies. The structure dates from 1900.
MMCO, the Bentley Forbes subsidiary that owns the building, acquired it from Medical Mutual for nearly $48 million in October 2000, then leased the entire structure through 2020. Bentley Forbes owns 66 assets with a total of 14 million square feet of office space, according to its website.
Such transactions are common and generally allow companies to free up cash for their balance sheets by selling their properties, while maintaining control of their operations.