Dealer Tire Revs Up Long-Vacant Victory Center in Cleveland’s Midtown
March 26, 2017
By Michelle Jarboe
Dean Mueller is the car guy. A Porsche 911 by Singer guy, to be precise.
His brother, Scott, is the art guy, the curator of a collection waiting to be mounted on the walls of a century-old building in Cleveland.
Together, the siblings have turned a third-generation Cleveland family business into a $1.5 billion enterprise. And they’ve done it with little fanfare, eschewing attention while refining the mix of old-fashioned salesmanship and newfangled technology that drives Dealer Tire LLC.
The privately held company manages replacement-tire and maintenance-parts programs for more than 10,000 car dealers, spanning two dozen automotive brands. Dealer Tire employs upwards of 450 people at its headquarters and twice that number across the country.
Last year, the Muellers committed to locating a new headquarters in Midtown Cleveland.
Their decision to lease the long-empty Victory Center, a historic structure at the heart of the city’s Health-Tech Corridor, is likely to have broader economic reverberations.
Dealer Tire expects to add 100-plus headquarters jobs within a few years, expanding its local payroll to $60 million. The arrival of hundreds of office workers, and the resolution of a glaring vacancy at East 71st Street and Euclid Avenue, could boost the neighborhood’s efforts to attract other investors and businesses, including restaurants and small retailers.
In early March, the Mueller brothers and their father, Walter, were among the last Dealer Tire employees to move to Victory Center from the company’s longtime – and cramped – rented space on Chester Avenue, 34 blocks west. The new offices are the farthest the business has been from its origin as a tire-seller that opened at the edge of downtown Cleveland in 1918.
This place, like the product, arguably is an essential part of the company’s DNA. But that doesn’t mean that Dealer Tire’s ongoing presence in the city was a sure thing.
“We had some wonderful suburbs that gave us great opportunities, with land and site selection,” said Scott Mueller, the chief executive officer. “You could have built a new building, with parking, for less than the cost of our current facility. … A lot of our customers and suppliers are in the South. We’re a national business. It doesn’t really matter where we are. And a lot of states threw very serious economic packages at us.
“But our model is really to stay close to our roots in the city,” he said. “We’re proud to be here. You don’t walk away from a place after 99 years very lightly.”From family store to major distributor
Walter Mueller, now 89, remembers riding the streetcar to his father’s store at East 13th Street and Superior Avenue in the early 1940s.
He was a teenager when he started working at the shop, where his early tasks included rolling and mounting tires, unloading trucks and taking deposits to the bank.
Early on, the story goes, his father tried to do $100 of business each day.
In today’s dollars, that’s roughly $400,000 a year – a scrap of the billion-dollar business that Dealer Tire has become.
“It’s been a little scary but exciting, very exciting,” Walter Mueller said of the company’s expansion since his sons joined him in retail during the 1980s.
Mueller Tire became Mueller Tire & Brake, a chain of stores, on Dean and Scott’s watch.
But the brothers had bigger aspirations. They realized that automotive dealers, who didn’t stock and sell tires, were losing customers to shops like theirs. Once a dealer referred a customer to an outside store for new tires or tire repairs, that shopper wasn’t likely to come back.
By the early 1990s, the Muellers had shifted their focus to helping dealers hang onto their customers.
The company would use a nationwide network of distribution centers to ensure quick access to tires for dealers, who wouldn’t have to stock tires themselves. The brothers would help dealers establish, run and grow their tire-service programs and light maintenance business. And the family would use its retail background to help dealerships ward off competition from gas stations, mechanics and stores.
In 1999, Mercedes-Benz USA asked the Muellers to run its tire program. Dealer Tire got legs. Soon after, the family sold its stores to Tire Kingdom.
The brothers bet everything on their new model, which Scott Mueller describes as part logistics, part consulting.
But they kept it all hush-hush for the better part of two decades.
“That was by design,” said Dean, the company’s president. “When we set out to do the Dealer Tire piece, we were onto what we thought was a good idea. We wanted to expand and grow before people really knew what we were doing.”
Dealer Tire started out with 40 to 50 employees, court filings show. Today, the company employs more than 1,200 people and is one of the nation’s largest tire distributors, with 38 distribution centers in the United States. The Mueller brothers recently established a small team in China, where they hope to capitalize on a developing market.
The company took on private-equity investors as it grew. In late 2014, a New York firm called Lindsay Goldberg, which focuses on family businesses, bought a majority stake in Dealer Tire, according to credit-ratings records from Moody’s Investors Service.
Public records show that Dealer Tire patented its system for evaluating dealers’ tire-sales opportunities and service prospects. Last year, the company launched RightTurn.com, a website that lets consumers buy tires online and schedule installations at local dealerships.
Even as their public profile rises, the Muellers haven’t completely shaken their reticence.
Scott, 53, and Dean, 58, rarely grant interviews. Walter Mueller responded to questions through a company spokesman.
But when you’re trying to recruit young, tech-savvy employees, it’s tough to stay mum. And it gets harder to make that pitch from a makeshift headquarters complex, a warehouse that gradually filled with cubicles as the business grew. The company’s old Chester Avenue space is being marketed to new tenants. And Dealer is starting to woo workers from brighter, airier digs.
“We wanted to get a place that was efficient – what Dean would say is a gritty place, that matches our design – a loft-type space with kind of an industrial, backbone feel to it,” Scott said. “The challenge was finding the right building and the right location. It took us a long time.”New team takes on long-vacant building
By late 2014, Ed Dunlap knew he had a problem at Victory Center.
The H-shaped, four-story building was still empty, more than a year after the completion of a city- and state-assisted renovation project. Dunlap, a Pittsburgh-based investor with a stake in the building, decided to take a more hands-on role and bring on a new team in Midtown.
“It’s an entire city block,” said Laura Englehart of the Kohrman Jackson & Krantz law firm, which was part of the Victory Center turnaround team. “It’s a really big success story when a building that would have failed and gone under will, within three years, have generated the most significant job growth in the corridor.”
Dunlap, who laughingly described his role as “the checkbook,” estimated that he’s sunk $7.5 million into the property. He’s now the sole owner. That investment – and valuable historic tax credits that were set to expire – was at stake.
But vacancy at Victory was threatening more than the landlord’s wallet.
The emptiness was hampering nearby construction and leasing, making the office market in Midtown seem less robust than it was, said Rico Pietro of the Cushman & Wakefield/Cresco Real Estate brokerage, which joined the Victory Center team more than two years ago.
From day one, Pietro pursued Dealer Tire, which was exploring new headquarters options with help from a site-selection affiliate of Fairlawn-based Welty Building Co.
The Muellers were tepid on Victory Center, largely due to the costs and parking challenges. To make the deal work, the Victory team structured a 20-year-lease, with below-market rent that was attractive to Dealer Tire and an upside for Dunlap in the long-term commitment. Most commercial leases are shorter.
The long-term lease also made it easier to finance one of Dealer’s biggest needs: parking.
Dunlap bought property behind the building, acquiring the rest of the block between East 70th and 71st streets and Euclid and Carnegie avenues. After clearing out blighted buildings, there was enough room for a 650-space parking garage for Dealer Tire’s employees and visitors.
On Sundays, the company will allow the neighboring Baptist church, which agreed to sell the final piece of land for the project, to use the parking garage. That negotiation was just one of many points when Pietro was convinced that the transaction would collapse.
“This deal probably fell apart more times than any deal I’ve ever worked on,” he said.
The city of Cleveland approved more than $8.6 million worth of funding for the project, making the garage construction possible. The largest pieces of that package were a $4 million, low-interest loan of federal funds and a partial property-tax reallocation deal worth $3 million. Cuyahoga County signed off on a $3 million, 20-year loan to assist with the parking garage.
The renovations also involved federal and state tax credits for historic preservation and a years-earlier round of economic-development financing from the city and the state.
Apart from the real estate financing, Cleveland approved a $1 million job-creation grant for Dealer Tire. The company will receive the money over three years, based on payroll growth.
The headquarters move wrapped up two months ahead of schedule, after frenzied work by Welty, the Vocon architecture firm and Donley’s, a parking contractor.
During a tour, Megan Mayhugh Arth, Dealer’s chief people officer, pointed to conference rooms named after cars, longtime dealership customers and famous tire brands. On the building’s first floor, a walking-only track – with 11 laps to the mile – offered employees the option to hold meetings on foot.
On Euclid Avenue outside, cyclists sporadically whizzed by. A bus hummed along the HealthLine route between downtown Cleveland and University Circle.
Within a few months, the rest of the block outside will be landscaped. Scott Mueller’s art collection will spill onto the grounds. He’s selected a giant asphalt sphere, a sculpture crafted to look like a rolled-up Costco parking lot, to sit at one end of the campus.Midtown gains a new anchor
Just north of Victory Center, local investors are starting to clean up contaminated land for a hotel project. To the east, a Boston-based developer wants to build 23 townhomes, according to a proposal reviewed by the Cleveland City Planning Commission early this year.
Eleven blocks west, University Hospitals is constructing an outpatient health center for women and children. And the developer behind the MidTown Tech Park, which is nearly full, is speculating on more interest in offices with a project called Link59.
With the addition of Dealer Tire’s headquarters and hundreds of jobs, Jeff Epstein hopes he finally can lure a coffee shop and other amenities to the neighborhood. The executive director of MidTown Cleveland, Inc., a neighborhood nonprofit, Epstein described the Dealer Tire lease as a boon to the office market and a boost to Midtown’s image as a contender for investment.
“Anytime you can drop that number of jobs into an area, it automatically increases the vibrancy of the area,” said David Ebersole, the city’s interim economic-development director. “It makes the area more attractive for additional development as well as, potentially, retail.”
When Ebersole’s former boss, Tracey Nichols, made her case for keeping Dealer Tire in Cleveland, she pulled out a handful of new tools: walk scores, bicycling scores and transit scores, showing how Midtown stacked up against other places the company could land. It was the first time that Nichols, now a private consultant, had used such metrics in a corporate-retention pitch.
Only time will tell how many feet Dealer Tire puts on Midtown’s streets.
The company’s large parking garage indicates that most employees will drive to the office. Scott, the East-sider, lives in Hunting Valley. Dean, the West-sider, lives in Avon Lake and owns dozens of cars.
But Dealer Tire’s move is a gamble on what the next generation of employees will want.
It’s a wager on what the next century holds for a high-growth business, a reinvigorated building and a corridor where start-ups and old-guard companies are trying to reimagine the economy of a Rust Belt city, a few thousand square feet – or, in this case, almost 170,000 of them – at a time.