Market Square project to shrink by about one-third

While construction of Harbor Bay's Market Square residential
building (at left) will go forward, the office building (at right)
won't -- at least not in the foreseeable future. It was a casualty
of Cleveland's high construction costs, low rents, lack of local
public subsidies for office construction and the city's desire to
protect its jurisdiction in approving tax abatement (HBREA).

Without state financing and a tax exemption for its project, the developer of a $175 million, mixed-used development has decided to scale back the project by about one-third -- at least at the outset.

Harbor Bay Real Estate Advisors, LLC is hoping for the city to approve a conventional, 15-year, 100-percent tax abatement for the residential portion of its Market Square project. If that happens, a seven-story apartment building with ground-floor retail would be located at the corner of Lorain Avenue and West 25th Street in Cleveland's Ohio City neighborhood.

But without a tax exemption for the entirety of the roughly 500,000-square-foot development, the 150,000-square-foot, 10-story office building is going to have to wait for more signed leases and an as-yet-unidentified form of public subsidy before it can be built.

That building was expected to increase the daytime population of the Market District with 1,000 office workers at a transit-accessible location, thereby boosting business at the West Side Market as well as at local restaurants and shops, said Harbor Bay's Project Director Dan Whalen.

"We had some leasing done in the (office) building, but there was still a ways to go," he said. "All we can do is keep going forward and treat the office (building) as a possible second phase. Hopefully, once companies see the timber in the flesh on the residential building, they’ll get excited about the potential and want to consider talking (about leasing)."

Market Square is proposed to be built with timber framing. It's a construction technique that is more expensive at the outset, but saves up to 40 percent in ongoing heating and cooling costs. And it is more environmentally friendly than manufacturing steel and concrete for traditional structures.

That's why the Ohio Air Quality Development Authority (OAQDA) was willing to finance the project and give it a tax exemption. But the city, school district and Cleveland Metroparks voiced their opposition, blocking the OAQDA request.

The Market Square development was planned to feature
roughly 500,000 square feet of development, as well as
structured parking. But the 150,000-square-foot office
building at lower right will have to wait for a second,
possibly distant phase of construction (HBREA).

Instead, with timely city approval of the residential tax abatement, Whalen anticipates being able to start construction on about 335,000 square feet of the project with minimal delay. Construction of expanded water lines and sanitary sewers could begin in the first quarter of 2020.

Demolition of the existing Market Plaza retail strip will begin as soon as KeyBank can move into its new location, Whalen added. KeyBank is relocating to the West 25th Street Lofts development, at the southwest corner of West 25th Street and Church Avenue, next to Bookhouse Brewing. Other retailers in the plaza have found new homes.

"The office (building) is on hold until we can basically pre-lease a building with tenants, or one big tenant, in the future," Whalen explained. "And we will need to determine how to finance it because Cleveland office rents don’t pencil without substantial public financing assistance."

That's also why a big reason why the nuCLEus development has stalled -- a lack of public assistance for constructing new, market-ready office buildings. Nearly half of nuCLEus' square footage is proposed to be offices. The last new office tower built in or near downtown Cleveland was the 21-story Ernst & Young building in the first phase of Flats East Bank in 2012.

Nearly half of the $270 million cost of the first phase of Flats East Bank, or $130 million, was publicly financed. That included loans and grants from the City of Cleveland, Cuyahoga County, Cleveland-Cuyahoga County Port Authority and the State of Ohio.

The existing Market Plaza retail strip along West 25th Street
is due to be demolished in the coming months -- just as soon
as KeyBank's new store just up the street is ready (Google).

Another large source of funding for Flats East Bank's first phase was the EB-5 "investor visa" program. While an exact figure wasn't available, up to $30 million from that program was used to finance Flats East Bank's construction. The Cleveland International Fund, which pools investor visa funding for local projects, has had to scale back its activity due to recent problems.

How can the city aid these stalled, new-construction office projects which cost as much to build as those in New York or Chicago due to prevailing construction wages, yet command low Cleveland rents? When asked that question, Ward 3 Cleveland Councilman Kerry McCormack chose to instead defend the city's jurisdiction on whether it should offer tax abatement.

"I support common-sense incentives to bring in jobs, development and housing, but allowing the state to completely strip a local municipality of its authority is never going to be supported," McCormack said. "I am working closely with Harbor Bay right now to get a great project over the finish line."

"Our position is that we don’t really want to be adversarial with the city," Whalen emphasized. "What’s done is done and we need to turn the page. We are in complete partnership with the city and success to us means building a world-class project at this corner in very short order."

END

Stadium sites are as much about development

A growing development zone and public realm space next to
Minneapolis' new US Bank Stadium offers an example to us
in Cleveland how a stadium-oriented development site can be
designed (Ryan Cos.). CLICK IMAGES TO ENLARGE

It's still early in the game, but a few sites in downtown Cleveland are being considered by the Haslam family, owners of the Cleveland Browns, for a large, stadium-oriented development zone. The planning process is just getting underway with an eye toward 2029 -- the year the team's lease ends with the city for use of First Energy Stadium.

While the record nationally of sports stadiums producing spin-off economic development has been uneven, much of it is due to the fact that the stadiums were often considered the end product. Most stadiums were sponsored by public agencies and any spin-off development was often not part of a coherent plan, let alone part of the sponsoring agencies' organizational missions.

Increasingly, sports stadium developments are led by private efforts and the stadiums themselves are roughly only half of the end game of these developers. The rest includes offices, hotels, housing and supportive retail/restaurants.

Looking north over the Malls extended above the lakefront
railroad tracks to First Energy Stadium, complete with two
20-story towers, one residential and the other a hotel and a
new multimodal transportation center between them (HKS).

The nation's biggest stadium-oriented real estate master plan is in Los Angeles, where a $2.4 billion stadium for the Rams and Chargers anchors an overall $5 billion development. The LA Stadium and Entertainment District in Hollywood Park includes $2.6 billion worth of commercial, residential and retail investment.

Cleveland obviously isn't Los Angeles (it hasn't been since LA overtook it in population in 1930), but it does have a few things in common with cold-weathered, Midwestern Minneapolis.

There, the city established a development zone around the new US Bank Stadium and began offering sites to developers willing to build to meet the city's vision of a high-density district next to a new public park and light-rail line. So far, Ryan Companies has responded with plans for a 17-story office building and a 25-story apartment tower.

Here are four of the potential stadium-oriented development
sites being considered at this early stage. These can and likely
will change as the process becomes more formalized (Google).

Similar opportunities exist in Cleveland. But where? So far, these are the sites that apparently are being considered by the Haslams, according to sources close to them, for their stadium-oriented development built around a domed/retractable-roof facility:

1. Rebuild existing stadium with retractable roof -- This would easily be the least expensive of the plans, costing in the hundreds of millions of dollars, but is also currently one of the least accessible. There are only two routes into the stadium -- West Third Street and East Ninth Street.

This is what First Energy Stadium could look like if someone
put a retractable roof on it and connected it with the new Hun-
tington Convention Center via a land bridge and transportation
center. This general idea has some strong proponents but has
yet to be subjected to a geotechnical analysis (Bob Corna).

Extending the downtown malls as a land bridge over the railroad tracks and Shoreway would help address that, along with incorporating a multimodal transportation center for trains, buses and light-rail connected to housing, hotels, offices and retail. The land bridge, with expanded convention facilities on a lower level and linked to the new stadium would create a massive, connected indoor complex for conventions, meetings and other special events.

2. Northeast side of downtown -- This part of downtown, along St. Clair Avenue west of the Inner Belt, has much in common with what was the Central Market District of downtown in the 1970s and 1980s (today's Gateway District). It is a place of low-rise buildings and parking lots that most people pass through between Interstate 90 and the central business district.

Another view of the stadium-area development zone located in
Minneapolis, with new office buildings at left for Wells Fargo
and a planned 25-story apartment tower beyond (Ryan Cos.).

The site has many advantages. It overlooks Lake Erie and with some access improvements, the site could become an attractive place for a stadium-oriented development zone. Improvement could include extending East 18th Street north to the Shoreway and extending the Waterfront Line light rail southward to create a more usable downtown loop.

But developing here would require acquiring dozens of small properties and demolishing lots of low-rise buildings, much like those in the Central Market-area properties that were sold to and demolished by the Greater Cleveland Domed Stadium Corp. in the 1980s. Those properties were later acquired by Gateway Economic Development Corp. of Greater Cleveland for the basketball arena and baseball stadium.

3. Intermodal Yards -- Formerly the Norfolk Southern intermodal railroad yards, this vast area of vacant land was acquired by the Ohio Department of Transportation in 2011 prior to its reconstruction of the Inner Belt highway. It and most of the surrounding vacant land, suitable for development, remains publicly owned thereby reducing acquisition costs.

The amount of publicly owned land on southeast side of the
Inner Belt (I-90) highway is large. This was the runner-up
site for the Cleveland Browns stadium in the 1990s (Google).

This was actually the runner-up site for the new Cleveland Browns stadium in the late-1990s. But time was of the essence in bringing back the Browns and this site needed lots of infrastructure improvements (parking, transit, plus storm/water/sanitary sewers) prior to building a new stadium.

The site still needs those features, but it is easily the most accessible of the stadium sites being considered. It is accessible from Interstates 77 and 90 and a station on the existing Red, Blue and Green rapid transit lines could be built below the stadium. It would turn a dead zone above the Cuyahoga River into a year-round modern sports and entertainment complex.

4. Honorable Mentions -- Two other sites were included in the list but one reportedly has already been rejected and the other is likely to be turned down, too. The already rejected site is the Weston Group-owned Superblock in the Warehouse District, bounded by West Sixth Street, West Third, Superior Avenue and St. Clair. The field would run parallel with West Third and Sixth. But the site is too constrained for an NFL stadium here.

This site, across Ontario Street from Progressive Field and the
Rocket Mortgage Field House, is a distant fourth among the
sites being considered for the stadium-oriented development
district. This graphic shows a proposed new Loop Trail that
would provide views of the Cuyahoga River valley (AoDK).

The other site, Flats South, has more room but the topography is difficult. It would either require a lot of fill dirt or relocating the rapid transit lines just southeast of Tower City Center and closing Canal Road. But it would offer prime development sites along the river in an area where developer Joel Scheer has been trying to jump start his Flats South Innovation District.

Before someone decides to run out to start buying up land near any of these sites, realize first that the Haslams are VERY early on their search. There are no active proposals being tendered, nor even an architect hired at this time. But it is intriguing to see where their initial search may be leading them.

END

Snavely, investors acquiring Vibrator site for Hingetown project

The familiar sight of the Cleve-
land Vibrator Co. in Ohio City
is due to give way to a fourth
phase of the Snavely Group's
mostly residential Hingetown
real estate development (KJP).
CLICK IMAGES TO ENLARGE

Cleveland Vibrator Co., one of the most recognizable names in local manufacturing, will move its operations to the city's Old Brooklyn neighborhood. In its place will be what amounts to the fourth phase of Snavely Group's ever-growing Hingetown development.

Pete Snavely Jr., vice-president of development at his family's Chagrin Falls-based development firm, confirmed the pending acquisition of the 1.715-acre, 14-parcel property bounded by West 28th and West 29th streets, as well as Church and Clinton avenues. Terms of the pending deal were not disclosed.

The property, and indeed the 96-year-old Cleveland Vibrator Co., are actually owned by 2828 Clinton Inc. To facilitate the property's ownership and development, Snavely Development Company (SDC) on Aug. 29 registered two new firms: SDC Residential – 2828 Clinton LLC as well as 2828 Clinton Avenue LLC, according to the Ohio Secretary of State's office.

Site of Cleveland Vibrator Co.'s 1.715-acre, 14-parcel property
in Ohio City's Hingetown section. Also on the same block is
 the Ohio City Firehouse, the Malachi House and the Banana
Blossom Thai Cuisine restaurant which, presumably, will
remain untouched by Snavely's fourth phase (Google).

As reported here at NEOtrans in February, Snavely initially intended to design the fourth phase of its Hingetown master development around the new offices of The Adcom Group. The full-service marketing and communications firm is headquartered at 1370 W. 6th St. in downtown Cleveland's Warehouse District, above Starbucks Coffee.

In Snavely's fourth phase, Adcom's offices would have relocated to the ground floor of a new building topped by residential. But Adcom CEO Joe Kubic said that plan was scrapped due to its high cost. That doesn't mean he has lost interest in redeveloping that site, however. Quite the opposite.

Snavely's third phase along Detroit Avenue between West 26th
and West 28th streets will have a commanding street presence.
But the fourth phase will be located off the main thoroughfare
and in a neighborhood of smaller-scale buildings (Vocon).

"Myself and other investors, including the Snavely Group, are in the process of buying the Cleveland Vibrator site," Kubic said. "We haven't determined what we are going to do with it yet, but we hope to soon. It's a great site, in a great community and we are excited to continue to explore our options there."

Kubic and others at Adcom, founded in 1990, haven't decided if they will look for another location to move the 120-employee headquarters. But a decision has already been made to relocate Cleveland Vibrator and its roughly three dozen workers from its 27,000-square-foot plant that has much outdoor storage. The company manufactures material handling equipment.

Construction barriers went up this week along Detroit Avenue
and West 28th Street for Snavely's third phase (KJP).

Cleveland Vibrator's new location will be at 4544 Hinckley Industrial Parkway in Cleveland, two sources said. The site is the former Watt Printing building located just south of the Jennings Freeway's interchange with Spring Road/Hinckley Industrial.

The property currently is owned by the Gergel-Kellem Company Inc. according to Cuyahoga County records. The 3.14-acre property and 60,790-square-foot building was listed for sale at $3.25 million.

Craig Macklin, president of Cleveland Vibrator, did not respond to an e-mail seeking comment for this article. Thus it is not known when the company will relocate.

The former Watt Printing plant, built in 1996 at 4544 Hinckley
Industrial Parkway in Cleveland, will be the new home of the
Cleveland Vibrator Co., according to two sources (LoopNet).

However, the firm on Sept. 10 was approved by the Ohio Air Quality Development Authority  (OAQDA) for $160,000 in Air Quality Revenue Bonds to install air quality facilities at its new plant.

Cleveland Vibrator also was awarded two grants by OAQDA. One grant will cover the financing closing costs and the other will pay up to 30 percent or $30,000 of the principal amount.

Visible construction got underway this week for phase three of Snavely's Hingetown development, featuring 88 apartments in two buildings. One is an existing structure -- the three-story Painters Union building at 2605 Detroit Ave. that is due to be renovated. Next to it will be a newly built, five-story building.

Not all of the block being bought up for Snavely's fourth phase
of development was owned by the Cleveland Vibrator Co. The
block includes several buildings that may not be be a part of the
development, such as Banana Blossom Thai Cuisine restaurant
and, at left, the Malachi House which provides hospice care
and housing for terminally ill persons (KJP).

Phase two was completed this year -- the renovation of the historic Forest City Bank Building and Seymour Block on the southwest corner of Detroit and West 25th Street. The two buildings were updated with ground-floor commercial uses and 38 affordable apartments above.

Last year, Snavely built the first phase at the northwest corner of Detroit and West 25th -- The Quarter, consisting of 194 apartments above 30,000 square feet of ground-floor commercial space.

END

$175 million Market Square development gets new life

Although Harbor Bay's Market Square development may not
be as big as it would have been with the financing that was
minutes away from being OK'd by the State of Ohio, it will
still be a big improvement for Cleveland's Ohio City neigh-
borhood. This old rendering of Market Square shows a plaza
off Lorain Avenue (HPA). CLICK IMAGES TO ENLARGE

Like a tree at risk of getting chopped down, a $175 million development in the heart of Cleveland's Ohio City neighborhood was in danger of being felled. But instead of hearing the cry "Timber!" Clevelanders should soon see a new plan released for the construction of buildings here.

The large mixed-use development combining residential, retail and offices in two connected, uniquely timber-framed buildings at Lorain Avenue and West 25th Street was in danger of being axed by an impasse between the city and Chicago-based developer Harbor Bay Real Estate Advisors.

On one side, Harbor Bay sought a source of non-conventional financing that included an unusually long (30 years) and expansive (affecting not just residential but commercial uses, too) property tax abatement without civic and public input.

And while the school district and Cleveland Metroparks were willing to consider a shorter abatement term, the City of Cleveland refused to concede its abatement powers to a state entity -- in this case the Ohio Air Quality Development Authority (OAQDA).

But the impasse was addressed at a Sept. 11 meeting between city officials and the developer. The project could go forward with city incentives rather than state help, although the development probably won't be in the same form as before, according to Harbor Bay Project Director Dan Whalen.

"We likely will have to revamp" the project, he said. "But we are moving quickly."

With West 25th Street in the foreground and West
Side Market's tower at far left, Market Plaza will
be a significant addition to Ohio City's Market
District and its urban vibrancy (HPA).

Part of the reason for the expedited development timetable is because Harbor Bay had to commit to contractors and suppliers by the end of September on whether it would proceed with construction.

"The project is 70 percent bid and we can hold those prices for only a limited time," he said.

Harbor Bay has invested nearly $10 million in the project so far, including buying a retail strip for which it has city permits in hand to demolish. City officials acknowledged the renewed positive dialogue and a shared willingness to move the project forward.

"Yes, there are productive conversations with Harbor Bay," said Ward 3 Councilman Kerry McCormack confirmed. "The (city's) normal economic development tools are on the table."

Those typically include a 15-year, 100 percent tax abatement on new-construction residential, with a tax-increment financing arrangement so the city can share the increased income taxes with the school district during the abatement period.

The existing Market Plaza retail strip has more in common with
auto-oriented suburban areas rather than an urban neighborhood
with a busy rail station and three 24-hour bus lines that get more
than 700,000 boardings at this site per year. Harbor Bay hopes
to increase that synergy by demolishing this retail strip and
constructing a transit-oriented development here (Google).

Harbor Bay had hoped to get $150 million in bond financing and the 30-year tax abatement approved at OAQDA's Aug. 13 board meeting. But last-minute letters of of opposition from the city, school district and metroparks nixed the financing and abatement.

OAQDA was approached because Market Square's timber framing would reduce emissions by 40 percent mostly from reduced heating and cooling, but also from avoiding the manufacture of steel and concrete. The most recent plan was for a 10-story office building and seven-story apartment building connected by a pedestal of ground-floor retail.

While Whalen wasn't prepared to say how the project would be changed, he said the timber framing for the buildings would remain.

"Timber will still be the focal point," he said.

Whalen also noted that all of Market Square's office and retail tenants will be new to Greater Cleveland, bringing more than 1,000 jobs and nearly $11.8 million per year in new sales and incomes taxes to the city and county.

END

Sherwin-Williams finally admits new HQ, R&D site search

This unofficial massing based on available information from
 several sources shows what a 1,000-foot-tall headquarters
tower would look like if located on the west side of down-
town Cleveland's Public Square, flanked on the west (right)
by a second tower about 500 feet tall for Sherwin-Williams
research center. This is viewed from Lake Erie (Geowizical).
CLICK IMAGES TO ENLARGE

After months of denials, Sherwin-Williams (SHW) finally has acknowledged publicly and officially that it is seeking a new home for its global headquarters and research-development facilities.

In a press release shared today, SHW Chairman and Chief Executive Officer John G. Morikis admitted what has been reported here at NEOtrans for nearly a year -- that the global coatings giant has outgrown its scattered offices throughout Greater Cleveland and is looking for a new HQ+R&D.

“The company’s significant growth and global expansion over the last several decades has resulted in a less than optimal configuration of headquarters, offices and R&D facilities across multiple locations,” Morikis said.

This action comes as a result of the company’s ongoing review of its facilities requirements as it seeks to best meet the current and future needs of its customers and employees, the company said.

After multiple articles written here at NEOtrans, Morikis and SHW's public relations staff issued at least two intra-office e-mails (including one just last week) urging staff not to publicly discuss the company's HQ+R&D facilities search.

This has been the location of Sherwin-Williams' headquarters
since 1930 -- the 900,000-square-foot Landmark Office Tower.
. Until the 1970s, SHW shared this 22-story building with three
other large companies' headquarters -- Sohio, Republic Steel and
the Erie-Lackawanna Railroad. Now, SHW owns the property
and occupies about 90 percent of the building (KJP).

As part of the exploratory process, SHW said officially that will consider multiple potential sites, including locations in Cleveland, Northeast Ohio and several other states. Any transition to new facilities is not expected to occur until 2023 at the earliest and would require approval by SHW's board of directors, the company said.

The reference to "other states" is likely to appease former Valspar workers now working for SHW in Minneapolis and other locales, according to several sources. The Cleveland suburb of Brecksville also has been mentioned, as the DiGeronimo family -- developers of the former Veterans Administration hospital -- have pitched their site for SHW's R&D facility and possibly the HQ as well.

Also, other sources reminded that SHW sent request for qualifications to the Cleveland offices of Turner Construction Co. and Gilbane Building Co. for the construction of 1.8 million square feet of HQ+R&D facilities. And, Cleveland-based architectural firm Vocon was retained to develop site alternatives for the new HQ+R&D facilities. SHW's attention to the Cleveland offices of those firms may be noteworthy.

Councilman Kerry McCormack, whose Ward 3 includes downtown Cleveland, didn't sound terribly worried about SHW leaving.

"We're in good communication with Sherwin-Williams," he said. "We'll do whatever it takes to keep them. But companies that want to attract talent are looking at moving into cities, not leave them. We are going to work closely with Sherwin-Williams to make sure they have a great new home in Downtown Cleveland."

The days are numbered for Sherwin-Williams' John G. Breen
Technology Center, 601 Canal Rd. But they also appear to be
numbered for the coatings giant's larger research facility in
Minneapolis. Both may be consolidated as a result of major
changes to the growing company's space needs (Ohio EPA).
CLICK IMAGES TO ENLARGE THEM.

SHW's consideration of other cities/states for its HQ+R&D spaces may have more in common with Swagelok's recent facility search. In 2018, Solon-based Swagelok Co. issued an RFP for a new corporate headquarters and innovation center.

While company officials claimed that they would consider building a new home anywhere, few expected Swagelok to leave the city where it was founded in 1965. Sure enough, Swagelok decided to stay put and build a new Solon facility for 400 employees now, and possibly growing to 1,000 in the near future.

SHW's roots go 100 years deeper into Cleveland's soil. To pull them out would be a tremendous blow to the city and possibly to SHW as well. And it wouldn't merely be a public relations stain on SHW. All of SHW's headquarters employees and most of its research workers are located here.

A high-level source last week informed NEOtrans that SHW reportedly favors building its HQ+R&D on the west side of Public Square, the same location where SHW had proceeded to advance detailed civil engineering for a new HQ in 2014-15 before the firm decided to direct its resources to acquiring rival Valspar. SHW is on an increasingly speedy glidepath to pay down debt from the Valspar acquisition, possibly by 2022.

SHW has been in its current headquarters in the Landmark Office Tower at 101 W. Prospect Avenue in Downtown Cleveland, Ohio since 1930. The company expanded and filled out that building after it acquired it in 1985 and has since spread its 4,400 employees to multiple facilities in Greater Cleveland.

These facilities include the neighboring Skylight Office Tower, offices for the Performance Coatings Group at 4780 Hinckley Industrial Parkway in Cleveland, plus the Automotive Division Headquarters, 4440 Warrensville Center Rd. in Warrensville Heights. SHW also operates the Breen Technology Center, 601 Canal Rd. and additional automotive research facilities in Warrensville Heights.

The new HQ+R&D facilities will reportedly house 6,000 workers, several sources said.

Sherwin-Williams in 2017 leased this former check processing
center for Charter One Bank as the location for its Performance
Coatings Group. The 151,830-square-foot building is the work-
place for more than 250 SHW employees. The increasingly
scattered nature of SHW's office workforce is why Cleveland's
153-year-old, growing coatings firm is seeking a new global
headquarters and research facilities (LoopNet).

“Given the limitations of our current footprint and driven by the needs of our customers, we are exploring options that will help us to accelerate productivity and efficiency, enhance technology and innovation, enable greater collaboration, support recruitment and retention and reduce maintenance costs over the long term,” Morikis added.

In its press release, SHW said the company will update employees and external stakeholders on an ongoing basis as the multi-year process goes forward. In the meantime, SHW will continue to focus its efforts on the service, quality and innovations that fuel the company’s commitment to help customers around the world succeed, the company said in its written statement.

END

NuCLEus may be on hold for years

NuCLEus was proposed by a partnership of Stark Enterprises
and J-Dek Investments five years ago, but appears no closer to
seeing construction (KJP). CLICK IMAGES TO ENLARGE

The latest word on the proposed $350 million nuCLEus development is that its partnership appears to be waiting on the Ohio General Assembly's passage of a new financial incentive. That's according to a source with the City of Cleveland. Others in the real estate investment community confirm that the project is on hold.

The apparent decision to wait on the State of Ohio by the partnership, called Gateway Huron LLC, comprised of Stark Enterprises and J-Dek Investments Ltd., means that the project could be on hold for two to three years. The project was first announced in 2014.

That financial incentive is a so-called transformational tax credit, Senate Bill 39. It would create a new tax credit to incentivize the construction of transformational mixed-use developments (TMUD) in Ohio. NuCLEus would likely qualify, but it's not that simple.

NuCLEus is proposed to feature two 24-story buildings, one for residential and the other for offices, atop a muli-story pedestal of parking and retail between Prospect Avenue and Huron Road at East 4th Street.

According to Thompson Hine LLP, which helped draft the bill at the request of Stark, for a development to be considered a TMUD it must include a mix of land uses, have a development cost of more than $50 million and be 15 or more stories in height or at least 350,000 square feet.

The bill authorizes a nonrefundable insurance company tax credit of up to 10 percent of total eligible project costs for contributions of capital to eligible projects. The legislation still has to pass both the Ohio House of Representatives and the Ohio Senate in the same legislative session, then be signed into law by the governor.

Assuming that happens, it still doesn't guarantee that nuCLEus would be one of the certified TMUDs. Ohio's next biennial appropriations (budget) bill would have to authorize the number of TMUD credits the state will allow per year. Ohio just passed a biennial budget law this summer. The next one won't be passed until June 2021. A "budget corrections bill" is often passed in the intervening years, however.

Since construction costs in Cleveland are as high as those in
New York City or Chicago, but rents aren't anywhere near as
high, real estate developers say they need public financing to
help close financing gaps. A tax credit for "transformational"
projects is pending before the Ohio General Assembly (KJP).

So even if the number of credits is authorized in the budget corrections bill next year, nuCLEus would have to be one of the limited number of projects certified months later by the state's Director of  Development Services. Just because Stark staff thought of the TMUD credit, doesn't guarantee that nuCLEus would be among those chosen to receive one.

Ask developers John Carney, Bob Rains and David Goldberg who urged the creation of a $25 million Catalytic Historic Tax Credit to help finance their planned renovation of the May Co. building in downtown Cleveland. But their development project got passed over twice for the credit and ended up having to resort to a special earmark three years later at the conclusion of the program.

Ironically, the TMUD tax credit legislation has passed both the Ohio House and the Ohio Senate. It just hasn't done so in the same legislative session. House Bill 469 was passed by the House 91-0 in June 2018. But the term of the 132nd General Assembly expired at the end of 2018 before the Senate could pass it.

So in the 133rd General Assembly, Senate Bill 39 was introduced by Sen. Kirk Schuring. The Senate passed the nearly identical TMUD legislation by a 32-1 vote in July. The legislation was then introduced in the Ohio House and referred to the its Economic and Workforce Development Committee. No committee hearings have been scheduled for the remainder of the year but that can and probably will change.

Even if SB39 becomes law by year's end, the number of TMUD credits per year still has to be authorized by a budget bill sometime thereafter. Then, hopefully nuCLEus would win one of the TMUD credits perhaps as early as 2021 -- seven years after the project was first announced.

NuCLEus' prospective anchor tenant, Benesch Friedlander Coplan & Aronoff, has been remarkably patient. In 2015, it agreed to occupy 66,500 square feet in nuCLEus' office building, estimated to measure 400,000 square feet. A 250-unit residential building also is proposed.

Stark has attempted different public financing schemes to help pay for nuCLEus' construction costs. They included a tax-increment financing scheme involving the school district in 2017 when nuCLEus was proposed as a 54-story tower. Earlier this year, Stark sought a $12 million forgivable loan from the city. Neither scheme won acceptance.

These are the proposed uses in the two towers, representing
Stark Enterprises' current plan for nuCLEus (Stark). 

Ezra Stark, chief operating officer, of Stark Enterprises did not respond to two e-mails seeking comment for this article. But he recently chided the City of Cleveland for its "localism" and "stubbornness" in not embracing innovations in a recent blog.

As an example, Stark cited the city's blocking of the introduction of Bird electric scooters which had chosen Cleveland among its first 100 cities for its e-scooters. Despite that the scooters would improve the city's quality of life, Stark said "bureaucratic red tape, political posturing and a very unfortunate accident" kept Bird from introducing them here for many months.

Earlier this summer, Stark said he would not comment on the status of demolitions involving nuCLEus, citing a "delicate" political matter involving the city.

In related news, on Sept. 6, the City Planning Commission unanimously tabled a request by Stark Enterprises to demolish its vacant Herold Building, 310 Prospect Ave., next to the proposed nuCLEus site.

It did so a day after the commission's Design-Review Committee voted 7-3 against the demolition. The committee's vote was only advisory whereas the commission's vote would have been binding.

Stark asked the commission to table its request following the committee's negative recommendation so that it could work with the Historic Gateway District on seeking tax credits to renovate the building. The demolition was proposed in response to the city's condemnation of the Herold Building due to its many building code violations.

Rebecca Molyneaux, vice president of development at Stark Enterprises, told the committee it would cost $6 million merely to address the code violations. It could cost another $1 million to mothball the structure or millions more to renovate the building into a marketable property.

The committee on Sept. 5 offered to table Stark's demolition request but Stark initially refused. The committee then advised the Planning Commission to deny the demolition at its meeting the following day. At the Planning Commission meeting, Stark finally agreed to table its request.

Downtown Cleveland properties outlined in red are those that
that Stark Enterprises or a Stark-led partnership with J-Dek
Investments acquired in late-2014. The group of properties at
right is where nuCLEus is proposed. The group at left is the
site of a possible high-rise development. Public Square is
 located in the top-center of this satellite image (Google)

Stark inherited the Herold Building as part of a larger portfolio of properties it acquired in 2014 from L&R Group of Companies for $26 million. L&R also tried to demolish the Herold Building but was rebuffed by the city. It discovered that it is extremely difficult to demolish a building in a designated Cleveland historic district.

That portfolio not only included the 3-acre parking lot where nuCLEus is proposed to rise, but also a 2.33-acre parking lot at West 9th Street and St. Clair Avenue. The latter site is reportedly involved in discussions for a possible high-rise residential development.

Stark also has experienced delays in Downtown Pittsburgh in trying to develop the $63 million Smith & Fifth project, previously called the Icon on Smithfield. The project would renovate the former Frank & Seder department store into apartments over restaurants. Stark bought the property nearly three years ago.

The start of construction has been postponed further, now expected to start in early 2020. The delays in developing the vacant building have become a source of impatience for some, according to an August article in the Pittsburgh Post-Gazette.

END

Sherwin-Williams HQ, R&D sites identified

This is an unofficial massing based on Sherwin-Williams'
favored location for its new headquarters and research center.
Shown as the tallest two yellow towers, they will reportedly
be on the west side of Public Square in downtown Cleveland.
The 1.8-million-square-foot complex does not include parking,
but likely will involve a new parking garage for many of the
6,000 workers (Geowizical). CLICK IMAGES TO ENLARGE

A high-level source has identified that the Jacobs Group-owned lot on the west side of Cleveland's Public Square, as well as a portion of the neighboring Weston Group-owned parking lots in the Superblock, are the favored location for Sherwin-Williams (SHW) new headquarters tower. And it is the preferred location for the coatings giant's new research facility, as well.

The source also confirmed an earlier report that the HQ plus research and development center would measure 1.8 million square feet total. And he also confirmed that they were the subject of a request for qualifications (RFQ) sent several weeks ago to Cleveland-area construction management firms.

Additionally, the source said two firms received the RFQ -- Turner Construction Co. and Gilbane Building Co. No other construction management firms were identified. It should be noted that those two companies have the most experience locally not only in building high-rise structures, but also in digging caissons to bedrock for buildings nearly 30 stories and taller.

It shouldn't come as a surprise that SHW prefers to build its new HQ on Public Square to address its worsening space needs. It's the same location that SHW had advanced planning for a 900,000-square-foot HQ tower in 2014-15 before it redirected corporate resources to the acquisition of rival coatings firm Valspar. Today, SHW is a larger, faster-growing company than it was in 2015.

But what is a surprise is that a consolidated R&D center will supposedly come with it. And that's no small facility. It would combine the 140,293-square-foot Breen Technology Center, 601 Canal Rd., with the 170,000-square-foot former Valspar Applied Science & Technology Center in downtown Minneapolis. And it would add extra space for elbow room and future growth, presumably totaling about 330,000 to 350,000 square feet.

Another massing based on the available information shows a
1,000-foot-tall headquarters tower flanked on the west (right)
by a second tower about 500 feet tall for Sherwin-Williams
research center. This is viewed from Lake Erie (Geowizical).

The R&D component would be in a second tower, located across West 3rd Street from the HQ. The materials used and tested at SHW's existing R&D facilities are in such small quantities that they are no threat to the structure, let alone nearby buildings.

Consider that the General Services Administration approved building the 430-foot-tall Carl B. Stokes Federal Courthouse tower across narrow Canal Road from the Breen Technology Center. The research center is more like a college laboratory which often shares the same building with classrooms and offices.

But the big reasons why SHW executives want the R&D next to the HQ are to preserve and improve interaction between research and corporate. That's important for ensuring innovation as well as for security. Electronic transmittal of research findings can be vulnerable to outside attack, such as for corporate espionage or by garage-based hackers. And, consider that SHW has numerous government contracts, including the military.

Lastly, the 1.8 million square feet of space noted in the RFQ does not include parking, another source said. The parking component alone will be a massive structure. For example, providing a parking structure for just half of the 6,000 SHW employees involved in this project would mean a garage measuring more than 1 million square feet. But, at this early stage, it isn't known what the parking needs will be.

A new SHW HQ tower could make a colorful state-
ment. An example would be the Wilshire Grand
Center in Los Angeles. At night, its LED strip can
change colors for certain occasions (UrbanOhio).

SHW currently has more than 1.1 million square feet of office spaces scattered throughout Greater Cleveland, most of which is bursting at the seams. A few hundred thousand extra square feet of office space for elbow room and future HQ expansion is likely in the cards. Plus, SHW has the previously stated needs for up to 350,000 square feet of R&D facilities.

Yes, it is always possible that something could come along and slow, stop or redirect this project to another community, such as a Cleveland suburb. But, increasingly, that doesn't appear to be the case.

This HQ+R&D project is going to be a gigantic undertaking, involving some gigantic amounts of money coming from a corporate cash flow whose volume boggles the mind. It is quite likely that this project will cost somewhere in the vicinity of $2 billion.

While that sounds like a lot, a $2 billion construction cost could be funded by SHW as a current liability (ie: debt paid off in less than a year). That's thanks to SHW's post-Valspar net operating cash flow.

SHW's cash flow is so voluminous that even a major recession let alone a city's public incentives are unlikely to move the needle much for SHW. However, SHW is still reportedly listening to offers from other communities.

The company's net operating cash flow is nearly $2 billion per year -- a 49 percent increase from 2016, the last full year before SHW absorbed Valspar. And it's almost double the cash flow from 2014.

Even more impressive, during the depths of the Great Recession in 2008 and 2009, SHW's net operating cash flow was $876 million and $859 million, respectively. That was well before the Valspar acquisition.

SHW is a very resilient company. So even if there is a recession, SHW could probably still afford this 1.8-million-square-foot HQ+R&D facility with little difficulty -- and without public incentives.

END