Friday, May 26, 2017

Cleveland markets its new industrial sites

Development of the largest shovel-ready industrial/warehousing sites in the City of Cleveland aren't attracting much private-sector interest despite Cleveland's low prices. Meanwhile, inner-ring suburbs offering large parcels that are almost shovel-ready are having greater success in drawing private sector interest and potentially thousands of jobs from significant planned developments.

What, if anything, is the City of Cleveland doing wrong vs. what, if anything, are the suburbs doing right?

Take, for example, the largest available site in Cleveland in more than a half-century. Located off Interstate 77 south of the Pershing Avenue exit, the 65-acre Cuyahoga Valley Industrial Center offered the potential for up to 750,000 square feet of new manufacturing space and 1,000 new jobs, according to promotional materials for the site.

The 65-acre Cuyahoga Valley Industrial Center

Two prospective users of the former International Steel Group coal/coke plant are finalizing plans for their building construction projects that will occupy about half of the center. More than $5 million in taxpayer funds from the city and state were used to clear and clean the polluted property. But the number of jobs involved will likely be far less than backers of the redeveloped site had hoped.

Ohio High Reach LLC, which rents construction and maintenance equipment, is relocating to 12 acres of the Cuyahoga Valley Industrial Center. Ohio High Reach has outgrown its Exchange Street property in Valley View, according to Patricia Herrington, the registered agent for Ohio High Reach and ETC Commercial Property LLC.

The business database Graphiq notes that Ohio High Reach opened its doors in 2009 and already has $5.8 million in yearly revenue and 18 employees. Its relocation will allow that strong growth to continue, Herrington explained.

ETC Commercial Property bought the 12-acre site in April for $731,250 from the Greater Cleveland Community Improvement Corp., according to records from the office of the Cuyahoga County's Fiscal Officer. GCCIP is a part of Team NEO, a nonprofit, regional business development organization.

On May 8, the city's Board of Zoning Appeals approved a variance for ETC to construct a new two-story building and parking lot on the site whose address is listed as 4800 Ruffini Court. Ruffini is an old street, recently rebuilt for $1.5 million as an underpass of I-77 off East 49th Street. The street accessed the original industrial user of this site, the Fronek-Reid Coal Co., more than a century ago.

Herrington said no construction date has been identified yet as financing is still being finalized. However, she said the pending relocation had advanced far enough that Infinity Construction Co. of Warrensville Heights was hired as the building contractor.

That still leaves more than 50 acres of the Cuyahoga Valley Industrial Center left for development. Roughly 15 acres of that will be acquired by the Ohio Department of Transportation's District 12 for its new Cleveland maintenance facility, according to ODOT records.

ODOT District 12 currently has five maintenance facilities. It's existing, aging Cleveland facility is located at a 2.75-acre property at 5430 Lake Court, along I-90 near East 55th. ODOT District 12's newest maintenance facility, opening December 2016 off Emery Road and I-271 in Warrensville Heights, covers 16 acres.

Further details of ODOT's plans aren't yet available, including the number of jobs involved. But the maintenance facility's relocation would be within the City of Cleveland, possibly resulting in no net gain of road maintenance jobs.

Another publicly financed clean-up and repurposing of an old industrial site that came up short in drawing private sector interest was the Trinity Development Site. For more than 50 years, the address of 9203 Detroit Ave. was home to Club Aluminum/Monarch Aluminum Products, employing 500 people in 450,000 square feet of buildings.

An out-of-state investor bought the company in the 1980s and moved aluminum manufacturing operations to a southern state. The building was later used as a "chop shop" for stolen cars until the building caught fire in 1998 and was structurally damaged. The city seized the property, demolished its buildings in 2007, and cleaned the property of pollutants, costing $3 million in city, state and federal funds.

Despite city efforts to sell the site, there were no takers except for less than 1 acre sold to a neighboring business, Penstan Ltd. Trinity's remaining 4.7 acres are valued at $140,800 by the county. The property's zoning permits uses such as retail, light industrial and warehousing.
Proposed City Kennel development

Instead, the city will construct its new $5.3 million City Kennel at the Trinity site. The new, 13,500-square-foot building will be about the same size as the old one near Tremont and result in no increase in jobs or new tax revenues for schools from the property returning to the tax rolls. Ward 15 Councilman Matt Zone defended the decision to put the City Kennel there as a productive re-use of a property that had long been a blight on the surrounding neighborhood.

The site is a short walk to the nearby West Boulevard Red Line station, offering an opportunity for redeveloping the site with mixed uses including residential. The property was offered at $70,000 per acre. But that train has departed as construction is about to begin on the new kennel.

An opportunity to better encourage development remains possible for the available site of the former Midland Steel Products Co. Until 2005, a 540,000-square-foot plant stood on 23 acres at Madison Avenue and West 110th Street. Midland built automobile frames here from 1893 to 2003 when the plant was closed. Like the ISG coke plant and the Trinity site, a lot of tax money totaling $5.3 million was invested to clear and clean this brownfield property to make it ready for productive use again.

Cleveland Urban Design Collaborative's
concept for the Industrial Crossings
District, including the 23-acre Midland
Commerce Park, 10615 Madison Ave.

The city owns the site, dubbed Midland Commerce Park, and has it listed for sale. Like Trinity, the city is reportedly asking $70,000 an acre for Midland, or $1.61 million for the whole thing. The county valued the property at $463,200 for taxes.

Ward 11 Councilwoman Dona Brady said the city has rejected inquiries about using the property for storing trucks or other less-than-desirable uses. The city is requiring that the new user employ 10 people per acre of the property. Furthermore, the city wants the new user to pay to develop the site's utilities and roadway infrastructure. That's a tough ask when competing suburban municipalities will install utilities and roads for new office or industrial parks. There have been no takers for Midland.

Meanwhile, it's a different story in the neighboring inner-ring suburbs of Euclid and Brook Park. In a story first broken here by NEOtrans, Euclid Square Mall is proposed to be demolished for a massive distribution center, possibly for online retailer Amazon. The redevelopment could bring at least 600 jobs and possibly several times more if the project proves to be an Amazon Fulfillment Center. Principals involved with the project refuse to identify the end user.

Euclid Square Mall may be replaced by a similarly 
sized distribution center offering at least 600 new jobs.

The 66-acre mall site is owned by Beverly Terrace Ltd. that wants to sell the property for $5.75 million. As recently as 1997, when the mall was still active, the property was valued at $28,958,700 for tax purposes, according to county records. The owner since has petitioned to lower the property's taxable value to $1.1 million.

Similarly, a game-changing business development could be coming to an inactive, 88-acre portion of the Ford Motor Co.'s sprawling Brook Park complex. American Plasma Energy Group intends to revolutionize the internal combustion engine through an exclusive licensing deal with Plasma Igniter, LLC to make the Coaxial Cavity Resonator Ignition System. The CCRIS is essentially a plasma spark plug that improves fuel efficiency by anywhere from 25-50 percent while reducing carbon emissions by the same amount.

Ford Engine Plant No. 2, Brook Park

Not only is the auto industry interested in this innovation but so is the U.S. military, which has four seats on APEG's 18-member business advisory board. They are outnumbered only by the seven Northeastern Ohioans on this board, including board Chairman Doug Benns of the Cleveland suburb of Rocky River. That's a potential advantage for Northeast Ohio as APEG intends to decide by the end of summer on where to locate a production and distribution facility as well as management offices that may ultimately total 500 employees.

So far, only the empty Ford Engine Plant No. 2 on Snow Road in Brook Park has been named specifically. But APEG reportedly is keeping its options open for other sites near Cleveland, Detroit and Pittsburgh, too. The availability of the 1.2 million-square-foot Brook Park facility that closed in 2012 may offer a cost savings for APEG which prefers to locate in an existing structure rather than build new.

As recently as 2004, the county valued the Ford Engine Plant No. 2 at $33,572,400. Ford has since petitioned to have the plant's value lowered to $8.4 million. No sale or lease listing for the plant could be located. APEG may need only 10 percent of the facility's square footage to ramp up operations by the end of this year.

This doesn't include major warehouse, distribution and/or industrial developments in outer suburbs like Mentor or Twinsburg. So are the suburbs doing something right in attracting private sector employers to these redeveloped sites that the City of Cleveland is not?


Saturday, May 13, 2017

Busy month: 3 big downtown Cleveland projects?


The next month may be very busy with Downtown Cleveland construction announcements. As a follow-up to my recent posting The Cleveland Skyscraper Building-Binge Starts, it appears that three projects will be making news very soon. One project is a surprise.

Least surprising is that workers this month are swarming over the nine-level 515 Euclid parking garage. Stark Enterprises will soon erect a $62 million, 19-story apartment building called The Beacon on top of it. The workers are construction managers who are mapping out the logistics and sequencing of work to be done over the next 16-18 months. The Beacon, with its 187 apartments, is due to open in late-2018.

The Beacon apartments, 515 Euclid 

The project faces a small glitch, however. Stark representatives discovered a typo in a variance approved in Sept. 2016 by the city's Board of Zoning Appeals regarding the height of The Beacon. In 2016, BZA approved a height of 340 feet. Instead, Stark is requesting a height of 355 feet at BZA's May 22 hearing. It is possible this glitch will delay the project's start until about Aug. 1.

I've also learned from several sources that Medical Mutual's board of directors will meet June 20 to decide its facilities plan, including possibly a new downtown headquarters. They health insurance company wanted to decide its facilities plan in May but negotiations with the developer/property owner have taken longer than expected. Medical Mutual said it is unlikely it will own its new headquarters, be it an existing building or a new building. The company may seek to extend its leases to strengthen its negotiating stance.

The address or size of its new office building isn't known, but at least several major Northeast Ohio developers responded to a request for proposals from Medical Mutual last year on new or renovated buildings for Ohio's largest health insurance company. It is quite likely the public will learn in the next month about the winning proposal.

Medical Mutual HQ (Rose Building)

Medical Mutual also is moving forward on a new suburban office, apparently for its Consumers Life Insurance subsidiary based in Strongsville. There will be some corporate consolidations but those may involve its much smaller Beachwood and Copley locations. It isn't known if the Toledo office is part of the office consolidation plan.

In Northern Ohio, Medical Mutual has these existing offices (lease information according to
  • Downtown Cleveland HQ -- 2060 E. 9th St. -- 1,300 employees (lease ends late-2020)
  • Toledo Business Team -- 3737 W. Sylvania Ave. -- 500 employees (lease ends late -2020)
  • Strongsville Consumers Life Insurance Co. -- 15885 W. Sprague Rd. -- 400 employees (lease ends mid-2020)
  • Copley Mutual Health Services/Benefit Health Services Inc. -- 3636 Copley Rd. -- 50 employees (lease info NA)
  • Beachwood Data Center -- 23700 Commerce Park -- 20 employees (lease ends mid-2020)
It is interesting to note that one company, BentleyForbes, owns three of Medical Mutual's five Northern Ohio locations: downtown Cleveland, Toledo and Beachwood. BentleyForbes purchased them at the same time, in 2000, for $75 million and later took out a $52.7 million mortgage on Medical Mutual's downtown Cleveland headquarters, the 1905-built, 10-story Rose Building.

After the real estate market crashed in 2008, BentleyForbes has been unable to repay or refinance the mortgage on the downtown headquarters. About $47 million remains unpaid. BentleyForbes has occasionally been trying to sell its three buildings that are occupied by Medical Mutual. Medical Mutual will reportedly move out of all of their existing offices, and it may move out of all of them at the same time when their leases expire simultaneously in 2020, sources say.

This includes its Strongsville location to which it moved from another location in Strongsville in late 2016. But Medical Mutual will retain a suburban presence, sources said. It is not known where it will be, how many employees will be located there or from where they will come. But the board's action now allows enough time for constructing new buildings for either the downtown Cleveland headquarters, the suburban Cleveland office, or both.

Finalizing architectural documents, securing government approvals, programming and other pre-development activities for new office buildings will require about a year. Construction will take about 18-24 months. The new-construction timeline fits, albeit tightly, within the timeframe of Medical Mutual's simultaneously expiring leases. Medical Mutual may seek to stay i

Lastly, a proposed skyscraper that seemed a distant possibility may instead leap forward into the ranks of the likely candidates. As early as next month, a national real estate developer will reportedly announce plans for a 34-story luxury apartment tower on a surface parking lot at the southwest corner of Euclid Avenue and East 17th Street, according to two sources.

Development site is on the left, past the gateway arch

The 1-acre property is owned by the Playhouse Square Foundation who in 2011 razed the two-story Hanna Annex at 1512 Euclid. Later, in 2015, the foundation acquired a mid-lot, 1/4-acre parcel to put the entire lot under one owner. The goal was to encourage development of the lot which was made more accessible after the Greater Cleveland Regional Transit Authority extended East 17th Street south of Euclid to Prospect Avenue. The street extension was part of the Euclid Corridor Project that in 2008 that yielded the HealthLine bus rapid transit.

The Playhouse Square Foundation has been seeking to boost foot traffic in the theater district. It recognized two shortcomings of the district -- parking decks are behind and connected to the theaters, meaning that too few theatergoers set foot on Euclid Avenue's sidewalks to patronize its shops, restaurants and cafes. The foundation also says the district needs more residents -- something that is slowly being delivered by local real estate developer K&D Group Inc. K&D recently converted the eight-story Hanna Building Annex on Prospect to apartments and has begun work on the residential conversion on the upper six floors of the 12-story Halle Building.

But the proposed 34-story luxury tower would make a major contribution to the Playhouse Square Foundation's goals in two profound ways. First, it would add hundreds of moneyed residents to the theater district. And, second, it would add a proposed 600-car parking deck with ground-level retail on Euclid Avenue that requires people to set foot on Euclid Avenue's sidewalks to reach the theaters. No more sneaking in the back way, sight-unseen.

Much like 515 Euclid, this Playhouse Square tower would be built on a parking pedestal of perhaps five levels high. The foundation requested $4 million from the state's capital budget in 2016 to help fund the parking deck but got only $1 million. Additional subsidies are usually needed to make the financial numbers work for residential construction. But the more downtown residents there are, the more rents are growing to where fewer subsidies are needed.

Downtown's residential growth has attracted the interest and headquarters of powerhouse national developer NRP Group, based in Garfield Heights. NRP has chosen to relocate to Playhouse Square, into the lower floors of the Halle Building. The timing of NRP's relocation is intriguing. NRP is the nation's seventh-largest developer of apartment buildings. But it's tallest apartment building thus far is a 10-story structure in St. Petersburg, FL. If NRP is the developer of the proposed 32-story tower, it would mean a new philosophy for the 22-year-old company.

But so does relocating its headquarters and 200 employees from the suburbs to downtown Cleveland. NRP Principal and CEO J. David Heller said in an April 30th press release the company is moving to seize on opportunities for "rapid growth and expectations for further expansion (and for) enabling our employees to fully experience the city of Cleveland and what it offers."


Wednesday, May 3, 2017

Bye, Euclid Square Mall; hello Amazon?

After 40 years, Euclid Square Mall is destined to be physically replaced by the latest thing in retailing -- E-commerce. The mall, having closed Sept. 19, 2016 after years of limping along with two dozen churches as its remaining tenants, is vacated and officially condemned by the city for safety violations. Euclid Square Mall had succumbed to the changing retail market and population shifts long ago.

Circumstantial evidence suggests the replacement for the 687,000-square-foot shopping mall will be a massive distribution facility for the online retail giant Amazon. Called a Fulfillment Center, the facility would measure at least 650,000 square feet and possibly be as large as 1 million square feet. Based on similar projects elsewhere in Ohio, it would represent a capital investment in facilities and equipment of more than $100 million and result in the hiring of more than 600 permanent jobs.


Two similarly sized Amazon Fulfillment Centers that opened in 2016 outside Columbus now employ 5,000 people total, or roughly double what was originally projected. An 855,000-square-foot Amazon Fulfillment Center in Etna Township employs about 3,000 people while a 1 million-square-foot Amazon facility in Obetz employs more than 2,000 workers.

According to public records, Euclid's Planning & Zoning Commission on May 9 (see last item on the agenda) will consider at its regular meeting a proposed zoning change by Seefried Industrial Properties, Inc., an Atlanta real estate developer. The agenda reads:
Seefried Industrial Properties, Inc., prospective purchaser, on behalf of Beverly Terrace Ltd, SNS Properties LLC, MCM Superior-Glen Apartments, Lee-Silsby Associates, and Gerome’s Grove, has submitted an application requesting the rezoning of a group of parcels from a U4-Local Retail or Wholesale Store District to a U6-Industrial and Manufacturing District. The proposed rezoning is for eight irregularly shaped parcels totaling 2,866,248 square feet (65.80 acres) in size.
If the rezoning and other permits are approved, Seefried will execute pending purchase agreements with the five property owners listed above to acquire nine parcels. Not only would Euclid Square Mall be demolished for this distribution facility, but so would four long-closed outlot structures. These include a Toys 'R' Us store, Stop-n-Shop grocery store, Red Lobster restaurant and a bank according to documents submitted to the City of Euclid by Seefried.



While Seefried develops facilities for other clients such as Pepsi, PPG, Home Depot, and others, recent indicators suggest the client for the Euclid project is Amazon. The indicators include:

  • Seefried's largest client is Amazon, as Seefried is the real estate developer for dozens of Amazon distribution center projects around the country;
  • A source says Amazon is opening "three or four" distribution centers around Cleveland but could not identify their locations;
  • Amazon is opening a Twinsburg sorting facility in a 248,000-square-foot building at the former Chrysler automotive plant;
  • Amazon is also leasing 80,000 square feet of space in Euclid's Bluestone Business Center, across East 260th Street from Euclid Square Mall, for a delivery station;
  • This facility's size is consistent with Amazon's largest distribution facilities (Fulfillment Centers), including its first two in Ohio as described above;
  • Amazon enjoys having its facilities receive electricity either directly or indirectly from wind turbines and Euclid's location along Lake Erie makes it ideally suited for wind power. Euclid already has four companies whose facilities are directly powered by wind.

The Euclid Square Mall site is next to Interstate 90, State Route 2 and only several miles from Interstate 271 as well as CSX's intermodal rail terminal at Collinwood Yards. It is probably the largest, cleanest, developable property so close to the urban core of the Greater Cleveland area.

Euclid city officials are to be commended for re-purposing a large site that was made obsolete by the changing retail business. They further deserve kudos for ensuring that the city will benefit from the very business activity that replaced the shopping mall -- E-commerce. Too often, very large distribution centers find sprawling, clean properties at the urban fringe, far from labor pools that need jobs and established communities that need to replace lost tax revenues.

After World War II, Chase Brass & Copper Co. had two large plants on either side of East 260th Street in Euclid. One was sheet mill on Babbitt Road and the other a tube mill on East 260th (formerly Upson Road). The tube mill was shut down in the middle of a strike in 1973. In 1975 the mill was demolished for Euclid Square Mall, built by Jacobs, Visconsi & Jacobs (now the Jacobs Group) and opened on March 1, 1977. The mall's last retailer, a Dillards outlet store, closed in September 2013.

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