Thursday, December 27, 2018

Stark Enterprises sells its HQ, but to whom? And why?

Stark Enterprises' headquarters building at 1350 W. Third St.
in downtown Cleveland's Warehouse District as seen in 1964
 (left) and in 2017 (CPL, Google). (CLICK TO ENLARGE)

A potentially strategic property transfer in downtown Cleveland nearly slipped under the radar last week. Not only was the transfer publicly filed the Friday right before the Christmas holiday weekend, perhaps to avoid attention, but it was sold using a process that concealed the details of the transaction.

On Dec. 21, Stark Enterprises sold its 18,290 sf headquarters building at 1350 W. 3rd St., according to public records filed with the Cuyahoga County Fiscal Officer. The buyer is a company called 1350 W6, LLC. The person who formed that company on Dec. 13, per Ohio Secretary of State records, was none other than Stark Enterprises' founder Robert L. Stark.

No dollar amount was included. So anyone scanning the hundreds of property sales at the end of the month would probably look for transactions with larger dollar amounts first. Stark 1350 LLC bought the property in 2007 for $1.3 million and was asking $2.9 million, according to its since-removed listing on LoopNet.

Why would Stark sell a property to his own company? Because the company that Stark created in order to buy the property is probably going to be sold to another party. Why do that? Because the buyer can acquire the company for less money than the property. Acquiring a property incurs more transaction fees and potentially a higher property tax burden if the sale price is known. It's a process called Entity Sales.

The presence of another party is also inferred by the fact that Stark sold the property via a "Limited Warranty" exchange. If no other party was involved, Stark would have probably sold it via a "General Warranty" deed transfer. A limited warranty protects the seller in the event that some unknown liability could be passed on from the building's past. The Stark headquarters building was built in about 1900 and modernized with a new fa├žade in the late 1960s.

The location of Stark Enterprises's headquarters is visible in
this map courtesy of the Cuyahoga County Fiscal Officer.
All of the parking lots visible in this image are owned by
subsidiaries of Weston Investments. West 6th Street is
in the buildings' shadows on the lower left (CCFO).
It begs the question why Stark didn't just sell the company that had previously owned his HQ. A possible reason is that the company, Stark 1350 LLC, had Stark's name in it. The new buyer probably didn't want any reference to Stark in the company's name. That name, 1350 W6 LLC, is also an enigma. The property isn't at 1350 West 6th. It's at 1350 West 3rd. Both are at the corner of St. Clair Avenue. Unless it's a typo, the company's name suggests that the buyer has plans for the south side of St. Clair, all the way from West 3rd to West 6th.

The property along the south side of St. Clair from next to Stark's HQ west to West 6th is owned by a subsidiary of Weston Investments, a major real estate developer based in Warrensville Heights. None of these properties have transferred in the last two years and there's no indications from any other public records databases that these Weston subsidiaries were sold, added new partners or transferred to new statutory agents.

Stark Enterprises' proposed nuCLEus development in down-
town Cleveland will includes about 200,000 square feet of
offices, including for Stark's new headquarters (NBBJ).
I have reported on recent rumors about the Dream Hotel chain being interested in a site on "St. Clair Avenue in the Warehouse District" but had no further details regarding its location. I have contacted Stark Enterprises to learn more about the sale of it headquarters property but have yet to hear a reply.

Stark Enterprises plans to relocate its HQ offices from 1350 W. 3rd to its massive nuCLEus mixed-use development just north of Quicken Loans Arena. But Stark has been unable to fill a gap in their capital financing stack. It isn't yet known if this sale will contribute to it or otherwise affect Stark's timetable for building nuCLEus and relocating its HQ to it. But, unless Stark Enterprises moves to temporary offices, any redevelopment of Stark's HQ building is unlikely to occur until after nuCLEus is built.


Monday, December 10, 2018

Pop goes the West Rim

Click to enlarge all graphics (Google).

A skeptical Clevelander would look at the above map where five potential major real estate developments may rise atop the West Rim of the Cuyahoga River valley and question how many will actually get built. An optimistic Clevelander would be certain that most, if not all, will get built. And an older, lifelong Clevelander would look at that map and be amazed that there are five potential major projects at all.

Then again, some may argue that a sixth has already been built -- The Quarter, a $60 million, 194-unit apartment building with ground-floor retail that opened earlier this year on Detroit Avenue at West 25th Street. The developer, Snavely, also bought the Forest City Savings and Trust Building across Detroit and is renovating it with 38 affordable apartments and a food hall for start-up restaurants.

Or, that a seventh major real estate development is under construction here -- Church+State, a $57 million, 161-unit apartment complex (one 11-story building and a six-story building) rising on Detroit, north of Church Avenue at West 29th (formerly State) Street. Hemingway Development is leading this project.

Others might say the above map omits an eighth major project that is actually a stimulus of several of the proposed big projects on the West Rim -- Irishtown Bend Park. This large park along and between the Cuyahoga River and West 25th, from Detroit Avenue south to Columbus Road, has amassed tens of millions of dollars in funding commitments. It will get built in some form over the coming years. But the full slate of proposed improvements to realize the vision for Irishtown Bend carries a price tag in the neighborhood of $100 million and will require more fundraising.

Point is, there is going to be a large park here. And quality public spaces draw residents and investments. The West Side Market is one such quality public space -- an ethnic, European-style fresh food market house that has few equals in the USA. It is at least party responsible for two of the major developments planned at the southern flank of the valley, across from downtown Cleveland.

But the biggest factor in all of this is Cleveland's improving job market. It is diversifying and growing at rates that rank it with the fastest-growing metropolitan-area economies in the USA. Plus, the two biggest demographic sectors in American history -- Millennials and Baby Boomers -- want to live in downsized housing in walkable urban settings that offer quality biking and public transit amenities.

So here are the five West Rim development sites and what is or may soon be happening there:

In 2019, Cuyahoga County may dispose of excess properties,
including the former County Engineer's office at the west end
 of the Detroit-Superior Veterans Memorial Bridge (Google). 
Cuyahoga County Engineer's property -- If you've ever taken one of the subway tours in the lower deck of the Detroit-Superior/Veterans Memorial Bridge, then you've set foot on this 1.75-acre property. The entrance to the subway tour requires stepping across this land, owned and once used by the Cuyahoga County Engineer's office.

Not only does the engineer's office no longer use this property, but they're not even called the county engineer anymore. It's called the Department of Public Works and in 2014 it was consolidated along with many other county offices into the administration headquarters at East 9th Street and Prospect Avenue downtown.

So it, along with dozens of other properties countywide, has been deemed no longer essential to the operation of county government after a year-long analysis by the county's real estate advisor, Allegro Realty Advisors Ltd. The six-parcel county engineer's site will likely be the subject of an open-bid Request For Proposals by the county in early-2019.

However, a number of details about its disposition are not yet known, including if the six parcels will be sold individually or as a package, and if the county will seek to vacate the unused right of way of Superior Viaduct that separates parcel 00315046 from the other five county parcels. Or will that be up to the winning bidder to pursue? Either way, vacating this right of way will cause this land to be absorbed by the adjoining parcels, regardless of who owns them.

Questions about the disposition of the county engineer's property, directed at the county's Public Works Public Information Officer Koula Celebrezze, were referred to Damon Taseff who is heading up Allegro's county real estate advisor team. He said more details about this site will be publicly available very soon.

"I will be able to speak to more of this (disposition) in the coming weeks," Taseff wrote in an e-mail.

The Cuyahoga County Engineer's site which, if redeveloped,
could offer commanding views of Downtown Cleveland,
Irishtown Bend Park and the Cuyahoga valley (Google).
The county engineer's property is in a prime location for a major development. The Quarter apartment complex was built on 2 acres -- only slightly larger than this site (if the unused part of old Superior Viaduct is vacated).

And just east of the county's land is Stonebridge, a multi-structure mixed-use complex built in the early 2000s. Its closest building to the county engineer's site is an 11-story condominium building called Stonebridge Waterfront but is set on land lower in elevation. So a similarly sized building (or taller) on the county's land would tower over it and offer amazing views of downtown Cleveland, Irishtown Bend Park and the Cuyahoga Valley.

Downtown Ventures' proposed mid-rise apartment building at
2210 Superior Viaduct would be comparable in height to the
neighboring Stonebridge Waterfront building. Also visible is
the County Engineer's property, seen just above the massing
for 2210 Superior Viaduct (CityArchitecture).
2210 Superior Viaduct-Kertesz -- Daryl Kertesz's Downtown Ventures LLC paid $350,000 in June 2016 for a small industrial building at 2210 Superior Viaduct a short distance from the county engineer's site. Activity Capital, an investor group led by Kertesz, has proposed to replace the small industrial structure with a 64-unit apartment building perhaps 11 stories tall. He chose that height because it would come up to the 115-foot restriction for the current zoning height district. But Kertesz said he would like to get a variance and build up to 20 stories if the market allows for it.

Kertesz's conceptual designs for the project won approval from Cleveland Planning Commission's Design Review Committee. But that was nearly three years ago in February of 2016. Kertesz said he was attracted to the Detroit-West 25th intersection due to residential momentum in the area. That includes Stonebridge and the newly completed The Quarter, as well as traffic calming improvements to the intersection to enhance pedestrian safety.

"It's still an active project," Daryl Kertesz said in a phone interview. "It just has to be the right project. There's a lot going on in that area and I'm not sure if more of the same (Class A multi-family) over there is the right answer given the market saturation. We will only get one bite at the apple and when we have the right project, we will pull the trigger."

If the county engineer's site is developed, it may further boost the area as an attractive, high-density urban neighborhood or it could over-saturate it. Nearby is Lakeview Terrace public housing, including the 19-story, 204-foot Lakeview Tower built in 1973. But now the area is attracting residents with more disposable income that should attract more retailers, restaurants, so-called "Creative Class A" loft offices and jobs to the north end of Ohio City. It remains to be seen if that could, in turn, nurture a feedback loop of attracting more residents.

The 5-acre, 530-space Lutheran Hospital parking lot will offer
an unobstructed view of Downtown Cleveland when buildings
on the east side of West 25th Street are demolished for the new
Irishtown Bend Park (Google).
Lutheran Hospital parking/Weston -- While many urbanists lament the parking craters downtown, there is a large crater in Ohio City too. The 5-acre Lutheran Hospital surface lot acts like a moat between the long-established neighborhood around the West Side Market to the south and the emerging Detroit-West 25th intersection to the north.

The property has gained greater prominence with the development of Irishtown Bend Park, as well as the impending demolition of several buildings on the east side of West 25th. Front Steps Housing and Services will move by 2020 to its new address in the 2500 block West 25th. Its old facility at 1545 W. 25th will be demolished as will the abandoned, three-story, eight-unit Riverview Family Estates, 1505-1525 W. 25th. (not to be confused with the 15-story, 498-unit Riverview Tower, 1745 W. 25th.).

Once those buildings are gone, Lutheran Hospital's main parking lot or whatever development that may someday replace it will have a tremendous view of downtown and be right across the street from the new 20-acre hillside park. City Planning Commission's vision, per a rezoning done a few years ago, is for ground-floor retail along West 25th topped by multi-story buildings. To ensure enough parking remains, a significant parking deck would be needed.

There may be real interest in a development in that area. A company recently bought a half-acre of land at 1550 W. 25th that's surrounded by the Lutheran Hospital parking lot. On that small parcel is a former auto parts supply house that was bought in October 2017 for $435,000.

The buyer was I.B. Development LLC, which was registered with the state on Sept. 19, 2017 by Nadine Ezzie. She was general counsel for national real estate developer Weston at the time and the filing listed Weston's Warrensville Heights' address. Two other companies were also registered at about the same time with similar names, including Weston-I.B. Development, LLC and AK My Place I.B. Development LLC.
Clinton West Apartments are at left (the upside-down U-
shaped roof) and The Vine luxury townhouses are to their
right, or west (
My Place Homes was founded by Chad Kertesz (cousin to Daryl Kertesz) in 2010 and has been developing housing in Ohio City. That includes The Vine townhomes, a joint venture among Kertesz family members and their respective companies, rising on Vine Court at West 32nd. It is just west of the 70-unit Clinton West apartments, a project My Place developed with the Geis family in 2017. Crain's Cleveland Business reported in June that My Place Homes is a partner in I.B. Development with an unidentified national developer. But the state registrations show that developer is Weston.

"It's too early in pre-development to talk about it (the West 25th site plans) in detail," Chad Kertesz said to Crain's. He didn't respond to an e-mail request for an interview prior to publication.

A challenge for any future development here will be securing at least $20 million for a large parking garage to replace Lutheran Hospital's 530-space surface lot. South of Franklin Boulevard, two additional surface lots front West 25th and serve the hospital as well as the Cinecraft Building. They contain another 220 spaces. It is unlikely the hospital would pay for a new parking deck because they are not causing the change to the parking situation.

One funding possibility is to use tax-increment financing to secure a loan from a public sector partner, such as a port authority or from the U.S. Department of Transportation which offers Transportation Infrastructure Financing & Innovation Act (TIFIA) loans, credits and guarantees for transit-oriented developments near rail and bus rapid transit stations. This development is on the Greater Cleveland Regional Transit Authority's MetroHealth Line BRT-lite.

While local officials hope that many visitors will access the Irishtown Bend Park via walking, biking and transit, larger events will require a large parking facility. So while a new parking deck could serve Lutheran Hospital by day, it could also serve a new real estate development and the park in the evening and at night.
Harbor Bay's Market Square development (HPA)
Market Square-Harbor Square REA -- Look for the existing strip shopping center called Market Plaza at Lorain Avenue and West 25th to be demolished in Fall 2019. Following that, Chicago-area Harbor Bay Real Estate Advisors hopes to start construction on Market Square, a 3-acre development at West 25th Street and Lorain Avenue with a 12-story office building, 10-story apartment building, ground-floor retail and a 550+ car parking deck just above the west side of the Red Line tracks.

The reason why this development is moving forward is due to the persistence of Cleveland-area native Dan Whalen who is director of Harbor Bay. Whalen encouraged his employer, which builds major projects around public transportation in the Midwest, to look at Cleveland and, specifically, Ohio City. The project site is next to the Ohio City Red Line rail station.

A new feature may be added to the project's plans -- a walkway from Columbus Road and the rail station to Market Square. This development will be similar in height to the United Bank Building across West 25th from the project site. That renovated building has attracted new office tenants and leads credence to the notion of attracting more to the Market District.
Original plan for Brickhaus Towers/One Twenty West (HPA)
One West Twenty-ex-Brickman -- It's possible that we may hear an announcement in 2019 regarding the former Brickhaus Towers/One Twenty West development. This project was proposed by Andrew Brickman who has a lot on his plate already. There have also been reports that an investor withdrew from this project. Brickman scaled back his original plans for Brickhaus Tower to a smaller plan called One West Twenty.

Instead, a national developer is seeking to take over this site to deliver as many housing units as possible to the booming near-West Side. Sources asked that this developer not be named publicly as the company doesn't like to announce a project unless it is more than 90 percent certain the project will happen.

Word is that the new developer will likely go back to something similar to Brickman's original vision for this site -- a larger-scale mixed-use development with mid- to high-rise towers offering 500-600 apartments with ground-floor retail and live-work units facing Lorain. The new developer is not concerned about the scale of this project, citing increased interest by New York City investors in Cleveland and its newfound job growth.

If the larger-scale development is achieved, along with at least several of the others mentioned above, a number of substantial buildings will ring the West Rim of the Cuyahoga Valley in the coming years.

In addition to the 11-story Stonebridge Waterfront, 11-story Church+State, 19-story Lakeview Tower, 15-story Riverview Tower and the 10-story United Bank Building, we could soon see more big buildings here. The West Rim could see as many as six or seven large buildings in the five development sites discussed in this article. If so, Ohio City could have an impressive skyline for an urban neighborhood.


Wednesday, November 28, 2018

Lakewood housing hunt drew Columbus developer here

Preliminary site plan for Solove Real Estate's high-end market-
rate apartment complex on Detroit Avenue east of Bunts Road
in Lakewood. (BBCO Design)(Click to enlarge all images)
Anyone who has tried to buy a high-quality, competitively-priced home in Lakewood in the last year or two knows the drill. The real estate search is one of the most difficult scavenger hunts you'll play. Unless you're willing to sacrifice many features you want in a home or make a high, all-cash offer, a Lakewood housing hunt is not a game for the impatient.

Real estate developer Jerry Solove of Columbus knows it all too well. His son spent the past year looking to buy or rent a home in Lakewood. Solove and his son learned that quality homes sell within a day or two of being listed with a realtor, with some prices bid upward in all-cash deals. Solove recalled seeing a renovated bungalow for sale this summer on Mathews Avenue, behind the Around The Corner Saloon. It was listed in the evening and, before the sun rose again, it was already under contract by a buyer.

Experiences like this are one reason why Lakewood housing prices rose 22.5 percent, highest among all Cuyahoga County communities in 2018. Another reason for the price spike is that Lakewood has lost more than 1,700 housing units since the 1980s due to demolitions of housing and conversions of rental doubles into single-family, for-sale homes.

Lakewood housing inventory is limited. Only East Cleveland's housing stock is older than Lakewood's in the county. Another reason for the price spike is the growing interest by Milennials and Baby Boomers, the two largest generations in U.S. history, in downsized housing in walkable settings -- something that the streetcar suburb of Lakewood touts. And still another reason is that the Greater Cleveland's economy has picked up significant momentum in recent years, adding jobs faster than all but 15 other metro areas.

Columbus developer Jerry Solove addresses a Nov. 27 public
meeting about his proposed Lakewood project. (Prendergast)
Eventually, Solove's son found a decent Lakewood apartment.

"But we spent a year trying to find a home," Solove said at a public meeting at Lakewood City Hall on Nov. 27. "The community need is for more single-level housing. We intend to focus on two category of residents. First are people just starting their careers and families, and earning $45,000 to $85,000 or more. Second, we want to serve empty-nesters who don't want to climb stairs."

His Columbus-based firm, Solove Real Estate, is proposing to build an apartment complex with 278 housing units in two mid-rise buildings, a 375-space parking garage plus a pocket park and a rooftop lounge on the site of the former Spitzer Lakewood Chrysler dealership at 13815 Detroit Ave. and neighboring Educators Music. The development plan is at a conceptual stage, called a massing, and will be refined with more input.

Conceptual plan of proposed development. Above, this view
looks south from Detroit Avenue. Below, the view looks
northward toward Detroit Avenue. (BBCO Design)
"Our goal is to try to have a pedestrian feel along Detroit (Avenue)," said Bhakti Bania, CEO of  BBCO Design -- Solove's architect. "There will be heavy landscaping on all of our perimeters."

The preliminary idea is to have a five-story parking garage with an entry off Parkwood and fronted by apartments on Detroit with a one-story amenity building south of the parking garage. The building west of Parkwood would be eight stories of apartments and a public pocket park. All servicing (utilities, waste, etc) would be off Bunts, Detroit and Wyandotte.

The public meeting was the first step in a four- to six-month-long city review process that will start in January or February and be shaped by public input, traffic studies, market data and the city's existing development masterplan called Community Vision. That plan, updated most recently in 2017, has these guiding principles for housing:

  • A housing market that is stable and provides for moderate growth in housing values.
  • Adequate housing opportunities for the city’s economically and culturally diverse residents.
  • A high-quality housing stock that is diverse in style and is well maintained through proactive code enforcement and community home improvement programs.

It can be argued that this proposed development responds to all of these masterplan goals by helping to address the shortage of quality, contemporary housing that is, in part, causing Lakewood housing prices to spike and taxes to rise.

"We work hard for urban development," Solove added. "We try to have pedestrian-friendly communities. The attention to detail is very important to us. We have a good retention rate and we take a lot of pride in what we do."

Solove has a purchase agreement with Spitzer Lakewood Chrysler Plymouth and a partnership with Stavash Family LLC. The buildings on those parcels will be demolished. The Stavash family, which has owned Educators Music since it opened in 1960, sold their company to two partners on Oct. 4, according to the Ohio Secretary of State's website. The two partners, Scott McDermott and Bill Craighead, introduced themselves at the Nov. 27 meeting.

Attempts by Solove to purchase the 0.35-acre parcel used by Bruce's Automotive & Fleet Services, 13919 Detroit Ave., were rejected by George Shaker. He owns G & M Property Management 3 LLC, which in turn owns the property leased by Bruce's Automotive.

"We tried to incorporate Bruce's but he (Shaker) wants nothing to do with that," Solove said.

One of the early steps would involve rezoning the roughly two acres of land from C-3 Commercial to Planned Development, said Bryce Sylvester, the city's director of planning and development. Solove said he is not seeking any public subsidies from the city for this development -- a testament to the strength of Lakewood's real estate market.

"Bill (Craighead) and I drove to Columbus to see Solove's developments first-hand," McDermott said. "I was impressed with Solove's developments. This (Lakewood project) is a market-driven development. It will fill quickly."

The goal is to start construction in 2019 and open in the Spring of 2021, Solove said.


Wednesday, November 21, 2018

Another big investment coming to Lakewood

Two acres of mostly vacated land near the center of Lakewood
is proposed to be redeveloped by Columbus-area real estate
developer Jerry Solove (CLICK TO ENLARGE).
Over the past 30 years, Lakewood has lost more than 1,700 housing units, with only Cleveland, East Cleveland and Euclid losing more. The average age of its housing stock is the second-oldest in the county. At the same time, growing interest in traditional, walkable communities has made Lakewood a hot real estate commodity. It's why Lakewood had the highest property value rate of increase, 22.5 percent, among all Cuyahoga County communities in 2018.

So, to say that real estate investors are interested in Lakewood is an understatement. That includes everyone from real estate corporations to mom-and-pop renovation companies converting duplexes into luxury single-family houses to people simply trying to outbid each other for their next place to live.

Furthermore, the biggest, most underutilized properties are highly sought after. Those that often fall into that category are former car dealerships whose automotive operations have left for outer-suburban highway interchanges. The next one is about to fall.

Jerry Solove, of Columbus-based Solove Development Inc., has a contract to acquire about 2 acres of the former Spitzer Lakewood Chrysler dealership at 13815 Detroit Ave. and neighboring Educators Music. Terms of the sale are not available. The 1.6-acre Spitzer property and structures are valued at $767,500 for real estate taxes, according to the Cuyahoga County Fiscal Officer's records. The 0.4-acre Educators Music property and its two structures have a tax value of $232,300.

A two-acre parcel could provide enough room for several dozen townhomes or two or more multi-family residential buildings with ground-floor retail facing Detroit Avenue. Solove's plans will be revealed at a public meeting at 7 p.m. Nov. 27 at Lakewood City Hall's auditorium.

Solove Development Co. has built a variety of residential and
mixed-use styles depending on their immediate surroundings.
Above is The View On Pavey Square offering student housing
near Ohio State University. Below is phase 2 of The View On
Fifth in Columbus' Grandview Heights neighborhood. These
are a small glimpse of the architectural and land use styles
developed by Solove Development (Solove).

Much of Solove's recent developments have been in Columbus. Most are near the Ohio State University campus and in the neighborhoods just north of downtown Columbus. Lakewood is obviously a different market, but has some similarities as well. Lakewood is popular with young professionals and new arrivals to Greater Cleveland, based on all of the out-of-state license plates seen around town and the new faces in Lakewood's schools and day care centers.

Someone can learn a lot about a real estate developer by looking at what types of projects and genres they like to build. Developers of projects in urban and inner-ring suburban neighborhoods prefer to stick with projects common in those areas. Look for three- to six-story buildings of for-sale townhomes or market-rate apartments, sometimes with a shop, restaurant or cafe to provide a pedestrian-friendly street presence on a busy thoroughfare.

Due to recession-induced restructuring in the auto industry, Spitzer lost its Chrysler Motor City franchises in Parma and Lakewood in 2010. Spitzer still owns much of its Lakewood site but leased its building and parking/inventory lots to Wingstar Transportation LLC which began in 2013 to provide trucking and logistics services.

Joining Wingstar at the dealership was its sister company, Volens LLC. It began in 2015 to provide trucking equipment, trailers and tarps for shipping purposes. But Wingstar and Volens quickly outgrew the 1.6-acres of land south of Detroit, divided by Parkwood Road, and are looking for more space elsewhere.
Educators Music closed last spring after it and the house behind
it was sold to Solove. The former Chrysler dealership is just out
of view to the right, and shown in the view below (Google).

Also under contract to sell is the Stavash Family Limited Liability Co. which owns Educator's Music, 13701 Detroit Ave. and the house behind the store at 1406 Wyandotte Ave. Educator's Music was started in the early 1950's by the late John Stavash Sr., once a member of the world-renowned Cleveland Orchestra. He built the store building in 1960. His son, John Jr., runs the business today and temporarily relocated to the house behind the now-closed store.

It should be noted that Solove's plans don't include the 0.35-acre parcel used by Bruce's Automotive & Fleet Services, 13919 Detroit Ave. It is at the highly visible corner of Detroit and Bunts Road. This property is valued at $165,600 for taxes and owned by G & M Property Management 3 LLC, which in turn is owned by George Shaker. Shaker has owned the property either directly or through a company for more than 40 years, county records show.

Copy of a letter sent to property owners near
the proposed Solove development site.

According to sources, Shaker has been approached by multiple persons seeking to buy this site, including a Columbus-based real estate broker. However, Shaker has turned them all down. He has a multi-year lease with Bruce's Automotive which recently expanded into the former Baker Towing site on Detroit, just east of Cove Ave. 

There are more than a half-dozen recently built, under construction, or planned real estate investments along Lakewood's Detroit Avenue corridor. These include Rockport Square Townhomes built on the former Fairchild Chevrolet, Center North Apartments in the former office tower, McKinley Place townhomes built on the former McKinley School, One Lakewood Place mixed-use development at the former hospital site, an unknown residential development planned on the site of the now-closed Steve Barry Buick and neighboring Bobby O's Place tavern, an unknown development at the closed Trinity Lutheran Church, and an unknown development at the closed Phantasy Cleveland theater complex.

Combined, they would make a significant dent in the loss of housing inventory that has helped drive Lakewood's population loss, declining from a peak of 70,000 residents in 1970 to 60,000 in 1990, to 50,000 today. Having more modern housing options to complement the many historic and, in some cases, obsolete housing in Lakewood will enable the community to remain as an attractive place to live for years to come.


Monday, November 19, 2018

Cleveland's profile soars among out-of-state investors

Development of Cleveland's Flats East Bank also tracks with
the metamorphosis of Cleveland's economy in the last decade.
In that time, the Wolstein Group and other developers sought
huge public subsidies to justify their earlier investments. Now
Akara Partners, a Chicago-based firm, has joined Wolstein to
help develop Phase 3. It will be Akara's first investment in
 Cleveland (Akara)(CLICK PHOTOS TO ENLARGE).
Presidential candidate Ross Perot in 1992 famously referred to a "huge sucking sound" when it came to jobs leaving the USA. When money starts pouring into a city like Cleveland, it ought to make a sound, too. It is, and people are noticing.

Since the late 20th century, capital investment in Cleveland typically came from wealthy Clevelanders who loved their community and wanted to give something back to it. It was done in the name of altruism, not a healthy return. Indeed, local real estate investors who had to answer to out-of-town shareholders -- especially the highly demanding folks on Wall Street -- could never hope to justify investing in Cleveland. It's why publicly traded firms like Forest City Enterprises had stopped investing locally and instead directed their efforts toward coastal markets plus a few booming inland cities like Atlanta, Chicago, Dallas and Denver.

But nothing ever stays the same. Real estate markets get over-crowded with investors and overheat. Some get overbuilt. That's when real estate investors start looking for the next big thing. And they start looking for bargains.

NRP Group's 308-unit The Edison was the fastest lease-out of
a residential project in the history of the nation's 7th-largest
apartment developer. NRP, which seeks to expand The Edison
in 2019, recently joined forces with New York City-based
Tripost Capital Partners for an equity stream (Aerial Agents).
Enter Cleveland. And, to be fair, enter other Rust Belt cities that were also economic drivers of the late 19th and early 20th centuries whose momentum carried their growth briefly into the second half of the 20th century. Buffalo, Cincinnati, Detroit, Milwaukee, Pittsburgh, St. Louis and others are joining Cleveland, in part because of what they gained as the economic powerhouses of the industrial revolution. Their wealthy benefactors plowed riches into libraries, parks, museums, performing arts, institutions of higher learning and other assets that approach or even exceed those of the nation's top-tier cities. Nearly all of these cities still possess and support those assets.

And that's why, when coastal bargain hunters began looking for a good investment, they found Cleveland. Of course, you can't make money just by owning something cheap. There has to be a realistic hope for growth.

In doing an e-mail survey of real estate developers and entrepreneurs, they are noticing a big change in out-of-state investment in Cleveland. This is also borne out in the voluminous list of hot-linked headlines shared below. What do investors say is the reason? Greater Cleveland's positive job reports.

We locals sometimes question the validity and usefulness of those reports because we see the story on the ground, especially on Cleveland's troubled East Side. But out-of-state investors really do pay attention to this data. They are predicting population gains, so they are partnering with developers and entrepreneurs to try to get in on this market early.
With real estate investments throughout the Midwest, Chicago-
based Harbor Bay Group will enter the Cleveland market for
the first time with its Market Square development, on which
it plans to begin construction in 2019 in Ohio City (HPA).
Cleveland's job market has shot up in 2018 (includes the latest October data, which continues to show strong, steady growth) in all sectors except information technology and "other services." Job growth in Greater Cleveland is now increasing at a pace that ranks it with some of the fastest-growing metropolitan areas in the USA. The Web site recently announced that Cleveland ranked in the top 10 nationally among cities that had more jobs available than people to fill them. Global real estate firm CBRE ranked Cleveland 8th nationally in technology and talent growth "momentum markets."

Respondents to my e-mail survey cautioned that capital is not transferring away from the coasts. There are no signs that development is slowing in coastal cities as well as a few inland cities like Atlanta, Denver or those in Texas. Instead, it appears that investors are trying to diversify, and Cleveland, Pittsburgh and Detroit offer great opportunities to do that at a fraction of the cost of the coasts. Put it this way, respondents say they are more confident in the futures of Cleveland, Pittsburgh and Detroit than Chicago. They feel Chicago is building a bit of a bubble while its smaller Midwest neighbors still have huge growth potential and pent-up demand. Plus the image of Cleveland is definitely starting to change.

So investors are branching out into newer markets because of the overcrowding and cost of land in some of the East Coast markets. Insiders confirm that investors want to continue to put money in the Northeast markets because they are stable, but the opportunities are growing in the Midwest, and they are feeling very confident about diversifying their investments by putting money into the old Rust Belt powerhouses.

And it's not just Cleveland's residential projects that are attracting out-of-state investors. They're industrial and entrepreneurial projects as well.

Put simply, investors can get more for their money here, most say. They can buy and hold and get good returns versus markets with higher barriers to entry like on the coasts, and whose value is largely driven by investors from out of the country. They are at risk of a bubble and may already be over-priced.

Lastly, demographics here in Cleveland are starting to change slowly and, if they really pick up, these investors will be poised for even better returns should they stay or exit the market and sell the assets they've acquired. This is particularly visible when it comes to industrial properties around the area and the general lack of good industrial space that suits the needs of end users.

But don't depend on the word of unnamed sources. Look at the totality of recent actions by investors, not to mention the quality of their actions. They range from examples of direct investments in projects, to the opening and expansion of offices locally.

I don't expect readers to open all of these links and to read all of the articles (you can, if you want). But the story told by the totality all of these headlines is compelling...

11-13-18 / Arcapita of Bahrain teams up with homegrown landlord Weston Inc. to buy seven suburban industrial buildings

11-13-18 / Real estate investment-advisement firm Raider Hill Advisors expands to Cleveland 

11-07-18 / Dealmaker's guide to 15 cities where M&A thrives

11-06-18 / Bay Area tech startup sees a rent-to-own housing solution — just not here, invests in Seattle, Memphis, Atlanta, and Cleveland instead

10-26-18 / Dallas M&A firm Generational Equity opens office in Cleveland where outsourcing companies are booming

10-03-18 Santander Bank of Spain quietly enters Ohio market with Cleveland loan production office

09-11-18 / Align Capital buys Cleveland's enterprise asset management firm Predictive Service, merges it with Lewellyn Technology

09-09-18 / CBRE Group adds jobs to Cleveland, Akron offices to keep up with growth

06-24-18 / Biomedical investment growing in Cleveland, Midwest

03-09-18 / A dozen companies selected for Plug and Play Cleveland accelerator

01-28-18 / Banks feeling the draw to Northeast Ohio to break into market

01-09-18 / Courtland Partners of Cleveland agrees to be acquired by New York real estate investment firm, from among many suitors

11-26-17 / Bank of the West sees Cleveland region as growth zone

10-10-17 / Pennsylvania's NexTier Bank expands into Ohio with Cleveland market loan office

08-13-17 / Historic investment aims to bring opportunity, prosperity

08-10-17 / SunTrust Bank opens commercial banking offices in Cleveland, Cincinnati

07-31-17 / Fund That Flip plans to expand in Cleveland

07-30-17 / Investors starting to shower their love on Cleveland

05-17-17 / Marcus & Millichap’s IPA division launches Midwest Multifamily Group, bases its HQ in Cleveland

05-02-17 / Citizens Bank buys Cleveland M&A advisory firm Western Reserve Partners

There are many more stories that could be shared, but remain behind the scenes. They include small to large coastal investors taking board seats on Cleveland-based real estate firms and business expansion organizations to provide larger, more continuous streams of equity. These resources can only mean more jobs, construction activity and a higher quality of life for Greater Clevelanders.

"The talk at our company would have anyone very excited for what's to come in Cleveland and other Rust Belt markets," wrote a manager at a large, Cleveland-based residential development firm. "I think the 'sleeping giant' is finally awakening."


Thursday, November 8, 2018

Big developments converge on Ohio City's Red Line station

Ohio City station-area develop-
More developments are cozying up to the Greater Cleveland Regional Transit Authority's (GCRTA) Red Line and station in Cleveland's Ohio City neighborhood. The scope and scale of the planned developments are unlike anything that's been built along Cleveland's underutilized rail transit system, outside of the downtown area and University Circle. The lack of dense developments around rail stations has a direct correlation to the usage of the rail system. But that's starting to change.


Red Line Greenway (Vocon)
In 2019, construction will begin on the 2-mile, $6 million Red Line Greenway trail from near the Zone Recreation Center at West 53rd Street to the bluff overlooking the Cuyahoga River above Franlkin Ave. It will be on the south/east flank of the Red Line tracks, in some cases within a few feet of them.

Harbor Bay's Market Square development (HPA)
Also sometime in 2019, Chicago-area Harbor Bay Real Estate Advisors hopes to start construction on Market Square, a 3-acre development at West 25th Street and Lorain Avenue with a 12-story office building, 10-story apartment building, ground-floor retail and a 550+ car parking deck just above the west side of the Red Line tracks.

But if you don't think that stunning scale of development is enough, then you're in luck. Because there's more:

Look for an announcement in 2019 regarding the former Brickhaus Towers/One Twenty West development, first proposed by Andrew Brickman. With a lot on his plate already, a larger, more prominent local developer is seeking to take over this site to deliver as many housing units as possible to the booming near-West Side. Sources asked that this developer not be named publicly as the company doesn't like to announce a project unless it is more than 90 percent certain the project will happen.

That, of course, means this project is far from certain. But this site is in a prime location. It's across Lorain Avenue from the GCRTA station, has an unobstructed view of downtown, is a short walk to the West Side Market and the West 25th business/restaurant district, and is next to the Towpath Trail plus the planned Red Line Greenway. The Scranton Peninsula development will be down the hill along the Cuyahoga River and won't block the views here.

Original plan for Brickhaus Towers/One Twenty West (HPA)
Furthermore, the new developer will likely go back to something like Brickman's original vision for this site -- a larger-scale mixed-use development with mid- to high-rise towers offering 500-600 apartments with ground-floor retail and live-work units facing Lorain. Brickman scaled back the project in his last conceptualization. The new developer is not concerned about the scale of this project, citing increased interest by New York City investors in Cleveland and its newfound job growth.

Last but not least is the development of GCRTA-owned land along Columbus Road, above the Red Line and the planned alignment for the greenway. In the hopes of attracting a "high-quality, dense, mixed-use, transit-oriented development," GCRTA publicly issued a request for qualifications (RFQ) from developers so that a selection committee could choose the most capable company to whom the authority could sell or lease its land. The deadline for developers to respond was Oct. 11.
Rezoning changes approved by Cleveland City Council on
Oct. 17. The blue rectangle shows an area larger than what
GCRTA ultimately included in its development RFQ (CPC).
GCRTA Real Estate Manager James Rusnov said in an e-mail to All Aboard Ohio, a non-profit that advocates for better public transportation and more transit-oriented development, that it won't reveal the identity of the winning bidder or how many responses GCRTA received to the RFQ until after a development agreement is submitted to the GCRTA board. That probably won't happen until February or March of 2019.

However, a neighborhood rumor is that Sam McNulty, a proponent of mass transit and biking, is very interested in developing this property. His Duck Island 7 development at Columbus Road and Abbey Avenue, with townhomes selling for $500,000 to $600,000 each, is nearly sold out. And, on Nov. 3, McNulty posted on Instagram a photograph of a large roll of construction blueprints to be submitted to the city's Building Department for a large development. He pledged to "announce the details soon."

Sam McNulty's Nov. 3 Instagram post (Instagram)
An architect's name was visible on the blueprints -- Dimit Architects, which designed McNulty's Duck Island 7 project. Dimit sources refused to identify the project associated with those blueprints, deferring to McNulty. Considering that McNulty referenced getting building permits from the Building Department, they aren't for the GCRTA property. Its sale is still months away from being approved by the RTA board.

Cleveland City Council on Oct. 17 voted unanimously to rezone multiple parcels of land in the fast-growing Duck Island neighborhood (see map above). It followed the creation of a development masterplan based on public input. The land along the west side of Columbus Road, from Lorain to West 25th, was rezoned from semi-industry to "multi-family G-1" which allows a range of residential uses, from single-family homes to apartment buildings. The maximum square footage of a building on a property zoned G-1 is three times the lot area and can be up to 35 feet in height based on the street frontage. However, the Red Line right of way below Columbus Road is 25-30 feet lower.

Sam McNulty's Duck Island 7 townhomes (Mendo/UrbanOhio)
Rusnov noted that the GCRTA-owned land that is the subject of the RFQ is south of Abbey, measuring 85 feet by 700 feet. That brings it to the vicinity of the Wiley Avenue intersection. The land north of Abbey, next to GCRTA's Ohio City station, is not part of the RFQ because Rusnov said it is where an ADA access ramp to the greenway will be located.

GCRTA's RFQ stipulates that developers have the option to request additional land if a larger project is proposed. However, Rusnov emphasized that the Red Line Greenway is "distinct from the development site and is fully contained on a separate parcel of land."

GCRTA's Ohio City Red Line station (KJP)
Property south of Wiley isn't part of the RFQ because the GCRTA right of way widens in that area. It adds a third track that serves as a Red Line maintenance siding. A greenway ramp to/from West 25th will also be located south of Wiley. And, long term, the Duck Island masterplan proposed an extension of Monroe Avenue over the Red Line tracks and greenway to Columbus Road. That will allow the removal of Columbus Road's dangerous, angular intersection with West 25th and open up a multi-acre site for future development.

Increasingly, as living, working, shopping and playing becomes more popular in Ohio City and the adjoining Duck Island neighborhood, space is going to be at a premium -- especially near high-capacity public transportation stops like rail stations. Indeed, these latest developments show how much in demand this area is becoming.


Wednesday, October 31, 2018

Is Sherwin-Williams ready to paint Cleveland's sky?

Will a new 40+ story tower paint the sky in downtown Cleveland
 in a few years to consolidate the scattered headquarters offices
of the Sherwin-Williams Company? With the Valspar deal now
 behind it, there are new rumors that the world's largest coatings
company is reviewing its skyscraping options (thetorontoblog).

On Jan. 22, 2016, some 6,000 Sherwin-Williams Co. (SHW) salespersons began descending upon the Fortune 500 company's annual National Sales Meeting in Orlando, Fla. Many were excited and not just because it was the paint and coatings company's 150th year in business. Reportedly, a large number of attendees expected to learn about the company's grand birthday prize to itself -- a shiny new headquarters tower in SHW's home city of Cleveland, Oh.

But when the sales meeting wrapped up five days later, no such announcement was made. For the next two months back in Cleveland, however, rumors about the headquarters tower continued to swirl despite (or even enhanced by) off-the-record denials by SHW. The city's largest developers were reportedly responding to SHW's requests for proposals for a 900,0000-square-foot headquarters, roughly 40 stories tall, to consolidate its scattered offices into a modern, efficient, collaborative new headquarters. The Jacobs Lot on Public Square was the favored site. Before the sales meeting, developers apparently delivered their proposals to SHW.

It was soon learned why SHW didn't announce a new headquarters tower at Orlando. SHW had started working on something much bigger. In late March 2016, it was revealed that SHW was seeking to acquire rival coatings company Valspar Corp. of Minneapolis in an $11.3 billion transaction.

Accomplishing a task of that scale and complexity would occupy so much of SHW's staff time that they brought in outside consultants and law firms to help them through all of the paperwork and filings with the Federal Trade Commission, Securities & Exchange Commission, and other agencies in the USA and overseas. Antitrust approvals were also required in Australia, Brazil, Canada, China, Ecuador, the European Union, Mexico, Russia and Vietnam.

That paperwork didn't end after governments gave their blessings, with conditions, to the merger that wrapped up June 1, 2017. After that date, SHW managers began sorting through new organizational charts, staffing needs, office locations and assignments for nearly 53,000 employees on a global scale. It would take another year of internal reorganization and wrapping up of legal work.

Once the reorganization was done, SHW's interest payments increased roughly four-fold to service the debt from acquiring Valspar, but its free cash flow increased further, too. SHW's ability to cover its interest payments is still better than than any of SHW's competitors except PPG.

SHW started to grow again. It began hiring again. And it reportedly began looking at its headquarters situation again.

It's difficult to know the specifics of what SHW is pursuing because its clients apparently have non-disclosure agreements with the coatings firm. But you can learn some things even when typically friendly, chatty sources refuse to even return a phone call or e-mail to discuss this subject.

What can be gathered from recent sources and cross-referenced against 2016 information is that SHW is pursuing a headquarters tower measuring about 1 million square feet (upwards of 40 stories in height depending on the site), that it will be located within 1-mile of where the company was founded near SHW's John G. Breen Technology Center, 601 Canal Road (per the company's charter), that it may have already hired its engineering and architectural firms (possibly from 2015-16) but is still in the conceptual stage because it hasn't gotten into detailed costs of elements like electrical and structural needs.

If SHW had justification for consolidating its administrative offices in 2016, it has even more justification now. Fifty years ago, SHW occupied less than one-fourth of the Landmark Office Towers. Today, the growing company occupies six facilities scattered across Greater Cleveland. Consider:

Landmark Office Towers at Cleveland's Tower City Center
complex, with the Skylight Office Tower to the left (KJP).

  • In 2014, SHW outgrew its 900,000-square-foot (SF) Landmark Office Towers, which it has called home since it was built in 1930. Perhaps 100,000 to 150,000 SF is leased to other tenants, the largest of which are Reminger Attorneys at Law and McCarthy, Lebit, Crystal & Liffman Co., LPA. In the 1950s-70s, there were four major tenants leasing space in the complex -- Republic Steel Corporation, Erie-Lackawanna Railroad, Sohio and SHW. During the 1980s, an expanding SHW acquired the majority of the leases in the complex. SHW purchased the complex in 1985 and remodeled it in 1989. Nearly 3,000 SHW employees work at Landmark Office Towers today.
John G. Breen Technology Center, Cleveland (Google)
  • One of SHW's oldest facilities is the Breen Technology Center, built in 1948 but was expanded 50 percent in 1998 to 140,293 SF. It was built next to SHW's pre-1930 headquarters and where SHW was founded in 1866. Today, it is the workplace for about 400 researchers and scientists. The facility is so full that most of Valspar's R&D staff had to remain in Minneapolis.
Sherwin-Williams Learning Center, Strongsville (Google)
  • In 1994, SHW opened its Sherwin-Williams Learning Center, 11350 Alameda Dr., in Strongsville. It purchased a 8,928-SF building and added two new buildings, bringing the total size of the complex to 24,150 SF. It is one of several such facilities around the country. An online curriculum also is offered.
Sherwin-Williams Automotive Finishes Corp. world head-
quarters and technical center, Warrensville Hts. (Google)
  • In 2000, SHW acquired a 388,766 SF, 80-acre manufacturing plant and office campus, 4440 Warrensville Center Rd., Warrensville Hts., from BP America (was a Standard Oil facility) for its Automotive Finishes Corp. global headquarters, research and development facility and training center. The administrative headquarters building measures about 30,000 SF and houses about 100-130 employees.
Skylight Office Tower, Cleveland, tenants and leases
(Morgan Stanley et al, CLICK TO ENLARGE)
  • Starting in 2014, SHW began leasing up to 51,810 SF in the Skylight Office Tower., across West 2nd St. from the Landmark Office Towers. With respect to 39,792 SF, SHW's lease began on April 1, 2014 and had an expiration date of Oct. 31, 2018 with a three-year lease extension option that SHW exercised. With respect to 12,018 SF, SHW's lease began on July 1, 2014 and has a current expiration date of March 31, 2020 with a three-year lease extension option.
Sherwin-Williams flex, Hinckley Pkwy., Cleveland (LoopNet)
  • In mid-2017, and according to SHW sources, about 225 SHW administrative employees began moving to 4770-4780 Hinckley Industrial Parkway in Cleveland. This 1985-built, former Charter One Bank check processing facility was sold in 2012 to IRG Dayton I LLC (former Ohio Realty Advisors) which marketed the 151,830 SF facility as an office/flex space. SHW began moving employees from downtown Cleveland, from Valspar in Minneapolis or creating new jobs to replace (rather than relocate) Valspar workers. I was able to locate more than $740,000 in building permits in the past year for SHW's remodeling 63,000 SF of offices in this structure and for the addition of a fitness center for SHW employees. Leasing information could not be located.
When you see a summary of the office space growth of SHW from the past 30 years and how scattered it has become, the need for a new consolidated headquarters facility becomes more apparent. The need existed before the Valspar acquisition. The need is even more acute now. With the Valspar integration process concluded, it is understandable why there are reports that SHW has returned its attention toward graduating from its nearly 90-year-old headquarters building and constructing a much larger, more efficient and modern structure to chart its growth for the next 90 years.

It remains to be seen whether SHW can advance planning for a consolidated headquarters enough beyond a conceptual level by January to where its representatives can discuss it publicly. If so, when its cadre of salespeople gather for the next national sales meeting in Orlando, they will feel even more proud about their company and its towering future.