Wednesday, February 20, 2019

Ohio City mixed-use project may feature downtown ad firm

It was only a matter of time before the 1.7-acre Hingetown site
of the Cleveland Vibrator Company was acquired for redevelop-
ment. It is surrounded by recent, in-progress and planned high-
value, multi-story developments (Google).
An exciting mixed-use development is in the works for the Hingetown section of Cleveland's Ohio City neighborhood, according to multiple sources. Although still in a preliminary stage, the development's concept at this point involves putting the offices for a fast-growing downtown company on the lower floors of a new building with apartments on the upper floors.

Two sources say the site is 2828 Clinton Ave., the current location of one of the region's most well-known and oft-photographed businesses -- the 94-year-old Cleveland Vibrator Company which will relocate from the site. The downtown company seeking to move to the site is The Adcom Group, a full-service marketing and communications firm, according to two other sources.

However, Adcom CEO Joe Kubic would not confirm specifics at this time.

"I personally, along with some other partners, are in the process of buying some commercial property in Ohio City," he wrote in an e-mail. "We haven’t yet finalized our plans for it though. It is certainly a possibility that Adcom may relocate there at some point, but we are happy in our current location as of now."

Adcom is headquartered at 1370 W. 6th St. in downtown Cleveland's Warehouse District, above Starbucks Coffee.

The Adcom Group's Warehouse District HQ
is becoming constrained by the company's
rapid growth. The communications and
marketing firms anticipates further growth
and needs more office space (Google).
Two sources also say that The Snavely Group of Chagrin Falls will likely be the developer for the proposed mixed-use project. However, President Pete Snavely Sr., Vice-President of Marketing Polly Snavely and Vice-President of Development Pete Snavely Jr. have yet to respond to a Feb. 19th e-mail seeking comment for this article.

This would be Snavely's second Hingetown development. Last year, at the corner of Detroit Avenue and West 25th Street, it completed construction of The Quarter -- 194 apartments above 30,000 square feet of ground-floor commercial space. The commercial space is fully leased and the residential units are 93 percent leased, according to The Quarter's Web site. The $60 million development also involves the renovation of the historic Forest City Bank Building on the other side of Detroit with ground-floor commercial uses and 38 affordable apartments above.

One of the most well-known signs on the West Side is this one
at the corner of West 29th Street and Clinton Avenue in Ohio
City's Hingetown section. The manufacturer of industrial equip-
ment to resolve material flow challenges is already looking for
a new home in the area (Google).
Through 2828 Clinton Inc., Cleveland Vibrator owns 14 parcels totaling 1.715 acres, according to Cuyahoga County property records. The site is bounded by West 28th and West 29th streets, as well as Church and Clinton avenues. The proposed development reportedly does not include the Ohio City Firehouse, 1455 W. 29th, which was converted into offices and the Rising Star Coffee Roasters cafe. There is also no information to indicate whether the development site includes a residential property and the Banana Blossom Thai Cuisine at West 28th and Clinton.

Sources do not have information yet as to how tall the proposed mixed-use building might be or when demolition and construction might begin. Contrary to Kubic's statement, other persons close to the project say time is of the essence. Adcom reportedly expects to double in size in the coming years and needs more space soon.

Adcom was founded in 1990 and today has more than 110 employees although Kubic wouldn't clarify how many. The employment data comes from news coverage last year about 100-employee Adcom's purchase of fellow ad firm Arras Keathley that had 10 employees.

The Cleveland Vibrator site is reportedly under a sale contract but has yet to close. Terms of the deal were unavailable. In total, the land and buildings on the 14 parcels are appraised by the county at a combined value of $510,000 for tax purposes. Cleveland Vibrator has already begun a search for its new location and hopes to find a new home nearby soon, a source said.

Its current site is surrounded by new developments, in addition to Snavely's Quarter. Northward, across Church Avenue, Hemingway Development is building its $60 million, mixed-use Church & State project, featuring an 11-story building and a 6-story building. In the opposite direction, across Clinton Avenue, Casto will soon begin constructing its $22 million, 119-unit Dexter Place apartments. To the east, across West 28th, the $24 million West 25th Street Lofts were renovated a few years ago with 83 apartments over 9,600-square-feet of commercial space.


Friday, February 15, 2019

Gordon Park area -- Cleveland's next housing boom site?

About 150 homes and 8,000 feet of commercial space are
proposed by Knez Homes at East 55th and the Shoreway,
near where Bo Knez grew up. But the site's access to the
lake, downtown Cleveland and University Circle were
bigger factors in him wanting to build here (RSA)
Recent real estate projects show the strength of the housing market in Cleveland, especially in certain neighborhoods accessible to downtown and the lake. New projects are taking at a stab at an undeveloped area for housing -- East 55th Street and the Shoreway, just west of Gordon Park.

When motorists enter Cleveland on Interstate 90, they get an up-close view of Lake Erie to their right that is spectacular at sunset. But to their left is an underwhelming collection of low-level, single-use commercial structures and vacant lots.

This "gateway" to downtown offers an immediate message -- Cleveland hasn't figured out how to capitalize on its lakefront. The highway itself is testament to that. When it was built, it sliced Gordon Park in two to skirt the coal-fired Cleveland Electric Illuminating Co. (now First Energy) Lake Shore Power Station, demolished in 2017. With the power plant gone, developer interest in the Gordon Park area has perked up. That includes rerouting the highway to restore the park and improve access to the lake.

Entering downtown from the east along the lakefront is under-
whelming. The lack of major developments conveys a message
that Cleveland hasn't capitalized on its lakefront (Google)
The latest developer to show interest in the area is Bo Knez, president and CEO of B.R. Knez Construction, Inc., DBA Knez Homes. Knez, who was born in Slovenia and raised in the East 55th-St. Clair Avenue neighborhood, said he has wanted to developed here for some time.

On Feb. 15, he presented conceptual plans to the Design Review Committee of the Cleveland Planning Commission to get its feedback before proceeding with more detailed designs for a mixed-use development. The site is at 5700 South Marginal Rd. with two parcels of city-owned land totaling 3.9 acres. In urban development, that is a large canvas.

On it, Knez says he plans 50-60 townhomes, 90-100 apartments and 8,000 square feet of ground-floor commercial space on the Shoreway side for retail, restaurants or offices. Townhouses would be above the commercial spaces, he said in a phone interview on Feb. 13 but asked for this article to not be published until after his plans were presented to the planning commission.

Views from the Shoreway (I-90) of Knez's proposed East
55th development. The tallest building is a 90- to 100-unit
apartment building, with the shorter structures being 50-60
townhouses. Those nearest to the highway would have
retail/restaurants/offices on the ground floor (RSA).

The site is the former Howard Johnson's 12-story hotel built in 1965 but demolished in 2009. Knez likes this location not just because he grew up nearby, but because it has easy access to downtown Cleveland and University Circle -- the first- and fourth-largest employment concentrations in Ohio. And, of course, the lake is a short walk away.

Planning Commission staff threw some of that cold lake water on Knez's plans, based on their written comments.

"The planned density feels somewhat relentless. Consider reducing the number of units, and create more communal spaces which encourage interaction and a sense of 'dwelling' for the residence," said one unidentified staff person.

"Consideration needs to be given to how this site connects to the surrounding neighborhood and environment to maximize the potential of the 'amenities' that surround this locations," said another commission staffer.

The eastern approach to downtown is a stark landscape, devoid
of any significant structures since the 2017 demolition of the
Lake Shore Power Plant that stood at the left. With it gone,
there's more interest in developing this area including relo-
cating the highway and adding more greenspace (Google).
The last comment is interesting because there is no nearby neighborhood to connect with nor any adjacent amenities. Knez's development, by adding about 150 living units and perhaps 300 residents, will hopefully jumpstart a lakefront neighborhood that can connect with his project.

Interestingly, Knez's presentation listing in the planning commission's agenda also showed his project included a city-owned site on the north side of the Shoreway, at 5500 North Marginal Road. But Knez said that was not correct.

"My interest is only on the south side of the Shoreway," he said. "That site (former Howard Johnson's) has been vacant for a long time."

While Knez may not be interested in the north side of the Shoreway, others are. In fact, that's where development of housing in this area began.

The Shoreline apartments, developed as Quay 55 in 2002, as
 seen from Gordon Park. A dozen more developments of this
scale, including multiple high-rises along this stretch of lake-
front, would offer the kind of neighborhood Knez is trying to
jumpstart with his proposed development (Marous).
It started in 2002 when the Nicholson Terminal building, once a new car warehouse, was converted to the 138-unit Quay 55 apartments by Rocky River-based Coffin Development Co. But Coffin defaulted on a $20 million U.S. Department of Housing and Urban Development-guaranteed loan.

Quay 55 went through several owners until 2017 when Landmark Lakeshore LLC bought Quay 55, renamed it The Shoreline, and got approval to add 29 apartments to the property by converting indoor parking spaces. Occupancy of the building has continued to be high. Only five apartments are currently available in the building, according to The Shoreline's Web site.

Unfortunately, a 4-acre lakefront parcel east of The Shoreline and west of 5500 North Marginal remains undeveloped. This flat, wide open, grassy parcel is owned by Coffin Development Co. -- the same firm that redeveloped the Nicholson Terminal. While it would be a terrific development site, the property remains untouched. There are no public filings to indicate any development activity here.


Thursday, February 14, 2019

Downtown-lakefront land bridge has momentum, funding

Lake Erie Plaza was a wide pedestrian bridge lined with statues
and vendor spaces over the lakefront railroad tracks. But it was
built for the Great Lakes Exposition of 1936-37 and dismantled
soon thereafter. A land bridge of similar design or even wider
may be sought by city officials and others to link the downtown
malls and North Coast Harbor including its museums, new
development and a long-planned transportation center (PD file).
If the city has its way, a $65 million land bridge linking Downtown Cleveland's malls to the lakefront could soon be the centerpiece of a multi-faceted plan to enhance the area around North Coast Harbor. Developments surrounding the proposed land bridge include expansion of the Rock & Roll Hall of Fame, Great Lakes Science Center, Cumberland Real Estate Development's next phases as well as a multi-modal transportation center.

The City of Cleveland has $25 million in city, county and state funds left over from an earlier plan to link downtown and the lakefront with a flamboyant, curving, skinny and ribbon-like pedestrian bridge designed by "starchitect" Miguel Rosales. The bridge's cost had ballooned to $33 million. Instead, the Cleveland Economic Development Department is pursuing a land bridge envisioned more like the statue-festooned and storefront-lined promenade that linked downtown to the Great Lakes Exhibition of 1936-37. In fact, the land bridge could be even wider -- as wide as the malls themselves. City officials seem confident they can get it built by 2022.

To do so, the city is seeking another $40 million from a variety of public and private sources. The land bridge, also dubbed "Mall D," would replace the now-closed pedestrian bridge that has connected Mall C (above the Huntington Convention Center, north of Lakeside Avenue) with First Energy Stadium and Cleveland Municipal Stadium before it.

Because of this connection, the Cleveland Browns are reportedly contributing funding to the land bridge and possibly to a partnership with Cumberland's lakefront development plans. The amount or conditions aren't yet known and the Browns aren't revealing anything yet. So far, Cumberland has built on the lakefront the two-story Nuevo Modern Mexican & Tequila Bar restaurant and the three-story, 16-unit Harbor Verandas apartment building at the foot of East 9th Street.

Cumberland Development's Harbor Verandas apartments over
retail are the latest phase of lakefront investments to turn North
Coast Harbor into more of a year-round setting (KJP).
Next phases for Cumberland and its partner Trammel Crow apparently include redeveloping two former Port of Cleveland warehouses into shops and restaurants. Full build-out shows 1,000 apartments, 80,000+ square feet of offices and 50,000 square feet of retail space. It also reportedly involves partnering with the Rock & Roll Hall of Fame and the Great Lakes Science Center on proposed museum expansions that would, among other things, connect their buildings with an enclosed, climate-controlled walkway.

Additionally, the latest of many iterations of a Lakefront Multi-Modal Transportation Center is part of the land bridge plan, sources said. The transportation center would unite Greyhound buses, Amtrak trains, Greater Cleveland Regional Transit Authority (GCRTA) buses and trains and possibly other regional transit agency buses.

Looking east toward East 9th Street from near the Amtrak train
station, and possibly from below where a new land bridge/Mall D
could be built, the Greyhound bus station portion of the planned
Lakefront Multi-Modal Transportation Center is seen. The Shore-
way is to the left and the rail tracks are to the right (CPC).
The 700,000+ combined annual passenger boardings (includes an anticipated 20 percent boost thanks to more convenient transfers between trains and buses) at this hub in downtown Cleveland would, for context, exceed the 619,000 enplanements at Akron-Canton Regional Airport in 2017. It would also exceed the attendance of 526,000 people at Cleveland Browns home games last year. With that kind of 24-hour, 365-days foot traffic, it could certainly attract a cafe, newsstand and possibly a convenience store that would also be supported by existing and planned lakefront tourism, housing and maybe a hotel.

The most recent plan has a refurbished Amtrak station and new Greyhound station built along and south of the Shoreway. The Greyhound station was assumed to be built in such a manner so that it could support a small building built above it, such as for a hotel, offices or residential. The transportation center at full build-out is estimated to cost less than $70 million. The Northeast Ohio Areawide Coordinating Agency, which oversees federal transportation spending in Greater Cleveland, has included the Lakefront Multi-Modal Transportation Center in its current funding priorities.

The city's most recent plan for a Lakefront Multi-Modal
Transportation Center with a possible location for the newly
proposed land-bridge/Mall D concept added (CPC/KJP).
In 1998, one of the most exciting variations of the lakefront multimodal transportation center was proposed (See the 1998 plan's Executive Summary here). Called the North Coast Transportation Center, it featured an enclosed station over the Norfolk Southern/Amtrak and GCRTA tracks plus a roadway for buses with a green roof that was nearly as wide as Mall C to the south. It could even feature meeting spaces to expand the convention center. In other words, it would provide indoor and outdoor pedestrian linkages between the central business district and North Coast Harbor.

Other transportation linkages are possible with this site. For example, the public transit advocacy group All Aboard Ohio has proposed a waterside terminal in Cleveland (possibly in the harbor) where high-speed catamarans could take passengers to Port Stanley or Shrewsbury to board Ontario's planned high-speed trains and be in downtown Toronto in less than four hours.

The 1998 plan for the North Coast Transportation Center that
would also feature a green roof and thus serve as Mall D over
the tracks and end at a boulevard that would have replaced
the Shoreway highway. A new lakefront hotel and parking
garage was also envisioned in this amazing plan (GCRTA).
Realizing the 1998 transportation center plan would cost about $200 million in today's dollars. But the $25 million already in hand could be used to fund the design/engineering and environment approvals. Then the city would be in a position to apply for and secure a no-match federal Railroad Rehabilitation & Improvement Financing loan (for which there is still $29 billion in direct loan authority remaining) to pay the entire cost of a transportation center. A $200 million loan would cost the city about $10 million per year. By the way, the $10 million per year to service debt that built First Energy Stadium in 1999 ends in 2028.

"Seems like a no-brainer" to debt-finance the land bridge incorporated with a transportation center, said one planner involved with the city's lakefront projects who spoke off the record. "But everyone is waiting around for a grant. We need to just do it and pay it back over time."


Sunday, February 10, 2019

Ten million square feet of downtown Cleveland construction

More than 4 million square feet of
development projects were recently
completed, are underway or about to
begin along Euclid Avenue in down-
town Cleveland. But that may be just
the appetizer for what's next. (KJP)

What if I told you that Downtown Cleveland could soon have more than six million square feet of buildings under construction at the same time? What if I told you downtown already has four million square feet of construction underway or about to begin? Yes, 10 million square feet total.

First, the second question. Here's a quick summary of current projects to add residential space only along Euclid Avenue and only between Public Square and Playhouse Square. In some cases, where the building is being completely rehabbed, I'm including the total square footage of the building which may include some ground-floor retail space or some co-working spaces. I'm not including all of the space in the Halle's and Terminal Tower buildings for example, because roughly half of each will not be touched by renovations and therefore is not subject to the construction investment.

May Company........800,000
Euclid Grand..........308,000
Halle Building.........200,000
Terminal Tower.......340,000

TOTAL.................4,060,000 square feet

There has been some publicity recently about how many construction cranes dot the skylines of America's largest cities. Cleveland counts only one tower crane currently up -- for The Lumen 34-story apartment tower at Playhouse Square. It went up shortly before the tower crane for The Beacon 28-story apartment tower came down last fall. Another will go up soon for the Church & State development now underway on Detroit Avenue at West 29th Street. This doesn't include the many shorter cranes positioned around the Quicken Loans Arena expansion.

Downtown Cleveland's many underutilized, obsolete commercial buildings can be renovated and repurposed for less cost than building new towers that would require construction cranes. All those old buildings have been or are filling up with residents to satisfy the still-insatiable demand for housing in our urban core.

Among 37 downtown Cleveland residential buildings 100 feet or taller, 21 of those became or are becoming residential since 2010, 27 of 37 since 2000, and 31 of 37 since 1995. Downtown has seven 20+ story residential developments completed or underway since 2006 with two more in advanced stages of planning. That's nine total. Only three 20+ story residential buildings were developed in downtown Cleveland before 2006 -- all from 1967-73. How many of 20+ story downtown residential developments since 2006 involved a construction crane? Two.

Downtown Cleveland, as seen from Voinovich Park at North
Coast Harbor in summer 2018 (KJP).
More are coming, however. The unmet demand for housing amounts to 6,800 residential units by 2030, which would equal another 21 Lumen-sized apartment towers to meet that demand. Cleveland's suddenly robust job growth and near-exhaustion of the supply of obsolete commercial buildings is timely. It coincides with new financial tools like the Opportunity Zone tax breaks or the fact that real estate investment trusts are willing to take lower, longer-term returns. These changes bode well for meeting the residential demand with new construction as the supply of obsolete, convertible commercial buildings runs dry.

So when someone says it's a bummer that Cleveland doesn't have more construction cranes dotting our skyline, we probably would have them if we didn't already have so much obsolete, lower-cost commercial space available for conversion to meet the demand for residential.

Now, the first question. What might the six million square feet of new construction involve? Right now, we're looking at a much more feasible, scaled-down but still massive nuCLEus development, potentially measuring 2 million square feet of offices, residential, retail and parking.

A preliminary massing for Stark Enterprises' scaled-down
nuCLEus development between Prospect and Huron at
East 4th Street. Plans are still being finalized (Stark).
In the last two years, Stark Enterprises tried to initiate two innovative financing schemes to provide additional public funding to his original, $500+ million plan for nuCLEus. Those schemes suggest that Stark had a $50 million to $100 million gap in his capital stack for nuCLEus. In other words, Stark Enterprises was able to amass upwards of $400 million of capital for the project. At current construction prices, the revised design for nuCLEus could cost as little as $350 million. If so, it's possible that Stark may have enough capital to move forward with this new, smaller plan.

What's next? It's possible that another 4 million square feet of downtown development could be in the cards and, at their rates of apparent progress, they could both see construction at roughly the same time.

In talking to city officials and consultants hired by Sherwin Williams, the Fortune 500 company was ready to move forward in 2016 with a new 900,000-square-foot headquarters tower on the Jacobs Group-owned parking lot on Public Square. The global coatings company was quickly outgrowing its 86-year-old headquarters in the Landmark Building on lower Prospect Avenue.

Then, Sherwin Williams saw an opportunity to build its market share and revenue by acquiring rival coatings firm Valspar for $11.3 billion. All planning for the new HQ was put on hold. The Valspar acquisition was approved by various governments around the world in 2017, and all of the legal work and internal reorganization was wrapped up by mid-2018.

To accommodate the year-over-year growth of 615 new jobs
in Greater Cleveland, Sherwin Williams added a fourth office
building to its local inventory, on Hinckley Industrial Parkway
in Cleveland. This came two years after the coatings giant
shelved plans for building a new consolidated headquarters
tower on Public Square in downtown Cleveland (LoopNet).
But Sherwin Williams is now carrying more than four times the average debt that the rest of the coatings industry was carrying. At current trendlines, it could take the coatings giant until the end of 2022 before its debt-to-equity reaches levels more typical of its competitors.

But with 615 additional employees now spread across four office locations in Greater Cleveland in 2018 compared to a year earlier, Sherwin Williams has more of a need for a consolidated headquarters tower than ever before. And it needs to be an even larger headquarters than the one it planned in 2014-16. It is likely to be 1 million square feet or even larger so it can accommodate future growth of the company.

Sherwin Williams isn't going to take on new debt from constructing or long-term leasing a new headquarters, possibly costing $1 billion, until it pays down the Valspar debt. But it might revisit planning for a new headquarters before the Valspar debt is paid down to a reasonable level. At its current rate of paying down long-term debt, and considering that the design and construction of a skyscraper takes three to four years, we might start hearing more substantial rumblings from Sherwin Williams about a new headquarters in about a year.

The existing Justice Center, including the courts tower (center-
left) and jail (part of which is visible in the foreground) is a
massive complex at 2.3 million square feet. Its replacement
will likely be even larger, perhaps up to 3 million square
feet and built at separate locations (Google).
That project could also coincide with what may be the largest single real estate construction project since the Cleveland Union Terminal complex and associated rail rights of ways were built in the late 1920s and early 1930s. All signs are pointing to the county building a new Justice Center consolidated courts tower and a regional jail complex rather than rebuilding its existing center.

The reason is that the existing facility, despite measuring 2.3 million square feet, is too small for Cuyahoga County's vision. Its goal is to regionalize all municipal courts and jails, thereby eliminating duplicative functions and saving taxpayers money. It's quite possible that a consolidated courts tower and regional jail complex would add up to 3 million square feet, including parking.

That doesn't mean that both facilities would be under one roof as they are now or even across the street from each other. The county hired Project Management Consultants to present alternatives, ranging from reconstructing the existing Justice Center courts tower and/or jail facilities to building new in adjacent sites or separated by miles. The consultant began their work in early 2018 and must wrap it up by Jan. 31, 2020. Their to-do list includes developing build/rebuild specifications for a possible request for proposals from developers.

If the county does favor new construction for both the courts tower and jail complex, the cost could be more than $1 billion. According to a 2014 report by Cleveland-based Osborn Engineering Co., maintaining the 26-story court tower, central atrium, the two 11-story jails, the city's seven-story police headquarters (now leased for county probation offices) and 432,500 square feet of underground parking over the next 10 years would cost nearly $179 million.

Leasing a new courts tower and jail, as the county does with its administration building, could cost upwards of $75 million per year. And, as with its administration building, the county could buy a new courts tower and jail for $1 at the conclusion of the lease.

One option proposed about a decade ago was the construction
of a new courts tower and jail tower built over a parking deck
and transit center along Superior Avenue, between West 3rd
and West 6th streets in the Warehouse District (GCRTA).
County officials have prioritized keeping a consolidated courts tower downtown because of its central location, accessibility by public transportation and car, the presence of many restaurants for workers, visitors and juries, and the proximity of offices for attorneys/public defenders, bail bondsmen, social services and other support services.

A location that might make sense for a 30-story consolidated municipal and county courts tower is on the Weston-owned parking lots on Superior Avenue at West 3rd Street, one block west of Public Square. It is also right next to the Public Square lot where Sherwin Williams planned to build its headquarters tower and might revisit that site again.

Where might the new regional jail be put? Anywhere in or near downtown is a logical guess. But if a new regional jail isn't built next to a new courts tower, look for a jail facility for unsentenced inmates to be included inside the courts tower so that the accused and their attorneys can have proximate access to each other. The consolidated jail would offer 200 more beds than the existing jail. It will be a massive complex, measuring more than 1 million square feet.

In 2026, just seven short years from now, the Justice Center will be 50 years old. By that time, it may already be vacated. And as part of a request for proposals, the winning developer may get the keys to that complex, perhaps at a vastly reduced price, to do with it what they will. Given its age by then, the building would qualify for historic tax credits to reduce its cost of redevelopment. And given the building's rapidly decaying condition, its redevelopment will have to be extensive.