Friday, January 10, 2020

Another residential tower continues Euclid Avenue's boom

The proposed 23-story City Club Apartments would fill the last
undeveloped gap in Euclid Avenue's streetscape, rising where
the Hippodrome Building stood before 1981. The new tower
would add more vitality to a street that has seen an incredible
amount of investment in the 2010s, with more development
The Michigan-based chain of City Club Apartments has acquired enough capital to move forward with a proposed 23-story apartment tower at 720 Euclid Ave. in downtown Cleveland. It would be the third new-construction apartment tower to rise on Euclid Avenue downtown since 2018.

Based on preliminary, conceptual designs submitted to the City Planning Commission for approval Jan. 16, the new tower would measure about 250,000 square feet and offer 310 apartments over a two-level retail/lobby base. Proposed retail includes a restaurant and a doggy day care business.

At this early stage of planning, the high-rise would offer 180 studios, 78 one-bedroom apartments, 42 two-bedroom apartments and 10 three-bedroom apartments. Prices for those units are not yet available.

Based on the per-square-foot construction costs of the other two apartment towers built recently -- the 29-story Beacon and the 34-story Lumen -- the construction cost of the City Club Apartments could be less than $85 million.
Looking southward on East 9th Street toward Euclid Avenue,
the City Club Apartments (right) would tower over its neigh-
bors, the City Club Building and the Schofield Building (left)
with the current view of the site seen below (Vocon, Google).

Although details of the City Club Apartments' financing aren't known, a significant portion of the funding came when the firm sold an apartment building in St. Louis for $48 million and exited that market, in part to help capitalize his Cleveland project.

“We have a responsibility to our investors, lenders and partners to perform at the highest level and we are reallocating our financial and human capital to several accelerating markets including Cleveland,” City Club Apartments co-founder and CEO Jonathon Holtzman said in a written statement.

The downtown Cleveland real estate market is stronger now than when The Beacon and The Lumen were first planned in the mid-2010s. Rents are higher, occupancy rates have held steady and this latest project can benefit from the new Opportunity Zone program.

The new federal O-Zone program increases liquidity by reducing investors' tax burdens when they reinvest their capital gains in projects that are in designated O-Zones. Downtown Cleveland is in such a zone.
The City Club Apartments, as proposed, would add a splash
of color to downtown's palette which is dominated by brown
and grey buildings. The new tower would also offer to resi-
dents an amenity deck on the roof (Vocon).
City Club Apartments was able to keep construction costs low by not having to purchase any land or build any parking for the new building. That likely trimmed $10 million to $15 million from the tower's development costs.

Instead, Holtzman worked out a deal with the property's current owner David Goldberg to not only build on the Goldberg site but to also dedicate parking spaces to City Club Apartments residents in a six-story, 540-space garage. That parking deck is mostly full during the day but mostly empty at night. The new apartment building would be connected to the existing garage with a new, enclosed walkway.

A similar arrangement made The Beacon financially doable a few years ago. The Beacon had the benefit of not needing any new parking because it was built on top of a nine-level parking deck that was filled during the day and empty at night.

Also, The Beacon's developer Stark Enterprises didn't buy any land to build its tower. It formed a partnership with Reuven Dessler, the managing partner of an investor group that owned the 515 Euclid parking structure atop which The Beacon was built.
Vocon's plan for the City Club Apartments shows a vibrant
and active street-level, with a two-story pedestal enclosing
a restaurant, doggy day care, lobby, fitness center, theater,
business center, mail room plus building management and
residential support offices (Vocon).
The same strategy is being arranged in Playhouse Square. There, The Lumen's developer, the Playhouse Square Foundation (PHSF), has designed that apartment tower to potentially set the stage for a second residential tower.

The Lumen's parking garage was intentionally overbuilt, offering 540 spaces -- more than were necessary for the 318-unit apartment building. The parking will also serve theatergoers and area businesses. That should also free up spaces in the parking deck off Chester Avenue and the behind the theaters.

The freed-up spaces could support a second residential tower on land PHSF bought in 2016 at East 13th Street and Chester. Word is that the foundation is already setting aside financial resources just in case leasing activity at The Lumen indicates there is market demand for a second tower.

The new City Club Apartments tower is proposed for a surface parking lot next to the City Club Building. But that's not why the proposed high-rise has the City Club name. Instead, it's the name of national developer City Club Apartments.

It's a coincidence that this last undeveloped site along Euclid Avenue between Public Square and Playhouse Square is next to the City Club Building, historically called the Citizens Building which features the City Club where meetings and speeches are held. The upper floors of the building includes tenants such as law firms, marketing agencies and wholesale jewelers.


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