NuCLEus may be on hold for years

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

END

Sherwin-Williams HQ, R&D sites identified

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

END

Market Square tax abatement isn't the issue; it's about control

A $200 million development by Chicago-based Harbor Bay is
at risk, as are other spin-off developments in Ohio City. City
officials fear that a state tax exemption on buildings that don't
yet exist would hurt the schools. However the city had already
offered a 100 percent tax abatement to the project (HBREA).
CLICK IMAGES TO ENLARGE

With just 35 minutes to go before an Aug. 13 meeting of the Ohio Air Quality Development Authority's (OAQDA) board of trustees, representatives of Harbor Bay Real Estate Advisors thought their request for $150 million in 30-year bonds and a property tax exemption would be approved.

The bonds would finance most of the $200 million Market Square development, including a 10-story office building and seven-story apartment building, at Lorain Avenue and West 25th Street in Ohio City. The innovative project, using timber framing, would reduce emissions by 40 percent mostly from reduced heating and cooling, but also from avoiding the manufacture of steel and concrete.

That's what made the project attractive to OAQDA. That, along with 13 letters of support from the likes of Ward 3 Councilman Kerry McCormack,  Cleveland Building & Construction Trades Council Executive Secretary David Wondolowski, Ohio City Inc. Executive Director Tom McNair, Cleveland-Cuyahoga County Port Authority CEO William Friedman, and economics professor Daniel Shoag, Ph.D. from the Weatherhead School of Management at Case Western Reserve University.

But moments later, three letters of opposition arrived by e-mail. Their authors were the City of Cleveland's Chief of Regional Development Ed Rybka, Cleveland Metropolitan School District CEO Eric Gordon and Cleveland Metroparks CEO Brian Zimmerman.

All complained bitterly about lost future property taxes -- taxes they would never get if Harbor Bay's development, being undertaken under the name Ohio City Legacy LLC., didn't win tax abatement.

OAQDA tabled Harbor Bay's request (click here for a draft of Resolution 19-47), not only putting the $200 million investment by the Chicago-based company in jeopardy, but also several other nearby proposed developments that were triggered by the Market Square project.

Among those catalyzed are a housing conversion of the closing Voss Industries, a new-construction transit oriented development by Carnegie Management, a tax-increment financed renovation of the West 25th-Ohio City Red Line rail station, plus several developments along West 25th that have yet to be announced publicly.

Voss Industries and its 300 employees, many of whom live in
the neighborhood or take transit to work, have vacated this site
for a new factory in suburban Berea. A proposed renovation
of the property into apartments by Chicago-based Bixby
Bridge Capital was instigated by Harbor Bay's project
across West 25th Street (LoopNet).

Without them, Market Plaza might still be razed or it could stay empty of retailers. A decaying West Side Market with fewer vendors would be denied a large source of new customers, the Metroparks' new Red Line Greenway would be denied a large source of users and the entire south end of Ohio City would decline with a possible recession looming.

Harbor Bay Project Director Dan Whalen noted that all of Market Square's office and retail tenants will be new to Greater Cleveland, bringing more than 1,000 jobs and nearly $11.8 million per year in new sales and incomes taxes to the city and county. More than 300 residents would live across the street from the West Side Market, the Red Line station and new greenway trail.

And just like the city's 15-year, 100 percent tax abatement which it routinely awards to similar developments, the state's exemption wouldn't apply to land -- only to buildings.

That means the Market Square project would increase the value of the land which currently pays only $85,000 in property taxes. The new development would double that amount of property taxes to the school district and the Metroparks while tripling the property's existing $17,000 contribution to the Ohio City's Special Improvement District, Whalen said.

"We're willing to be flexible on the duration of the tax exemption," Whalen offered. "And this exemption eliminates the need for tax-increment financing which the city routinely gives to new construction projects of this size."

Gordon and Zimmerman also offered to be flexible on the public financing, which Whalen said is necessary for Cleveland projects that cost as much as those in Chicago to build, but lack the high rents of Chicago.

"We are more than willing to work with all of the interested parties and believe it is important that the community as a whole be engaged in this discussion," Gordon wrote in an Aug. 13 letter to OAQDA.

Harbor Bay has an educational program called Project Classroom that uses skilled professionals to teach real estate development, design and construction while on the job. In Cleveland, Whalen says his company would partner with the school district, vocational schools and the union trade organizations to expand that program here. Each seemed excited at that prospect, he said.

The Market Plaza retail strip located at West 25th Street and
Lorain Avenue was bought by Harbor Bay earlier this year
for $5.85 million. Demolition permits were approved by the
city to clear land located inside the blue line, indicating the
boundary of the Market Square development. Soon, no
retailers will remain in the aging plaza (Google).

Zimmerman said he was troubled not just by the duration of the tax exemption, but also by the lack of public notice of OAQDA's Aug. 13 meeting agenda. Zimmerman said in an Aug. 13 e-mail to OAQDA that he was willing to accept a shorter bond and tax-exemption term of 20 years, or better yet, 10 years, with conditions including an annual audit of the project's performance measures.

"(OAQDA should) require Harbor Bay/Ohio City Legacy LLC to contribute a meaningful amount for (Red Line Greenway) trail enhancement/construction in the vicinity of their project," Zimmerman wrote.

Rybka made no offers in his Aug. 13 letter to OAQDA. Instead, he flat-out told OAQDA to deny the financing request.

Worse, just hours after a meeting Tuesday (Aug. 27) between Cleveland city officials and the Harbor Bay development team, a cleveland.com reporter was tipped off to the proposed exemption and the city's claims about the project, Whalen said.

That resulted in an article that was heavily slanted in favor of the city's position. It lacked any information about the new taxes that the project would bring in, or that no new property tax would be generated if the project never happened. In fact, less tax revenue would result after a demolition of the retail plaza, already approved by the city.

"We've already invested $10 million on the project in terms of buying the property, architectural fees, getting City Planning Commission approvals and so on," Whalen said on Aug. 19. "This (OAQDA) financing was the last piece. We have to commit in the next 30 days on whether to proceed. The project is 70 percent bid and we can hold those prices for only a limited time."

OAQDA has already approved significant financing requests this summer, including $100 million in bonds for a southern Ohio utility development project by the Ohio Valley Electric Corp. and a $350 million bond issue and 30-year tax exemption for expansion of AMG Vanadium's industrial recycling center in Muskingum County that would create 100 jobs. Harbor Bay's project would create more than 1,000 jobs.

Ironically, the city seemed less concerned about "lost tax revenues" when it was willing to offer a 100 percent property tax abatement to the Market Square development before Harbor Bay investigated the state bonding opportunity. But apparently, city officials feel that only they should be allowed to abate tax revenues to the schools, Metroparks and others.

“We really think it’s overstepping,” Rybka said in the cleveland.com article.

OAQDA could take up Harbor Bay's request again at its next meeting, scheduled for Sept. 10.

END

Sherwin-Williams seeks builders for HQ + R&D project

A request for qualifications sent to a few construction manage-
ment firms in Greater Cleveland for building a new headquarters
and research center for Sherwin Williams may indicate that the
global coatings giant is taking a serious step forward. But is
there another message in the issuance of an RFQ to so few
firms? (Bobek) CLICK IMAGES TO ENLARGE THEM.

Unless the economy does a crashing repeat of 2008 in the next 6-12 months, Sherwin-Williams (SHW) could make a significant announcement about its headquarters (HQ) as well as it research and development (R&D) facilities by the end of 2020. Even a modest economic downturn is unlikely to put a stop to a multi-year process that has already started.

That process suggests that SHW is on a schedule that could have them start construction on a new HQ and R&D project by 2022. And some aspects of the process point toward downtown Cleveland as the site for most, if not all of this massive project.

According to a source, a Request For Qualifications (RFQ) was sent to a small number of construction management firms in Greater Cleveland for the construction of a new headquarters and research center for Sherwin-Williams. The source didn't identify which firms received the RFQ, but it was reportedly sent by SHW's real estate broker CBRE.

An RFQ is intended to reduce the number of bidders on a project to only those with the expertise to qualify for the project. So then why issue it to so few firms to start with?

A logical assumption is that an RFQ was issued because SHW needs a highly specialized construction manager. Furthermore, considering that so few firms received the RFQ, it suggests that SHW apparently needs a level of expertise that few local construction management firms have.

What expertise? It isn't known for certain, but the temptation is point to firms that know how to build supertall skyscrapers, like those that reach up to 900 feet tall and require caissons excavated 200 feet down to Cleveland's bedrock.

Could the two tallest proposed buildings in this graphic be the
approximate size of a new Sherwin-Williams headquarters and
research facility over parking? Before this rendering gained a
new life and more buildings as part of Cleveland's promotional
efforts to attract Amazon's HQ2, it apparently was SHW's plan
in 2015 for a new HQ on Public Square (GCP).

The source says that the RFQ specifies the project will measure 1.8 million square feet. That's even larger than the last report of 1.6 million square feet, likely due to SHW's rapid growth.

Either number is large enough to mean that the project includes both the HQ and the R&D. It doesn't mean they'll be in the same building or even on the same property. But it does mean they could be part of the same construction bid.

Another source says that if an office campus of shorter buildings for an HQ+R&D near downtown or in the suburbs was under serious consideration, then the RFQ probably would have been sent to many more local construction management firms. It apparently wasn't.

That all leads to the next big question: where would the HQ+R&D be built? The RFQ apparently didn't identify the project's location except that it would be in the Greater Cleveland area and it would total 1.8 million square feet. The construction firm, when selected, will then presumably learn where the project will be built.

Vocon Partners, LLC is reportedly designing conceptual alternatives, including for different locations downtown. It isn't publicly known where those sites are. One site that is likely to be strongly considered is the site where SHW planned in 2014-15 to consolidate its scattered offices -- the Jacobs lot on Public Square.

The Jacobs lot on Public Square, as seen in 2014. This parking
lot has occupied the west side of the square for 30 years and
 measures 50,974 square feet or 1.17 acres. Another 6 acres
acres of surface parking on the Weston Group-owned lots
is visible beyond (Google).

Considering that more than one alternative site is in play downtown is also a good sign for those who believe SHW's HQ+R&D should stay in the central business district. And it's a good sign that the project would consolidate other offices and R&D activities from around Greater Cleveland and Minneapolis in downtown Cleveland.

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

"We're in good communication with Sherwin-Williams," he said. "We'll do whatever it takes to keep them. But companies that want to attract talent are looking at moving into cities, not leave them."

While there are a lot of moving parts at work here, and based on the timeline of past projects, it is possible that facility conceptual designs, programming, infrastructure and other components could be ready for delivery to a city's planning commission in as soon as a year from now.

SHW representatives would likely request approval of conceptual plans, then refine them into more detailed schematic designs. Approval of the conceptual plans will first require releasing them publicly. That's when the public will probably get its first official notice of the project. The 6,000 SHW employees involved, as well as civic-minded Clevelanders, will have to wait until then.

Thankfully, at least SHW is no longer officially denying that there may be an HQ+R&D project on the horizon. They've confirmed they are analyzing their HQ space needs, but are peddling the theme that they do such analyses regularly. That's pretty unlikely considering the last time SHW moved into a new HQ building was 1930.

Sherwin-Williams' Center of Excellence is located inside its
existing headquarters building, the Landmark Office Tower.
The flags represent each country in which SHW has at least
$1.5 million in annual sales. The center has displays on the
company's 153 years of business, all of it headquartered in
downtown Cleveland (WKSU News).

It's also unlikely based on the post-2014 spread of SHW offices to several facilities beyond its aging, 900,000-square-foot Landmark Office Tower HQ where employees have complained of uncomfortable climate controls, lack of open floor layouts and even roaches. SHW's apparently random leasing of additional offices since 2014 doesn't scream "coherent plan."

Offices are located among three non-contiguous floors totaling 51,810 square feet in the Skylight Office Tower, a remodeled 151,830-square-foot flex space at 4780 Hinckley Industrial Parkway in Cleveland, as well as in 30,000 square feet of the Automotive Finishes Corp. facility, 4440 Warrensville Center Rd. in Warrensville Heights.

That doesn't include the 140,293-square-foot Breen Technology Center in downtown Cleveland and the former Valspar Applied Science & Technology Center in downtown Minneapolis. That complex includes several renovated historic structures and totals more than 170,000 square feet.

If combined into a new facility that offered more elbow room plus space for future expansion, it could mean an R&D center of 330,000 square feet or more. Parking for thousands of employees and visitors would add roughly 350 square feet per parking space in a multi-level structure. It isn't publicly known if the 1.8 million square feet figure for the HQ+R&D includes parking.

What is known is that SHW's debt burden from the 2016-17 Valspar acquisition is shrinking at an increasing rate. Six months ago, SHW had been on a glidepath to get its long-term debt-to-equity (D/E) ratio down to 2:1 by December 2019.

But it's already five months ahead of that pace. Last year, SHW looked like it would reduce its long-term debt to $8.12 billion by June 30, 2019. Instead, it fell to $7.2 billion. Shareholder equity is only slightly below where it was destined to be on June 30. It was on target to be about $3.77 billion. Instead it was at $3.75 billion at the mid-year point.

SHW debt-to-equity ratio on June 30 was already below 2:1 -- at 1.92:1, thanks to strong cash flow from the Valspar acquisition.

According to second-hand sources, SHW officials have said that the company wouldn't consider building a new HQ until its debt was down to reasonable levels. "Reasonable" may well mean the coatings industry average of a 1:1 D/E ratio.

Last year, it appeared SHW was on a glidepath to hit that 1:1 D/E ratio at the end of 2022. But if cash flow continues to be strong and shareholder equity continues to rise steadily, SHW should get its D/E down to 1:1 in a little more than two years from now.

That's roughly when the planning, programming, design and procurement should allow for construction of the HQ+R&D facilities to begin. Fingers crossed.

END

NuCLEus development stalls -- again?

The nuCLEus development, as seen from Huron Road at East
4th Street and next to the expanded Rocket Mortgage Field
House (Stark). CLICK IMAGES TO ENLARGE

Sources at two companies that do business with Stark Enterprises say that the $350 million nuCLEus development in downtown Cleveland isn't going to be moving forward anytime soon.

One source says the project is on hold. The other says the project is dead. The reason why the project apparently has stalled isn't completely clear.

However, according to one rumor, it appears that there may be differences of opinion between the city and Stark as to how helpful one has been to the other. Some of that was suggested by recent events.

On Aug. 15, and at the request of Ward 3 Councilman Kerry McCormack, the Downtown/Flats Design Review Committee tabled a request by B&B Wrecking Inc. to demolish a condemned, four-story building at 310 Prospect Ave.

B&B Wrecking is a Stark contractor. Stark owns the property and the structure, called the Herold Building, through an affiliate Herold Building LLC. The structure was built in 1900 and measures 15,720 square feet, according to Cuyahoga County records.

Stark and its nuCLEus partner, J-Dek Investments Ltd., own the neighboring 16-space parking lot property through a partnership Gateway Huron, LLC. Both properties would reportedly serve as a single staging area during the construction of nuCLEus.

The Herold Building is within a National Historic District and is a designated National Historical Landmark. The previous owner, Los-Angeles-based L&R Group of Companies, tried to demolish the Herold Building for a new but smaller building. It was rebuffed by the city. Stark pledged to refurbish the building when it bought the property in 2014. Since then, however, the building has only decayed further.

Outlined in green, the Herold Building at 310 Prospect Ave.
is proposed for demolition, apparently to help create a staging
area for the construction of nuCLEus (Stark).

McCormack said he urged tabling the demolition request because neither Stark nor B&B Wrecking provided the city with a required plan for the property post-demolition. It should be noted that downtown buildings cannot be demolished for surface parking lots except in hardship cases, such as the building being declared unsafe or the owner not having the resources to develop it.

"The city is looking for a detailed plan," McCormack said in an Aug. 19 interview. "I have not been briefed on what the plan is. In general, if you're going to demolish a building, the last thing we need is a surface parking lot. I don't know if that's what they propose. We just want to see a plan."

In an interview several weeks ago, following an article reporting that demolition for nuCLEus was scheduled to start in mid-August, Stark Enterprises' Chief Operating Officer Ezra Stark declined comment about the possible demolitions that could also include a 418-space parking deck at 611 Huron and an historic building at 618 Prospect featuring Mr. Albert's Men's World clothier.

However, Stark said the reason why he declined comment on the demolitions was due to a delicate "political" matter. He offered no further details.

The Herold Building is seen at left with a small red X sign on
the facade, indicating that the building is condemned. The
building was condemned by the city before Stark bought
it in 2014 for $1 million (KJP).

McCormack laughed when asked if he knew whether nuCLEus was still an active project or not.

"I don't even know how to answer that question anymore -- I hear it a lot," said the councilman whose ward includes downtown. "My understanding is it's still alive."

Stark first announced nuCLEus five years ago, long before it or J-Dek had most of the financing in place to develop the project. That was when nuCLEus was planned to be a 54-story skyscraper.

The current plan for NuCLEus is that it would feature two 24-story towers atop a pedestal of retail and parking between Prospect Avenue and Huron Road at East 4th Street. One tower would feature 400,000 square feet of offices; the other 250 residential units.

While it was reported in late June that nuCLEus now has most of its financing in place, others in Cleveland real estate circles dispute this. Some believe that nuCLEus is far from finalizing its capital stack.

In yet another of the rumors surrounding nuCLEus, Stark apparently is redirecting capital resources -- including Opportunity Zone program funds which have time constraints on their use -- to projects in other cities including Pittsburgh.

"I think we have a solid economic development package" that's been offered by the City of Cleveland, Cuyahoga County and the State of Ohio to aid nuCLEus, McCormack volunteered.

END

Midtown property sale designed to spur new development

This a conceptual masterplan of the Penn Square area of
Cleveland's Midtown, with the Greater Cleveland Regional
Transit Authority's property outlined in blue (Pennrose).
CLICK IMAGES TO ENLARGE

On Aug. 20, the Greater Cleveland Regional Transit Authority's (GCRTA) Board of Trustees is expected to approve selling a chunk of Euclid Avenue land in Midtown to a Cleveland Foundation affiliate for future development.

The sale is the latest example of intensifying interest in rejuvenating this once-vibrant neighborhood that's been relegated to pass-through status for more than 40 years.

GCRTA has a tentative deal with Civic Property Development LLC to sell seven parcels totaling 2.38 acres at 5508-5810 Euclid Ave. for $550,000. The Cleveland Foundation will also contribute $50,000 to aid in the planning of a transit oriented development (TOD) project or projects on the site, in partnership with GCRTA.

The foundation created Civic Property Development, filing incorporation documents with the state on May 15, to support this development site and possibly others in the future. The Cleveland Foundation has for years supported programs and projects to boost Cleveland neighborhoods, especially Midtown.

The Cleveland Foundation's conceptual plan for its new head-
quarters (at right) and a new Center for Innovation. This view
looks north up East 66th Street from Euclid Avenue (CF).

In fact, the foundation announced on June 28 its intention to relocate its headquarters from the Hanna Building in downtown to alongside the Dunham Tavern on Euclid Avenue and East 66th Street in Midtown, despite a pending lawsuit.

The Cleveland Foundation proposes a three-story, 50,500-square-foot headquarters building on the northeast corner of of Euclid and East 66th. On the northwest corner, the foundation proposes a future Center For Innovation measuring 100,000 square feet.

While the immediate vicinity of Midtown and Hough has seen more than $400 million worth of development in the last decade, 40 percent of area residents and 66 percent of children live in poverty, according to the city.

It isn't known yet what would be planned for the GCRTA property, but TOD typically features dense, mixed-use residential and commercial development with less emphasis on parking and more attention to walkability and, thus, transit access. The site is next to the East 59th Street station stop on GCRTA's HealthLine bus rapid transit.

Looking east on Euclid Avenue in September 2018 from below
the Norfolk Southern railroad overpass. The vacant, GCRTA-
owned property is visible at right (Google).

Some conceptual masterplan work for the area, called Penn Square, was done in recent years. It helped developers like Pennrose Properties, LLC and Berusch Development Partners, LLC map out emerging developments along East 55th Street between Euclid and Carnegie avenues.

The Euclid-East 55th area was called Penn Square for more than 100 years because the main Cleveland railroad passenger station for the Pennsylvania Railroad was located here. Travelers could board and alight 24 daily passenger trains to/from places as far west as St. Louis and as far east as New York City.

Two busy streetcar lines also crossed here, carrying as many riders as all of Northeast Ohio's transit agencies combined do today. The neighborhood once had the density and activity of a 24-hour, satellite downtown, with large apartment and commercial buildings, shops, cafes and theaters.

Looking east on Euclid Avenue circa 1980, from atop the same
railroad overpass as above. The property at right, once part of a
vibrant satellite downtown area, had fallen into decay. It wasn't
to be demolished for another 20 years. All but two buildings
 on the north side of Euclid, at left, were also razed (TPH). 

Prior to being bought by GCRTA, the land was home to multiple users over the last two centuries, including a country estate, mercantile businesses, wholesalers, warehouses, light industry and second-hand furniture stores into the 1980s. But as Midtown declined after World War II, the properties fell into neglect. GGF Inc., a real estate arm of the George Gund Foundation took over the property nearly 50 years ago in the hopes of spurring revitalization.

It was sold in 1977 to the DiGeronimo family, doing business as Ace Realty, and leased it to several tenants. The properties continued to decline. DiGeronimo, in turn, sold the land in 2002 to Lassi Enterprises, LLC, a subsidiary of MidTown Cleveland Inc., a community development corporation.

Midtown transferred it to GCRTA in 2005 so that it could demolish the handful of decaying buildings remaining on the property. Here, GCRTA established a construction staging site for its $200 million Euclid Corridor (later called HealthLine) that was completed in 2008. The properties have remained vacant ever since. GCRTA put the land up for sale in 2017.

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Condos to rise at Avenue District this fall

** UPDATED SEPT. 4  **

Rising along East 12th Street, north of the existing, 10-story
 residential building (Phase I), will be Phase II of the Avenue
District. It will be a new condominium building that will serve
downtown Cleveland's market while testing it for more condos
in the near future (GLSD). CLICK IMAGES TO ENLARGE

Geis Companies reportedly is on an aggressive timetable to build a five-story, 31-unit condominium building in downtown Cleveland, eyeing a possible fall groundbreaking if it can get city approvals in a timely manner.

The working title for the project is The Avenue Condos-Phase II, because it would be located at 1325 East 12th St. It is in the area where Zaremba Group planned and began building a multiple-structure, multiple-phase development along and between East 12th and 15th streets, as well as St. Clair and Superior avenues on the northeast side of downtown Cleveland.

Like Zaremba before it, Geis plans a shorter building just north of the first phase. The reason why this site was chosen is because the existing foundations for phase II that were built in 2008. However, they cannot support a larger structure.

Site of the Avenue District Condos-Phase II as seen from the
construction site of the phase I building in February 2008. As
one can see, foundations for Phase II already exist (KJP).

Zaremba in the late 2000s built a 10-story Avenue District condominium building, which since has offered units for rent, and 20 for-sale townhomes. Another 16 for-rent townhomes were built along East 15th, called the Milton Townhomes. All are now Geis-managed properties.

More for-sale townhomes are being built in the Avenue District by Knez Homes. They are selling quickly despite listing at prices near $500,000, or $250 per square foot. The 12-unit first phase sold out as construction continues, with a second phase of up to 24 homes approved by City Planning Commission. Knez is easily exceeding its 50-percent presale goals for each phase.

Geis proposes to build at 1325 East 12th Street the Avenue

District Condos Phase II, to be located next to and to the north

of the Phase I building seen here. This view looks from the

north side of St. Clair Avenue at East 12th (GLSD).

Prices for condos in Geis' Phase II of the Avenue District are expected  to start at upwards of  $400,000. The project builds off of Knez's success. And it builds off of Geis' success at the high-rise Metropolitan at The 9, a rehab of the 29-story, 383-foot-tall former Ameritrust Bank headquarters into apartments, a hotel, grocery store and two restaurants.

Rumors about the new condo building have circulated for a while, but became official when the project appeared on the city's Design-Review docket. Planning documents were submitted to the city in July and meetings were held with top city officials to move the project forward. GLSD, Geis' in-house architect, designed the project.

Geis representatives were not prepared to comment publicly at this time.

Site plan for Geis's Phase II of the Avenue District.
North is at the top of this image (GLSD).

This is Zaremba's original site plan for the Avenue District
from 2006. The top of the map is east and left side north.
Most of the development was proposed along East 12th
Street, from Lakeside Avenue on the left to Chester
Avenue on the right (City Architecture).

Knez's success with selling townhomes at the Avenue District combined with strong occupancy rates at Geis' Metropolitan at The 9 prompted Geis to pursue the new condo building. In addition to its Sky, Luxury and Boutique apartments, The 9 also features a Metropolitan at The 9, Autograph Collection Hotel, full-service Heinen’s grocery store in an attached, soaring Gilded Age bank rotunda, wine cellar and restaurant along with a rooftop restaurant and bar.

The tower is the favored address of Cleveland professional sports stars, business executives, medical specialists in Cleveland’s globally regarded health care field, and others seeking the best in luxury downtown living.

This was Zaremba Group's vision for the Avenue District
when proposed in 2006. However, only the building at the
center of this view (looking north on East 12th) was built,
along with several dozen townhomes. (City Architecture).

The Avenue District condos may be Geis' introduction into new-construction condominium offerings in downtown Cleveland. There are rumors that Geis may be interested in building a new condo tower on East 9th Street at Bolivar Road.

Downtown Investment Group LLC, a Geis Companies affiliate, bought the former New York Spaghetti House and razed it for future development. Although there is not yet a timeline for this project, the city in 2015 gave Geis permission to use the property for a parking lot for up to five years.

Geis representatives aren't commenting on that project either.

END