Shaping up Sherwin-Williams new HQ, R&D facilities

Is a multi-building urban campus totaling 1.8 million square
feet, plus a large parking ed parking, be in the cards for the
7 acres of surface lots to the west of downtown Cleveland's
 Public Square? Or will it be somewhere else? (Geowizical)
CLICK IMAGES TO ENLARGE

For those of us who were expecting Sherwin-Williams' (SHW) new global corporate headquarters plus research and development facility to be Cleveland's newest, tallest skyscraper, we may be disappointed. That's more of a statement of about what the new HQ+R&D might look like than where it might be built.

In fact, in its recent Request For Qualifications from the Cleveland offices of two international construction management firms (CM), SHW has asked for their conceptual proposals for downtown Cleveland facilities only, according to a high-level source. Those proposals were due to be submitted today.

That source, confirmed by another, said that SHW's real estate broker, CBRE, hasn't reached out to any other U.S. or international offices of those two CM firms -- Turner Construction Co. and Gilbane Building Co.

SHW's project development process is highly compartmentalized. The Fortune 500 company, through CBRE, has separately reached out to downtown Cleveland property owners to discuss their asking prices and possible partnerships. Unfortunately, all of the sites aren't yet known.

On another track, SHW is working with Vocon Partners LLC to develop architectural concepts of potential developments involving those sites to accommodate approximately 6,000 office and research workers.

And on yet another track, SHW is reaching out to suppliers, many of them in Northeast Ohio, for design concepts and cost estimates for everything from office decorations to amenities to furniture.

Goodyear's headquarters in Akron offers an example of what
SHW's CEO John Morikis reportedly likes in a large office
building for 6,000 of his company's employees (Goodyear).

However, SHW is also accepting unsolicited proposals from other real estate owners and developers for places outside of downtown Cleveland and, indeed, from outside of Ohio, two sources said. Another source said that the proposals will have to include "significant" incentives to offset SHW's costs of relocation.

In other words, SHW will stay in Cleveland, and especially downtown, unless some other city makes SHW an offer it can't refuse and Cleveland can't at least match it.

Yet another source notes that Greater Cleveland goes through at least one of these big corporate competitions per year. This year, it's SHW's HQ+R&D. Last year, it was Swagelok's new HQ. The year before, it was Amazon's HQ2. Greater Cleveland has one win and one loss in that time, although Swagelok was as unlikely to leave Northeast Ohio as Amazon's HQ2 was to come here.

The source says the public-private sector here isn't taking any chances on whether SHW is seriously considering leaving Greater Cleveland or even the City of Cleveland.

As with recent efforts, the source says there will be a "full court press" to keep SHW in Cleveland, led by Gov. Mike DeWine, former Forest City Enterprises CEO Albert Ratner and the Greater Cleveland Partnership.

As a result of its extensive and compartmentalized due diligence, SHW's staff and board has received a great deal of detail from the respondents as to what the downtown Cleveland headquarters could look like. The extent of detail ranges from the overall physical form at the optional downtown Cleveland locations, right down to the interior finishes.

Interestingly, the overall physical form may not be the focus of many Cleveland skyline postcards. Why? To understand that, we need to understand SHW's leadership and corporate culture.

In contrast, Eaton Corp.'s HQ in Beachwood didn't gain a
fan in Morikis after he visited it and other corporate offices
throughout Northeast Ohio (Pickard Chilton). 

CEO John Morikis has been a SHW employee since he got his master's degree from National Louis University in Chicago. He studied business and psychology. He worked his way up through SHW's ranks since 1984. He has embraced his company's conservative, non-pretentious approach. And he is well aware of the company's deep Cleveland roots.

Armed with an understanding of psychology, business and what employees at multiple strata experience, he is now tasked with coming up with new HQ+R&D facilities that affect everything from the employees' mood, to their sense of belonging, to their innovation and to their productivity.

For those reasons, Morikis doesn't seem interested in setting a new height record for a downtown Cleveland skyscraper or building anything iconic merely for the sake of bragging rights, according to those working around him on this project.

In fact, when SHW first started working with century-old law firm Kohrman Jackson & Krantz on drawing up the RFQ one year ago, it initially assumed that the tallest building in the HQ complex would be a 40-story skyscraper.

While that sounds like a big building, the space requirements in the RFQ are far bigger -- 1.8 million square feet, divided among a roughly 1.45-million-square-foot HQ and a 350,000-square-foot R&D facility.

If the HQ was put in a single building with floorplates similar to those of Cleveland's Key Tower, SHW's HQ would be taller than Key, currently the tallest building between Chicago and the East Coast.

An artists' rendering of Sherwin-Williams Paint Co.'s first store
store at 118 Superior Ave. -- on Public Square in downtown
Cleveland in 1866. This is near the site SHW favors for its
new global headquarters and research center (SHW).

But, apparently Morikis has no interest in challenging Key Tower's reign. Instead, he reportedly envisions a multiple-structure urban campus with at least one tower, but none taller than 40 stories.

He seems to want a campus that is connected, collaborative, energizing and uplifting, rather than one or two buildings that are so confining that employees rarely step outside to recharge their batteries until their workday is done.

There are several large sites within downtown Cleveland where such an urban campus can be built without having to deal with multiple property owners and undertaking significant demolitions. The sites would have to be large enough so that SHW can spread 1.8 million square feet (not including parking) among multiple buildings.

Not many people realize how much land SHW owns along the Cuyahoga River -- 9.2 acres. It is where SHW's John G. Breen Technology Center is located now and where SHW was founded 153 years ago. It would be a beautiful and historic site for a SHW HQ+R&D, but only if construction could be undertaken in stages without disrupting the Breen Center.

The other that is more well known is on the west side of Public Square, near where SHW established its first store in 1866. The site starts with the 1.17-acre Jacobs Group-owned parking lot on which Ameritrust planned to construct a 60-story, 1,198-foot-tall headquarters in 1989 until the former Cleveland Trust Bank was acquired by Society Bank which then merged with Key Corp.

That site continues into the 5.6-acre Weston Group-owned Superblock, bounded by Superior and St. Clair avenues, as well as West 3rd and West 6th streets. Combined, the 6.77 acres of parking lots would provide the site for a connected, urbanized office campus that is fully integrated into the amenities of a major city's central business district, including a newly refurbished Public Square.

SHW's Center of Excellence on the ground floor of its current
downtown Cleveland headquarters, located in the SHW-owned
Landmark Office Tower in the Tower City Center complex. It
has been headquartered there since 1930 (WKSU).

A high-level source said this site is favored by SHW because it was the chosen site for SHW's HQ when the company did extensive due diligence for it in 2014-15. Since then, and including Morikis, SHW's 11-member board of directors has four new people, replacing three. Also, Lead Director Steven Wunning joined the board late in that HQ process in 2015.

But Morikis was the chief operating officer until the end of 2015, ranking below only CEO Christopher Connor. Morikis oversaw the last HQ development effort that was temporarily halted by SHW focusing resources on the acquisition of competitor Valspar Corp.

Morikis' leadership and recommendations on how to proceed with the HQ+R&D project will be very important to SHW's board. Morikis has visited an unidentified number of Fortune 500 company HQs in the region to learn what those companies' executives, managers and staff like and don't like about their facilities. And he reportedly soaked up the atmosphere and designs and finishes of each.

So when Morikis visited Eaton Corp.'s 2012-built HQ in Beachwood, he "hated" it, primarily due to its finishes and atmosphere, a source said. Its isolated, car-dependent, 53-acre setting wasn't what he apparently hated. Instead, he was looking at how employees related to the building's design, materials and furnishings, once they were inside.

Conversely, he liked the atmosphere and finishes in the Goodyear Tire & Rubber Co.'s 2013-built HQ in Akron, just down the street from where the company was founded in 1900. Apparently that building energized him. Richard Kramer, who has served on SHW's board since 2012 and also serves on Goodyear's board, shared with Morikis his experiences in building a new global headquarters.

After today's deadline, solicited proposals for downtown Cleveland HQ+R&D sites and any unsolicited proposals for sites outside of downtown will be reviewed by SHW staff with presentations to the board likely in the coming weeks and months.

If that schedule holds, the new HQ+R&D project could be announced at SHW's annual National Sales Meeting in Kissimmee, Fla. in January 2020. Or, considering how fast this project is moving, the announcement could come even sooner.

END

Future of two idled Cleveland-area Ford plants looks electric

This is the office portion of Rivian's lone production facility,
a former Mitsubishi plant in Normal, IL (Rivian).
CLICK IMAGES TO ENLARGE THEM

Since spring, Greater Clevelanders have been hearing that the sale and reactivation of two massive, idled auto plants in the area to a single buyer will be a "game-changer" for the economy of this region. There were more than 15 potential buyers with many showing interest in reusing both factories in a positive way.

Ford has since short-listed the potential buyers and will soon select a winner. I took a stab last May at who one of those buyers might be. While I'm pretty sure I missed then (Tenneco's finances have fallen sharply in the past year), I feel much more comfortable in my aim in this article.

Previously, I completely overlooked some major news announced only a month before my May article. That news and much more since then points strongly in one direction....

A possible buyer of Ford Motor Company's Brook Park and Walton Hills plants could be Rivian, a start-up SUV and truck manufacturer whose vehicles are powered by electric engines. They have impressive performance (0-60 mph in three seconds) and impressive ranges of 400 miles or more per charge.

Word is that a formal announcement of who will buy the two legacy auto plants will be made in two months or less. The hiring of 2,000 to 3,000 workers would follow a two- to three-year renovation and retooling of both factories.

Why Rivian?

Prototypes of Rivian's two launch vehicles, a seven-passenger
SUV and a five-passenger pickup -- both electric -- were a hit
at the New York Auto Show earlier this year (Rivian).

First off, Rivian, founded in 2009 and headquartered in the Detroit suburb of Plymouth, has come out of nowhere. But, already, it is a multi-billion-dollar company. It has raised $2 billion in equity since 2017 and just got an order from Amazon to build $10 billion dollars worth of electric delivery trucks.

So, $12 billion -- not bad for a company that has made only prototype vehicles so far.

Rivian's production line won't start churning out its launch products -- the five-passenger R1T pickup and seven-passenger R1S SUV -- until late-2020. And that doesn't include its new 100,000-truck order from Amazon. Nor does it include Rivian’s innovative, flexible chassis, dubbed the "skateboard platform" (the chassis looks like a skateboard!) that will be built en masse for the foundation of another automaker's huge EV program (more later).

Some will ask why would Rivian buy two huge factories in Northeast Ohio when it has already invested $200 million to reactivate a 2.6-million-square-foot former Mitsubishi auto plant it acquired in 2017 on the northwest side of Normal, IL. The company will employ about 1,000 people there.

As big as that plant is, it may not be big enough for what may be asked of Rivian in the coming years. At its peak under Mitsubishi, the Normal plant produced about 200,000 cars a year. Under Rivian, it expects to produce only about 50,000 vehicles in its first full year. But that doesn't quite tell the full story.

For context, consider the 3.7-million-square-foot Ford Avon Lake, OH plant. It produces 370 truck chassis a day. That's 128,000 to 135,000 chassis per year. That's just chassis. It also assembles about 15,000 medium-duty trucks per year with their engines and transmissions made in Mexico.

So not only will the Normal plant produce electric trucks. It will also produce the skateboard platform that will be the chassis for Rivian's two launch trucks, as well as for Amazon's 100,000 delivery vans as well as Ford's all-new EV.

That's a lot of skateboards, and that's just for the known business. Can the Normal plant handle all of that? And what will business be like in two to three years -- also known as the time it will take to reactivate the two Cleveland-area Ford plants?

That means adding millions more square feet to the production process. Ford's Brook Park Engine Plant No. 2 on Snow Road, closed since 2012, measures 1.7 million square feet and the Walton Hills stamping plant on Northfield Road, closed since 2014, totals 2.1 million square feet.

Ford's 1.7-million-square-foot Brook Park Engine Plant No. 2
(above) that closed in 2000 and Ford's Walton Hills Stamping
Plant (below) that closed in 2015 (Google).

If so, that could mean Rivian's chassis plant will be in Illinois, its engine plant in Brook Park and its stamping/body plant in Walton Hills. Sounds like a production line. And we're talking at a more appropriate scale -- not just for production, but also for equity.

Why is Rivian amassing billions in equity and orders merely to spend it on a single, reactivated factory, its growing Michigan headquarters and a California engineering center? It's not. Those facilities probably don't account for anywhere near close to the billions in Rivian's grasp.

That scale of resources probably means a larger scale of capital investment as well as to launch its first production vehicles.

Of course, transportation is a big part of the supplier chain. Interestingly, Rivian's Normal, IL plant, the Brook Park plant and the Walton Hills plant are all on Norfolk Southern Corp.'s (NS) railroad lines. That means no costly, time-consuming interchanges, least of all through congested Chicago.

And the trio of plants are situated so that NS can run continuous unit trains, each loaded with a thousand or more chassis in one direction and hundreds of finished vehicles in the other. NS-owned railroad yards are in place and in good condition at all three factories. And if NS should ever treat Rivian like a hostage shipper, there are competing mainline railroads nearby to pick up the slack.

Rivian's electric delivery truck for Amazon. The online retailer
ordered $10 billion worth of these trucks from Rivian, despite
that Rivian hasn't mass-produced any vehicles yet (Rivian).

Finally, perhaps the biggest reason why Rivian is the likely buyer is because of Ford itself.

The buyer of the Brook Park and Walton Hills plants was never going to be a competitor to Ford. Ford would not hand the keys to so much production capacity to GM, Chrysler, Toyota, Honda or Tesla. It might hand the keys to Volkswagen which announced an alliance with Ford in January.

A source who knows who is on the shortlist to buy the Ford plants wouldn't say publicly who they are. But he did say who it isn't, and it isn't VW "unless they are buying it under another name, but that would be unlikely," the source said.

The buyer could always be in an unrelated industry. But why sell to an unrelated industry and make money only once when you can sell it to a partner and make money for years and years?

And guess who Ford is a partner to? Rivian.

Ford, the nation's second-largest automaker and fifth-largest in the world made a $500 million equity investment in Rivian in April. That was the big news that I missed a month before I wrote my May blog. That's just a spark to Ford's $11 billion venture into the EV field.

Ford and Rivian agreed to work together to develop an all-new, next-generation battery electric vehicle for Ford’s growing EV portfolio. And Rivian will build for itself and for Ford its skateboard platform chassis to be used on several models of EVs. That's hundreds of thousands of vehicles, possibly including Ford's new electric Mustang and F-150.

It's a massive production commitment, one that will require billions of dollars and more production capacity than one auto plant in the flatlands of Illinois. Indeed, it looks increasingly like the two massive, idled auto plants in Greater Cleveland will be reactivated for this game-changing manufacturing future.

END

Lakefront development project to start this winter

An updated lakefront development plan, dated Sept. 10,
2019, was released this week by Cumberland Development
LLC with a phased development approach. It includes two
parking lots that can be re-developed if the owners of the
Cleveland Browns build a new stadium and an associated
development zone elsewhere in/near downtown Cleveland
(Dimit). CLICK IMAGES TO ENLARGE THEM

After shedding its partner Trammel Crow Co., things are starting to move a little faster for Cumberland Development LLC. when it comes to its lakefront development project. Demolition for and construction of the lakefront project is due to start in January.

This week, Cumberland President Dick Pace released a fully updated plan (see high-res PDF here) for his lakefront development that includes timelines and phasing for new and larger buildings. The revised plan also scuttles the idea of re-using one of the two old Dock 30 port warehouses as previously proposed. Instead, both warehouses are to be demolished.

Cumberland's plan would capitalize on growing momentum at City Hall for a "land bridge" to extend the downtown "malls" over the lakefront railroad tracks, Shoreway highway, and continue this corridor of greenspace all the way north to Lake Erie.

As proposed, a 200-foot-wide grassy public space would link downtown with its lakefront better than it has been linked since the Great Lakes Exposition of 1936-37. Because the land bridge would require demolishing the aging Amtrak station, a multi-modal transportation hub to unite rail and bus modes under one roof would need to be built. Recent plans showed a glassy transportation center west of East 9th Street.

An official rendering isn't publicly avail-
able to portray a proposed "land bridge"
 that would extend downtown's malls
over the lakefront railroad tracks and
Shoreway. However, this is generally
how the proposed, 200-foot-wide land
bridge would look from above (Google).

And, the plan would provide two surface parking lots and on-street parking along Erieside Avenue, north of First Energy Stadium, for stadium visitors. This would provide 412 stadium parking spaces to comply with the city's parking requirements, per its stadium lease with the Cleveland Browns.

But the parking lots are designed in such a way that one or more of them could be developed as a future phase if a parking deck was added. Or, they could be developed if Cleveland Browns owners Jimmy and Dee Haslam built a new stadium and development zone elsewhere in or near downtown by the time their existing stadium lease expires in 2029.

Cumberland has already built two buildings on the east side of North Coast Harbor -- the two-story Nuevo Modern Mexican & Tequila Bar and the three-story, 16-apartment Harbor Verandas where rents range from $4,000 to $5,000 per month.

The first structure west of North Coast Harbor to rise has the working title "Residential Building 4." Architecturally, it will look like a taller version of the Harbor Verandas. Its construction is due to start in January.

Each of the next three buildings to the west are scheduled to rise at a rate of one per year. The last one, Residential Building 1, would see construction starting in 2023 depending on the local and national economies.

Cumberland's Harbor Verandas apartments on the east side of
North Coast Harbor reportedly offer architectural insights into
 the planned quartet of mid-rise apartment buildings west of the
harbor. The Rock & Roll Hall of Fame and downtown's skyline
loom behind the fully occupied Harbor Verandas (KJP).

The bases of these four residential buildings are proposed be lined with 2.5-story townhouse rental liner units. While Pace said he would prefer to offer for-sale townhouses, this development is located on land owned by the City of Cleveland and leased by Cumberland. A lease prevents him from offering for-sale units.

On the other side of the extended mall greenspace (complete with a Superman statue), the office building, hotel and STEM school are also scheduled to be built over the course of the next four years. That will also depend on the economy, the commitment of an anchor office tenant and the availability of public subsidies to offset low office rents endemic to the Cleveland market.

Here are the proposed features and characteristics for each planned building:

Residential Building 4 -- Eight-story building with 115 apartments over a two-story podium base with 20 liner townhouses and 165 indoor parking spaces.

Residential Building 3 -- Eight-story building with 110 apartments over a two-story podium base with 20 liner townhouses and 160 indoor parking spaces.

Residential Building 2 -- Eight-story building with 100 apartments over a two-story podium base with 15 liner townhouses and 140 indoor parking spaces.

Residential Building 1 -- Nine-story building with 220 apartments over a three-story podium base with 30 liner townhouses and 250 indoor parking spaces. This building can be up to 150 feet tall as it is farther away from Burke Lakefront Airport.

Hotel -- Six-story, four-star hotel with 175 rooms over parking and retail base. A full-service restaurant is planned. No hotel brand has been publicly identified yet.

Office Building -- 200,000 square feet of leasable space above parking podium base and retail. The height of the office building and the hotel are limited to 100 feet because they are the closest planned buildings to Burke Lakefront Airport.

STEM School -- A two- to three-story school offering daycare and early education, as well as a K-8 curriculum focusing on science, technology, engineering, and mathematics is proposed. But the Cleveland Metropolitan School District has yet to commit to locating here.

Signs for Cumberland's lakefront development appear in front
of the Dock 30 warehouses on Erieside Avenue, north of First
Energy Stadium. The warehouses are scheduled to be razed
this winter to make way for new apartment buildings (KJP).

Other features are planned, in addition to the above buildings and the extension of the malls to Lake Erie. One of the saved Hulett ore unloaders is proposed to be located on the west side of the mouth of North Coast Harbor, next to the Steamship William G. Mather Maritime Museum, part of the neighboring Great Lakes Science Center. Also a playground, which has funding, is proposed to be located here.

Linking the west side of North Coast Harbor with the east side, via Voinovich Park, will be a $16.8 million pedestrian bridge. Construction of the bridge, which will raise up in the middle to allow boats to pass, is scheduled to begin in early 2020.

Lastly, construction of the Rock & Roll Hall of Fame and Museum's expansion is due to start the day after the 2021 NFL draft is held in Cleveland, in April or May. The expansion, costing $35 million, will add 50,000 square feet of space between the rock hall and science center, along the south side of North Coast Harbor.

END

Market Square project to shrink by about one-third

While construction of Harbor Bay's Market Square residential
building (at left) will go forward, the office building (at right)
won't -- at least not in the foreseeable future. It was a casualty
of Cleveland's high construction costs, low rents, lack of local
public subsidies for office construction and the city's desire to
protect its jurisdiction in approving tax abatement (HBREA).

Without state financing and a tax exemption for its project, the developer of a $175 million, mixed-used development has decided to scale back the project by about one-third -- at least at the outset.

Harbor Bay Real Estate Advisors, LLC is hoping for the city to approve a conventional, 15-year, 100-percent tax abatement for the residential portion of its Market Square project. If that happens, a seven-story apartment building with ground-floor retail would be located at the corner of Lorain Avenue and West 25th Street in Cleveland's Ohio City neighborhood.

But without a tax exemption for the entirety of the roughly 500,000-square-foot development, the 150,000-square-foot, 10-story office building is going to have to wait for more signed leases and an as-yet-unidentified form of public subsidy before it can be built.

That building was expected to increase the daytime population of the Market District with 1,000 office workers at a transit-accessible location, thereby boosting business at the West Side Market as well as at local restaurants and shops, said Harbor Bay's Project Director Dan Whalen.

"We had some leasing done in the (office) building, but there was still a ways to go," he said. "All we can do is keep going forward and treat the office (building) as a possible second phase. Hopefully, once companies see the timber in the flesh on the residential building, they’ll get excited about the potential and want to consider talking (about leasing)."

Market Square is proposed to be built with timber framing. It's a construction technique that is more expensive at the outset, but saves up to 40 percent in ongoing heating and cooling costs. And it is more environmentally friendly than manufacturing steel and concrete for traditional structures.

That's why the Ohio Air Quality Development Authority (OAQDA) was willing to finance the project and give it a tax exemption. But the city, school district and Cleveland Metroparks voiced their opposition, blocking the OAQDA request.

The Market Square development was planned to feature
roughly 500,000 square feet of development, as well as
structured parking. But the 150,000-square-foot office
building at lower right will have to wait for a second,
possibly distant phase of construction (HBREA).

Instead, with timely city approval of the residential tax abatement, Whalen anticipates being able to start construction on about 335,000 square feet of the project with minimal delay. Construction of expanded water lines and sanitary sewers could begin in the first quarter of 2020.

Demolition of the existing Market Plaza retail strip will begin as soon as KeyBank can move into its new location, Whalen added. KeyBank is relocating to the West 25th Street Lofts development, at the southwest corner of West 25th Street and Church Avenue, next to Bookhouse Brewing. Other retailers in the plaza have found new homes.

"The office (building) is on hold until we can basically pre-lease a building with tenants, or one big tenant, in the future," Whalen explained. "And we will need to determine how to finance it because Cleveland office rents don’t pencil without substantial public financing assistance."

That's also why a big reason why the nuCLEus development has stalled -- a lack of public assistance for constructing new, market-ready office buildings. Nearly half of nuCLEus' square footage is proposed to be offices. The last new office tower built in or near downtown Cleveland was the 21-story Ernst & Young building in the first phase of Flats East Bank in 2012.

Nearly half of the $270 million cost of the first phase of Flats East Bank, or $130 million, was publicly financed. That included loans and grants from the City of Cleveland, Cuyahoga County, Cleveland-Cuyahoga County Port Authority and the State of Ohio.

The existing Market Plaza retail strip along West 25th Street
is due to be demolished in the coming months -- just as soon
as KeyBank's new store just up the street is ready (Google).

Another large source of funding for Flats East Bank's first phase was the EB-5 "investor visa" program. While an exact figure wasn't available, up to $30 million from that program was used to finance Flats East Bank's construction. The Cleveland International Fund, which pools investor visa funding for local projects, has had to scale back its activity due to recent problems.

How can the city aid these stalled, new-construction office projects which cost as much to build as those in New York or Chicago due to prevailing construction wages, yet command low Cleveland rents? When asked that question, Ward 3 Cleveland Councilman Kerry McCormack chose to instead defend the city's jurisdiction on whether it should offer tax abatement.

"I support common-sense incentives to bring in jobs, development and housing, but allowing the state to completely strip a local municipality of its authority is never going to be supported," McCormack said. "I am working closely with Harbor Bay right now to get a great project over the finish line."

"Our position is that we don’t really want to be adversarial with the city," Whalen emphasized. "What’s done is done and we need to turn the page. We are in complete partnership with the city and success to us means building a world-class project at this corner in very short order."

END