Hingetown, Cleveland's hottest development hotbed

A picture is often worth a thousand words. This graphic shows
how many developments were built, are under construction, or
in advanced planning in Cleveland's Hingetown since 2000.
CLICK TO ENLARGE ALL IMAGES (Google/KJP)

Hingetown, that little enclave within a neighborhood within a city seemingly couldn't be growing any faster than already it is. No matter where you stand in Hingetown these days, you're either standing next to a 21st-century real estate development, across the street from one or you can see one less than a block away. Increasingly, in Hingetown, you're surrounded by projects.

That's a dramatic change considering that drug dealers and prostitutes once roamed this northeast corner of Cleveland's Ohio City neighborhood. Today, they have given way to young professionals eager to share their fresh ideas, families pushing baby strollers and entrepreneurs looking to make their mark or a new start. It's come a long way from what was a "toxic corner" as Vanity Fair told the enclave's story four years ago.

Now, one of the neighborhood's biggest developers, The Snavely Group, is rapidly expanding its footprint on Detroit Avenue which is along the northern edge of Hingetown (actually, the West Shoreway seems to be the unofficial northern boundary).

By the end of this year, Snavely reportedly hopes to delve into Phase 3 of its multi-phase, mixed-use, mixed-income development, moving westward from West 25th Street. A fourth phase may not be far behind that.

Snavely's first phase, The Quarter (clad in green), is under
construction in this January 2018 scene. Two buildings across
Detroit Avenue were undergoing renovation as part of phases
1 and 2. The third phase will renovate the historic Painters'
Union in the center-foreground and add a 5-story apartment
building on the parking lot at bottom (Aerial Agents).

“This project is a place-making project,” said Peter Snavely Jr., vice president of development for the Snavely Group in a written statement. “It’s a mixed-use, mixed-income, socially-driven project.”

Last year, Snavely completed its first phase at the northwest corner of Detroit and West 25th, called 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 development replaces a huge, windswept parking lot.

Tenants for the ground-floor commercial space in The Quarter include the Music Settlement, an early education and music school, APG Office Furnishings, D.O. Summers dry cleaners, and The Grocery OHC, a local grocery offering healthy, locally sourced food. But the first phase also continues across Detroit -- though only to the ground floors of two historic buildings. There, Hingetown's reputation as a place where entrepreneurs can find a guiding hand is enhanced.

The first floor of the Forest City Savings and Trust Building was renovated into the Ohio City Galley, a restaurant incubator including a 200-seat food hall and four kitchens for new-start restaurateurs. To the west is the Seymour Building whose first floor was redeveloped with the The Beauty Shoppe, a co-working office space and Foyer café, according to an article by Novogradac & Company LLP, a real estate services consulting firm specializing in affordable housing development.

Soil boring equipment for geotechnical testing was on the site
of Snavely's planned third phase of its Hingetown master
development during the first week of April (KJP). 

The second phase stayed in one of those historic buildings. Snavely is renovating the upper floors of the Forest City Savings and Trust Building with 38 affordable apartments. The building will be renamed Forest City Square, with work due to be completed by the end of the year. Total investment among the first two phases is $60 million.

Next is the third phase -- 88 apartments in two buildings. One is an existing structure -- the three-story Painters Union building at 2605 Detroit Ave. that is due to be renovated. Next to it could be a newly built, five-story building like The Quarter across Detroit albeit smaller in land area. It will be on the April agenda of the Clinton-Franklin Block Club which will meet at 7 p.m. April 25 at St. John's Parish Hall, 2600 Church Ave.

 An image from the schematic designs for
phase 3, submitted by Snavely to the city
for approval. A renovated painters Union
building is at left and the new-construction
 element is at right. (Vocon)

Deciding whether to pursue a third phase likely wasn't a difficult one for Snavely, considering the speed and market-rate rents at which The Quarter leased out. But the third phase, due to start this fall, will feature affordable apartments for residents earning 80 percent of the average median income. Snavely was able to offer reduced-rate apartments thanks in part to Opportunity Zone funding, according to the Novogradac article.

A possible fourth phase may come in a couple of years, pending the relocation of two businesses. The first relocation would be Cleveland Vibrator Company, 2828 Clinton Ave. Its relocation, which isn't yet finalized, would make way for the other relocation, that of The Adcom Group whose offices are currently located at 1370 W. 6th St. in downtown's Warehouse District.

The 1.7-acre Hingetown site of the Cleveland Vibrator Company
 is being acquired for redevelopment, including for ground-
floor offices and apartments on the upper floors  (Google/KJP).

Although still in a preliminary stage, four sources say the development concept for the fourth phase involves putting the offices for Adcom, a fast-growing marketing company, on the lower floors of a new building with apartments on the upper floors.

"I personally, along with some other partners, are in the process of buying some commercial property in Ohio City," said Adcom CEO Joe Kubic. "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."

Few places in Greater Cleveland have had so many real estate development projects built or planned in so small of an area in recent years as Hingetown. While downtown adds housing units in big gulps, Hingetown adds them in seemingly countless nibbles. Even as this walkable neighborhood's bites into the market are getting bigger, the appetite seems insatiable.

For now it's just a big hole in the ground. Soon, two apartment
buildings, one six stories tall and the other 11 stories, will rise
for the Church+State development between Detroit and Church
avenues, and West 28th and 29th streets. The latter was called
State Street. It shows how Hingetown continues to grow and
foster a much more vibrant urban neighborhood just west of
 downtown Cleveland (Ken Prendergast).

The spark to this development brush fire began with a main street of shops, cafes and restaurants along West 29th Street south of Detroit. It was led by investors Marika Shiori-Clark and Graham Veysey. They named it Hingetown because it's like a hinge between the Gordon Square Arts District, the Market District, and the Warehouse District.

The goal was and is to have an inclusive, socially conscious, entrepreneur-based enclave, located in the cultural heart of Cleveland's LGBT community. Shiori-Clark and Veysey renovated an 1854-built firehouse with a coffee shop and businesses. Other pioneering efforts were the Federal Knitting Mills Apartments conversion and renovation of a long-vacant streetcar electrical substation-turned-art gallery called the Transformer Station.

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New county jails proposed as UC-area high-rises!

This reportedly is the conceptual design for Cuyahoga County's
new consolidated jail facility proposed on East 105th Street, just
north of the Greater Cleveland Regional Transit Authority's newly
 expanded East 105th-Quincy Red Line station (KJP file).

Instead of seeking to develop high-rise, quality, affordable housing near rapid transit stations along the Opportunity Corridor, community development corporations are vying for Cuyahoga County's proposed consolidated jail facility.

The winning site, according to 13 sources, is on East 105th Street at Quebec Avenue. The location is next to the newly expanded East 105th-Quincy Red Line rail station, just east of the county's nine-story Juvenile Justice Center built in 2011. As part of the Opportunity Corridor project, the Greater Cleveland Regional Transit Authority (GCRTA) opened the expanded station last year after investing $5 million in local and state funds. The previous station was rebuilt in 2005 for $1.3 million.

GCRTA's newly expanded East 105th-Quincy station, looking
westward. The proposed jail facility will reportedly be located
just out of view to the right (GCRTA).

The new Cuyahoga County Consolidated Jail Facility, comprised of two towers, one 27 stories and the other 18 stories over a two-story pad offering restaurants, neighborhood retail and a Star-On-The-Fly drive-through coffee store, is projected to cost $1.8 billion. It will not only address overcrowded conditions at the aging jails downtown, it will unite in one location county and municipal jails from several suburbs.

"This Transit Oriented Development will place hundreds of exciting jobs within a short walk of a rail station, which is what TOD is all about and what the Opportunity Corridor is all about," said John Jacob Jingleheimer Schmidt, president of Schmidt Corrections Construction Corp. "This jail is about opportunity."

But Ken Prendergast, executive director of All Aboard Ohio, a nonprofit that advocates for improved transit and for TOD to address the region's spatial mismatch between jobs and job seekers, called the project a missed opportunity.

The proposed location of new Cuyahoga County Consolidated
Jail Facility on East 105th Street at Quebec Avenue (Google).

"This has to be a joke, right?" Prendergast asked. "The largest planned project on the Opportunity Corridor is going to be a jail? Sure, the jail jobs and retail jobs will be a welcome addition to this depressed neighborhood that's within sight of the shiny towers of University Circle. But that's not what TOD is all about."

All Aboard Ohio recently advocated for developing larger-scale housing developments next to Opportunity Corridor rail stations at East 105th and at East 79th streets. The organization said that new, inexpensive construction techniques combined with Opportunity Zone financing and existing incentives for affordable housing should make these larger-scale developments more viable and likely.

"I'm sure the jail towers will be a tremendous visual addition to University Circle's growing skyline," Prendergast added. "But it's time for this region to stop developing as if every day is April Fool's Day."

END

USL Cleveland soccer stadium site chosen

While a new Cleveland USL soccer stadium will probably be
less elaborate than this new stadium being built in Louisville,
it shows how much the USL has grown in some markets. The
new home of the Louisville City Football Club will seat 11,700
and can expand to 20,000 seats. The site will also have offices,
retail & a hotel (LouCityFC).(CLICK IMAGES TO ENLARGE)

For 30 years, a forlorn spit of land south of the Inner Belt highway in downtown Cleveland has been eyeballed by different people for different types of sports stadiums.

Now, the latest and perhaps most realistic stadium effort has reportedly targeted land owned by the Ohio Department of Transportation (ODOT) for a 5,000-plus-seat United Soccer League (USL) venue. That's according to two sources, one a major local developer and the other a Cleveland building and construction trades representative.

Brothers Greg and Shaw Abrams, co-owners of six Force Sports fitness centers, are apparently teaming up with as-yet unidentified investors to acquire and develop the site, as well as to pay the USL's $5 million franchise expansion fee. The team will be called the Cleveland Force, as the Abrams brothers acquired the naming rights to the Force, an indoor soccer league team that briefly thrived at the since-demolished Richfield Coliseum from 1978-88. However, the Abrams said they are not in a position yet to confirm the site.

"Our goal is to make sure that a stadium deal can be announced at some point soon," Greg Abrams said in an e-mail March 28. He said the announcement will be made as soon as he gets the OK from his partners.

The site involves less than half of the 49-acre, former Norfolk Southern intermodal rail yards. It is located just south of the Interstate 90 Inner Belt and is bounded by Ontario Street/Broadway Avenue, East 9th Extension and Commercial Road. ODOT acquired the land in 2011 for $29.8 million to construct the Inner Belt's new Cuyahoga Viaduct bridges.

ODOT acquired all 49 acres of Norfolk Southern's intermodal
rail yards on the south side of downtown Cleveland in 2011. An
ODOT spokesman said it doesn't want or need the entire site
and confirmed that there are suitors interested in acquiring at
least some of the land, but refused to identify them until
agreements have been finalized (Cuyahoga County/KJP).

A soccer stadium measuring at least 400 feet wide and 500 feet long could fit on the mostly level land next to the Inner Belt. An ODOT spokesman confirmed there have been inquiries about that property but no deals have been finalized.

"There is excess land that ODOT is having appraised," said Brent Kovacs, public information officer at ODOT District 12. "ODOT has received inquiries about the land. ODOT would like to sell the land, but there is no agreement to sell or lease the land with any party, at this time."

Constructing USL Division II stadiums in other cities cost anywhere from $15 million to $65 million. The United States Soccer Federation sets the USL Championship league at one level below the top-rung North America's Major League Soccer (MLS). The Abrams brothers and their partners reportedly want Cleveland in this league to draw better players, competition and attendance.

The USL continues to grow in franchises, popularity and games. In 2018, USL's Championship league was drawing an average of nearly 5,000 fans per game. However, the USL's most popular team, FC Cincinnati that attracted 25,000 fans per contest last year, was moved up one level to the MLS.

This is an oversimplified diagram of how a soccer stadium and
supportive uses could fit on the site that is reportedly being
targeted for a new USL Cleveland franchise (Google/KJP). 

This would be Cleveland's second attempt at a USL franchise. The first one lasted just three years, from 2007-09. In its first two years, the Cleveland City Stars regularly filled Cleveland State University's (CSU) 1,800-seat Krenzler Field on Chester Avenue. For its third season, the Stars moved from USL's lower division to the upper division, so it had to offer a stadium of at least 5,000 seats, per league rules. The team's home games were played at Bedford's Bearcat Stadium and attendance dropped. There were some conversations about building a new stadium downtown, including at the former intermodal yards, but the Stars franchise was losing money and soon folded.

After rumors that it was looking to replace Krenzler Field, CSU renovated the soccer stadium last year for $2.9 million, including a removable, air-supported dome. A spokesman said CSU will not move its soccer program to the proposed USL stadium due to the number of indoor and outdoor matches and practices that CSU can host at Krenzler Field.

"At this juncture, we have had no discussions with parties associated with the construction of a USL soccer stadium, or any partnership with the team after completion of the project," said Roger McAfee, CSU's assistant athletic director for communications.

The size of the proposed USL stadium, supportive infrastructure and surrounding amenities like parking, restaurants/bars and team shops is limited by other land uses and the topography of the land. The site is perched atop a hill overlooking the Cuyahoga Valley and is next to a trench through which the Greater Cleveland Regional Transit Authority's (GCRTA) rapid transit rail lines pass. To the north is Interstate 90's Inner Belt, although the highway bridges over the land that has a paved and illuminated parking lot on it.

The Greater Cleveland Regional Transit Authority's rapid transit
rail line cuts through the southeast edge of downtown Cleveland
and alongside the site (at left) where the USL soccer stadium is
 proposed to be built (KJP collection).

GCRTA has no current plans to build a station here but some long-range planning from 20 years ago proposed adding an infill station or relocating the East 34th-Campus station to this vicinity. If a station was built, it might cost up to $15.6 million as the 2015-built Little Italy-University Circle Station had. That was the last all-new rail station built by GCRTA. However, GCRTA completely redesigned and replaced its existing Tri-C Campus District Station 1 mile east of here in 2018, costing $7.5 million. Some GCRTA rail stations are located less than a mile from each other.

On the other side of the GCRTA rapid transit line is Cleveland Black Oxide, a small industry that makes metal finishing products. Its 22,000-square-foot building sits on 0.71 acres at 836 Broadway Ave. Its owner and President Bob McElwee bought a roughly 14,000-square-foot building in October 2018 at 3490 W. 140th St. But McElwee says it was for storage, not for relocation. He also notes that he has been approached by developers recently.

"We don’t have plans to move, however there have been developers talking with us about purchasing our building or building us a new building and doing a like kind exchange," McElwee said. "We are also looking at expanding at our current site (on Broadway). The folks that have approached us were not involved with a stadium development."

The LouCity FC stadium in Louisville is now under construction
and carries a price tag of $65 million. However, it is unlikely that
Cleveland's new soccer stadium will be so grandiose. But it could
be expandable to someday offer the kind of facility now enjoyed
by soccer fans in many top-attendance USL cities (LouCity FC).

Discussions about building a sports stadium at this location date back to the late 1980s. But those early efforts focused not on world futbol, but on American football -- the Cleveland Browns. When serious discussions were getting underway for the Gateway sports complex, the Browns were invited to participate along with the Cavaliers and Indians. The Browns stadium was proposed to be where the current soccer stadium is planned, south of the Inner Belt. Ultimately, however, then-owner Art Modell preferred to renovate the existing lakefront Municipal Stadium.

In 1996, after Modell moved to Baltimore, the City of Cleveland didn't want to build a new Cleveland Browns stadium anywhere other than on the lakefront site of the old stadium. But there were those with dissenting opinions in Mayor Mike White's administration who wanted it built on the newly vacated Norfolk Southern intermodal yards. The complicated site was rejected because the city wanted the Browns returned to Cleveland without delay and without having to build the infrastructure necessary to accommodate 70,000 sports spectators.

But the site might just be right for a 7,000-seat soccer stadium. We'll see if it's good fit here.

END

Ohio City manufacturer bucks housing trend

The Kowalski Heat Treating Co. is a manufacturing outlier in the
booming Detroit Avenue residential corridor in Cleveland's Ohio
City neighborhood (Google).(CLICK IMAGES TO ENLARGE)

A stretch of Detroit Avenue in Cleveland's Ohio City neighborhood, once known as Mariners' Row for its many boat dealers and boating stores, is quickly becoming home to a number of mid-rise apartment buildings. From The Quarter, Federal Knitting Mills, Mariner's Watch, Edge 32, to the latest and largest project yet -- Church + State -- more than a dozen blocks of Detroit Avenue next to the West Shoreway (now Edgewater Parkway) are lined with apartment buildings from four to 11 stories tall.

A notable exception is a holdout manufacturer, Kowalski Heat Treating Co., that has grown from 3,000 square feet to 83,000 square feet during its 44 years, adding nearly 23,000 square feet just in the past week.

A source said owner and President Steve Kowalski had secretly been looking to move to larger quarters in a business park elsewhere in Cleveland but the deal fell through. If so, it makes sense that Kowalski may stay put because his metalworking equipment is expensive to move. But the source said it is possible that Kowalski's latest acquisition might be for storage in the short term. In the long term, he could still sell his entire property to a developer and relocate his operation which employs about three dozen people.

Prior to 5 p.m. March 22, Kowalski had not returned two voicemails and an e-mail seeking clarification for this article. A woman who answered the phone earlier that day at Kowalski Heat Treating said the company wasn't planning on moving.

There are other indications that Kowalski Heat Treating will keep expanding to increase production of treated metal products and continue bucking the trend of an increasingly residential Detroit corridor overlooking Lake Erie and Whiskey Island.

To the right of the new Edge 32 apartments is the former head-
quarters and plant of Conveyer & Caster that was bought on
March 18 by Kowalski Heat Treating. Conveyer & Caster
moved out to Westlake and Kowalski moved in (Google).

On March 18, a corporation owned by Stephen G. Kowalski of Bay Village closed on the purchase of 0.83 acres that belonged to The Storefront Ltd. (doing business as Conveyer & Caster Inc.), 3501 Detroit Ave. Storefront is named after the Stohr family who founded Conveyer & Caster in 1961 and continues to run it today. The land and four buildings, including a house on Clinton Avenue, were valued in 2018 by Cuyahoga County at $719,400 for tax purposes.

The purchase amount is not publicly available. However, SGK Development Co. and KMJC Properties LLC, both owned by Kowalski, secured two $1.44 million mortgages from The Storefront Ltd. which also acted as lender, according to documents filed with the Cuyahoga County Fiscal Officer.

SGK Development is the firm that owns most of the 1.16 acres on which Kowalski Heat Treating had been operating. Its mortgage pertains to the parcels in those 1.16 acres. KMJC Properties was formed in January as part of Kowalski's efforts to acquire the neighboring Conveyer & Caster site.

Conveyer & Caster moved its offices, manufacturing plant and roughly 30-40 employees on March 1 to a 75,000-square-foot building it renovated at 29570 Clemens Rd. in Westlake. KMJC Properties' mortgage pertains to the parcels in the 0.83 acres that Kowalski acquired March 18.

It isn't known for what purpose Kowalski will use or has used the $2.88 million in loans. But it appears that one loan was used to acquire the Conveyer & Caster site and the other to possibly improve, replace or add equipment owned by Kowalski Heat Treating.

Stephen G. Kowalski, owner and president of Kowalski Heat
Treating, now has a significant presence on the Detroit Avenue
corridor that stands out along the West Shoreway (Google/KJP).

Kowalski Heat Treating has been expanding ever since the company was founded by Steve Kowalski's father Robert in 1975. The company's previous expansion before last week was in 2014 when it acquired Kennick Mold & Die, 3601 Detroit, for what Kowalski calls Plant 6. That acquisition brought the six-building site up to 60,000 square feet.

In 2002, according to Crain's Cleveland Business, Kowalski invested $2.5 million to refurbish its then-18,000-square-foot site and add 10,000 square feet of space to it. The article noted that Kowalski said he had no thoughts of relocating the company because many of his employees lived in Cleveland.

"We love this area," Kowalski told Crain's 17 years ago. "This location is ideally suited for our business. We didn't do this (refurbishment of the building) for the short term."

Ironically, back in 2002, Kowalski also said he doubted the ability of the Detroit corridor to support more shops and housing. Yet, the neighborhood continues to boom with the addition of more shops and housing -- and a growing manufacturing plant.

END

New Sherwin Williams HQ plans may stir by 2020

Sherwin Williams' world HQ is the 89-year-old Landmark Office
Building in downtown Cleveland that the Fortune 500 company
outgrew five years ago. That was before it swallowed up rival
Valspar Corp. (KJP). (CLICK IMAGES TO ENLARGE)

By the end of this year, Cleveland coatings giant Sherwin Williams (SHW) plans to issue a request for proposals (RFP) from design-build teams for a new or expanded corporate world headquarters and research facilities. That's the word from two sources in the development community.

Once SHW wrapped up legal and staffing issues in the summer of 2018 surrounding its acquisition of rival Valspar Corp., it commissioned work on drafting an RFP for the combined company's facilities. While most of the parameters in the RFP aren't known, some are. For example, the RFP will reportedly seek proposals not only for a new headquarters but also for a new research center.

It is apparent that SHW will re-open consideration of Downtown Cleveland sites for the new headquarters or an expansion of its existing headquarters. Prior to launching its plan to acquire Valspar in 2016, the company was near to announcing a new headquarters tower on the Jacobs Group-owned parking lot on Public Square, according to a source at a firm hired by SHW five years ago to assist its extensive due diligence efforts.

SHW's headquarters since 1930 has been the Landmark Office Tower, 101 Prospect Ave. which it has owned since 1985 but outgrew five years ago. The growth accelerated even more rapidly following the Valspar deal, with local SHW employment increasing by 615 people between June 2017 and June 2018, to nearly 5,000 employees. SHW corporate office and research activities now are scattered among six facilities in Greater Cleveland.

Reportedly, SHW's charter directs its principal offices to be located within one mile of where the company was founded in 1866, roughly where SHW's Breen Technology Center is today at 601 Canal Rd. If the existing headquarters is vacated, the RFP may include parameters for purchasing and redeveloping it.

SHW's Breen Technology Center is next to where the company
was founded on Canal Road in 1866. The crowded R&D facility
is in need of a larger, more modern replacement. While it could
be built anywhere in the world, it will likely be close enough to
the downtown Cleveland headquarters to retain easy, personal
interaction between SHW's executives and scientists (Google).

Unlike the headquarters, there is no corporate restriction on where the Breen Center should be located. A new research and development facility is also part of the RFP, a source said. More than 400 people work at Breen which was built in 1948 and expanded in 1998. Today, the facility is so full that most of Valspar's R&D staff has had to remain in Minneapolis.

The RFP will likely leave it open to relocate SHW's primary R&D facility to anywhere in the world, although remaining relatively near the headquarters is apparently desirable. There is a lot of personal interaction between the two facilities, as SHW executives and researchers regularly walk back and forth between Landmark and Breen in their duties to advance new products and processes.

The timing of the release of the RFP before 2020 coincides with SHW's progress in paying down debt it incurred from the Valspar acquisition. SHW has been hyper-focused on paying down that debt and will not consider a new headquarters or research facility until its debt load is reduced. That includes leasing new facilities built and owned by others because long-term leases also count as debt.

In 2017, SHW's debt was more than four times higher than the average debt-to-equity ratio of its competitors in the coatings industry.

SHW's debt load is still significant but improving. Right after the Valspar acquisition was given the green light by numerous governments around the world, more than $11 billion of debt was on SHW's books in the third quarter of 2017. Its debt is now dropping to near $9 billion, but was just below $2 billion before acquiring Valspar.

So far, SHW has been able to pay off about $1 billion of its debt per year thanks to strong cash flow from increased business following the Valspar buy. The firm is not over-leveraged, however, as measured by the debt-to-equity (D/E) ratio. SHW's D/E ratio was 4:1 in 2017 but is now below 2.5:1 and should be at 2:1 by the end of this year.

An over-simplified projection of how and when SHW's debt-
to-equity ratio could recover from the Valspar acquisition and
return to an industry standard 1:1 ratio. SHW will not build or
pay a long-term lease for a new headquarters until its debt is
reduced to a normal level. Note that it takes more than three
years to design and build a skyscraper (KJP).

For context, competitor PPG's D/E ratio is at 1.66:1, although their debt is at a five-year high. The industry average is slightly better than 1:1. It is possible that SHW's D/E ratio could approach PPG's level by level by the middle of next year, assuming cash flow and share values do no worse than remain stable.

Assuming there are no major corporate or economic hiccups, SHW's D/E ratio should be able to reach 1:1 by the end of 2022. That's interesting timing considering that it takes more than three years to design and build a roughly 1-million-square-foot skyscraper that would be big enough to accommodate all of SHW's scattered corporate offices and allow room for future growth.

That three-year clock could start ticking at the end of this year. That coincides when sources say SHW will issue its RFP to developers for what would likely be the largest office building constructed in downtown Cleveland in 30 years.

END

New HQ may land on Scranton Peninsula

A corporate headquarters is now shown in the marketing materials
for Thunderbird, the 22-acre development of Scranton Peninsula
in Cleveland's Flats, after a 7.44-acre plot was put under contract
 to a new user. (LoopNet)(CLICK IMAGES TO ENLARGE)

With roughly 80 acres of land, Cleveland's Scranton Peninsula is practically a blank canvas for a developer to pursue their SimCity dreams along a navigable waterway in the heart of a major city. And someone has just planted a big flag on Scranton Peninsula, the largely vacated expanse of land nearly surrounded by the Cuyahoga River a mile south of Public Square.

Great Lakes Brewing Company planted the first and biggest flag, taking eight of 22 acres being actively marketed as "Thunderbird" by developers. The craft brewer will expand its brewing capacity and for a possible canning facility, tasting room and restaurant. Great Lakes has an option to buy two more acres to the west, along the river.

But it wasn't Great Lakes that took the next chunk of Thunderbird on barren Scranton Peninsula. Thunderbird is being marketed and potentially developed by an investor group including developer Fred Geis, a group of investor companies called the East West Alliance (led by attorney Matthew Weiner) and J Roc Development. After Great Lakes grabbed its parcel, there were three more plots of land to be had in the Thunderbird offering -- the 7.44-acre Lot A, 4.17-acre Lot B, and 2.04-acre Lot C.

The proximity of Thunderbird and Scranton Peninsula
to downtown Cleveland is evident. so is the new HQ
shown in this image, released March 11 (LoopNet).

The largest of those is now under contract for sale or lease to.....someone. That means there is an agreement to sell or lease it but because the transaction hasn't closed, it's still a mystery who it is. However, a couple of clues suggest a notable shift in the aspirational designs for this site.

First, the land area involved is more than 324,000 square feet. At this point, it doesn't appear to be for a land-gobbling warehouse or assembly plant -- if the new renderings being marketed in brand-new Thunderbird marketing materials are any indication.

Released on March 11, a new marketing brochure shows a glassy, 11-story, cube-shaped corporate headquarters rising next to the planned Great Lakes brewery, along cobblestone streets and overlooking the Cuyahoga River and Columbus Road peninsula. Three of the stories appear to be for parking, above a ground-floor level of retail and/or restaurants.

The headquarters building bears an obscure sign "Tenants Name" on the facade. And the marketing piece encourages a headquarters tenant to locate here, suggesting that an end user isn't the firm who is under contract for Lot A, but rather another developer or investor.

Views from the same vantage point, before (above) and after
(below) an unknown user agreed to buy or lease Thunderbird
Lot A for what is now shown as a corporate headquarters.
Previously, the aspirational design envisioned a possible
residential use for the same site (LoopNet).

Previously, in Thunderbird's listing on LoopNet, the building shown in the renderings for this site looked residential, complete with balconies. It was elongated, about half as tall, and built possibly of brick and other earthy colored materials.

While the identity of the company that is buying or leasing here is still a mystery, Thunderbird's newfound promotion of its inclusion in the Opportunity Zone program is not. The backers now tout it on the cover of the marketing brochure and with a full page inside explaining how the O-Zone program can benefit investors who choose to put their money into Scranton Peninsula.

This 135-year-old building at 1920 Scranton Rd. is due to be
demolished soon. It is next to the Lot A site that is now under
contract for development. This view is from 2016 (Google).

Most of the rest of Scranton Peninsula is not being actively marketed for development, but that may be starting to change. Scranton Averell Inc. owns most of the land on the peninsula. It has owned properties here through predecessors and ancestors since the 1820s.

Although Scranton Averell is not a partner in the Thunderbird project, it is cooperating with it by allowing its land to be shown bearing conceptual developments in marketing renderings. And Scranton Averell has agreed to pursue demolition of a collection of brick buildings at 1920 Scranton Rd., dating from 1884. These buildings are next to the Lot A parcel that is now under contract.

This graphic from the Thunderbird marketing tools show the
15.5 acres of land that are spoken for and the 6.2 acres that
are still on the market for lease or purchase (LoopNet).

Another development may also be moving forward, separate from both Thunderbird and Scranton-Averell. At the neck of Scranton Peninsula along Carter Road just east of Columbus Road, Lake Link LLC is requesting city approvals to build a 2,967-square-foot model home. It's the first of a dozen luxury, single-family homes that will carry a weighty price tag that's becoming more common in Cleveland's core city. The homes' list prices start in the $750,000 range according to a roadside sign.

END

Four downtown towers are in the works

A pair of 24-story towers in the revised nuCLEus development,
as seen from the Huron Road entrance to Quicken Loans Arena,
may see construction start by the end of Summer 2019.
(Stark) (CLICK IMAGES TO ENLARGE)

The real estate market in Cleveland and especially downtown is shifting into a whole 'nother gear.

Growth of the market combined with the advent of new financing tools, plus the dwindling supply of older office buildings available for residential conversion is making significant new construction more realistic.

There's 3.4 million square feet of obsolete office space getting converted, or about to be converted to residential or mixed-use downtown. When that supply goes, that's it for a while, unless and until another office user vacates its historic digs (thinking of you, Sherwin Williams, with love).

That's why there's four new towers in the works downtown, in addition to the two already under construction -- The Beacon (28 stories) and The Lumen (34 stories).

Stark Enterprises' announcement this week is just the start. Its nuCLEus development has evolved into a more financially viable design, with two 16-story towers (one office, the other residential) atop a eight-story pedestal. It evolved just as the downtown market has evolved. No longer does Stark need as much subsidy to build this long-sought project on land the company owns just north of Quicken Loans Arena. In fact, Stark has most of the financing already in place or pledged.

Looking south, nuCLEus' office tower is at the left and residen-
tial tower is on the right. The two 16-story buildings will be
built atop an eight-story pedestal of parking and retail (Stark).

“The new plan responds to the changing demands of the market and is sized so that the project can move forward immediately," said Ezra Stark, Chief Operating Officer at Stark Enterprises. "Public-sector assistance is fully supported by incremental tax revenue generated by the project.”

The nuCLEus office tower is proposed to reach 353 feet tall while the residential tower would top out at 310 feet tall. Stark Enterprises' development plan for nuCLEus was submitted March 7 to City Planning Commission for schematic design approval. Stark hopes to break ground as early as August 2019, according to an official press statement.

About a year behind nuCLEus is the City Club Apartments, proposed for the surface parking lot next to the City Club Building. But that's not why the proposed high-rise carries the City Club name. It's because that's the name of the national development firm Jonathan Holtzman leads. It just so happens that this last undeveloped Euclid Avenue site between Public Square and Playhouse Square is next to the City Club Building, historically called the Citizens Building.

Holtzman has offered little fanfare about his plans for the 0.56-acre lot. It's a site he has so far publicly revealed only to Crain's Cleveland Business last November as his favored location for constructing a high-rise, mixed-use building. Based on City Club's other projects, the non-residential uses are ground-floor retail and co-working/creative Class A office spaces. Typically, City Club has about 300 apartments in each of its developments. Given the 22,000-square-foot development site, this could be a roughly 25-story building.

Visible progress was noted on March 2 when several drilling rigs were on site to extract core samples for geotechnical analysis to engineer a foundation for a new skyscraper. The last time similar drilling rigs descended on downtown was in September 2015 at a parking lot where The Lumen apartment tower is now rising. Playhouse Square Foundation searched for nearly two more years for a sponsor, financing and a developer for the project, choosing instead to sponsor the project itself. Ground was broken for The Lumen in April 2018.

Geotechnical drilling to gather soil samples was conducted on
March 2 below a parking lot at 720 Euclid Ave. prior to the
engineering work for a 300-unit apartment tower that could
be approximately 25 stories tall (NCLE-UrbanOhio.com).

Will it take 2.5 years before ground is broken for the City Club Apartments? Probably not. Consider that the lowest-hanging fruit among the new-build apartment towers was the first one started this century -- The Beacon. Yet this project may have a better shot of happening than when planning started on The Beacon more than five years ago.

The Beacon had the benefit of not having to build any parking because it was built on top of a nine-level parking deck that was mostly full during the day but mostly empty at night. Also, Stark didn't buy any land to build The Beacon. 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.

The City Club Apartments might benefit from a similar arrangement. Thus far, Holtzman has not purchased land from David Goldberg who owns 720 Euclid, the property that has a surface parking lot on Euclid, a surface lot on Prospect and a six-story, 540-space parking deck in between. That parking deck is mostly full during the day but mostly empty at night. Holtzman may not purchase any land and instead form a partnership with Goldberg to reduce his upfront costs.

Holtzman has a knack for reducing costs on developments while also finding hidden value. Thus it is possible that there will be little or no parking added as a result of this development. That could save $10 million+ from the cost of building this project.

There are more reasons why this project has a better shot at happening than The Beacon in 2014. City Club Apartments is a larger company and better capitalized that Stark Enterprises. Holtzman sold an apartment building in St. Louis for $48 million, in part to help capitalize his Cleveland project. The downtown Cleveland real estate market is stronger than when The Beacon was first planned five years ago. And this project can benefit from the Opportunity Zone program which increases liquidity by reducing investors' tax burdens when they reinvest their capital gains in projects that are in O-Zones. Downtown Cleveland is in such a zone.

Finally, a fourth tower is more speculative but there are growing signs it has been in the works for a couple of years. For decades Lou Frangos has been known as a parking lot magnate. Last year, he turned the family business over to his son Damon Frangos who is less interested in parking lots and more interested in real estate development. Last year, The Frangos Group outsourced much of its parking management to Platinum Parking North East to focus on real estate.

Since 2000, The Frangos Group has acquired 3.2 acres of land
along East 14th between Prospect and Carnegie avenues, west
of the Wolstein Center at CSU. Most of the land was acquired
in 2017 and 2018 as The Frangos Group shifted its focus from
operating parking lots to developing real estate (Google).

In April 2017, through paper companies Prospectus Holdings/II, Frangos acquired 17 parcels southeast of the intersection of Prospect and East 14th. Then, in June 2018, through Travelers Building LLC, Frangos bought two parcels hosting the former Travelers Leather Goods Manufacturing Co. Terms of those deals were not available.

The purchases added to three parcels Frangos acquired in 2000 under the name Caton Court LLC and one parcel acquired in 2007 as 2200 Prospect Parking LLC. So now Frangos owns 3.23 acres of land bounded by Prospect, East 14th, East 18th and the Salvation Army's Harbor Light complex. The site is less than a block south of The Lumen tower, under construction.

On June 8, 2018, as Frangos closed on the last property acquisition in that block, the company's Twitter account posted "DOWNTOWN CLEVELND [sic] DEVELOPMENT - THE BIGGEST SURPRISE IS YET TO COME - 2020."

In recent days, surveyors have been measuring and photographing those 3+ acres from the ground and from nearby parking decks. And, a couple of years ago, about the same time Frangos decided to vastly increase its property holdings in this block, Frangos commissioned drone photography from 300 to 400 feet in the air to see what the views would look like from a building of that height.

Pursuing a development of that scale would be a significant escalation for The Frangos Group whose real estate development experience has been limited to renovating a few existing, historic buildings in Cleveland and Youngstown. It is likely Frangos may pursue a development here in partnership with another developer who has experience with large, new construction projects.

"I see great things on our horizon as we plan to do more real estate development and form strategic partnerships that will make a lasting impact on our city and community," Damon Frangos said in a 2018 press release.

It will certainly be worth watching.

END