NuCLEus gets financing, possible August groundbreaking

After facing complications in securing a $12 million city loan,
it appears the nuCLEus development in downtown Cleveland
is back on track (Stark). CLICK IMAGES TO ENLARGE

To paraphrase Mark Twain, the reports of the nuCLEus development stalling were greatly short-lived. For those of us who welcome investment in downtown Cleveland, we're grateful for the news.

Just last week, sources said all signs indicated that the $354 million project to build two 24-story towers between Prospect Avenue, Huron Road and East 4th Street had stalled. The delay apparently was the result of complications surrounding a $12 million loan from the city. It was among the final pieces of financing for the project.

But this week, a source says that real estate developer Stark Enterprises has significantly closed that $12 million gap without the city loan and is likely to close the remainder soon -- soon enough to tentatively plan an August groundbreaking for the mixed-use development. Two sources confirmed the August groundbreaking.

The complications surrounding the city loan also weren't what they seemed. Reports that the city was reluctant to give the loan to Stark because it wasn't going to pay workers prevailing wages, or that Stark was reluctant to accept the loan for the same reason don't hold water.

NuCLEus will be a mixed-use development, with its
uses stacked vertically. Its most prominent features
on the skyline will be its 354-foot-tall office tower
and its 311-foot-tall residential tower (Stark).

Stark reportedly has hired Cleveland Construction, Inc., a firm with seven offices nationwide but is based in Mentor, to be its general contractor for nuCLEus. Cleveland Construction is a prevailing wage contractor, meaning they aren't signatory with the trade unions. But it can use union labor or non-union labor.

Even if Cleveland Construction wasn't a prevailing wage contractor, the construction market in Greater Cleveland is booming and demanding higher wages. So there isn't much difference right now between prevailing and non-prevailing wage firms.

Furthermore, Stark was awarded and is gratefully accepting other forms of public financing including loans and tax-increment financing from the city, county and state that are likely triggering prevailing wage requirements.

It should not be a surprise that Stark has closed the financing gap on nuCLEus, a project featuring a residential tower and an office tower atop a pedestal of structured parking and ground-floor retail. The reason is that Stark is quickly leasing out its downtown projects' residential, office and retail components.

The Beacon apartment tower, as seen from the
site where the much larger nuCLEus develop-
ment may soon soon rise (mack34/UrbanOhio).

Stark's other big project downtown is The Beacon apartment tower -- a $94 million 19-story building atop an existing nine-story parking garage. It is filling up quickly.

Brian Weisberg, vice president of residential operations at Stark, said at the 5th Annual Commercial Real Estate Summit held June 27 that The Beacon is 60 percent pre-leased. Stark began soft-leasing (without advertising) The Beacon in February and immediately got 550 prospects for apartments in the 187-unit tower.

Weisberg said he anticipates leasing out The Beacon in the first year, despite commanding premium rents. A normal lease-out for a multi-family tower takes 18-24 months. He also noted that Stark is getting more interest for its downtown residential and office spaces than it is for its many suburban properties. NuCLEus will have 250 residential units, most of which will be apartments but some will be for sale.

In the other tower, two-thirds of nuCLEus' 400,000-square-foot office component is pre-leased, with the large law firm Benesch Friedlander Coplan & Aronoff as the anchor tenant. Stark's own offices will relocate to nuCLEus once it is completed. The national developer and capital group has temporarily relocated from 1350 W. 3rd St. to 629 Euclid Ave, Suite 1300.

There also is 80,000 square feet of ground-floor retail, with much of that leased out as well. The biggest portion will be occupied by Fox Sports Midwest, a national chain of sports and entertainment venues. Other retail tenants so far include HopCat and Starbucks Reserve. More are retailers coming, Weisberg said.

END

Seeking opportunity in the Opportunity Corridor

The Opportunity Corridor is finished between East 93rd Street
and Chester Avenue. Construction is starting on the boulevard
between Interstate 490 and East 93rd (ODOT).
CLICK IMAGES TO ENLARGE

This week I took a tour of the completed portion of the Opportunity Corridor, a project whose side mission is to change land use and turn dirt in a part of the city where the dirt hasn't been turned in a very long time.

Road construction started by widening East 105th Street to four lanes with a landscaped median between Chester Avenue and Quincy Avenue. Work in this area included replacing a straight bridge with a wider, curving span over the Norfolk Southern railroad tracks and Greater Cleveland Regional Transit Authority Red Line. Here, the rail station at East 105th-Quincy was expanded.

Then, the new boulevard extends southwest along the RTA Red Line to East 93rd Street. The next phase will link East 93rd to East 55th Street and finally to Interstate 490. That work is just getting underway.

Community development corporations along the Opportunity
Corridor have developed land use plans in preparation for the
completion of the roadway. Slavic Village CDC developed its
Hyacinth Transit Oriented Development plan with multi- and
 single-family housing to capitalize on access to the East 55th
rail station next to the Opportunity Corridor. Both the station
and roadway are just out of view beyond the top of the image
that looks northwesterly (Slavic Village Development).

Burten, Bell, Carr Development Inc. plans a mixture of housing,
light-industrial and agricultural uses north of the Kinsman Ave.-
East 79th intersection, at center-left. The RTA Green-Blue lines
curve through the middle- to upper-right of the image with the
Opportunity Corridor to the upper-right of it. This view also
looks northwesterly (BBC).

Fairfax Renaissance Development Corp. is advancing work on
Innovation Square starting with the two apartment buildings at
the left side of the image, next to an expanded Red Line station
at East 105th-Quincy. On the bottom of this westerly looking
image is East 105th/Opportunity Corridor (Fairfax RDC).

As you can see from the pictures below, the development signs and for-sale signs are already starting to pop up along the roadway. The city and the three community development corporations along the route have their land use plans. But property owners have their own ideas. How this road project will be able to "leverage the boomtown" that is University Circle for the benefit of nearby neighborhoods is still a work in progress.

So will the Opportunity Corridor be lined with gas stations and convenience stores? Or with biomedical labs and advanced manufacturing? Or with scrap processors and aggregates dealers? Or with light-industrial/warehousing? Or with townhouses surrounding apartment towers over retail near the Red Line stations?

What future will this $350 million investment by the Ohio Department of Transportation bring to this forgotten part of Cleveland? The following views are the "before" images. The "after" images will be interesting to see in the coming years and decades.

At the northeast end of the Opportunity Corridor-East 105th is
Ohio's fourth-largest concentration of employment -- University
Circle. The road will improve access to University Circle for
Northeast Ohioans with cars but how will it benefit residents
in the adjacent neighborhoods? (KJP)

Remnants of once-crowded neighborhoods surround University
Circle, often within sight of it. Plans are afoot to "reboot" those
neighborhoods, including with affordable housing (KJP).

One of the few transit-related components of the Opportunity
Corridor includes the expansion of the East 105th-Quincy Red
Line station that lengthens the trackside platform and adds this
secondary street access to reach the future Innovation Square
district south of University Circle (KJP).

The area surrounding the East 105th-Quincy intersection where
the entirely new section of roadway of the Opportunity Corridor
begins. This view looks northeastward (KJP).

A sign of things to come? A sign for Innovation Square adorns
the widened stretch of East 105th where a dense mix of homes,
stores, schools, churches and businesses stood. The goal is to
rebuild this neighborhood with 21st-century needs, such as
homes, stores, schools, churches and businesses (KJP).

The Opportunity Corridor is going to be an opportunity for
someone. Whether it is an opportunity for those who need it
most will take more effort than just putting up a sign (KJP).

In 2019, this is as far west as the Opportunity Corridor goes--
to East 93rd Street. Construction is already underway to link
this roadway to the highway system at I-490 and I-77. Making
the Opportunity Corridor useful to surrounding areas, called
the Forgotten Triangle, where poverty rates of 40 percent or
 are common will take years if not decades (KJP).

 END

Downtown's nuCLEus stalls with impasse, tiny Stark equity

Leasing signs for nuCLEus went up on Prospect Avenue at
East 4th Street -- in October 2014. Five years later, no dirt
has yet been turned for the ambitious, mixed-use real estate
development (UrbanOhio). CLICK IMAGES TO ENLARGE

Another bump in the road has stalled the massive nuCLEus development in downtown Cleveland. This time it has stalled from an impasse over a city loan, even as the project has garnered more than 95 percent of its funding and was scaled down to two-thirds of its previous size. The last piece of financing seems to be eluding the joint venture of Stark Enterprises and J-Dek Investments Ltd.

That's even more difficult to comprehend when considering Stark's equity contribution to the project may be no more than 1-2 percent, according to a source reportedly familiar with Stark's financing for the project, called the capital stack.

In dollar terms, Stark's contribution may be as little as $3.5 million to $7 million of the $350 million nuCLEus project. In other words, when Stark sold its former headquarters building at 1350 W. 3rd St. for $2.65 million in late-2018, it either came close to equaling its equity in nuCLEus or allowed Stark to almost double it.

Ezra Stark, Stark Enterprises' chief operating officer, did not answer questions for this article submitted by e-mail, including a request to confirm Stark's equity contribution. Stark, however, acknowledged that he read and received that e-mail. In other words, he has no comment.

Yes, Stark touts that nuCLEus has a $100 million equity contribution. But the sources of those funds is opaque. NuCLEus is actually being sponsored by a joint venture between Stark and J-Dek Investments Ltd. called Gateway Huron, LLC. Stark touts that Stark, J-Dek and their equity investors are making a sizable contribution to the project. That also includes their $26.7 million purchase of more than 3 acres of land in 2014.

This is a simplified breakdown of the capital stack for
nuCLEus, as presented to the City of Cleveland and that
appeared in an attachment to a proposed ordinance for
awarding a $12 million loan to the nuCLEus project. The
breakdown doesn't show who contributed the equity nor
does it show in what amounts (City of Cleveland).

And it includes $9.5 million which J-Dek raised in a public offering of a shares in Nucleus Jdek LLC in 2014-15, according to its Notice of Exempt Offering of Securities and subsequent amendment filed with the Securities and Exchange Commission.

The source familiar with Stark's equity contributions for nuCLEus and other projects said Stark typically doesn't contribute large amounts of equity to its projects. Stark also reportedly didn't contribute more than 1-2 percent of its own equity to build the $94 million Beacon apartment tower above the existing 515 Euclid parking garage, he said.

"Stark seems to be more of an organizer of equity from others, then Stark does the work to deliver the project," the source said.

It's not uncommon for project sponsors to deliver sweat equity in a project, only to get paid at the back end. By comparison, limited investors typically contribute 80-95 percent of the capital yet don't get their hands dirty on a project. Instead, they receive a preferred 5-10 percent return on their investment from a majority of the cash flow and profits as well as most of the tax benefits.

But that often means the project sponsor puts 5-20 percent of its own equity in a project -- not 1-2 percent. If Stark contributed just a shade more than 5 percent of the equity in nuCLEus, perhaps it might not need the $12 million city loan.

The latest plan for nuCLEus is scaled down by one-third
compared to the previous version. It has two 24-story
towers (actually a 16-story residential tower and a 16-
story office tower above a lobby, six levels of parking
and ground-floor retail (Stark).

Stark's desired final piece of the financial puzzle likely isn't going to happen, barring a miracle. That piece is the $12 million loan it has requested from the City of Cleveland. But City Council seems to be arbitrarily attaching a prevailing wage provision for this construction loan.

The city probably isn't going to back off that condition. City council members have said, given the scale of the nuCLEus project, they can't easily award the loan without the prevailing wage attached.

That's odd. The prevailing wage issue hasn't come up before. Stark has already been awarded two city loans totaling $360,000, a $19 million city-sponsored tax-increment financing deal, as well as two $6 million loans -- one pending from the county and another from the state. None have come with prevailing wage strings attached.

But apparently the wage condition is a deal-killer for Stark. It can't seem to make the numbers work on its nuCLEus project if it paid all construction workers the prevailing wages for their trades and crafts.

So the $350 million project has stalled because the city and Stark are at an impasse.

There may be other options. Stark could further reduce the scale of the project and thus reduce its cost (albeit scaling back its eventual revenue, too). But it has already been substantially scaled down from a $500+ million project that would have put the city's second-tallest skyscraper on downtown's second-biggest parking crater, across Huron Road from the Rocket Mortgage FieldHouse.

NuCLEus would eliminate downtown Cleveland's second-
largest parking crater, filling it with 400,000 square feet
of offices, 250 residential units and 80,000 square feet
of retail, bringing new life to an area that is a dead
zone much of the time (Stark).

Or perhaps Stark could create a new company to receive the $12 million city loan and to quickly build at prevailing wages the least lucrative part of the development, likely to be the foundation pad. Then Gateway Huron LLC could build nuCLEus above the pad, similar to how Stark built Beacon using the air rights above 515 Euclid, which is owned by another company (an investor group led by Reuven Dessler).

Stark will likely have little trouble filling nuCLEus' duo of 24-story towers -- one for offices and the other for residents. The office tower is two-thirds pre-leased in a tightening office market and the residential tower is likely to lease out quickly, just as other new housing products downtown keep filling up within a year or two despite rising rents.

But apparently Cleveland's real estate market isn't recovering as quickly as we'd hoped. And Stark is no stranger to finance. Stark created a capital group four years ago to raise money from institutional investors and high-net worth individuals and families. The firm knows where to find money if it wants to come here.

If Stark doesn't want to contribute more than a few million dollars and can't find $12 million from investors (including through Opportunity Zone funds) to top off the few remaining percentage points in his capital stack, then maybe Cleveland still isn't ready for projects like nuCLEus.

END

Seeds & Sprouts II - Early intel on real estate projects

This is the second edition of Seeds & Sprouts - Early intelligence on Cleveland-area real estate projects. Because these projects are very early in their process of development or just a long-range plan, a lot can and probably will change their final shape, use and outcome.

Nautica Entertainment LLC has secured financing and possibly
a joint development agreement to move forward on at least one
part of its Waterfront District project, possibly starting with this
building (AODK). CLICK IMAGES TO ENLARGE 

Flats West Bank: Nautica Waterfront District seeks Joint Venture

On May 13, Nautica Entertainment LLC recorded with Cuyahoga County the issuance of $35 million in five-year notes from a line of credit it collateralized through Wilmington Trust, National Association. The debt was mortgaged against all of Nautica Entertainment's properties on the Flats West Bank. A portion of the financing could reportedly help build the first phase of an ambitious, high-end community on the West Bank. Most of the rest will help capitalize the firm's other interests.

The first phase could be a 17-story residential building, located between Jacobs' Nautica Entertainment Complex (FirstEnergy Powerhouse & Jacobs Pavilion live stage) and the Main Avenue High Level Bridge (State Route 2).

Nautica Entertainment, chaired by Jeff Jacobs, isn't an active real estate developer in Ohio anymore. So it is seeking a joint development agreement with an active real estate developer to achieve a grand vision for its Flats West Bank properties. The issuance of short-term notes suggests that Nautica may be dangling some capital as a carrot to attract a deal. No joint development partner is yet confirmed.

David C. Grunenwald, vice-president of development at Nautica, did not return a phone call seeking comment.

The financing was secured as an amendment to a $350 million line of credit that Golden, Colorado-based Nautica Entertainment collateralized through Wilmington Trust, headquartered in Minneapolis. The amendment boosted the line of credit, established in 2017, to $385 million.

Nautica announced plans in 2016 for a $405 million complex of mid-rise buildings offering residential, office and hotel uses plus several parking garages. Once a joint development partner is in place, Grunenwald recently said he hopes to realize the grand vision for Flats West Bank in about seven years.

"We opened Nautica in 1987, and it has evolved from there," Grunenwald said in a cleveland.com article in 2016. "We've spent a lot of time evaluating the site and potential uses, and we've also watched as the city has emerged. This is not the same city as it was 36 months ago. Young people have discovered the city."

The former Cuyahoga County Engineer's headquarters
 in Cleveland's Ohio City neighborhood is for sale. The
 recommended bidder will likely build mid-rise housing
on the highly visible site (Allegro).

Ohio City: Hemingway favored to acquire county land

The former Cuyahoga County Engineer's headquarters property at the west end of the Veterans Memorial Detroit-Superior bridge is recommended to be sold to Hemingway Development, a county source said. The property, at 2429 Superior Viaduct, went on the market in an open-bid request for proposals (RFP) last winter.

Damon Taseff, a principal at Allegro Realty Advisors which serves as the county's real estate consultant, said he had no information he could share, but added "I presume the county will make a formal announcement in the future."

Mike Panzica, a principal at Hemingway, said he could not comment on the possible sale at this time.

The site is in a prime development location, at the edge of the booming Hingetown neighborhood and uphill from Flats West Bank (see previous news brief). It is also across the street from the planned $100 million, 20-acre Irishtown Bend Park and The Snavely Group's multi-phase Hingetown development.

Current zoning for the site is a mix of local retail-D and semi-industry-B, but both are in a height district allowing the construction of structures up to 115 feet tall, or roughly 11 stories.

Although the property is listed at 2 acres, it includes easements that extend out into the roadways for West 25th Street and old Detroit Avenue. Those easements cannot be built upon, reducing the developable land area to 1.6 acres.

Also, there is an abandoned street running diagonally through the site. The county has yet to vacate the street. Once vacated, its ownership would revert to that of the adjoining parcels, all owned by the county and which are the subject of the RFP.

The Cuyahoga County Personnel Review Commission had offices in the building but Taseff said in January that it would be moving out soon. The Cuyahoga County Engineer, which plans, builds and maintains all Cuyahoga County-owned roads, bridges and structures, was changed into the Department of Public Works during the county's reform in 2009. Its offices were relocated to the new county administration building at East 9th Street and Huron Road downtown.

Actually, there are four structures and six parcels which comprise the former county engineer's headquarters. According to the Cuyahoga County Fiscal Officer, the structures were built between 1947 and 1964, with the two largest buildings remodeled in 1970 and 1993. In total, there are 21,616 square feet of usable buildings on site.

The entire property was appraised by the county at $732,300 in 2018 but was valued at $1,015,200 in 1999. The appraisals didn't include the street rights of way.

Cleveland Clinic's Fairhill Facility, 11203 Stokes Blvd., is due
to be redeveloped with 38 housing units called North Park
Place by Premier Development Partners (Google).

University Circle: Cleveland Clinic partners in residential project

A former medical office building uphill from the heart of University Circle is proposed to be redeveloped with 38 housing units, both for-sale and rental. Cleveland Clinic Foundation's Fairhill Facility, 11203 Stokes Blvd., and its two acres of land will be redeveloped as North Park Place by Premier Development Partners of Cleveland.

As proposed, the 50,752-square-foot medical office building will be converted into 23 apartments with indoor parking and a three-level, 43,560-square-foot parking deck will be demolished to make way for 15 townhouses. Both the office building and parking deck were built in 1965 for Kaiser Foundation Health which sold it to the Cleveland Clinic in June 2001 for $3.25 million. The land and buildings are appraised by the county at $4,815,000 for taxes.

The project requires several zoning variances before development can proceed. The Board of Zoning Appeals will consider those variances at its next meeting, scheduled for June 17. North Park Place's architect is Kaczmar Architects, Inc.

Cleveland Clinic used the Fairhill Facility for its Sleep Disorders Center and Ohio Renal Care Group. The medical building was remodeled in 2006 for $897,900. Additional improvements, including to interior electrical systems, elevator and sleep lab plus dialysis facilities, were made in 2013-14, according to county records.

North Park Place Partners, LLC was formed in April by Premier Development Partners's Chairman Emeritus Ross Farro to deliver the project. Farro did not respond to a request for more information about North Park Place.

Premier was formed in 2006 with the acquisition of 330 acres in Northeast Ohio, previously owned by Duke Realty Corporation. As Duke exited the Northeast Ohio market, Farro, who was then Duke's senior vice president of Duke's office development and Spencer Pisczak, Duke’s then-senior vice president of industrial development, joined forces to create Premier, according to an online company history.

Although North Park Place is located in the city's University Circle planning district, it is across the street from Cleveland's Buckeye-Woodhill planning district in one direction, Buckeye-Shaker Square planning district in another, and the City of Cleveland Heights in yet another direction.

A small portion of the Tinnerman Building on Fulton Road,
just south of Lorain Avenue, is visible from the street. Most
of the historic building, owned by The Dalad Group, will be
 rehabilitated with apartments (Google).

Ohio City: Dalad Group submits plans for Tinnerman Building

Nearly three years after purchasing the historic Tinnerman Building, 2038 Fulton Road, The Dalad Group of Independence has declared its intentions to redevelop the largest portion into 53 apartments. The "announcement" came in the form of a zoning variance request to the city's Board of Zoning Appeals (BZA).

Of the 62,550-square-foot, seven-building complex that extends south behind homes to Chatham Avenue, 54,101 square feet are proposed for renovation, according to Dalad's filing with the city. The seven buildings range from one to three stories and were built from 1903 to 1938, county records show.

The Tinnerman Building was used most recently by Vista Color Imaging and Able Packaging. Vista moved to Brooklyn Heights and Able closed. It was named the Tinnerman Building because the Tinnerman Steel Range Co. was located on the site from 1880 to 1957, then moved to a new plant on Brookpark Road. It merged with Eaton Corp. in 1969.

The BZA filing was submitted by Paul E. Gallo LLC. The Gallo family has owned the property since at least the 1970s. However, property tax mailings are sent to Neal Viny, president of The Dalad Group at the firm's Independence address, per county records.

Next door to the Tinnerman Building is a long-vacant store built as a Rite Aid drug store and became a Hollywood Video store after 1998. It was bought in December 2016 by paper company FRE Holdings II created by MetroHealth System.

MetroHealth is moving most of its neighborhood clinical services from the city-owned Thomas F. McCafferty Health Center, 4242 Lorain Ave., to its new facility at the Urban Community School campus. However, a MetroHealth dental clinic will move into the the former drug/video store. The Veterans Administration also has services at McCafferty but their new home isn't yet known. Once vacated, McCafferty will likely be sold by the city for redevelopment.

END

Sherwin-Williams has Cleveland's number, thankfully

The days may be numbered for Sherwin-Williams' Breen
Technology Center, 601 Canal Rd. But they also appear to be
numbered for the coatings giant's larger research facility in
Minneapolis. Both may be consolidated as a result of major
changes to the growing company's space needs (Ohio EPA).
CLICK IMAGES TO ENLARGE THEM.

One number can convey a lot information. But it also leaves a number of questions unanswered.

As many longtime readers of this blog know, I've been closely following Sherwin-Williams' (SHW) worsening office space situation and upcoming request for proposals (RFP) to build a new world headquarters (HQ) in the Greater Cleveland area. That coverage earned this blog some mainstream media coverage recently.

A source came to me recently with a succinct piece of information about the global coatings giant: "Sherwin-Williams' RFP has only 330,000 square feet," he said.

I said to him that that doesn't make any sense as another source had previously told me that the SHW HQ plus research and development (R&D) facility would total 1.6 million square feet. Two other sources had confirmed it by noting that a new SHW HQ tower, if built on the Jacobs Lot on Public Square, would be as large as the 1.25-million-square-foot Key Tower, if not larger. And that's without the R&D space included.

We both quickly came to the realization that the 330,000-square-foot structure in the RFP is probably SHW's R&D facility. After checking with other sources, all signs still indicate that the HQ RFP won't be issued until the end of this year.

Another realization: the number "330,000" could also portend some very good things for Greater Cleveland.

Breen Technology Center has an attractive riverside campus in
downtown Cleveland where Sherwin-Williams was founded in
1866. But the well-kept research center is undersized, cramped
and isolated from the rest of downtown (Google).

Consider.... SHW's existing R&D facility in Cleveland is the cramped 140,000-square-foot John W. Breen Technology Center, 601 Canal Rd., divided primarily among two buildings. One dates from 1948 and the other from 1998. Roughly 400 scientists and researchers help plot the future for the Fortune 500 company from that address.

When SHW acquired coatings rival Valspar Corp. two years ago, Valspar HQ office staff in Minneapolis was either bought out or moved here. Any replacements were hired to work locally. Many ended up at SHW's new flex office space on Hinckley Industrial Parkway.

But Valspar's R&D staff stayed in Minneapolis. SHW has been consolidating R&D spaces but couldn't bring any Valspar R&D staff to Cleveland due to the already crowded conditions at Breen and the lack of suitable flex research facilities here. Even SHW's Automotive Finishes office/lab in Warrensville Heights wasn't sufficient.

SHW wants to consolidate its research sites. SHW closed its Chicago lab and moved its employees into a former Valspar Applied Science & Technology Center, 1101 South 3rd St., near US Bank Stadium in downtown Minneapolis. That complex, spread among several renovated historic structures, measures more than 170,000 square feet.

All three brick buildings in this scene at 11th Ave. South and
South 3rd St. represent the former Valspar headquarters and
research center near downtown Minneapolis. This scene was
from August 2017, just two months after Sherwin-Williams
won regulatory approval to buy its coatings rival (Google).

Breen is 140,000 square feet. Valspar's R&D is 170,000. Combine them and you have 310,000 square feet. Add another 20,000 square feet for some breathing room and future expansion and you have 330,000 square feet.

If that calculus is sound, then it appears that SHW will consolidate its domestic R&D activities in the same structure. R&D consolidation has been the trend for SHW for a while now anyway. That could be good news for Greater Cleveland if the R&D facility ends up here. Word is that SHW executives like having R&D close by, preferably within walking distance of the HQ. R&D consolidation could mean hundreds more good-paying jobs for this region.

Back to the math.... Subtracting 330,000 from the 1.6 million square feet of total space needs for SHW's HQ and R&D leaves 1.27 million square feet for a new HQ. That puts it in Key Tower territory.

But all of this poses new questions that don't have any answers or even any solid clues yet. For example, why is a separate RFP for 330,000 square feet being put out there by SHW's real estate broker? If it's for SHW's R&D facility, as it appears, why is the R&D being pushed out to development teams separately from and in advance of the HQ?

Sources say this rendering that was part of Cleveland's sales
pitch to Amazon to attract its HQ2 here reportedly bears a
striking similarity to a 2015 rendering by SHW of its new
headquarters on the Jacobs Lot. Sources said the second-
tallest proposed building in this image, at the northwest
corner of Superior Avenue and West 3rd Street, was also
part of the SHW rendering, possibly enclosing an R&D
facility. The rest of the highlighted buildings are either
existing or part of a former Weston plan (WEWS).

The speculation here is that SHW already knows where it wants to build its HQ so it can consolidate offices from at least four scattered buildings into the same structure. It's likely the same site for which SHW has already done extensive due diligence since before 2015 -- the Jacobs Lot on Public Square.

As noted earlier, SHW reportedly is on track to issue an RFP by the end of this year for building the HQ tower, but it doesn't look like it will include a months-long site search. That RFP's distribution may be targeted only at construction project delivery teams to design and build a new tower.

The RFP for the R&D facility is apparently being left wide open to competing property owners with sites around the Greater Cleveland area. Unlike the HQ, which must be located in the City of Cleveland unless SHW's articles of incorporation are amended, the R&D facility can be located anywhere. Although I'll wager that the HQ and R&D facility will ultimately be built within walking distance of each other. What is to become of Breen? Will it be demolished or repurposed?

As for the Jacobs Lot, SHW already knows a lot about it -- from the air currents 1,000 feet above the city to the bedrock 250 feet below it. SHW will need to learn about proposed R&D sites around the region before deciding which is best for continuing the innovations that have arguably made SHW's products the best in the coatings industry. That will take time, and that's likely why SHW's 330,000 square feet of space needs are being put out there separately, now.

END

Cleveland can energize its lakefront in 10 years. Here's how...

The City of Cleveland, Cuyahoga County and other regional
stakeholders possess the fiscal resources to turn downtown's
lakefront into one of the best on the Great Lakes. The above
vision for the lakefront is a mix of recent and emerging plans
that have failed to attract the political will needed to become
a reality. But perhaps pursuing all of those plans at roughly
the same time might draw enough support to achieve them.
Below is the existing, disconnected, unfriendly downtown
lakefront (Google/KJP). CLICK IMAGES TO ENLARGE

Greater Clevelanders' favorite past-time is to complain about the weather. But somewhere in their top-five of complaints is probably the attractiveness of our downtown lakefront. As I write this, several projects proposed for the lakefront are in active discussions by community leaders and appear to be competing for the same pieces of real estate.

They don't need to. In fact, when combined, they provide complementary uses and can tap funding resources that make them more likely to occur -- and possibly in short order, depending on political will.

The projects, in no particular order, are:

• Expansion of the Huntington Convention Center;
• Expansion of convention center parking;
• Construction of a second convention center hotel;
• Construction of a multi-modal transportation center;
• Reroute freight trains carrying hazardous materials off lakefront tracks;
• Construction of Mall D/land bridge over the railroad tracks;
• Conversion of downtown Shoreway into a lakefront boulevard;

What's even more important is that, when built out, they improve the likelihood for more development, more resources for lakefront investment and better lakefront access to push publicly accessible land uses right to the water's edge.

One of the more thoughtful lakefront plans was the 1999 North
Coast Transportation Center plan. It replaced the Shoreway
with a landscaped boulevard that could host future develop-
ment along it. But the plan lacked a wide land bridge over
the lakefront tracks (PB/WSP).

But first, two physical impediments need to be defeated.... The Shoreway highway and the lakefront railroad tracks. Better yet -- turn them into a means to better access the downtown lakefront and to increase the value of it. The funding already exists to do these things, although they're being used for two other things for a few more years -- construction of the Gateway sports complex and First Energy Stadium. Yes, these 30-year funding mechanisms have been on the books a long time and are about to become available again.

About $8.8 million per year in Cuyahoga County revenues will no longer service Gateway bonds after 2022. And nearly $10 million per year in City of Cleveland revenues will no longer service First Energy Stadium bonds after 2028. If these revenues, including a renewal of sin taxes, are used to retire new, 30-year bonds offering 2 percent yields, they could offer, in total, $425 million for lakefront improvements.

Existing convention center funding isn't considered for this conceptual proposal. The reason is that the existing convention center bonds, which mature in 2027, are entirely supported by a 0.25-percent sales tax hike passed by the Cuyahoga County Council. It would have to be renewed by the council and probably will be. My guess is that it will be tapped to finance construction of a new Justice Center.

Best of all, the city/county already have the funding in hand to start the preliminary engineering and environmental clearances to prepare a shovel-ready plan -- that is, if they don't cast it aside for a project that fails to change the game of the lakefront. There's about $20 million left from the ill-fated idea for an open-air, cable-stayed pedestrian bridge over the lakefront tracks and Shoreway. With this money, the city and county could jointly issue a request for proposals to design a a truly game-changing, shovel-ready plan in a matter of months, if they wanted.

An overhead view of the 1999 North Coast Transportation
Center plan. It enhanced lakefront connectivity via two
pedestrian linkages - the station itself, including a green
roof, and development along East 9th Street over the
railroad tracks. But the West 3rd Street corridor, at left,
was neglected by the plan (PB/WSP).

By including a multi-modal transportation center for Amtrak, Greyhound, Greater Cleveland Regional Transit Authority (GCRTA), and other transit agencies in this mix, it offers federal funding resources. The Northeast Ohio Areawide Coordinating Agency has $71.4 million total available from the Surface Transportation Block Grant Program (STBG) through 2024 with probably more thereafter.

Also, the Federal Railroad Administration (FRA) has two grant programs that are applicable here -- Consolidated Rail Infrastructure and Safety Improvements and the Federal-State Partnership for State of Good Repair Program. Combined these had nearly $590 million available in 2018. Congress is increasing funding for these programs. Federal funds should be pursued to pay for at least half of certain public improvements to make our lakefront more attractive for private investment and more enjoyable as a public space.

Federal funding (and Ohio Department of Transportation System Conditions funding) is not proposed for converting the Shoreway into a boulevard. The reason is that the Federal Highway Administration will not support a project that reduces a highway's Level Of Service, based on the fluidity of traffic.

Since the revenues for the county and city bonds become available six years apart, the lakefront improvements could be pursued in two phases -- transportation infrastructure first, followed by multi-modal center/convention center/hotel next.

2023 Phase One capital costs (rough estimates):

Parking (1000 spaces) + supports for future hotel & housing. . . .$ 40 million
Lakefront railroad capacity enhancements for passenger rail . . .$ 15 million
Lakefront bypass for general/hazardous freight rail traffic. . . . . . $ 40 million
Convert Shoreway to downtown boulevard + East 18th ext. . . . $100 million

TOTAL PHASE ONE COSTS -------------------------------------- $195 million

2023 Phase One resources (rough estimates):

Ohio Department of Transportation Urban Paving Program . . . .$ 50 million
Ohio Department of Transportation Municipal Bridges . . . . . . . .$ 10 million
Cuyahoga County Public Works Division (license renewal). . . . $  5 million
City of Cleveland Department of Public Works . . . . . . . . . . . . . .$  5 million
County bond issue (30 yrs @ 2% ~ post-Gateway maturity). . . .$ 70 million
Federal transportation program (STBG or FRA) grants. . . . . . . $ 25 million+
Parking garage revenues (20 yrs @ 3% bond issue). . . . . . . . . $ 30 million

TOTAL PHASE ONE RESOURCES ------------------------------ $195 million

2029 Phase Two capital costs (rough estimates):

300-room hotel built atop new parking garage. . . . . . . . . . . . . $150 million
Downtown Lakefront multi-modal transportation center. . . . . . $240 million
Convention center expansion with Mall D on roof. . . . . . . . . . .$200 million

TOTAL PHASE TWO COSTS ------------------------------------- $590 million

2029 Phase Two resources (rough estimates):

Private sector investment (hotel concession) . . . . . . . . . . . . . . $150 million
Other private (naming rights, Amtrak, Greyhound, etc). . . . . . . $ 10 million
County bond issue (20 yrs @ 3% ~ new bed tax revenues) . . . $ 75 million
County bond issue (30 yrs @ 2%, post-Gateway maturity). . . . $130 million
City bond issue (30 yrs @ 2% ~ post-FE Stadium maturity). . . $225 million

TOTAL PHASE TWO RESOURCES ----------------------------- $590 million

The City of Cleveland's lakefront plan of 2004, above, and the
city's lakefront plan from 2012, below (CPC).

With the Shoreway converted from a grade-separated highway into an at-grade boulevard with intersections, several new streets will be needed to be built or historic ones restored. These can be done with tax-increment financing (TIF) as development occurs next to the boulevard.

Not included in the above calculus is the fiscal impact of lakefront development (aside from a proposed hotel). With about 26 acres opened up for lakefront development along the new lakefront boulevard, more than $100 million in TIF-supported infrastructure improvements (new/rebuilt streets, sewers, sidewalks, bike routes, etc) along and near the boulevard could be afforded. These investments should further improve pedestrian and bike access within downtown and with the lakefront. And they should lead to development of waters-edge sites which are more isolated now.

Some Norfolk Southern (NS) freight trains can be detoured off
the lakefront via NS-owned rights of way -- except for less than
600 feet of former railroad right of way next to I-77 that would
need to be reacquired and 2.4 miles of rail corridor that would,
at minimum, need to be upgraded to mainline quality (KJP).

The lakefront bypass for Norfolk Southern's general/hazardous freight rail traffic involves reactivating a once-busy rail corridor through the North Broadway neighborhood. Now owned by Norfolk Southern, the former Erie Railroad runs from near GCRTA's East 34th-Campus Rapid Transit station, below Interstate 77, above Interstate 490, along Bessemer Avenue, and reunites with Norfolk Southern's mainline at Union Avenue. Mainline tracks would have to be realigned to offer more gradual curves on connecting tracks at both ends of the former Erie right of way segment.

Lakefront railroad capacity enhancements for existing and future passenger rail services would reduce delays with remaining freight rail traffic on the lakefront and simplify the movement of shipments in and out of the Port of Cleveland. That would allow passenger rail traffic in Cleveland to grow in the near future, making a more developed downtown lakefront more accessible.

Other aspects of this plan include reworking GCRTA's Waterfront Line into a more user-friendly, connected transportation system. This includes consolidating the stations at West 3rd and East 9th into a single station within the multi-modal transportation center, offering under-same-roof pedestrian connectivity with Greyhound, Amtrak, regional bus services and to nearby buildings including City Hall, convention center and hotels while retaining proximate access to First Energy Stadium and North Coast Harbor tourist sites.

An aerial view rendering of the 2004 downtown lakefront plan
that would have de-emphasized the Shoreway by lowering it to
street level including an intersection with West 3rd Street but
descending further to below East 9th Street (CPC).

While not funded by this conceptual proposal, the initial diagram includes extending the Waterfront Line as a loop around the east side of downtown, through Cleveland State University, Playhouse Square, St. Vincent Hospital, Cuyahoga Community College, and via low-density land opened up for development. The Waterfront Line extension/Downtown Loop, which was studied in 2000 and was shown to be feasible, could be built for $118 million ($179 million today). A TIF district could be established along its route to finance light-rail construction and operation.

Land would be opened up for development along the route of the downtown rail loop by Greyhound relocating its station to the multi-modal transportation center, and by redeveloping the many surface parking lots and low-level structures along the light-rail route.

The Port Access Road underneath West 3rd Street would be preserved, surrounded by retaining walls so that development could be built above it, offering sufficient overhead and lateral clearances for high/wide loads. And it would be combined with a widened South Marginal Road under East 9th Street. Together, they would also become a multi-modal station access route for Greyhound and regional transit buses separate from stadium traffic.

I hope that this conceptual plan, which actually combines a number of recent and older plans into a single vision for Cleveland's downtown lakefront, is taken seriously. I believe this plan would help put Cleveland's lakefront on a path to be on par with downtown lakefronts in Chicago, Toronto and even Milwaukee.

END

Cleveland-area Ford plants redo to spark local economy

Two Cleveland-area auto plants that were closed earlier this
decade could be repurposed into advanced manufacturing
and warehousing operations. (FordAuthority.com)
CLICK TO ENLARGE ALL IMAGES

Redeveloping one auto plant measuring nearly 2-million-square-foot for a single manufacturer is a pretty big deal. The redevelopment of two of them for a single manufacturer is a bigger deal. The use of them for producing game-changing automotive technologies is about as big as it gets.

At least one of the game changing technologies is the plasma ignition system, also known as the sparkless ignition, according to a party involved with sales transaction.

The plants are the 1.7-million-square-foot Brook Park Engine Plant No. 2 on Snow Road and the 2.1-million-square-foot Walton Hills stamping plant on Northfield Road.

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).

Sparkless ignitions will replace spark plugs which have been around since the 1800s. Using plasma-based systems to ignite fuel translates to cleaner-burning, more fuel-efficient engines. Most manufacturers conservatively say sparkless ignitions improve fuel economy by 10 percent, but the potential is for savings as much as 25 or 30 percent.

However, the source could not divulge the buyer's identity. But the information available narrows the focus of who the potential buyer may be, as there are few companies who have the ability and interest to mass produce sparkless ignition systems.

The checklist for helping to identify potential buyers includes a company that:

• Is seeking to mass-produce a sparkless ignition system;
• Has significant financial resources to buy, redesign/retool and sustain two massive manufacturing plants;
• Has significant know-how to redesign/retool them for their production line(s);
• Has existing supplier/buyer relationships to ramp up volume production to fully utilize 3.8 million square feet of plant space in a reasonable period of time;
• Produces other advanced automotive products for next-generation cars that produce low/no emissions, feature self-driving-technologies, etc. since the manufacture of sparkless ignition systems likely won't require the utilization of anywhere near 3.8 million square feet of plant space.

One of the pioneers in the field of sparkless ignitions is Plasma Igniter, LLC which makes the Coaxial Cavity Resonator Ignition System (CCRIS). However, it is a small company with few resources whose small, California-based production line is limited to military applications.

Another possibility might be an existing automobile manufacturer. All automakers are seeking to bring to market cars that offer sparkless ignition systems and other advanced powertrain technologies. However, Ford is unlikely to sell two of its large plants to a competitor -- unless that automaker has an alliance like the one Ford announced with Volkswagen earlier this year. 

In December, (Volkswagen CEO Herbert) Deiss said his company may expand its U.S. production presence beyond Chattanooga, Tennessee, by building products in underutilized Ford factories with UAW workers, according to the Detroit Free Press. That would be a significant change -- foreign automakers have avoided U.S. union labor other than a past General Motors-Toyota operation in California that now is the site of Tesla's factory.

But another source who knows who bought the Ford plants would say publicly only that the buyer isn't VW "unless they bought it under another name, but that would be unlikely," the source said.

Ford's Engine Plant No. 2 in Brook Park is located next to
Cleveland Hopkins International Airport, Interstates 71/480,
Norfolk Southern, CSX as well as large distribution hubs for
UPS and FedEx (Google).

So the speculation here is that the buyer could be part of Tenneco/Federal-Mogul LLC. Federal-Mogul is a company based in the Detroit suburb of Southfield and earns more than $7 billion in revenue per year. Last year, the Chicago-based multinational corporation Tenneco purchased Federal-Mogul for $5.4 billion.

Even more interesting is that newly combined businesses are proposed to be separated in late-2019 into two independent, publicly traded companies -- one an aftermarket auto parts company called Driv and the other a powertrain technology company, to continue to be called Tenneco. The latter has sought to introduce a sparkless ignition system called Advanced Corona Ignition System (ACIS) that Federal-Mogul has been developing and wants to put into volume production.

"Following the separation, the powertrain technology company will be one of the world’s largest pure-play powertrain companies serving OE markets worldwide with engineered solutions addressing fuel economy, power output, and criteria pollution requirements for gasoline, diesel and electrified powertrains," according to a written statement issued Oct. 1, 2018 by Tenneco. "The powertrain technology company would have 2017 pro-forma revenues of $10.7 billion, serving light vehicle, commercial truck, off-highway and industrial markets."

Ford's Walton Hills plant is located next to Interstates 271/480
as well as Norfolk Southern (Google).

So not only is Federal-Mogul/Tenneco making a big move into sparkless ignition systems, it has significant business in other aspects of automotive production. Furthermore, it is undertaking a major corporate restructuring to capitalize on a rapidly changing automotive industry that, with the exception of Tesla, has weak strategies for reducing emissions, improving fuel economy, developing electric vehicles and advancing driverless-car technologies.

While its eyes may be bigger than its wallet right now, repurposing the Ford plants offer a relatively affordable way for Tenneco to put sparkless ignitions into mass production. They also offer a means to consolidate their warehousing operations for the eastern U.S. and close down more costly locations on the East Coast. But these aren't necessarily game-changing moves for Greater Cleveland's economy.

The sale of the two Ford plants looks to be close to do a done deal. On May 15, a New York City law firm on behalf of Wilmington Trust Co. filed Uniform Commercial Code Financing Statement Amendments with the Cuyahoga County Fiscal Officer for Ford's Brook Park and Walton Hills plants.

Wilmington Trust, as trustee under some Ford-issued debt instrument, is confirming its interest in the two properties. As part of the sale process and title search, Ford is establishing what encumbrances there may be to a clear title.

END