Sherwin-Williams HQ and CEO are finding new homes

Paint is still drying on the brand-new, roughly $10 million lake-
front home of Sherwin-Williams CEO John G. Morikis. It looks
magnificent from Lake Road, which offers a view of only the
skinny side of this 22,197-square-foot mansion (Mark Carlson).
CLICK IMAGES TO ENLARGE THEM

If you were the chief executive officer of a major corporation that is about to build a new global headquarters in a new location, would you build a brand-new mansion for your primary residence right now? And if you did, where would you build it?

Chances are, you'd probably build it in the same metro area where your new headquarters will be located.

According to public records, Mr. and Mrs. John G. Morikis put the finishing touches earlier this year on their beautiful, brand-new 22,197-square-foot mansion. They moved in in March. Mr. Morikis, if the name doesn't immediately ring a bell, is the CEO of Sherwin-Williams Corp. (SHW).

As most of Greater Cleveland is almost certainly aware by now, SHW announced publicly in September that it is looking at establishing a new global headquarters building and research facilities for the the Fortune 500 company.

Morikis said SHW will consider multiple potential sites, including locations in Cleveland, Northeast Ohio and several other states.

So where did Mr. and Mrs. Morikis build their new home? At 24300 Lake Road in the Cleveland suburb of Bay Village.

Construction work was near to wrapping up on the Morikis'
new mansion in October 2018. That same month, a satellite
view of the property was recorded, showing how the new
mansion sets on the property, with Lake Road to the south
or left and Lake Erie to the north or right (Google).

The huge house sets on one-fourth of a 2-acre parcel overlooking Lake Erie. The property was bought by a trust in the name of Tammy Rae Morikis, the CEO's wife. Their previous home, at 6586 Summer Wind Drive in Brecksville, was also in her name. They sold their Brecksville house on Jan. 31, 2019 for $1.3 million after residing there since 2000, according to Cuyahoga County records.

It isn't known how much the Morikis' paid to build and landscape their dream house. But a 9,073-square-foot house on 0.92 acres with a lake view, set eight houses farther west at 24524 Lake, sold in June for $3.65 million, county records show. That's $402 per square foot. On that score, the Morikis' 22,197-square-foot house and 2-acre property could be valued at up to $10 million.

Some suggested that SHW might move to Brecksville because they thought Morikis still lived there. And, DiGeronimo Cos. was making a vocal case that the global coatings firm should at least put its new, consolidated research and development facility and possibly its HQ at DiGeronimo's Valor Acres development in Brecksville.

Hopefully no one is wondering. But just in case they are, it should be said that Bay Village, a built-out bedroom community, isn't in contention for SHW's HQ+R&D. No sources have suggested that Westlake, Avon or Avon Lake are in contention either.

View of Lake Erie, Lakewood and downtown Cleveland in the
distance, as seen from the Morikis' property (realtor.com).

The Morikis trust bought their Bay Village property for $1.5 million from Susan J. Cook on June 20, 2016, eight months after Mr. Morikis was elected as SHW's ninth CEO. Morikis was previously the chief operating officer and, in 2014-15, in charge of efforts to build a new SHW headquarters on the Jacobs-owned lot on the west side of Cleveland's Public Square.

Morikis knew of Cook in her role since 2009 as vice president of strategic facilities planning at Eaton Corp. In other words, Cook was in charge of building Eaton's new HQ that opened in 2012 in Beachwood. By the way, the word is that Morikis isn't a fan of Eaton's new HQ.

SHW principal offices have been located in downtown's Landmark Office Tower, 101 W. Prospect Ave., since 1930. It outgrew that 900,000-square-foot building in 2014, spreading up to 4,400 employees into numerous buildings in Northeast Ohio.

But the 2014-15 effort to build a new SHW HQ was shelved when the opportunity arose to buy rival coatings firm Valspar in 2016. Since then, SHW is on an increasingly speedy glidepath to pay down debt from the Valspar acquisition, possibly returning to a coatings industry standard 1:1 debt-to-equity ratio by 2022.

SHW reignited planning for new HQ+R&D facilities more than a year ago, around the time NEOtrans first got wind of it. Up to 1.8 million square feet of new facilities are planned. Any transition to new HQ+R&D facilities is not expected to occur until 2023 at the earliest, SHW officials have said.

A 3,965-square-foot house built in 1990 by David and Carol
Panacoast was demolished in 2015 to eventually make way
for the Morikis' grand mansion (movoto.com).

Like many new lakefront mansions built in Bay Village, the Morikis home was built on the site of a previously existing house. But most new mansions replaced small, aging lakefront bungalows. Not the Morikis'.

The Morikis' house was built on the site of a 3,965-square-foot, four-bed, four-bath house built in 1990, and listed for sale in 2014 at $900,000 per movoto.com. That home was built by David and Carol Pancoast, the latter serving on the Bay Village school board for 28 years. She died in February 2014, 4 1/2 years after her husband passed. Cook bought the property in September 2014 and demolished the Pancoast house in 2015.

And in case you were wondering, Morikis shortened his commute to downtown Cleveland by moving to Bay Village. Google Maps show that his drive in light traffic between his old Brecksville home to 101 W. Prospect via Interstate 77 was 17.8 miles and 27 minutes each way. That dropped to 12.7 miles and 18 minutes each way between his new Bay Village address and his downtown office.

BTW, when Interstate 90 gets bogged down in traffic, Morikis has the option of taking U.S. Route 6 (Clifton/West Shoreway) which is just 11.9 miles and 20 minutes in light traffic. And it's often a less stressful trip that takes commuters past some great restaurants and Edgewater Park.

There are unsubstantiated rumors that SHW may announce the location of its new 1.8-million-square-foot HQ+R&D facilities in a month or less. And there is reportedly a substantial public incentive package with SHW's name on it. One wonders if city, county and state officials knew about the CEO's new crib before packing their gift basket to SHW.

It's doubtful that knowledge would have made a difference. Certainly a brand-new, roughly $10 million home of SHW's CEO doesn't prove that SHW will stay in Cleveland. But it is a powerfully fragrant tea leave that's hard to avoid reading.

END

Rebuilding Cleveland's CBD office supply

This group of buildings in the 2100 block of Superior Avenue
will soon be renovated into the national headquarters of the
fast-growing CrossCountry Mortgage LLC that is relocating
from Brecksville to downtown Cleveland (Google).
CLICK IMAGES TO ENLARGE THEM

A decaying, aging hulk of a building in or near downtown today could be tomorrow's next premier, Class A office space. Why? Because that's the most economical way that new office space can be added to Cleveland's Central Business District (CBD).

Absent a sudden jump in rents, new public subsidies or a large company pursuing a new building for itself, adding new CBD office space has proven to be extremely difficult. For those reasons, groundbreakings for two new-construction speculative office towers have been postponed indefinitely -- a 24-story high-rise at nuCLEus and a 10-story mid-rise at Market Square in Ohio City.

Developers of both projects sought to create or tap unusual public financing mechanisms that have failed to materialize so far. The reason public financing is needed is because Class A office rents of $23.75 per square foot in Cleveland's CBD don't come close to covering the cost of construction.

Real estate developers lament that the cost of new buildings in downtown Cleveland approaches that of larger cities, primarily due to the cost of materials. Contrast that with Cleveland's top-rung office rents. Meanwhile office rents average $50-$90 per square foot in the CBDs of Chicago, Toronto or New York.

The last new construction office tower in downtown Cleveland was the 21-story Ernst & Young building built in 2012 at Flats East Bank. That project relied heavily on about $30 million in funding from the EB-5 "investor visa" program which has since been curtailed due to recent problems.

And yet the market demand exists in downtown Cleveland for new Class A office space. Vacancy rates have dipped to anywhere between 9.5 percent according to Cushman & Wakefield and 13.3 percent according to Colliers International. That's the threshold a market usually needs in order to trigger construction of new, speculative office buildings. But that's not happening in Cleveland -- yet.

GBX Group's new headquarters fully occupies an historic
building it renovated on the northeast corner of Superior
Avenue and East 21st Street (across from CrossCountry's
future HQ). Absent more public incentives for new construc-
tion office buildings, the renovation and conversion of historic
buildings will likely provide most of the new office supply in
Cleveland's central business district (ArchDaily.com).

"Class A properties have been in high demand, reflecting the flight to quality that many companies believe necessary to attract and retain talent. Notably, the Central Business District (CBD) and Chagrin Corridor submarkets have seen strong leasing activity," wrote Colliers International in its second quarter 2019 office market report.

But the office market has taken a step backwards in 2019 and especially in the third quarter, according to the latest report by Newmark Knight Frank.

"The CBD led the market in negative net absorption for the third quarter in a row, as this sub-market gave back 172,408 square feet in the third quarter, bringing the total space returned so far this year to 417,420 square feet," NKF wrote in its report.

"Downsizing and rightsizing initiatives by occupiers in the CBD have put a damper on an otherwise vibrant year for the sub-market. Despite the space losses, the overall asking rent (in all classes) in the CBD rose by $0.08/SF to $19.32/SF, as the (CBD) sub-market reclaimed the highest average from the East (sub-market)," NKF added.

Another east side of downtown office renovation is the former
Ambassador Lanes bowling alley, proposed to be converted
into The Zeppelin, offering 36,000 square feet of office space
above two levels of parking and ground-floor retail (AO).

Authors of the NKF report noted the uncertainty involving the major projects mentioned earlier, namely the office components of the Market Square and nuCLEus projects, as well as the Cleveland Foundation's pending relocation of its offices from Playhouse Square to Midtown.

So unless you're a CEO building a new office building for your own large company, as Sherwin-Williams is considering, adding new-construction office space in Cleveland's Central Business District is proving extremely difficult.

Although, Sherwin-Williams is likely to reserve a couple hundred thousand square feet of extra office space to allow for future expansion -- space that might be leased out temporarily to other users.

The above market factors are why Millennia Cos. has traded 400,000 square feet of proposed office space for residential in its pending rehabilitation of the 1.3-million-square-foot Centennial project at 925 Euclid Ave. It is also faced with a year-end deadline of having to use a $25 million Ohio historic tax credit or lose it. Construction must get underway soon. Millennia can't wait for a 40,000 to 50,000 square foot anchor office tenant to emerge.

A redesigned entrance to CityBlock, formerly The Avenue at
Tower City Center, seen from Prospect Park, now Prospect
Avenue between West 2nd and West 3rd streets (Vocon).

That doesn't mean the CBD office market is on life support. Far from it. Developers are finding ways to be more creative and cost effective in delivering more office space to the market. And they're doing so while providing the kind of open-floor, more interactive office spaces that today's younger tenants and entrepreneurs want.

Plus, there are more public funding tools for renovating historic structures into modern offices than there are for building new office buildings from scratch. These include state and federal historic tax credits as well as federal New Market Tax Credits to distressed areas and the city's Job Creation Incentive Program that offers grants and refundable loans.

One of the CBD's most visible office development projects is CityBlock that will convert the mostly retail portion of Tower City Center into a unique office complex. At least a half-dozen tenants have been identified, including Stripe, CYBR, Bunq, Ezza, TEDx so far. A naming rights partner is also near to signing, said Jon Pinney, Managing Partner at Kohrman Jackson & Krantz LLP.

The Avenue at Tower City Center is proposed to be purposed
as CityBlock, a hub for local entrepreneurs to "collide" with
each other to bring together and ultimately monetize ideas
into new business enterprises (Vocon).

First envisioned as a tech hub for blockchain- and digital-related companies, backers of the project have embraced a broader goal of an entrepreneurial hub. Bedrock Cleveland Co., Blockland Cleveland, JobsOhio and others are funding the $110 million first phase that could get underway in early 2020.

"It (the tech hub-only vision) doesn't include the people who need help now, the local entrepreneurs," said Blockland founder Bernie Moreno. "This hub has to be at Tower City -- it's our central location for transit. Entrepreneurship is about networks and making connections. If we take 50 percent of the impoverished in this region and turn them into the middle class or more, what's the economic impact of that?"

A potential competitor for CityBlock could be The Zepplin, formerly the Ambassador Lanes, 1500 Superior Ave. Victor Shaia, through Ambassador Superior LLC, purchased the three-story, 96,000-square-foot, 99-year-old former bowling alley in April 2015. It features two levels of parking with ground-floor retail, with the third floor offering a 30,000-square-foot office level and a 6,000-square-foot mezzanine.

The ceiling of the former Ambassador Lanes bowling alley is
how The Zeppelin got its name -- it looks like the inside of a
airship. The open floor concept, like CityBlock, is intended
on creating "collisions" of ideas among entrepreneurs (AO).

Architecture Office (AO) was approached by Shaia to provide conceptual designs and interior layouts to provide flexible work areas and marketing. After working closely with Shaia to determine identity, image and spatial goals, AO provided an overlay of expandable work areas.

But the bigger office development on the east side of downtown -- also involving the conversion of historic building uses -- is that of CrossCountry Mortgage, LLC. After buying up a 6-acre block of downtown buildings in the final days of 2018 and renovating them in 2020, CrossCountry CEO Ron Leonhardt, Jr. will move his fast-growing, 450-employee firm from Brecksville to downtown.

The six-acre block is bounded by Superior, East 21st and East 22nd streets, plus Payne Avenue. All 16 of the parcels in that block were bought on Dec. 28 by CC Superior Holding LLC for $849,500, according to Cuyahoga County records. Leonhardt said CrossCountry, founded in 2003, could see its headquarters staff grow to 1,000 employees in five years.

Tap Packaging, formerly The Chilcote Co., has vacated these
100-year-old buildings in the 2100 block of Superior Avenue
to make way for the corporate headquarters of CrossCountry
Mortgage LLC and its 450 employees and growing (Google).

A source says that news of the renovation will be announced "soon" now that Tap Packaging Solutions (formerly The Chilcote Co.), the block's remaining occupant, has moved its 125-employee operation to a plant on Tiedeman Road in Brooklyn. The other buildings in the block were mostly vacant.

Lastly, New York City-based office investor Somera Road Inc. made an interesting acquisition earlier this year. On April 3, it acquired from the Frangos Group the former Ohio Bell Telephone Co. building, 1020 Bolivar Rd. (not to be confused with the 27-story AT&T, former Ohio Bell tower north of Progressive Field). The purchase price was $10,350,000.

Cushman & Wakefield's second-quarter 2019 office market analysis said 1020 Bolivar's sale is "signaling yet another large redevelopment project in the works that will yield more office supply to match increased demand."

Two stories could be added to the rooftop of 1020 Bolivar,
an historic commercial building that was acquired earlier
this year by New York City-based office space developer
and investor Somera Road which seeks to renovate the
property for a new end-user (LoopNet).

The 108,508-square-foot group of structures offers parking on the lower levels. The largest building, a four-story structure with 36,169-square-foot floorplates, can have additional floors added on top of it, according to marketing materials posted on LoopNet.

Somera Road acquired 1020 Bolivar even though it has owned for three years a completely vacant, 564,976-square-foot office building called The Ellipse, formerly 45 Erieview Plaza, on the southeast corner of East 9th Street and Lakeside Avenue. The 16-story office building was built in 1983 for the Ohio Bell Telephone Co., later Ameritech.

END

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

END

Future of two idled Cleveland-area Ford plants looks electric

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

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

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

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

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

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

Why Rivian?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And guess who Ford is a partner to? Rivian.

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

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

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

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Lakefront development project to start this winter

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Market Square project to shrink by about one-third

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Stadium sites are as much about development

A growing development zone and public realm space next to
Minneapolis' new US Bank Stadium offers an example to us
in Cleveland how a stadium-oriented development site can be
designed (Ryan Cos.). CLICK IMAGES TO ENLARGE

It's still early in the game, but a few sites in downtown Cleveland are being considered by the Haslam family, owners of the Cleveland Browns, for a large, stadium-oriented development zone. The planning process is just getting underway with an eye toward 2029 -- the year the team's lease ends with the city for use of First Energy Stadium.

While the record nationally of sports stadiums producing spin-off economic development has been uneven, much of it is due to the fact that the stadiums were often considered the end product. Most stadiums were sponsored by public agencies and any spin-off development was often not part of a coherent plan, let alone part of the sponsoring agencies' organizational missions.

Increasingly, sports stadium developments are led by private efforts and the stadiums themselves are roughly only half of the end game of these developers. The rest includes offices, hotels, housing and supportive retail/restaurants.

Looking north over the Malls extended above the lakefront
railroad tracks to First Energy Stadium, complete with two
20-story towers, one residential and the other a hotel and a
new multimodal transportation center between them (HKS).

The nation's biggest stadium-oriented real estate master plan is in Los Angeles, where a $2.4 billion stadium for the Rams and Chargers anchors an overall $5 billion development. The LA Stadium and Entertainment District in Hollywood Park includes $2.6 billion worth of commercial, residential and retail investment.

Cleveland obviously isn't Los Angeles (it hasn't been since LA overtook it in population in 1930), but it does have a few things in common with cold-weathered, Midwestern Minneapolis.

There, the city established a development zone around the new US Bank Stadium and began offering sites to developers willing to build to meet the city's vision of a high-density district next to a new public park and light-rail line. So far, Ryan Companies has responded with plans for a 17-story office building and a 25-story apartment tower.

Here are four of the potential stadium-oriented development
sites being considered at this early stage. These can and likely
will change as the process becomes more formalized (Google).

Similar opportunities exist in Cleveland. But where? So far, these are the sites that apparently are being considered by the Haslams, according to sources close to them, for their stadium-oriented development built around a domed/retractable-roof facility:

1. Rebuild existing stadium with retractable roof -- This would easily be the least expensive of the plans, costing in the hundreds of millions of dollars, but is also currently one of the least accessible. There are only two routes into the stadium -- West Third Street and East Ninth Street.

This is what First Energy Stadium could look like if someone
put a retractable roof on it and connected it with the new Hun-
tington Convention Center via a land bridge and transportation
center. This general idea has some strong proponents but has
yet to be subjected to a geotechnical analysis (Bob Corna).

Extending the downtown malls as a land bridge over the railroad tracks and Shoreway would help address that, along with incorporating a multimodal transportation center for trains, buses and light-rail connected to housing, hotels, offices and retail. The land bridge, with expanded convention facilities on a lower level and linked to the new stadium would create a massive, connected indoor complex for conventions, meetings and other special events.

2. Northeast side of downtown -- This part of downtown, along St. Clair Avenue west of the Inner Belt, has much in common with what was the Central Market District of downtown in the 1970s and 1980s (today's Gateway District). It is a place of low-rise buildings and parking lots that most people pass through between Interstate 90 and the central business district.

Another view of the stadium-area development zone located in
Minneapolis, with new office buildings at left for Wells Fargo
and a planned 25-story apartment tower beyond (Ryan Cos.).

The site has many advantages. It overlooks Lake Erie and with some access improvements, the site could become an attractive place for a stadium-oriented development zone. Improvement could include extending East 18th Street north to the Shoreway and extending the Waterfront Line light rail southward to create a more usable downtown loop.

But developing here would require acquiring dozens of small properties and demolishing lots of low-rise buildings, much like those in the Central Market-area properties that were sold to and demolished by the Greater Cleveland Domed Stadium Corp. in the 1980s. Those properties were later acquired by Gateway Economic Development Corp. of Greater Cleveland for the basketball arena and baseball stadium.

3. Intermodal Yards -- Formerly the Norfolk Southern intermodal railroad yards, this vast area of vacant land was acquired by the Ohio Department of Transportation in 2011 prior to its reconstruction of the Inner Belt highway. It and most of the surrounding vacant land, suitable for development, remains publicly owned thereby reducing acquisition costs.

The amount of publicly owned land on southeast side of the
Inner Belt (I-90) highway is large. This was the runner-up
site for the Cleveland Browns stadium in the 1990s (Google).

This was actually the runner-up site for the new Cleveland Browns stadium in the late-1990s. But time was of the essence in bringing back the Browns and this site needed lots of infrastructure improvements (parking, transit, plus storm/water/sanitary sewers) prior to building a new stadium.

The site still needs those features, but it is easily the most accessible of the stadium sites being considered. It is accessible from Interstates 77 and 90 and a station on the existing Red, Blue and Green rapid transit lines could be built below the stadium. It would turn a dead zone above the Cuyahoga River into a year-round modern sports and entertainment complex.

4. Honorable Mentions -- Two other sites were included in the list but one reportedly has already been rejected and the other is likely to be turned down, too. The already rejected site is the Weston Group-owned Superblock in the Warehouse District, bounded by West Sixth Street, West Third, Superior Avenue and St. Clair. The field would run parallel with West Third and Sixth. But the site is too constrained for an NFL stadium here.

This site, across Ontario Street from Progressive Field and the
Rocket Mortgage Field House, is a distant fourth among the
sites being considered for the stadium-oriented development
district. This graphic shows a proposed new Loop Trail that
would provide views of the Cuyahoga River valley (AoDK).

The other site, Flats South, has more room but the topography is difficult. It would either require a lot of fill dirt or relocating the rapid transit lines just southeast of Tower City Center and closing Canal Road. But it would offer prime development sites along the river in an area where developer Joel Scheer has been trying to jump start his Flats South Innovation District.

Before someone decides to run out to start buying up land near any of these sites, realize first that the Haslams are VERY early on their search. There are no active proposals being tendered, nor even an architect hired at this time. But it is intriguing to see where their initial search may be leading them.

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