Cleveland ended the decade with a boom, and it's showing

Several major residential construction
projects are visible in this October 2018
view looking east down Euclid Avenue,
including construction cranes for the 34-
story Lumen (foreground) and 29-story
Beacon. Plus the construction elevator
guideway on the side of The Athlon, a
conversion of the 15-story Cleveland
Athletic Club, is also visible. The 10-
story Edge Apartments that opened in
2018 is at left. The May Company
residential conversion is just out of
view (clevelandskyscrapers.com).
CLICK IMAGES TO ENLARGE

When John Knopfler and his spouse moved into their Tremont house where a large family had just moved out, each did what many are doing in Cleveland these days. They're participating in the city's Fifth Migration, bringing with it socio-economic changes unlike any experienced from the previous four migrations in the past 223 years.

As empty-nesters who grew up in rural Northeast Ohio, they brought decent incomes from their professions in insurance and law. The couple bought a single-family home previously occupied by a six-person family who were lower income. They reduced the population of that home but increased its income.

The Knopflers fixed up the house, originally built more than century ago for a family of four plus a live-in unit, such as an au pair or housekeeper, as there's a servant's staircase built into the house.

Their experience became increasingly common from the 1990s into the 2010s in 19th-century Tremont, whose previous best years were two or three great migrations ago. But over the past 20 years, Tremont has morphed from a downtrodden neighborhood of rotting homes in the shadows of mammoth steel mills that had once supercharged this enclave.

"In the past five years, four adjacent homes that were owned by long-time residents have flipped," Knopfler said. "The first that sold went to a couple. I believe the previous family that lived there was four or five people."

While near-west neighborhoods like Tremont and Ohio City were among the first to gentrify from a heavily low-income population to having slightly fewer but wealthier residents, they certainly wouldn't be the last. And there may not be fewer residents for long considering the rate which some neighborhoods are densifying.

Downtown, Detroit-Shoreway, Edgewater, St. Clair-Superior, Midtown, University-Little Italy, and even Glenville, Fairfax and Hough are seeing increased incomes and a resultant physical change in the landscape.

Some parts of Cleveland sparkle and could soon shine even
more. This is the scene on Huron Road at Tower City Center
which could see a multiple-phase development called City-
Block featuring a business incubator alongside the city's
rail transit hub plus new offices and apartments (KJP).

COMPELLING DATA

Since 2016, individual taxable incomes in Cleveland have grown by more than $1.25 billion, according to data extrapolated from Cleveland's 2019 city budget (Page 81). And this year's income data is still just a conservative estimate. The city won't know the real data until February when its 2020 budget is released.

Care must be used with that income number, however. The reason is that taxable income also includes people living outside of Cleveland and working in Cleveland. In fact, 87 percent of Cleveland's income tax revenues in 2016 came from non-residents. They also benefit from credits that reduce their tax impact.

In addition to a changing population in the city, the data also strongly suggests that a big reason for a bump in city income tax revenue is due to either better-paying jobs in Cleveland or an increase in the number of jobs in Cleveland or both.

Preliminary data from the Bureau of Labor Statistics show that nearly 25,000 more Greater Clevelanders were employed in November 2019 than they were in November 2016. Roughly 600,000 jobs, or more than half of the region's 1.1 million non-farm employment total, is in Cleveland.

Based on that data, about one-third of the $1.25 billion growth in Cleveland's taxable incomes is due to the increased number of jobs. The rest is due to better pay and more wealthier residents living in Cleveland.

And the revenue also includes an income tax increase that Cleveland voters passed in November 2016, raising the base amount from 2 percent to 2.5 percent. But after the tax increase impacts were added, a changing population demographic and an increasing number of jobs in Cleveland have pushed the city's income tax revenues another 10 percent higher.

When combining the results from that tax hike and the city's changing population makeup and job growth, the city's income tax receipts grew a whopping 35 percent, from $314,801,172 in 2016 to a conservative projection of $424,869,173 this year. Income taxes represent 66 percent of Cleveland's budget revenue. The next largest source is grant revenue at a mere 6 percent.

Parts of Cleveland can be considered a boomtown. University
Circle is one of them. This is Cleveland's education and health
care epicenter, accounting for more jobs in the region than any
other economic sector. Apartments rents rose 44 percent in
University Circle in 2018. This is Uptown along Euclid Ave-
nue, lined with parking lots at the start of the 2010s (KJP). 

THE FIFTH MIGRATION

That's the data behind the Fifth Migration, which was detailed in a 2016 report by The Center for Population Dynamics at the Maxine Goodman Levin College of Urban Affairs at Cleveland State University (CSU). The report was issued just as Cleveland's residential development was kicking into a higher gear.

The Fifth Migration is the movement of Millennials and, to a lesser degree, empty-nest Baby Boomers -- the two largest generations in U.S. history -- into Cleveland. CSU's study said Cleveland ranked 8th in the U.S. in the growth rate of college-educated Millennials.

"This infill into the core has recently been termed the Fifth Migration by urban scholars," the report said. It noted that, of course, this migration is occurring in cities throughout the nation.

To put this migration into context, the CSU report said the First Migration was the pioneers that settled North America; the Second Migration from farms to the factory towns; the Third Migration to the great metropolitan centers like Cleveland; and the Fourth Migration to the suburbs of these centers.

"The Fifth Migration -- which will significantly affect the City of Cleveland’s landscape going forward -- is a ‘re-urbanizing' counter-movement to decentralization, particularly for younger, college-educated adults," the report said.

The Hingetown Section of Ohio City is another boomtown
part of Cleveland. A haven for drug dealers and prostitutes at
the start of the 2010s, there is now a 21st-century development
built, underway or in advanced planning on every single block
in this neighborhood. In the foreground is the third phase of
Snavely's Hingetown development with the crane above
Hemingway Development's Church+State project (KJP).

RENTS & CONSTRUCTION RISING

That has manifested itself in a number of ways, including rising apartment rents, increased real estate investment and growing immigration.

Robert Salmon, a Maryland-based investor/analyst who tracks securities and public-sector bonds, said the city's recent spike in wealthier residents moving is apparent. He occasionally visits Cleveland to see family.

"I would say that extra billion (dollars) in new wealth is very visible around town," he said.

According to Apartment Guide, Cleveland ranked 7th in the nation with the highest increases in rent. Cleveland rents have grown in the past year by 11.1 percent, to an average of $1,364 for a one-bedroom apartment. Newark, NJ ranked #1 with a 30 percent average rent increase, due mainly to people fleeing higher rents in nearby New York City.

"The major surprises for me from the research was the Newark percentage increase and Cleveland’s rents also headed upwards," said Apartment Guide’s Managing Director Brian Carberry. "An ongoing trend we are seeing is younger people who want to live in big cities."

"Thanks to its strong economy, people from Ohio are flocking to Cleveland," he added.

Rent.com echoed the Apartment Guide report, but added more detail by showing the one-bedroom apartment rent increases by neighborhood. Most of the largest increases were either downtown or in and near booming University Circle, a planning district that includes Little Italy.

University Circle led the way in Cleveland with a 44.28 percent increase, where a one-bedroom apartment's rent now averages $1,853. Rent pressures in University Circle spilled over into neighboring Hough, long a national symbol of urban decay, where average rents have shot up 7.74 percent to an average of $1,415 for a one-bedroom apartment, according to Rent.com.

Hough is home to market-rate apartment developments built, underway and planned like Upper Chester/Innova, Axis at Ansel Avenue, Paradigm near Wade Park Avenue in the East 60s, 75 Chester located in the 7500 block of Chester Avenue, and the East 90th Street Apartments, just north of Chester.

Downtown's Gateway District saw rents rise 11.83 percent while the Warehouse District edged up 3.6 percent. Overall, downtown apartment rents grew 7.34 percent, even as thousands of new units are added to the market each year either through new construction or renovation and conversion of obsolete office buildings. Occupancy percentage rates are holding steady in the mid-90s.

Downtown, of course, has among the city's wealthiest populations. Yet new arrivals displaced fewer residents because there weren't many residents to begin with. It had 6,484 residents in 1990 but is approaching 20,000 residents today. If it was a separate municipality, downtown would be larger than all but 15 of Cuyahoga County's suburbs. There are 58 suburbs in the county.

Thomas Bier, a senior fellow at CSU's Maxine Goodman Levin College of Urban Affairs, recently wrote in Cleveland.com that, even with smaller households replacing ones with larger families, Cleveland's seven-decade-long population slide has virtually stopped. In the 1970s, Cleveland was losing 30,000 people a year. Last year, it lost just 1,700. But that could be one of its last losing years.

"People will continue to move out -- which is normal, just as people move from suburb to suburb -- but probably within a few years movers-in will exceed movers-out," Bier wrote. "Then, after 70 years of loss, the corner finally will have been turned as growth takes hold."

The population stabilization is reflected in Cleveland's real estate values, he added. Between 2012 and 2018, the value of the city’s residential properties increased by $248 million, resulting in more property tax revenues for the schools, libraries and parks.

"That’s quite a turnaround from the previous 12 years, spanning the Great Recession, when the city lost $821 million," Bier said. "The value of commercial properties, including apartments, increased $1.1 billion between 2000 and 2018. Downtown and University Circle are responsible for most of that gain."

The Inspiron Group's East 90th Street Apartments, just north
of Chester Avenue, is just one of many developments built,
underway or planned in the long-troubled Hough neighbor-
hood. These investments are occurring because of Hough's
 proximity to boomtown University Circle (LDA).

MIGRATIONS AND INEQUALITY

But there's still some of the old Fourth Migration showing a pulse in Cleveland. It and the Fifth Migration are simultaneously causing a contrast in terms of income inequality and abandonment in neighborhoods yet to be touched by investment.

For every middle-class person moving into Cleveland, there may be an impoverished person either moving out of their dangerous Cleveland neighborhood to a less dangerous one, or to an inner-ring suburb, or out of the metro area altogether.

This is especially true on the East Side where depopulation continues, People are escaping a lack of opportunities and the resultant drug-fueled crime and violence. Neighborhoods like South Collinwood, Mount Pleasant, Union-Miles, and others are fighting to address disinvestment, improve education and attract jobs.

Kinsman and Fairfax are on the cusp of turning long-abandoned urban prairies into job-rich development sites along the new Opportunity Corridor. This urban boulevard is clearing and cleaning dozens of vacant, polluted, 19th-century industrial sites so they can be returned to productive uses.

Cleveland also has a void of new, high-quality housing types in between the luxury units at one end of the market scale and subsidized housing at the other. So, as developers tap into Opportunity Zone investment funds, they are marketing 5-15 percent of their apartments as "affordable." Smaller units are being developed and marketed as "workforce housing."

Interestingly, one of the most inclusive developments in recent years is Snavely Group's growing Hingetown development, along and near the intersection of Detroit Avenue and West 25th Street in Ohio City. The multi-block development features a mix of market-rate and affordable housing units, as well the Music Settlement school plus co-working facilities and business incubators.

For decades, Midtown was an overlooked, pass-through be-
tween downtown and University Circle. Today, streets like
East 69th are seeing new life. Restored homes set next to
Tru Hotel by Hilton, as viewed from the Midtown Tech
Hive, a coworking and business incubator space (KJP).

IMMIGRATION DRIVES GROWTH

Another impact of the city's improving economy and real estate development, in part spurred by the Fifth Migration's stabilization of urban neighborhoods, is increased foreign immigration. Immigration plays a decisive role in separating America's growing cities from its declining cities.

Without immigrants, powerhouse metro areas such as New York City and San Jose would have lost population at triple the rate of metro areas such as Milwaukee and St. Louis last year, according to a 2019 report by the Economic Innovation Group (EIG).The report is titled "Why is San Jose Growing While Cleveland Shrinks? Maybe It’s Immigration and Not the Weather."

"Many metro areas such as Cleveland that lost population from 2017 to 2018 would instead have registered positive growth if they had received new immigrants at even half the rate of San Jose," the EIG report notes. "In fact, with only slightly more immigration, Cleveland’s population growth last year could have matched that of Seattle and Washington, DC."

That may be starting to occur, according to the New American Economy (NAE) Cities Index.

In 2018, Greater Cleveland ranked 64th nationally among major metros in the NAE Cities Index, a ranking of cities based on their ability to integrate immigrants into the economy. This year, however, Greater Cleveland leaped ahead to 14th in the nation. It was the largest year-over-year increase for any metro area.

Immigration not only boosts population figures, it boosts the economy. Immigrants in the Cleveland area have far higher educational attainment than U.S.-born residents and are more likely to start new businesses than established residents.

"Not only did median incomes rise and poverty rates fall for all residents in Cleveland, but the city’s immigrant entrepreneurship rate also increased, going from 6.9 percent to 8.0 percent, meaning more new businesses creating more new jobs for all workers," the NAE report noted.

Cleveland in the 2010s saw dozens of underutilized and vacant
buildings restored to productive uses, as well as lots of mid-
rise construction and five 20+ story towers built. What will
the next decade offer to Cleveland? And what might Cleve-
land offer to the world in the next decade (KJP)?

THE NEXT DECADE

The challenge for Cleveland as it enters the 2020s isn't merely to continue the turnaround it started in the 2010s, but to make it more inclusive, the NAE report notes. The city cannot accept merely replacing a person of need with a person of means. Everyone deserves and desires access to their dreams.

Yes, there are still too many neglected areas of the city that are in need of more investment as well as a need of more ways for longtime residents and immigrants to physically reach education and employment opportunities.

But it's clear that Cleveland's trend is to bring wealth and opportunities nearer to the urban core where everyone can physically access it. It's a powerful counterforce to decades of urban sprawl, and that's moving the region strongly in a positive direction. For a change.

END

City gets pushback on police HQ in Opportunity Corridor

The Cleveland Police Department's current headquarters is at
1300 Ontario Street in downtown Cleveland, a 9-story-tall,
330,000-square-foot office building that has too much office
space and too little parking, storage and training areas for the
CPD's needs (Ideastream). CLICK IMAGES TO ENLARGE

Like a traffic cop directing traffic at a downtown intersection, two interest groups have reportedly given Mayor Frank Jackson's administration the stop hand and a whistle for going the wrong way with its proposed new Cleveland Police Department (CPD) headquarters (HQ).

According to a Jackson administration source, the rebuke reportedly came from two interest groups -- the local business community and from downtown law firms.

The local business community, whose primary mouthpiece is the Greater Cleveland Partnership, expressed its concerns about the administration's proposed site for a CPD HQ at East 75th Street and the under-construction Opportunity Corridor.

According to the source, the business community wanted to use the Opportunity Corridor to attract growing businesses from throughout Greater Cleveland. Or, better yet, it would attract new businesses from outside the region.

The Opportunity Corridor is a 3-mile-long, $350 million boulevard that will link Interstates 77 and 490 with University Circle by 2021. But it also is, in part, being used to clear and clean polluted, vacant industrial sites that have lain fallow for 40 years and began falling into decline 40 years before that.

The orange oval is the proposed site for the new CPD HQ
on East 75th Street with the alignment for the Opportunity
Corridor boulevard shown as a yellow line (Google).

The goal for the Opportunity Corridor is to attract employers to hundreds of acres of newly cleared land that are accessible to the city's under-employed residents. Also running through the Opportunity Corridor are high-frequency transit routes including all three of the region's rail transit lines plus several bus routes that would help provide that access.

"The Opportunity Corridor isn't for relocating up to 1,000 police department jobs from downtown," the source said.

Similarly, the source said downtown law firms have also expressed concerns about moving the CPD HQ out of downtown where the region's largest concentration of lawyers, support staff and their offices are located.

Lawyers typically accompany clients in meetings with police investigators, facing interrogations or appearing in line-ups at the current police headquarters on Ontario Street and St. Clair Avenue downtown. Lawyers, paralegals and legal assistants also frequently visit the police station to request and gather reports, records and other documents.

Many lawyers or their staffpersons can walk from their offices to the police station, or take one of the free trolleys that circulates around downtown. While parking is plentiful downtown, with 60 acres of parking lots and structures available, someone could walk halfway to the police station in the time it takes to get to their car and drive it out of a parking garage.

A vision for the Opportunity Corridor, as developed and
adopted by the Burten Bell Carr community development
corporation and City Planning Commission is to attract
growing employers from outside the region (BBC).

Relocating the CPD HQ increases travel time and costs for law firms and ultimately for their clients. And, with more time needed for travel means less time lawyers, paralegals and legal assistants can get work done.

Ward 15 City Councilman Matt Zone, chair of council's Safety Committee, did not respond to a personal message seeking comment prior to publication of this article.

City Councilman Kerry McCormack, whose Ward 3 includes downtown, Tremont and Ohio City, would not comment on the source's information. However, he doubted that a new CPD HQ would help jump-start development in the Opportunity Corridor, as the Jackson administration has claimed.

"I don't believe it will be an economic catalyst," he said. "It won't hurt the (Opportunity Corridor) area but I also don't want to promise people that it's going to be some economic development-, job-creating machine because, by itself, it won't be."

McCormack added that he didn't mind seeing the CPD HQ move out of the heart of the central business district. But he said that he would like to see it on the near-east side of downtown. McCormack said the Plain Dealer Plaza, 1801 Superior Ave., was an ideal location.

Properties shown in red are large-scale, underutilized parcels
that currently are owned by city, county or state government
agencies and may offer ideal sites for a CPD HQ (Google).

The city was near to acquiring that property for $19.5 million last year until the transaction was abruptly halted without any official reason given. Another $40 million in building renovation costs were anticipated for that site.

Two other buildings were considered for the CPD HQ -- 55 Public Square built in 1958 and the pre-1977 Central Police Station, 2001 Payne Ave. built in 1937. But the reuse of both structures with modern police station facilities did not meet city requirements. So the city pursued a newly built CPD HQ in excess of 200,000 square feet, not including training facilities, storage or parking.

City officials have said that they wanted to move quickly on the project. But the city's first request for proposals for the project was issued in early 2017 and officials still are mulling site options. Properties that already are publicly owned might be had at a far lower cost and without the delays of negotiation.

There are multiple underutilized and large properties owned by the city, county and state in and near downtown. Some of those properties, like the lakefront land north of First Energy Stadium, are already spoken for.

But the largest publicly owned, underutilized property in or near downtown is the former Norfolk Southern Corp. intermodal rail yard between the Inner Belt (I-90) highway and the Main Post Office. It is currently owned by the Ohio Department of Transportation (ODOT) and measures about 49 acres, according to county records.

ODOT District 12 Public Information Officer Brent Kovacs said earlier this year that the transportation department considers that site to be "excess property" and would like to sell the land. It acquired all 49 acres in 2011 for $29.8 million so that a small portion of it could be used for the construction of the Inner Belt's new Cuyahoga Viaduct bridges.

END

Sherwin-Williams HQ competition heats up, delays announcement

The Bedrock site (dark orange buildings) behind Tower City
is reportedly giving the Jacobs/Weston lots west of Public
 Square strong competition for Sherwin-Williams' new head-
quarters plus research and development facilities. That means
any announcement about the new facilities will have to wait
until 2020. This is an unofficial massing (Geowizical).
CLICK IMAGES TO ENLARGE

If you wanted a shiny new Sherwin-Williams (SHW) headquarters plus a research and development (HQ+R&D) facility in your Cleveland-area stocking by Christmas morning, you're probably going to be disappointed. But don't expect a lump of coal either.

According to two high-level sources, the competition for SHW's HQ+R&D facility is back to a two-horse race, with Bedrock Cleveland making a strong push to take back the lead from the Jacobs/Weston lots west of Public Square in downtown Cleveland.

The renewed competition means that there probably won't be a HQ+R&D decision by SHW before the end of the year.

One of the two sources said that SHW, although having purchase contracts in place for 6.82 acres of the 8-acre Jacobs/Weston lots since early spring, kept the lines of communication open with Bedrock.

"The conversations between Sherwin-Williams and Bedrock continue to take place," the source said. "They never stopped."

Keeping those lines of communication open has paid off for SHW, as Bedrock reportedly has sweetened its offer to SHW to locate its HQ+R&D facilities in the riverfront phase of its CityBlock development. That phase reportedly would include apartment buildings, a hotel and possibly additional office space.

Another unofficial massing of a SHW HQ+R&D complex
(dark orange) behind Tower City Center. The lighter orange
next to them is an official concept for the later phases of
Bedrock's CityBlock development (Geowizical).

The first phase of CityBlock is the already announced $110 million renovation of The Avenue Shops at Tower City into a business incubator. That project is due to get underway in 2020.

Bedrock has the resources to make this happen. Not only is Bedrock's Dan Gilbert a billionaire, but his Rock Ohio Ventures is $843 million richer after selling off and leasing back its Cleveland-area casinos in late October.

Details of Bedrock's offer to SHW are unknown. But a source says the site Bedrock and SHW are discussing is a 2.7-acre section of parking lot between Huron Road/Tower City Center and SHW's existing R&D facility -- the John G. Breen Technology Center, 601 Canal Rd. SHW also owns 9.2 acres along the Cuyahoga River.

SHW's new HQ+R&D would measure 1.8 million square feet. Parking facilities would be extra. The massive new complex would consolidate up to 6,000 jobs in downtown Cleveland where SHW currently has about 3,500 employees.

The other source said that, while the Jacobs/Weston lots might have had a 90/10 chance of landing SHW's HQ+R&D a month ago, that site's lead has probably shrunk to 60/40. The source said it wasn't due to any shortcomings found by SHW in its due-diligence work at the Jacobs/Weston lots. Rather, it was due to Bedrock's strong push, he said.

"The Jacobs and Weston lots aren't a done deal," he added.

Blocks outlined in red show the Jacobs Group- and Weston
Group-owned parking lots west of Public Square (Google).

Originally, Bedrock proposed to build a new headquarters tower and lease it to SHW. But a long-term lease would count as debt to SHW, which is still trying to shed the debt it used to acquire Valspar in 2017. SHW is making rapid progress in paying down that debt, but that progress would be slowed if it leased a $1 billion headquarters.

As noted before, SHW has purchase agreements with the Jacobs Group for its 1.17-acre lot on Public Square and with the Weston Group for its 5.65-acre "Superblock" bounded by Superior and St. Clair avenues, plus West 3rd and West 6th streets. It reportedly doesn't include any other land in the Warehouse District owned by Weston.

First American Title Insurance Co. is doing the title research on the Jacobs and Weston lots for SHW and its facilities consultant Welty Building Co. That became apparent when a source contacted NEOtrans Nov. 11 to say that SHW would file permits as part of its acquisition of the Jacobs/Weston lots.

Later that week, First American Title Insurance's subsidiary, Commercial Due Diligence Services of Norman, OK, filed 12 certificates of disclosure with the city for the Weston lots to gather information about those properties. However, the firm likely discovered that it didn't need to file the certificates for commercial property acquisitions in Cleveland. No certificates were filed for the Jacobs lot.

The red stars are placed on all of the parcels that were removed
in October from a three-year-old lease between Weston-owned
companies, so that residents of the Weston-owned Standard
Building apartments could park on those lots (Google).

The same firm was the title company associated with a mortgage that 4780 Hinckley Cleveland LLC, an affiliate of IRG Dayton I LLC, was released from on Dec. 10, Cuyahoga County records show. IRG owns a property at 4780 Hinckley Industrial Parkway leased by SHW since 2016 as an overflow office space.

First American found some anomalies with the Jacobs and Weston lots that had to be cleaned up, including the vacating of an unused alley, Broome Ct. N.W., from the county's plats maps. Cleveland City Council authorized the vacation by ordinance in 2017. The plat map was updated by the county on Dec. 2.

Another item discovered recently, although it is not clear by whom, was that the Weston Group had a lease agreement with its various Warehouse District properties that needed to be addressed. The lease was from 2016 and allowed residential tenants of its newly renovated Standard Building to park on its properties in the Superblock and those north of St. Clair as well.

That lease was amended and recorded with Cuyahoga County on Oct. 23. The amendment reduced the number of guaranteed residential parking spaces for the Standard Building from 370 to 281. And it removed all 23 parcels in Weston's 5.65-acre Superblock from the lease.

Less than two weeks later, geotechnical survey crews descended on the Weston and Jacobs lots to take soil and groundwater samples from deep below the surface. And into December, sewer crews began working in the area although a source said that some of the work may involve the installation of fiber optic cable conduits.

END

Downtown Cleveland hotel sells to NY-based REIT

Downtown Cleveland's Hilton Garden Inn and Gateway
Conference Center as seen from Interstate 90 (Google).
CLICK IMAGES TO ENLARGE THEM

Downtown Cleveland's Hilton Garden Inn, 1100 Carnegie Ave., sold on Dec. 9 to a New York City-based real estate investment trust that specializes in owning Marriott- and Hilton-branded hotels.

The 11-story, 240-room hotel, its adjoining Gateway Conference Center and the 2.85 acres on which the complex sets was sold for $28.16 million to MCR Cleveland LLC, according to Cuyahoga County records.

MCR Cleveland is an affiliate of MCR Hospitality Fund REIT LLC, headquartered on the 86th floor of One World Trade Center in New York City. It also has a secondary headquarters in Dallas.

The REIT, formed in 2006, owns about 90 hotels totaling 15,000 rooms with a combined value of $3 billion, according to MCR's Web site. Their hotel properties are in 30 states and 76 cities. This is MCR's first acquisition in the Greater Cleveland market but is its sixth hotel located in Ohio.

MCR owns the Homewood Suites by Hilton in Columbus/Ohio State University, Hilton Garden Inn in Dublin (Greater Columbus), Courtyard by Marriott in Lima, Homewood Suites by Hilton in Milford (Greater Cincinnati) and the Hampton Inn & Suites in Perrysburg (Greater Toledo).

The Gateway Conference Center, at right, was included in the
Dec. 9 sale of the downtown  Hilton Garden Inn (Google). 

The firm does not own any hotels in Greater Pittsburgh, Greater Buffalo or in the entire state of Michigan, its Web site shows. MCR touts that it is a recipient of the Marriott Partnership Circle Award, the highest honor Marriott presents to its owner and franchise partners, and the 2018 Hilton Legacy Award for Top Performer.

On the same day the hotel property purchase was recorded by Cuyahoga County, a $22,730,000 mortgage from Wells Fargo Bank to MCR also was recorded by the county along with a subordination agreement by MCR Cleveland Tenant LLC of Dallas for Wells Fargo Bank.

Based on recent transactions, the property has gained significantly in value in recent years. In 2012, the hotel's first owner, 1100 Carnegie, LP, sold it to JPMCC 2006-LDP7 Carnegie Avenue, LLC. for $12.43 million.

Then, it was sold again in 2015 to Hotel 1100 Carnegie, L.P. for $16,597,500, according to Cuyahoga County records. Hotel 1100 Carnegie sold the Hilton Garden Inn to MCR. This latest sale of $28.16 million represents a 133 percent increase in market value for the hotel in just seven years.

The proximity of Progressive Field, seen in the background,
is a major selling point for the Hilton Garden Inn (Google).

The 11-story Hilton Garden Inn was built in 2000 and measures 138,116 square feet. In addition to guestrooms, suites and accessible rooms, it has a fitness center, pool and whirlpool. Also on site is Harvey’s Bar and the Great American Grill restaurant which provides table and room services.

The neighboring 32,095-square-foot Gateway Conference Center was built in 1900 and renovated in 2001, county records show. Meeting space in the building measures 20,000 square feet not including audiovisual facilities, full-service catering and preparation rooms and other support areas.

Downtown Cleveland's Hilton Garden Inn is less than a block away from Interstate 90 and Progressive Field, home of the Cleveland Indians baseball team. It is one of four Hilton Garden Inn locations in the metro area, including Hopkins Airport, Mayfield Village and Twinsburg locations.

Sales of local Hilton Garden Inns show stability with the chain here. Other than downtown, the most recent sale was the Mayfield location which transferred in 2018 via a receivers deed for $2.3 million. The Twinsburg hotel last transferred in 2008 for $16.5 million while the Cleveland Airport site last transferred in 2000 when that hotel was built, county records show.

END

Transformational real estate development tax credit bill sees big changes

Substantial changes were made today to legislation that would
provide a source of capital financing to mega-developments in
Ohio's cities (State of Ohio). CLICK IMAGES TO ENLARGE

A proposed Transformational Mixed-Use Development (TMUD) tax credit pending before the state legislature was substantially amended today during a hearing of the Ohio House of Representatives' Workforce & Economic Development Committee.

Six changes were accepted by the committee that further refined the proposed law, Substitute Senate Bill 39. Most of the changes would link the release of tax credit awards more closely to the amount of state and local taxes generated by the credit.

The amendments were submitted by the bill's original sponsor, State Sen. Kirk Schuring (R-29, Canton), said Josh Ferdelman, legislative aide to State Rep. Paul Zeltwanger, chair of Workforce & Economic Development Committee.

"We are not closed off to amendments by any means," Ferdelman said. "We (the committee) won’t meet next week, but we will take this up again in January."

The tax credit would refund to insurance companies up to 10 percent of their investment in TMUDs, as defined by the bill. Those include projects whose new or to-be-renovated connected buildings are at least 15 stories tall, measure at least 350,000 square feet and contain any combination of retail, office, residential, recreation, structured parking or similar uses.

"Substitute Senate Bill 39 is designed to provide a unique tax credit that will foster mega-development projects that will transform Ohio's downtowns with new and robust economic development," said Schuring in testimony to the committee in October.

Stark Enterprises, which is seeking to develop nuCLEus
in downtown Cleveland, initiated the original version and
consideration of the TMUD tax credit legislation (Stark).

New provisions in the TMUD bill would limit the director of the Ohio Development Services Agency (DSA), which would administer the tax credit, to approving only four TMUD tax credits per fiscal year. If fewer than four TMUD applications were made or approved, the unused credits would carry over to the next year.

If more than four applications are submitted, they would be ranked by their economic value and transformational impact. The proposed change would give consideration to the new state and local taxes generated from the project and its surrounding area.

A project that has the most significant transformational impact and has a pro forma (or forward-looking financial statement) that shows the most expeditious schedule for the new state and local taxes to exceed the amount of the tax credit, will be the one that is approved.

After the TMUD credit is approved by the DSA director, the project must go into construction no later than one year after its approval. If it does not, the approved tax credit will be rescinded, according to the amended bill.

The revised bill also won't release the 10 percent tax credit to recipients all at once. Instead, the first 5 percent credit will be issued upon the completion of construction. The remaining 5 percent will be issued as evidence is submitted showing the new state and local taxes that were caused by the project and its surrounding area, according to Schuring.

If the evidence shows that, after the construction of the project was completed, it already generated new state and local taxes that exceeded the amount of the 10 percent credit, then a certificate for the full 10 percent will be issued.

But if the new taxes do not exceed the amount of the tax credit immediately after the completion of the construction, then the remaining 5 percent will be issued incrementally on an annual basis as evidence is shown that the new state and local taxes generated from the project and its surrounding area exceeds the amount of the additional credit. The incremental increases in the credit will be for a period of up to 5 years.

Millennia Cos.'s proposed Centennial development in down-
town Cleveland could also be a beneficiary of the TMUD tax
credit bill. This is part of the massive former bank lobby in
the Centennial, or ex-Union Commerce Bank (Millennia).

Lastly, the accepted amendments would increase the existing historic renovation tax credit percentage from 25 to 35 percent for projects in rural areas. And the bill would enhance a variety of Chapter 119 rules stipulating how DSA will administer the TMUD program.

The TMUD legislation had seemingly been on a fast track toward passage this fall as numerous business and civic groups testified in support of the bill. They included the Ohio Municipal League, Ohio Mayors Alliance, Ohio Chamber of Commerce, City of Hamilton, Ohio Insurance Institute, NAIOP of Ohio (Commercial Real Estate Development Association) as well as The Millennia Companies and Stark Enterprises.

The only group to testify in opposition to the bill was Policy Matters Ohio, a left-leaning non-profit policy research institute with offices in Cleveland and Columbus.

Stark's law firm, Thompson Hine LLP, originally drafted the TMUD legislation nearly two years ago at the request of Stark. It did so after Stark had attempted other methods of loosening up public-sector capital funding for its mixed-use nuCLEus development project in downtown Cleveland.

Stark and other real estate developers note that major developments in Ohio's larger downtowns cost nearly as much to build as those in larger cities like New York and Chicago but command rents that are one-half to two-thirds less.
 
Until today, the committee hadn't held hearings on Sub. SB 39 since early November. Today's hearing on the TMUD legislation was the committee's fifth. The bill passed the Ohio Senate 32-1 on June 25. An older version of the bill passed the Ohio House last year 91-0 but the legislative session expired before the Senate could act on that version.

The current legislative session expires Dec. 31, 2020.

END

Son of Seeds & Sprouts - Part I

These news tidbits are too small for Seeds & Sprouts but are nonetheless important. They include the last two weeks of items that appeared in public records such as building permits, planning commission filings, real estate listings and similar but brief references showing definitive movement in Cleveland-area real estate. They are listed by Cleveland neighborhood (per city-defined planning jurisdiction) and suburbs. Sometimes there's just too much going on to report it any other way! Thanks to Tykaps/UrbanOhio for providing insights on these tidbits.



BUCKEYE-SHAKER SQUARE

Rehab of 2804 South Moreland is due to begin soon (Google).

2804 South Moreland Blvd. -- Building permits were filed for the rehabilitation of this three-story, 24-unit, 14,130-square-foot apartment building built in 1930. The county rates this property in very poor condition. It was bought Dec. 21, 2018 by Rakefet Landes of Beachwood although he transferred it on May 28, 2019 to 2804 Moreland LLC that lists to his home address. The property is on the southwest corner of South Moreland and Drexmore Road, next to the Shaker Square business district.

Mixed-use is planned at 12607 Larchmere Blvd. (Google).

12607 Larchmere Blvd -- A 15,500-square-foot structure is proposed to rise on a 0.356-acre lot, according to newly filed building permits. Proposed is residential over a ground-floor commercial space. The street is zoned with a pedestrian retail overlay that requires structures to be built within 5 feet of the sidewalk; heights are limited to 60 feet. The land and its two-story wood warehouse were bought in 2011 by David Davita of Mayfield Village but transferred to his firm 12607 Larchmere LLC on July 15, 2019.

An 88-unit apartment building is planned at Larchmere Blvd.
and East 121 Street on the site of a charter school (Google).

12201 Larchmere Blvd. -- First Interstate Properties proposes building a four-story, 88-unit apartment building on the 1.27-acre site of the Life Skills NE Ohio charter school. The school would be demolished to make way for the apartments, located on the northeast corner of East 121st Street and Larchmere. A Dollar Store was proposed for the property in 2018 but met with neighborhood opposition. 

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CENTRAL

First phases of Sankofa Village are behind the foreground site
of the newer, later phases approved for construction (Google).

2701-2755 Community College Ave. -- The next phases of the Cuyahoga Metropolitan Housing Authority's Cedar Transformation Plan (Sankofa Village) are moving forward following the filing of building permits for more than 100 housing units that will be mostly, if not all single-family townhomes. Phases one and two recently were completed with 60 apartment units and 50 townhomes. A total of 377 residential units are envisioned for the 17-acre block, replacing 70-year-old, inadequate public housing. Pennrose is the developer.


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CLARK-METRO

The approximate site of a residential development being consi-
dered by the Spang Bakery's developers (Cuyahoga County).

3100 Barber Ave. -- Ben Beckman, an investor behind the conversion of the J. Spang Bakery, 2707 Barber, to market-rate apartments is filing certificates of disclosure with the city to purchase vacant land north of Barber and east of West 32nd Place. Additional nearby properties are in the land bank and are being used as a community garden. The actual size of the development site is unknown. Pursuing new construction in the same area may be a sign that the Spang Bakery apartments are filling up well.


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DETROIT SHOREWAY

A recently planned apartment building in Battery Park (LDA). 

1275 West 73rd St. -- New construction building permits were filed by Columbus-based Avenue Partners for two new apartment buildings on the east side of West 73rd. Avenue Partners is buying the land from Marous Brothers that began the massive Battery Park development. One building will measure 55,000 square feet and the other 36,000 square feet adding a total of about 250 units and underground parking. A clubhouse and pool will be at the north side of the site. For size comparison, the Battery Park Lofts built in 2018 at 1250 West 75th St. measure 105,000 square feet. Separately, the city of Cleveland will extend Battery Park Boulevard east of West 73rd to West 70th, through the former property of Elite Medical Transportation/Mobile Martin EMS property.

Proposed Gordon Green party center on Detroit Avenue (Dimit).

5400 Detroit Ave. -- Building permits were issued to a local group of investors led by John E. Lawrence and incorporated as JEL LAW Properties, LLC to renovate Saigon Plaza as a party center called Gordon Green. The 0.88-acre parcel was bought on May 7, 2019. That was where the east-side's Hawken School planned to build an early-childhood center until it merged with West Park's Birchwood School. An adjacent parcel along Tillman Avenue was sold July 22, 2019 by JEL LAW Properties to Tillman Partners LLC for $447,000.

Herman Ave. Townhomes to start building (Cuyahoga County).

5209-5217 Herman Ave. -- Stout Properties. LLC received building permits to construct an eight-unit townhouse development called Herman Avenue Townhomes. The project involves demolishing three existing, vacant homes. Also four parcels were recently replatted as nine lots, including a common lot to serve as a driveway and buffer, much like other townhouse developments in the neighborhood. MG2 is the project architect.

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FAIRFAX

Berusch is pursuing a development on this site at the northeast
corner of Euclid Avenue and East 71st Street (Google).

7107 Euclid Ave. -- Euclid 71 LLC, an affiliate of Berusch Development Partners, has acquired nine parcels along the east side of East 71st Street north to Chester Avenue for an unidentified development, presumed to be residential. A brick building owned by Russel J. Papalardo for his A-1 Liquidators at 7107 Euclid is the only structure remaining on these parcels that were acquired in Sept. 24, 2019. This is next to Vazza Real Estate Group's One Midtown townhouses.

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HOUGH

This abandoned, 160-apartment building has a buyer (Loopnet).

9410 Hough Ave. -- The spillover effect from the growth of University Circle and Cleveland Clinic is putting derelict properties to new uses. Case in point is that an unknown buyer on Dec. 6 reached a sale contract for the vacant 160-unit Kingsbury Apartments (aka Coventry Courts) with seller CLE Venture Fund LP. The 10-story building, built in 1973, had an asking price of $2.3 million. It is next to the new Axis At Ansel apartments, a 163-unit apartment building.

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KINSMAN

The new East 79th Red Line rapid transit station (GCRTA).

2625 East 79th St. -- Building permits were filed for the $8 million renovation of the Greater Cleveland Regional Transit Authority's East 79th Red Line rapid transit station, replacing the 1955-built facility that isn't ADA compliant. The rebuilt station will serve the Opportunity Corridor area including the site of the new Cleveland Police Department headquarters and it's nearly 1,000 employees.

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OHIO CITY

Market Square's first phase is this V-shaped apartment building
along Lorain Avenue. West 25th Street is at right (Harbor Bay).

2021 West 25th Street -- Building permits were issued for phase one of site development for the Market Square project by Harbor Bay Real Estate Advisors, LLC. This will allow the city to start utilities work here on Feb. 1, 2020 and for the developer to start demolition of the Market Plaza shopping center and site excavation work by March 1. Phase one includes a seven-story, 253-unit apartment building over ground-floor retail at the corner of West 25th and Lorain Ave. Remaining retailers at the plaza are on month-to-month leases.


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SLAVIC VILLAGE

NRP Group's Slavic Village Gateway development (NRP).

5163 Broadway Ave. -- Building permits were filed for the construction of the Slavic Village Gateway development, to be built by NRP Group of Cleveland. To built on 5.25 acres of land, the development's first phase will have 78 apartments and 10 townhomes along with 21,000-square-foot of ground-floor commercial spaces. One of the tenants is the University Settlement. Slavic Village Gateway will rise on the site of St. Michael/St. Alexis Hospital which closed in 2003 after 119 years of service.


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TREMONT

A 3.4-acre parcel in Duck Island is for sale (Cuyahoga County).

2000 Lorain Ave. -- Andrew Brickman's Brickhaus Partners is no longer pursuing an ambitious development that many consider is in Ohio City. One West Twenty actually is in the Duck Island enclave. Instead, Brickhaus has listed for sale the larger of two plots of land it assembled in recent years. It is asking $7.25 million for the 3.4 acres of land but will retain 1.32 acres of land between West 19th and 20th streets, north of Lorain Ave.

Developments on three of the four corners at Scranton-Willey-
Kenilworth will change this scene in the coming years (Google).

2329 West 16th Pl. -- As 3004 St. Clair, LLC, real estate investor David Ferrante acquired a brick warehouse and 0.42 acres of land at the northeast corner of Scranton Road and Kenilworth Avenue on Sept. 9, 2019 for $1 million. His intentions for the site became clear when he began a Design-Review case for an eight-unit townhouse development called Due North Townhomes. This intersection is attracting developments, starting with Gustave Development's 11 Scranton. Another Gustave development is proposed at the northwest corner of Scranton and Willey Avenue. And Sustainable Community Associates is planning roughly 83 residences on the southwest corner of Scranton and Willey.


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UNIVERSITY-LITTLE ITALY

Blue Sky Brews replaces Rising Star Coffee Roasters (Google).

2187 Murray Hill Road -- A coffee and beer spot called Blue Sky Brews is coming to the southeast corner of Edgehill Road recently vacated by Rising Star Coffee Roasters. The location is on the ground floor of a three-story apartment building, close to Case Western Reserve University and University Hospitals. This Rising Star store moved to 1975 Lee Road in Cleveland Heights.


END