Cleveland city meetings to resume, construction industry cheers

City Planning Commission meetings are due to resume in May
but not at Cleveland City Hall. Instead, they will do so digitally
with live public viewing and public input by e-mail (WKSU).
CLICK IMAGES TO ENLARGE

After a 40- to 90-day hiatus forced by the COVID-19 crisis, Cleveland's City Council and City Planning Commission meetings are due to restart. The first meetings are likely to be held in May.

That's good news for Greater Cleveland's real estate and construction industry whose projects and thousands of local jobs often depend on city reviews and the approval of incentives before they can proceed.

Although Cleveland's City Planning Commission hasn't announced anything formally, City Council members and local offices of architectural firms said they were aware of the city's plans to restart the planning meetings virtually. City Council will also begin meeting live virtually via Zoom as well as by other public media.

"The goal is to have council meetings running next week or the week following," said Ward 3 Councilman Kerry McCormack. "It will be broadcasted live on other platforms as well."

"It will be broadcast live and it will be public," Ward 12 Councilman Anthony Brancatelli said.

Similarly, the goal is for Planning Commission to start meeting remotely by mid-May.

"That's my understanding," said Ward 15 Councilman Matt Zone.

Cleveland City Planning Commission Web page (CPC).

However it is taking longer to set up a virtual meeting process for the Board of Zoning Appeals (BZA) and Board of Building Standards (BBS) because of legal issues of having to swear-in witnesses and stakeholders. For that reason, BZA and BBS meetings may not re-start until mid-June.

Getting the meetings, and thus new construction projects restarted is critical for the region's economy. Cleveland accounts for more than one-fourth to one-third of all new residential units built each year in Cuyahoga County, according to a recent housing study.

Major projects still awaiting planning review include a roughly 40-story Sherwin-Williams headquarters tower on Public Square, the 24-story Circle Square tower at 10600 Chester Ave. (the parking deck was already approved), the 25-story One nuCLEus Place downtown, Azure on Cleveland's lakefront, the first phase of Chester75 in Hough, Bridgeworks in Ohio City plus numerous not-yet-announced projects awaiting property sales to close.

Developers say the residential projects are needed to address a housing shortage in the city. Office developments are needed for growing companies that continue to need more office space long-term, despite the pandemic. All are on hold without the city's planning meetings.

"We are just hoping it starts as soon as possible," said Bo Knez, founder and president of Knez Homes, one of the largest residential developers in Greater Cleveland. "We have a lot of projects in the pipeline that are sitting and waiting."

In Miami, Florida, a city commission meeting proceeds as
scheduled on March 25 despite some commissioners self-
isolating. That was because the City of Miami had already
used technology to simplify permitting and enhance public
access by live-streaming city meetings (Mike Sarasti).

"It’s a good thing," said Dan Whalen, vice president of design and development at Chicago-based Harbor Bay Realty Advisors LLC. His firm is building the $175 million Market Square development at Lorain Avenue and West 25th Street in Ohio City.

"They want to keep things moving as much as possible during this abnormal time," Whalen said. "Presentations are given via PowerPoint presentation anyway, so there’s no reason not to try and accomplish things remotely, so long as everyone gets a chance to state their case."

Although the technological method of citizen and stakeholder participation at these meetings is not yet known, other cities and public agencies have used e-mail as their choice of input. That required having a deadline for e-mail submissions several hours before the meeting so that the e-mails could be received and presented for inclusion in the public record.

Cleveland Planning Director Freddie Collier didn't respond to questions e-mailed to him prior to publication of this article.

Some building permits that do not require new or additional design/zoning/building code reviews or appeals can be obtained through Cleveland's online portal. Also, rental registrations and certificates of disclosure/occupancies for residential properties can be obtained by contacting the city, by mailing them to the city, or by dropping off applications (not checks/money) at the drop boxes at the front/rear entrances to City Hall, 601 Lakeside Ave.

Virtual meetings by city council, boards and commissions offer some positives and negatives.

City of Miami's multi-media desk for managing the live-
stream of public meetings as well as communications so the
public can interact with those meetings (Mike Sarasti).

"I bet we will have many more viewers (for upcoming city meetings) than we normally would, which is good," McCormack said.

Last month, the Greater Cleveland Regional Transit Authority (GCRTA) held its first-ever virtual meeting via Facebook with public comments e-mailed beforehand. A total of 1,213 people viewed some or all of the live GCRTA board meeting, according to Facebook's statistics.

GCRTA board member Justin Bibb said that's many more people than the agency could have fit in the transit authority's board room at 1240 W. 6th St. in downtown Cleveland. That's also far more people than could fit in their schedules to attend the meeting, even under normal circumstances.

But virtual meetings also have their drawbacks.

"I remember nothing beat the democracy of live citizen engagement at the Planning and Landmarks commissions and the BZA," said Chris Ronayne who was the city planning director under Mayor Jane Campbell in the early 2000s. He has served as president of University Circle Inc. since 2005.

"When a crowd lined up outside the door of the commission board room, at least you knew where the community stood," he said. "I'll never forget the drama of petitions stacked up to save important places like Whiskey Island or the Coast Guard Station."

Cleveland City Hall, where Planning Commission meetings
are normally held on the fifth floor. For the foreseeable fu-
ture, meetings will be held digitally (ThisIsCleveland). 

Ronayne acknowledged that virtual meetings are a necessary course of business to keep government going now amidst the COVID-19 pandemic. But he said nuances can get lost in the digital world. That includes losing the tone and tenor of community opinion in each case, or even the chance to touch and feel the texture of proposed building materials.

"Access to digital public meetings is a double-edged sword," Ronayne said. "For some it's easier and more convenient. For others there's a digital divide (due to a lack of Internet access at home). For now digital meetings are the best we have. But I do look forward to the return of face-to-face planning meetings."

The last City Council meeting was held on March 23, when council approved city incentives for the Sherwin-Williams headquarters development. Council meetings are normally held weekly. March 23 was also the last BZA meeting which are held weekly, too. BBS meetings are scheduled every two weeks; BBS last met March 18.

March 12 was the last Landmarks Commission meeting, which are typically held every other week. So are Planning Commission meetings, but it's last meeting was March 6. Neighborhood-level design-review committees are held on an as-needed basis, and most of them had their last meetings in early- to mid-March.

"I do believe planning is still a people business, best conducted between people face-to-face who are able to bounce thoughts off of each other and improve our communities through the live iterative exchange of ideas," Ronayne added. "Innovation happens in proximity more so than in distance."

END

How nuCLEus and Herold got their lives back

A 25-story office tower on a pedestal of parking and
ground-floor retail appears to have more than enough
capital to afford its construction cost just above $200
 million. That doesn't include the potential renovation
and expansion of the Herold Building which is just out
of view at the bottom-center of this image (Cresco).
CLICK IMAGES TO ENLARGE THEM

As a follow-up to last week's article in which NEOtrans broke the story about the new nuCLEus and Herold Building plans, there is an interesting back-story behind the new approach. It all centers on addressing the difficulty of constructing new office buildings in Cleveland.

Granted, putting up office buildings for tenants in Cleveland isn't Mission Impossible. It's more like Get Smart. Titles for those 1960s-era spy TV shows summarize Stark Enterprises' plans for One nuCLEus Place and its "Mini-Me," a renovated/expanded Herold Building.

The reason for creative approaches? Greater Cleveland is the nation's 15th-most expensive metro to build an office building yet the region has the nation's third-cheapest office rents, eclipsed by only Albuquerque and Louisville.

According to EVstudio.com and adjusted for inflation, it costs more to build a 5- to 10-story office building in Cleveland than in Washington DC, Denver, Miami, Phoenix, Atlanta, Houston or Dallas.

The last new-construction office building to hit the leasing market was seven years ago -- the Ernst & Young Tower at 950 Main St. in the Flats East Bank development. Constructed was a 21-story, 487,000-square-foot, $145 million building. Even though it is 90+ percent leased and considered a "trophy-class" building, commanding some of the highest rents in Greater Cleveland at $30 per square foot, it couldn't be built without massive subsidies.

One of those subsidies -- the EB-5 Immigrant Investor Visa -- pumped $30 million into the capital stack for the Ernst & Young Tower. That program was since scaled back due to a number of problems, although President Donald Trump proposed last month to greatly increase the number of available visas and reduce the individual investment threshold necessary to get one.

Conceptual rendering for the interior of a renovated and
expanded Herold Building, 310 Prospect Ave. (NBBJ).

There are few other subsidies available to push more office developments into central business districts even though there is a clear public benefit in doing so. Downtowns offer accessible jobs to more socioeconomic groups because downtowns are located at the centers of highway and public transit networks.

Office tenants prefer new, Class A buildings but the only new-construction inventory being added is on less expensive suburban properties that are less accessible to minorities and the lower-income labor force. Suburban offices are also less favored by young professionals, making it more difficult to recruit them.

Yet the City of Cleveland doesn't offer tax abatement for office developments as it does for residential. Although the state does offer them, the City of Cleveland recently blocked an attempt by Harbor Bay Realty Advisors from getting a state-authorized property tax abatement.

After the city blocked it, Harbor Bay was able to regroup and get property tax abatement from the city for the housing component of the project. So while the residential portion is moving forward, the office component was set aside for a later phase.

Until recently, the only office developments getting any traction in downtown Cleveland involved redevelopments of historic properties. These office redevelopments can get the most subsidies -- namely a variety of state and federal historic tax credits, as well as new-market and job-creation tax credits.

Relying on historic restorations to add new office inventory will change with the new Sherwin-Williams (SHW) headquarters on Public Square. The 1-million-square-foot first phase of this development, not including parking, is unlikely to include any for-lease space.

Future growth of SHW's headquarters won't be accommodated by overbuilding the Public Square tower and temporarily leasing out the remainder. Instead, SHW parking structures built on the Superblock bounded by Superior-St. Clair-West 3rd-West 6th will reportedly be designed with the ability to add future phases on top of them or next to them.

New site plan for nuCLEus which also shows the ground-floor
plan for the Herold Building at the upper-left (Cresco).

That brings us to nuCLEus and the Herold Building.

In 2014, Stark Enterprises acquired from Los Angeles-based L&R Group of Companies two basic agglomerations of downtown properties for $26 million. One was a 2.33-acre parking crater at West 9th Street and St. Clair Avenue in the Warehouse District. The other was 2.3 acres of land that included a parking crater and several neighboring structures. J-Dek Investments Ltd. joined Stark in a partnership called Gateway Huron LLC in acquiring the latter group of properties.

The exception in the latter group was the Herold Building, 310 Prospect Ave., constructed in 1906 and expanded in 1908 to 300 Prospect by Oscar and A. B. Herold, owners of the Herold Brothers barber supply store on Public Square. The Herold housed the American Federation of Labor headquarters over Wilson's bird store and the Pilsener Brewing Co., according to its 2013 landmark registration,

Kurtz Furniture acquired the Herold in 1920 and modernized the facade with structural glass panels in 1948. Kurtz closed its downtown store in the 1970s. The building has since housed two ground-floor restaurants -- the Clock Restaurant and Downtown Eddie's -- but the upper floors have remained largely vacant for decades. The city condemned the building in 2010.

L&R had hired Benesch, Friedlander, Coplan & Aronoff and filed suit to overturn the city's denial of its demolition request. The case was withdrawn when Stark acquired the Herold. L&R was only too happy to get rid of the Herold, pocketing $1 million in the process. Stark pledged to renovate the Herold, only to change its mind after five more years of structural decay.

Stark and its demolition contractor requested approval in August 2019 from the Downtown-Flats Design Review Advisory Committee to raze the Herold. It had no post-demolition plan for the site, so Ward 3 Councilman Kerry McCormack urged the request be tabled until Stark could come back with a plan.

But Stark merely wanted the condemned Herold gone. It was proposing the $353 million nuCLEus mega-development next door and needed a construction staging area for it. So Stark came back to the design-review committee on Sept. 5, 2019 with a site plan showing a grassy lot. The committee wasn't impressed. It blasted Stark for not coming up with a more creative outcome for the property.

Office stacking in the revised plans
for the nuCLEus development (Cresco).

Apparently Stark felt it should get a pass from the city because Stark was planning 1.2 million square feet of development on one of downtown's largest parking craters. But the city wasn't about to ignore its own laws in accepting or rejecting a proposed demolition of an historic building with a landmark registration, located in an historic district.

Rebecca Molyneaux, vice president of development at Stark Enterprises, told the committee it would cost $6 million merely to address the code violations and remove the Herold Building's condemnation. It could cost another $1 million to mothball the structure or millions more to renovate the building into a marketable property.

Tom Yablonsky, executive director of Historic Gateway Neighborhood Corp., asked Molyneaux if Stark had considered a myriad of tax credits available for the Herold. If Stark had, it didn't apply for them. So the committee voted 7-3 to reject Stark's demolition request.

The committee's vote wasn't binding. It serves as an advisory panel to the full Planning Commission where decisions are legally binding. Stark was on a path to get its demolition request formally shot down by the commission on the following day.

Right after the design-review panel advised against Stark's request, Yablonsky made a bee-line for the Stark reps and reportedly reached out to them with a way to save the Herold. But it ended up doing more than that. It may have saved nuCLEus as well.

The megaproject next-door had been languishing for six years. It began as a $500 million, 54-story structure with a hotel bridging between office and residential buildings, above a pedestal of parking and retail. It was succeeded by second version that retained the retail/parking pedestal but perched atop it two separate 24-story towers of office and residential, costing $353 million.

This was the old floor stacking plan for nuCLEus, with
the office building at right and the residential building
to the left of it (Stark).

But because of Cleveland's high construction costs and low rents, Stark tried a variety of creative public funding schemes to bridge the gap between its design and available capital. None were embraced. The schemes were too innovative for Cleveland's reactive, parochial public entities to wrap their heads around.

So Stark went to state legislators in Columbus with a new public funding idea -- the Transformational Mixed Use Development (TMUD) tax credit. It won support from state-wide economic development organizations and other developers, but was amended multiple times by legislators to win more political support from around the state.

After two years of bouncing around the statehouse, the TMUD tax credit bill appeared in February to be weeks away from moving out of the Ohio House of Representatives and onto the governor's desk for his signature. However, the COVID-19 crisis put a stop to that, and now the fate of the bill is unknown.

Before the TMUD legislation got put on the shelf, rumors were emerging that nuCLEus had more than just a pulse. It might even be a fully funded project without the TMUD tax credit and could see construction start as early as this summer.

Then, earlier this month, new plans for nuCLEus were released publicly. They showed that Stark was willing to do some creative value engineering to build something that aligned with the capital in hand. The rumors about Stark having the resources to move forward on a slimmed-down nuCLEus were confirmed by two high-level sources who were not authorized to speak on the record.

COO Ezra Stark declined to comment.

Stark eliminated or delayed the 24-story apartment building, estimated to cost more than $100 million, from the project while hanging on to the office building. Although the office tower will remain at 350 feet tall, its floor count will grow by one story to 25 stories. Stark will add two more levels of offices by adding that floor to the tower and by shrinking the amenity deck on the roof of the eight-story parking-retail pedestal.

Location of nuCLEus in the central business district (Cresco).

Stark is also shrinking the size of the floorplates in the office tower by about 500 square feet. A skinnier office tower will offer 60,000 fewer square feet compared to what Stark had proposed previously. At about $300 per square foot, that's a savings of roughly $18 million.

Stark has commitments from potential office tenants for about 250,000 square feet of space in the skinnier building. In other words, roughly 73 percent of the building is already spoken for. The anchor tenant is the fast-growing law firm Benesch which would take about 180,000 square feet. Stark Enterprises' headquarters would also be a tenant. Other office tenants are unknown.

Benesch needs that space to become available by the summer of 2022. That's when its current lease at 200 Public Square runs out. Benesch and its timeline are why the developer wants shovels in the ground for nuCLEus by fall. They're why Stark shed the apartment tower from nuCLEus and retained the office tower.

At the same time, the developer is increasing the amount of ground-floor commercial use in the parking deck by 25,180 square feet to 103,000 square feet, adding several million dollars more in costs there.

The end result of all of these changes is that Stark could be saving anywhere from $115 million to $140 million from the cost of nuCLEus, potentially bringing the project's cost down from $353 million to as low as roughly $210 million.

In mid-2019, the developer publicly released a simplified breakdown of its capital stack, showing that it had about $294.5 million in private debt and equity. A previously established tax-increment financing arrangement with the city adds another $19 million. Publicly funded loans and aid, already committed, brings another $26.5 million. In its previous plan, Stark had a nearly $15 million gap in its capital stack which it had hoped to fill with a TMUD tax credit.

The Herold Building is in the middle of this view, looking east
down Prospect Avenue. The former Record Rendezvous, 300
Prospect, is at the right (Google).

In other words, the developer now apparently has more than enough resources to move forward on the slimmed down nuCLEus. But let's not ignore the Herold Building's role in all of this.

A future Herold Building project is allowing Stark to reduce the size of his nuCLEus office building, and thus reduce its construction costs. It is also allowing Stark to deliver brand-new Class A office inventory in One nuCLEus Place that is about 73 percent pre-leased before shovels hit the ground. Lenders have to love that.

There are some public incentives that Stark can get by repairing and renovating the condemned Herold Building, but the developer risks losing them if it expands the Herold Building as shown in a rendering in a recent marketing piece.

There are ways of working around the incentives' restrictions, but they involve more complications than a basic historic renovation project. The complications are likely why Stark isn't aggressively marketing the Herold Building right now.

Consider the land area of the Stark-owned Herold Building at 310 Prospect and a neighboring vacant lot at 320 Prospect. The latter is owned by the same Stark/J-Dek partnership Gateway Huron LLC that owns the land on the other side of East 4th Street where nuCLEus is planned. Together, their combined land area is 8,000 square feet.

If the Herold is repaired, renovated and expanded as shown in the marketing piece -- as an eight-story building with 8,000-square-foot floorplates except for the top floor which is about half as large and set back from the street facade -- it would measure about 60,000 square feet. That's the same amount by which Stark had reduced the size of its One nuCLEus Place office tower.

Such a building could cost about $25 million to repair, renovate and construct. Stark may have the resources to do it now, based on the cost savings and capital stack from nuCLEus. But the developer may not be able to expand the Herold as shown in the marketing piece.

Rendering of the expansion of the Herold Building as an
eight-story office building. The nuCLEus development
is just out of view to the left (NBBJ).

The reason is that, even with structural repairs, the Herold was designed to accommodate only two more stories above its existing four stories, according to its historic registration. Internal structural supports would have to be added to the building. And, if historic tax credits are used, they limit how the existing building can be altered, said historic preservation consultant Steve McQuillin.

"While I don’t hate plans to add floors to the top of (the Herold Building), it’s hard to see how that will meet the (historic) standards and thereby qualify for state and federal preservation incentives," he said.

For example, a non-competitive federal historic tax credit would likely require any vertical expansion of the Herold Building to be set back from the original facade so as to not be visible from the street.

There is a post-construction review and inspection by the National Park Service. If the building is changed in any way within five years after completion so that it doesn't meet federal standards, the project could lose the tax credit.

State tax credits, which have no post-construction review and pull-back provisions, could be used instead. But they are competitive and therefore more difficult to get, McQuillin said. If the state tax credit was used to repair and renovate the Herold Building, Stark could then sell the air rights post-renovation to Huron Gateway LLC for $1 for an expansion of the Herold.

While the National Park Service reviews projects seeking federal historic tax credits, the Cleveland Landmarks Commission reviews projects seeking state historic tax credits. That's another reason why Stark may want to apply to the state even though it wouldn't be guaranteed to receive its state tax credits, McQuillin said.

View and summary of One nuCLEus Place office tower and
its parking/retail pedestal (Cresco).

"Unfortunately the Landmarks Commission isn’t that strong," he said. "It’s true they did oppose demolition (of the Herold) in 2014 by a different, less connected developer. But they’d be flexible with Stark. The National Park Service won’t be."
​
Just west of the Herold Building are several more decaying, low-level buildings. One of them, 300 Prospect, is listed for sale. It was the 1908 expansion of the Herold Building and, up until 1920, was connected internally through to the Herold Building.

The owners of 300 Prospect, a joint venture between the Weston Group and Bobby George, reportedly would take the building off the market and redevelop it if nuCLEus goes forward, said a source who spoke off the record because he wasn't authorized to speak publicly about it. The vacant building, once home to Record Rendezvous, served as one of the cradles of Rock n' Roll.

Although Stark wants to move forward on nuCLEus before fall, that will depend on when the City Planning Commission's review panels can meet again -- either in person or virtually.

The COVID-19 crisis and the City of Cleveland's lack of virtual meeting technology is preventing design-review panels from meeting and acting on submitted plans. When those review panels do meet again, they will be asked to approve nuCLEus' revised conceptual, schematic, landscaping and signage plans. The latter two can wait until after construction starts, however.

But it looks like Stark has turned what seemed like Mission Impossible into a smarter match among resources, rents, renderings, renovations and reality. And those just might replace another downtown parking crater with new investment, jobs and urban vibrancy.

END

Lakewood weighs Plan B for hospital redevelopment

Could the City of Lakewood go with Plan B -- the runner-up
development proposal submitted for the redevelopment of the
former Lakewood Hospital site? CASTO/North Pointe Realty
submitted this rendering as part of their proposal for redeve-
loping the hospital site. This view looks southward at the in-
tersection of Detroit and Belle avenues (Dimit Architects).
CLICK IMAGES TO ENLARGE THEM

Starting today, the City of Lakewood will begin the process of salvaging the redevelopment of the city-owned Lakewood Hospital site.

That redevelopment was left in limbo when Mayor Meghan George last week announced that the city and its first-choice developer had reached an irreconcilable impasse over the site clean-up costs. Carnegie Management and Development Corp. had terminated its agreement with the city.

City Council members will meet virtually today, forced by the COVID-19 crisis and governor's social distancing order, starting with a Finance Committee meeting at 5:30 p.m. That will be followed by a Health & Human Services Committee and then the regular meeting of City Council at 7:30 p.m.

While it is too soon know what course of action the city will take following Carnegie's departure, there are some possible outcomes being considered by city officials. One option is to reissue a request for qualifications from developers for the site and weight the proposals received. Another option is that the city could turn to one of the other development teams that responded to the city's request for qualifications in 2017.

From that process three years ago, the city chose Carnegie. One of the reasons the city picked Westlake-based Carnegie is because it was the only respondent that said it could develop the hospital site without any city subsidies, city officials said. However the city would clean the site and then sell it to Carnegie for $1.

Carnegie's proposal, called One Lakewood Place, included 200 housing units, 100,000 square feet of offices, 84,000 square feet of retail and the aforementioned hotel which would have re-purposed the historic but vacant Curtis Block, 14501 Detroit Ave.The development site is between Belle and Marlowe avenues, extending south of Detroit by about 750 feet.

Carnegie Management and Development Corp.'s plan for rede-
veloping the hospital site included an office building at center-
right and a hotel at the left with ground-floor retail. South of
those uses would be hundreds of housing units. This view is
southward from the intersection of Detroit and Belle (CMDC).

The runner-up development team was led by CASTO of Columbus, North Pointe Realty of Mayfield Heights and Dimit Architects of Lakewood. Its proposed $62 million project would have 280 residential units (apartments and townhomes), 23,673 square feet of ground-floor retail, restaurants and community spaces, 50,265 square feet of offices plus 569 parking spaces, according to CASTO/North Pointe's 2017 proposal.

Their proposal centered around a public plaza, public lawn and a 12-story building containing eight stories of apartments over three stories of offices over ground-floor community center, plus retail or restaurants. The uses in that building would amount to 108 residential units, 50,265 square feet of offices and 11,400 square feet of usable ground-floor space.

CASTO has built a wide variety of mixed-use developments on sites which hosted prior developments in Columbus, Cincinnati and now in Cleveland. Its first Cleveland development is The Dexter, a five-story, 116-unit apartment building over a ground-floor retail/restaurant space, now under construction at Fulton Road and Franklin Boulevard in Ohio City.

By comparison, this was Carnegie's first-ever development of a site that was previously developed. Its prior projects were on former fields and forests that required no costly removal of structures or pollutants.

A source in Carnegie's development team who was not authorized to speak publicly said Carnegie was not aware of how much more expensive it is to redevelop a previously developed site. But the same source said Carnegie's project budget of $72 million for the first phase was realistic. He also said the city caused Carnegie to incur additional costs.

"The added expenditures that the city continued to push to them (Carnegie) allowed this project to be in its current state," the source said.

CASTO/North Pointe Realty's site plan
for the hospital site extends south from
Detroit Avenue (top of image) between
Belle and Marlowe avenues (Dimit). 

According to Carnegie's development agreement with the city, the developer had to deliver to the city "a complete set of all surveys, title reports, environmental reports, soil studies and all other written materials, records or other documents related to the Project that are in Developer’s possession or under its control."

Carnegie was responsible for identifying any environmental problems with the site and communicating it with the city. The city was responsible for providing to Carnegie a clean site, ready for development within a required time frame. Furthermore, the developer released the city of responsibility for all liability for the site's environmental conditions.

The city budgeted nearly $4.6 million and hired SafeCo Environmental Services Inc. in November 2018 to remove asbestos and other hazardous materials as well as demolish the hospital buildings. Cleveland Clinic closed the hospital in 2016 in favor of a new, exurban location in Lorain County

During the demolition, the city's contractor reportedly discovered pollutants from the former Lakewood Hospital laundry facilities which needed to be cleaned and ventilated. Also, an old creek found under the site had to be relocated and a pump house added. That increased the city's site-preparation costs by about $2.4 million, with $1 million of that funded by the Cleveland Clinic.

If one party terminated the development agreement due to a failure by the other party, the terminating party is due up to $500,000 from the failing party. Carnegie will likely demand $500,000 from the city. Mayor George notified City Council members in writing of Carnegie's termination of the deal on April 16 but disputed Carnegie's reasons for walking away -- that the city didn't prepare the site within the required time frame.

"After many months of negotiation over possible modifications to the development and use agreement (DUA) between Carnegie Management and Development Corporation and the City of Lakewood relating to the One Lakewood Place project, Carnegie ceased negotiations with the city," George wrote.

Under CASTO/North Pointe Realty's plan, a five-story apart-
ment building would extend south from Detroit Avenue along
Marlowe Avenue. This view looks south (Dimit).

"Carnegie is taking the position that Carnegie has terminated the DUA. The city disputes Carnegie’s basis for termination, but has expressed an interest in working with Carnegie to facilitate an amicable parting of the ways during these extraordinary times," George added.

"Our Plan B is that we will identify another developer," said Council President Dan O'Malley. "We may go our with second choice (CASTO and North Pointe). The site is prepped and ready for development."

Council's Finance Committee Chair Tom Bullock said that the city established a reserve fund following Cleveland Clinic's closure of Lakewood Hospital to soften its impact on the city's budget. But with with recent real estate developments and more young professionals moving into the city, officials haven't had to touch that reserve fund which has more than $2.5 million in it.

"The closure of the hospital, which was one of the city's largest employers, has brought no additional tax burden to city," Bullock said. "Lakewood should have confidence in itself that we are still appealing and attractive. We weathered the Great Recession better than most communities and we'll weather this (COVID-19) crisis."

He added that the public should expect the best from the redevelopment of the former Lakewood Hospital site. When redeveloped, it will add to the city's taxbase that supports city services and the schools.

"We can and should pursue the original development objectives which were ambitious," Bullock said. "The objectives are to realize a rare opportunity. For every reason we can and should pursue those development objectives which include providing a public square, to add jobs, housing and economic activity. The city has a significant amount of control over what gets built here because it owns the land."

END

Carnegie exits One Lakewood Place, new developer sought

The most recent rendering of One Lakewood Place with an
office building (center-right) and a late-addition boutique ho-
tel (left). Unfortunately, city officials may have to go back to
square one in negotiating with a new developer as Carnegie
Management and Development Corp. has withdrawn from
the project in a dispute over site clean-up costs (CMDC).

UPDATED APRIL 17, 2020

Lakewood Mayor Meghan George will reportedly announce tomorrow that Carnegie Management and Development Corp. is withdrawing as the city's chosen developer of the $72 million One Lakewood Place project, according to two sources.

The divorce is due to irreconcilable differences over who should pay upwards of $2 million worth of clean-up costs after pollutants were discovered late in into the inspection, clean-up and demolition of the 5.6-acre site at Detroit and Belle avenues in downtown Lakewood. Also, an old creek was found under the site.

It comes at a particularly unfortunate moment for the One Lakewood Place project as Carnegie had joined forces two months earlier with lodging developer Ceres Enterprises LLC of Westlake to add an eight-story boutique hotel to the project.

Also, Carnegie had a tentative deal with a global insurance company to relocate more than 100 employees from a suburban Cleveland office to One Lakewood Place, according to a third source who spoke off the record.

Timing of the separation is especially bad as businesses and municipalities are tightening their belts as they face reduced business and tax revenues from the economic shutdown to mitigate the spread of the COVID-19 virus. It will be difficult for the city to come up with additional money to clean up the site, and for any replacement developer to financially contribute what Carnegie would not.

A clear sign of trouble was the removal of this sign on or about
April 9 at Detroit and Belle avenues. However, there were other
signs of trouble brewing months before (The Lakewood Citizen).

"The city will have to identify another developer," said a source close to the project. The source, who wasn't authorized to speak publicly about the project, did not wish to be identified in this article. "The city may go with its second choice (of developer)."

One Lakewood Place was proposed with 200 housing units, 100,000 square feet of offices, 84,000 square feet of retail and the aforementioned hotel which would have re-purposed the historic but vacant Curtis Block, 14501 Detroit Ave.

The site for the mega-development was the former Lakewood Hospital that was demolished a year ago. The source noted that, when the city solicited for development proposals for the site, none of the developers proposed retaining the hospital's buildings. They all wanted the site cleared and cleaned so they could start anew.

This was Carnegie's first-ever development project on a site that had been previously developed. Its prior experience was in developing farmlands and forests at or beyond suburban fringe. Another source said that Carnegie was not aware of the higher costs of developing previously developed land in older, established communities.

A message left with a receptionist for Rustom Khouri III, director of business development at Carnegie, was not returned prior to publication.

Aerial view of Carnegie's vision of what One Lakewood Place
would have looked like. A new developer will have to take
over from where Carnegie had left off (Carnegie).

Per Carnegie's development agreement with the city, the developer must deliver to the city "a complete set of all surveys, title reports, environmental reports, soil studies and all other written materials, records or other documents related to the Project that are in Developer’s possession or under its control."

Also, per the agreement, Carnegie was responsible for identifying any environmental problems with the site. Furthermore, the developer released the city of responsibility for all liability for the site's environmental conditions.

But it was the city that had hired SafeCo Environmental Services Inc. in November 2018 and budgeted nearly $4.6 million to remove asbestos and other hazardous materials as well as demolish the hospital buildings. Their work was completed in mid-2019. Construction of One Lakewood Place was due to start by the end of 2019.

Former Mayor Mike Summers chose not to seek re-election last fall. He was succeeded by Mayor George, who narrowly defeated former Council President Sam O'Leary; she was sworn in this past January. George, an outspoken critic of the project, took a new look at the One Lakewood Place development after taking office.

On March 11, Mayor George along with then-Planning Director Bryce Sylvester co-wrote a letter to City Council members advising them that the One Lakewood Place project was in trouble. Sylvester was since hired for another job outside of the city; he did not return a phone message requesting more information.

A later phase of development of One Lakewood Place included
dozens of townhomes to the south of the office building and
a housing-wrapped parking garage. This concept view looks
northward on Belle Avenue (RDL).

George said that, on Feb. 7, the city delivered the final certification letter that the demolition, abatement, and the site preparation work at the former Lakewood Hospital site has been completed per the development agreement between Carnegie Management and the City of Lakewood.

"Environmental concerns uncovered during the demolition required additional steps and costs, pushing back our delivery date to February 7th, but still within the timeline established in the development agreement," George and Sylvester wrote.

"As you recall, (city) council approved additional contracting authority to support environmental cleanup of the site in December 2019. Even with these additional city funds contributed to the project for environmental mitigation, the developer has identified a significant financial gap, which represents a challenge to executing on the project as originally contemplated. Carnegie and the city have been exploring ways to move forward and make the project a reality," the letter added.

The newly discovered pollutants reportedly were from the former Lakewood Hospital laundry facilities which needed to be cleaned. The old creek found under the site had to be relocated and a pump house added, sources said.

Several city officials contacted by NEOtrans said they would not comment until after the mayor's official announcement tomorrow.

Developing in a built-up, densely populated inner-ring suburb isn't easy. For example, the City of Cleveland Heights had spent 20 years and is now on its fourth developer, Flaherty and Collins, to proceed with constructing the Top of The Hill mixed-use development atop Cedar Hill. That project is scheduled to break ground this spring.

END

New nuCLEus, sans apartments, eyed for summer start

Stark Enterprises wants to get started on building nuCLEus to

meet the timetable of its anchor tenant. So the Cleveland real

estate developer has slimmed the planned office building and

removed the apartment tower to trim more than $100 million

from the prior plan's $353 million construction cost (Cresco).

CLICK IMAGES TO ENLARGE THEM

If at first you don't succeed, try, try, try again.

Stark Enterprises has publicly released a third iteration of its proposed nuCLEus development. And sources say that Stark has the resources to move forward with a groundbreaking based on this plan as soon as the city's design review boards can meet again and act on it.

This version eliminates or delays residential in the project, now focusing on a single tower for offices only, rising above a large parking deck with ground-floor retail. Each new mixed-use concept by Stark for nuCLEus has eliminated a use from the prior variation.

The first, 2014 version was envisioned as a $500 million, 54-story structure with a hotel bridging between office and residential buildings, above a pedestal of parking and retail. The second version retained the retail/parking pedestal but perched atop it two separate 24-story towers of office and residential, costing $353 million.

The pedestal remains as does one tower -- an office building called One nuCLEus Place. But it would stand alone atop the far north end of the pedestal. Spaces were left open atop the east and south portions of the pedestal, perhaps for a future residential tower to rise someday.

The office tower, named One nuCLEus Place, would rise 25
stories and feature 340,000 square feet of Class A space, 73
percent of which is already spoken for, Stark says (Cresco).

E-mails sent to Stark Chief Operating Officer Ezra Stark seeking more information were not returned prior to publication. He acknowledged receiving them, however.

Stark is seeking to get shovels into the ground this summer for the office tower-only plan for a pressing reason. Its prospective anchor tenant, Benesch, Friedlander, Coplan & Aronoff, one of the region's largest and fastest-growing law firms, is quickly approaching the end of its lease at 200 Public Square. That lease will expire in July 2022.

It will take about two years for the pedestal and office tower to be built. But Stark executives apparently aren't worried about losing Benesch to another building in downtown Cleveland. They said they're worried about losing them to another city such as Chicago or San Francisco where Benesch also has offices.

Stark executives said recently they are concerned that Benesch will go the way of other major Cleveland law firms like Jones Day and relocate their growing number of employees to larger cities. A trophy office building could be a major recruiting tool for Benesch, Stark executives said in recent media interviews.

New site plan for nuCLEus shows the ground level uses, most
of which are for the 103,000 square feet of retail and restaurant
uses. The plan preserve the "laneway" linking Prospect Avenue
and Huron Road. But it also shows the Herold Building, at 310-
320 Prospect, expanded as an office building with a larger foot-
print and a vertical addition giving it eight stories (Cresco).

Benesch pledged to take 180,000 square feet of office space at nuCLEus. Another 68,000 square feet of office space was spoken for by other potential tenants, including Stark Enterprises for its headquarters. In total, those tenants would have filled 62 percent of the previously planned, 400,000-square-foot nuCLEus office tower.

But the new nuCLEus office tower is proposed to be 340,000 square feet. With the commitments in hand, Stark has 73 percent of that building already spoken for.

Another factor involved in Stark's desire to move forward immediately is the historically low interest rates. The low "cost of money" reduces the cost of borrowing for construction projects. For those projects like nuCLEus that have been just shy of their capital financing goals, low interest rates can help them stretch over the fiscal finish line.

There is no publicly available construction cost estimate for the new nuCLEus plan yet. Stark had all but about $15 million in hand or pledged to build the previous version -- a gap which it had hoped to fill with a Transformational Mixed Use Development tax credit, the legislation for which is pending in the Ohio General Assembly but stalled because of the COVID-19 crisis.

This image, showing the outdoor greenspaces on the rooftop
of the parking garage, is oriented with north at the bottom.
The top, or south side of the deck, may be reserved for a
future building such as apartments, hotel or additional
offices atop the parking structure (Cresco).

Eliminating or delaying the apartment building from the project certainly helps Stark deliver the rest of nuCLEus sooner. Although the cost of the discarded apartment tower isn't publicly known either, it represents a hefty savings.

For comparison, Stark spent $95 million building the 19-story, 187-unit, roughly 260,000-square-foot Beacon apartment tower atop the existing, 9-story 515 Euclid garage a block away. That tower was completed last year.

And, at Euclid Avenue and East 17th Street, the Playhouse Square Foundation is spending $138 million to build the 34-story, 318-unit, 602,000-square-foot Lumen Apartments and associated 550-space garage. This tower is scheduled to receive its first residents in June.

Based on the scale of those projects and their construction costs, less the cost of a garage, nuCLEus' discarded 250-unit apartment tower would have measured about 350,000 square feet and cost upwards of $100 million to build.

Outdoor greenspaces on the roof of the parking garage would
provide private terraces for the fourth-floor office tenant while
the eighth-level observation deck would open to all tenants of
One nuCLEus Place office tenants (Cresco).

According to a presentation made publicly available by Stark's real estate brokerage Cresco within One nuCLEus Place's listing, the new design for nuCLEus shows a still-large development totaling roughly 1 million square feet among all proposed uses including parking.

That breaks down to 340,000 square feet of highly sought after Class A office space downtown, 103,000 square feet of retail and 34,000 square feet of amenity space. Despite the office building's reduction and the elimination of the 250-unit apartment tower, the number of parking spaces in the six-level deck would remain roughly the same at 1,375 parking spaces, equaling about 450,000 square feet.

One nuCLEus Place would rise on 2.18 acres of land owned by a partnership of Stark and J-Dek Investments Ltd. Most of that land is used for parking, totaling 600 spaces in a surface lot and a 7-level garage on Huron Road that would be demolished. Also succumbing to the wrecking ball would be a two-story commercial building on Prospect Avenue featuring Mr. Albert's Mens World clothing store.

It's interesting to note that, when compared to the previous plan, Stark seeks to decrease the amount of office space from 400,000 square feet to 340,000 square feet while increasing the height of the remaining high-rise by one story to 25 floors. The number of office floors within that high rise would also increase from 16 to 18 while the new floorplates are about 500 square feet smaller. The building's height would remain at 350 feet, however.

One nuCLEus Place is a 25-story
tower (18 floors of offices atop a
seven-level pedestal of retail and
parking). Compared to the previ-
ous design for nuCLEus' office
tower, the new version is a little
skinnier but is the same height in
feet but one story taller (Cresco).

On the other hand, the amount of retail Stark proposes would increase from 77,820 square feet to 103,000. No retail tenants were announced or names otherwise depicted in the new nuCLEus presentation. Cordish Companies previously pledged to lease 48,000 square feet for a sports-entertainment venue called Cleveland Live! at nuCLEus.

While Stark retained a "laneway" -- an alley lined with shops, restaurants and courtyards -- in its new design, it abandoned the idea of opening up East 4th south of Prospect to pedestrians. The first nuCLEus plan would have closed East 4th to vehicular traffic between Prospect and High Street. The second plan narrowed East 4th as a southbound-only, one-lane street. The new plan has East 4th as a two-way street south of Prospect.

In one of the e-mails to Stark, NEOtrans also inquired about a rendering recently posted on the real estate listing service LoopNet, showing a renovation and expansion of the historic but vacant and condemned Herold Building, 310 Prospect Ave.

As shown, the four-story Herold Building would become an eight-story building, and expanded laterally on to the neighboring parking lot at 320 Prospect. The Stark/J-Dek partnership also owns the Herold Building and the parking lot at the southwest corner of Prospect and East 4th. Expanded, the Herold Building would be about 60,000 gross square feet -- possibly accounting for the 60,000 square feet reduction of One nuCLEus Place.

Stark and J-Dek Investments propose to expand the Herold
Building vertically (by four more stories -- note the eighth
story is set back) and horizontally onto a parking lot at East
4th Street and Prospect Avenue (NBBJ Architects).

Last summer, Stark sought to demolish the Herold Building but was turned down by the Landmarks Commission. The Historic Gateway Neighborhood Corp. offered to work with Stark on securing tax credits and other financing to help rehabilitate the building.

Tom Yablonsky, executive director of Historic Gateway, did not return a phone call and an e-mail seeking more information prior to publication.

An expanded Herold Building is proposed to be renovated and expanded as an office building with a ground-floor retail or restaurant space, according to the new site plan for nuCLEus. It specifically identifies an office lobby entrance off East 4th and a 5,895-square-foot ground-floor retail space. The Herold site is across 4th Street from the nuCLEus site.

Just west of the Herold Building are several more decaying, low-level buildings. One of them, 300 Prospect, is listed for sale. The owners, a joint venture between the Weston Group and Bobby George, reportedly would take the building off the market and redevelop it if nuCLEus goes forward, said a source who spoke off the record because he wasn't authorized to speak publicly about it. The vacant building, once home to Record Rendezvous, served as one of the cradles of Rock n' Roll.

END

Demolition, groundbreaking this week for big Ohio City project

Site preparation is already under way, and demolition of the
Market Plaza retail strip will be followed by excavation of the
Ohio City site for the first phase of Harbor Bay's huge Market
Square project. It's across the street from the West Side Market,
seen in the background of this northward-looking view (KJP).
CLICK IMAGES TO ENLARGE THEM

Demolition work is scheduled to start today for the $140 million Intro phase of the Market Square development in Cleveland's Ohio City neighborhood. But if you wanted to attend a groundbreaking ceremony for this mixed-use project, the coronavirus crisis has made that risky and unnecessary.

There's still going to be a groundbreaking in the coming days, just not a ceremony, said Dan Whalen, vice president of design and development at Chicago-based Harbor Bay Realty Advisors LLC.

"No formal groundbreaking is scheduled at this point due to COVID-19," he said. "We're pushing onward quietly."

But not invisibly. Crews were busy in the past week with site preparation -- putting up construction barriers and fencing around the roughly 2-acre site at Lorain Avenue and West 25th Street.

Also, workers have been installing larger sewers below West 25th, Lorain and Gehring avenues since March 23 to accommodate the 558,000-square-foot development. Most of that work was set by the city to occur during the overnight hours, scheduled before the pandemic and its sharp reduction of vehicular traffic made that workaround moot.

The project includes a 350,000-square-foot first phase, comprised of a nine-story residential building over ground-level retail and 550 below-ground parking spaces. When an anchor office tenant is signed, Harbor Bay will pursue a roughly 208,000-square-foot second phase in an 11- to 12-story building just south of the mostly residential first phase.

The suburban-scale Market Plaza has occupied the southeast
corner of Lorain Avenue and West 25th Street for more than
30 years. Larger-scale developments that would be more befit-
ting of this urban, high-profile site were proposed over the
years until the Ohio City residential market evolved to the
point where a large, mixed-use development like Market
Square finally became feasible (KJP).

Demolition of the 1989-built Market Plaza retail strip will take only a few days. Once the debris is cleared, construction crews will start excavating the site for the underground parking garage, Whalen said.

Ward 3 Councilman Kerry McCormack said he remembered the first rendering that came out for the site from a different developer in 2013.

"Seven years later, it's beyond exciting to see that work is starting," McCormack  said. "West 25th and Lorain is one of the best locations in the City of Cleveland and it will finally be the intersection it deserves to be. This corner is now reaching its potential."

At the intersection is the iconic West Side Market, the United Bank Building, Market Ave/Market Sq. Park and now a bustling mixed-use, transit-oriented development, he said.

The first phase consists of a 290-unit apartment building over 36,000 square feet of ground-level commercial spaces. Some of the commercial spaces are two stories tall, namely those facing Lorain and the south side of the West Side Market. Most of the commercial spaces will be retail and restaurants. But Whalen wasn't ready to reveal who they might be.

"Can't say just yet," he said. "The names are coming soon. But we're definitely going to gear towards local-service, neighborhood, daily-use-type stuff. A few (will be) food and beverage businesses, but a handful of other stuff."

Compare to the same view above, the corner of Lorain and
West 25th will look vastly different by the middle of 2021.
Indeed, the corner is already looking different as the Mar-
ket Plaza retail strip comes down (HBREA).

Exterior renderings of the development are being refined to reflect tenants' space usage needs and signage. However, getting city approvals may be difficult for some time as the city design review boards aren't meeting -- virtually or otherwise.

Existing zoning allows a building on this site up to 12 stories tall. But the height of the second phase -- the office building -- could be less depending on the tenant mix. There also is no minimum square footage of office leases Harbor Bay needs to have signed before it can move forward on the office building, Whalen added.

"There's no set number," he said. "It depends on any number of things. It's completely subjective on our part."

Cost of building the entire development is estimated at $175 million. On March 20, Harbor Bay closed on the bulk of its project financing -- up to $130 million in taxable lease bonds from the Cleveland-Cuyahoga County Port Authority. Some of that could be used for the second phase when the need arises.

The project also has a $10.8 million loan from the Ohio Development Services Agency and a $2 million loan from the city of Cleveland. Harbor Bay is contributing up to $30 million, Whalen said.

Construction is due to take about 18 months. When completed, Market Square will be the largest mass timber-framed building in the United States. The wood is being imported from Austria through the Port of Cleveland.

END