Yes, Cleveland-Cliffs is considering a new HQ building

Could Cleveland-Cliffs' recent acquisitions result in the construc-
tion of a new office tower in downtown Cleveland? That's what
Cliffs' executives are reportedly trying to figure out after buy-
ing AK Steel and ArcelorMittal USA in the past year. The
latter had its headquarters in this Chicago building, One
South Dearborn in The Loop downtown (Google).

Two weeks ago, I posted a speculative but data-driven article suggesting Cleveland-Cliffs Inc. will probably start looking for a new headquarters facility given its recent corporate shopping spree. This week, several sources at and close to Cliffs confirmed that the company is in fact considering a new HQ.

And that's not all. They are talking with others about identifying additional firms to co-locate with them in a building. Based on who they're reportedly talking with, it's apparent that Cliffs will stay in Greater Cleveland and probably in downtown Cleveland.

But wait -- there's more. The fact that Cliffs is talking with firms about co-locating their offices with them strongly suggests that Cliffs is looking to fill a large, empty building. There is only one large, empty, existing office building in downtown. So they're either trying to fill that building or build a new one. It's one of many office plays underway in Cleveland.

After its recent acquisitions of AK Steel and ArcelorMittal USA, Cliffs is now Greater Cleveland's second-largest Fortune 500 firm by revenue, barely edging out Sherwin-Williams. Only Progressive is larger locally. 

In West Chester, a northern suburb of Cincinnati, AK Steel's
headquarters waits to be emptied once Cleveland-Cliffs can
find or build a larger headquarters in Cleveland (Google).

But Cliffs has a relatively small HQ staff of about 600 compared to Sherwin-Williams' 3,000 or Progressive's 12,000. Cliffs' current home of 200 Public Square has only about 207,000 square feet of available space scattered among multiple floors of the 46-story tower. Cliffs occupies just under 110,000 square feet in the tower.

Once AK Steel and ArcelorMittal USA are assimilated into Cliffs, its HQ staffing may increase to 1,200 employees and its space needs may increase to 204,000 to 272,000 square feet. If those acquisitions result in growth as Cliffs' executives hope, the company's HQ staffing could rise by hundreds more workers and its office space needs could rise to about 255,000 to 340,000 square feet or more in the coming decade.

Considering that Cliffs is shopping for new HQ space, its probable that the HQ staffs from AK Steel near Cincinnati and ArcelorMittal USA in Chicago will be consolidated within Cliffs' HQ. If it wasn't for the pandemic, Cliffs would have already started moving AK Steel office jobs up to Cleveland. For the time being, Cliffs is only replacing departing managers at AK Steel near Cincinnati with new managers in Cleveland, sources at Cliffs say.

And it's a pretty safe bet that Cliffs' HQ will stay in Greater Cleveland if not in downtown Cleveland. The reason is that Cliffs is talking with firms that are already based in downtown Cleveland about co-locating with them.

ArcelorMittal USA's regional headquarters is located in Richfield
at 4020 Kinross Lakes Parkway. Cleveland-Cliffs could expand this
8-acre campus between Cleveland and Akron (Commercial Exchange).

What's more intriguing is what this could mean about Cliffs' new address. With the square-footage needs that Cliffs has by itself, there are only two existing buildings in downtown Cleveland with enough contiguous vacant space to accommodate Cliffs' HQ. One is 55 Public Square whose owner is the target of a federal investigation.

The other is the totally vacant, 493,000-square-foot Ellipse at 45 Erieview Plaza. The Ellipse is the 1983-built, 16-story former Ameritech HQ at the southeast corner of Lakeside Avenue and East 9th Street. It's not only big enough to accommodate Cliffs' after it assimilates AK Steel and ArcelorMittal USA, but it can also hold the offices of the firms with whom Cliffs is willing to co-locate.

Those firms reportedly have space needs in the 20,000- to 50,000-square-foot range. They approached Cliffs in the normal course of doing business with them. They informed Cliffs they were looking for new digs. Cliffs responded that they were also looking for a new home. That's when the conversations began but which are still very preliminary. Many other options for each firm are still on the table.

Because they do business with these firms, Cliffs' sources were unwilling to reveal them.

Buying and updating The Ellipse would be far cheaper than constructing a new building, but it's not a structure meant for everyone. If it was, it would already have office tenants. It has large floorplates averaging 34,000 square feet. It's certainly an attractive building inside and out, including a glassy, elliptical facade offering unobstructed views of Lake Erie. Plus it has a 348-space parking garage nearby and another 32 executive parking spaces under The Ellipse.

The Ellipse, a 16-story office building in downtown Cleveland,
is completely empty. It could accommodate Cleveland-Cliffs'
new HQ plus another small-medium office tenant or two,
 depending on their size (Google).

An unidentified buyer won an August auction to acquire The Ellipse for a bargain $14.9 million. For an unknown reason, the buyer walked away during the due-diligence period prior to taking title. New York City-based private equity firm Somera Road bought the property in 2016 for $36 million. To build an office building of similar scale in downtown Cleveland today could cost about $150 million.

And perhaps that's what Cliffs and another firm or two might be willing to do to get a trophy-class office building of about 20 stories or so with high-end finishes, the latest technologies and an energy-efficient design that reduces operating costs. One has to wonder if this is what Cliffs and a co-locating firm or two have in mind. 

The only reason why Cliffs might consider co-locating with another firm in a building is if it was to either occupy a completely empty building like The Ellipse or to construct a new building. The smaller firm or firms would be a tenant and help offset construction financing and maintenance costs.

Otherwise, Cliffs could go to The Ellipse by itself or build its own building without partnering with a tenant. The fact that they are considering co-locating with other Cleveland-based office users is a telling piece of information -- and a hopeful one for those of who like to see more downtown investment and more jobs coming to Cleveland.

END

Downtown soccer stadium project takes a time-out

Louisville's Lynn Family Stadium, home of LouCity Football
Club, opened this year under pandemic-induced social distan-
cing restrictions. The $65 million stadium has 11,700 seats
but is expandable to 15,304 by adding seats at the open
end where the big screen is located (Devon Roberts).

A 10,000-seat soccer stadium proposed to be built in downtown Cleveland is on hold until pandemic-hurt finances improve among backers of the project so they can acquire a site for it.

Last spring, the Ohio Department of Transportation began soliciting responses from prospective real estate brokers or auctioneers to help it dispose of at least 30 acres of land it owns immediately south of the Inner Belt section of Interstate 90 next to Ontario Street. The goal was to put the land on the market in November.

But ODOT District 12 Public Information Officer Brent Kovacs said disposition of the property has been put on ice.

"In light of the COVID-19 pandemic, ODOT decided to pause the process regarding the potential auction of the subject property," he said in an e-mail to NEOtrans. "Accordingly, no company was selected and no dates have been established. At this time ODOT does not have an estimate for when the process may resume."

About 49 acres of land was acquired in 2011 from Norfolk Southern
Corp. by the Ohio Department of Transportation for building the
new Cuyahoga Valley viaducts for the Inner Belt section of
Interstate 90. ODOT doesn't need most of the land and is
seeking to dispose of it once the pandemic eases (KJP).

ODOT acquired the 49-acre, former Norfolk Southern Corp. intermodal rail yards in 2011 for $29.8 million to facilitate construction of the Inner Belt's new Cuyahoga Viaduct bridges. But the preferred soccer stadium site may be less than half of that, a piece of land bounded by the Inner Belt, Ontario, Broadway Avenue, East 9th Extension and Commercial Road.

Considering that ODOT is seeing a significant reduction in gas tax revenues because of the pandemic, one would think that ODOT would be very motivated to raise revenues from non-conventional sources -- such as the sale of properties it doesn't use or intend to use in the future. Traffic on Ohio roads dropped to about 50 percent below normal levels earlier this year and while truck traffic has recovered, car traffic is still 15 percent below normal.

"Certainly as more people drive less it has impacted our budget," Kovacs acknowledged. "However, that impact hasn’t necessitated us changing our strategy of working to obtain the best return on investment possible for the taxpayers of Ohio."

That could include a desired buyer who is currently lacking the funds to make a targeted real estate purchase for the 10,000-seat stadium. That potential buyer may be the Gateway Economic Development Corp. of Greater Cleveland, based on an April 16 letter by U.S. Rep. Marcy Kaptur (D-9) to ODOT Director Jack Marchbanks.

"The Gateway Economic Development Corporation of Greater Cleveland, an entity with controlling ties to the City of Cleveland and Cuyahoga County is uniquely situated to own such a venue, as they have three decades of experience promoting sports, entertainment and tourism in downtown Cleveland," Kaptur wrote.

Like Louisville, another United Soccer League stadium opened
this year -- the 8,000-seat CHI Memorial Stadium. It is part of
a $150+ million mixed-use development (USL).

The letter didn't identify the property for the stadium but there aren't any other underutilized ODOT-owned properties in downtown Cleveland large enough to accommodate a soccer stadium. And other persons have identified the site, including when NEOtrans first broke the story in March 2019 about the potential for a downtown soccer stadium.

"I am pleased to express my strong support for the development of a soccer-specific, multi-purpose venue in downtown Cleveland," Kaptur added. "The use of property proposed by the Cleveland Soccer Stadium Corporation is for a public purpose and in the public interest. The addition of a 10,000-seat professional soccer venue would bring economic development opportunities that the city is poised to capitalize on."

Kaptur is a ranking member of the House of Representatives' Appropriations Committee which oversees all federal discretionary spending including the transportation budget. Her district extends along Lake Erie's shore from Toledo to Cleveland.

"This (soccer stadium) proposal presents an important public use, and I urge its favorage review, consistent with your agency's rules and regulations," Kaptur said to ODOT's Marchbanks.

She also said a soccer stadium of that size would facilitate the introduction of a new level of professional soccer to Cleveland and complement open-air venues the city can provide. Colleges, high schools and youth sports programs would be able to take advantage of the stadium, Kaptur added.

This image shows where various land uses could fit with
minimal earthmoving to flatten land or to put the Regional
Transit Authority's rapid transit rail line in a tunnel through
the potential soccer stadium/mixed-use project site (KJP).

But Todd Greathouse, executive director of the Gateway Economic Development Corp. of Greater Cleveland, said his nonprofit organization isn't on board yet with pursuing a soccer stadium. The corporation owns Progressive Field, home of the Cleveland Indians baseball team, and Rocket Mortgage Fieldhouse, home of the Cleveland Cavaliers basketball team, plus associated parking decks and joint development.

"This concept was brought up by the original director (of Gateway, Tom Chema) who left in 1995," Greathouse said. "It would require a long approval process to be considered any further."

Gateway Economic Development Corp. is funded primarily by leases paid by the Indians and Cavaliers as well as from the use of Gateway-owned parking decks and so-called sin taxes paid by persons buying alcohol and tobacco in Cuyahoga County.

Gateway receives up to $14 million per year from Cuyahoga County’s sin tax. That revenue reportedly is way down this year but exact dollar figures were not available. Far fewer people are out socializing with a drink or three as many bars are either closed or operating at reduced capacity due to social distancing. This is especially true in downtown Cleveland and at establishments near the Gateway stadiums.

Chema is listed in Ohio Secretary of State records as the statutory agent for the Cleveland Soccer Stadium Corp., which was incorporated in 2017. Because of ODOT hitting the pause button on the sale of the former intermodal yards downtown, the soccer stadium company's activities are also on hold.

Looking generally north towards towards downtown Cleveland
with the ODOT-owned land and potential stadium site spread
out across almost the entire bottom of the image (Google).

"Relative to the soccer project, there really is nothing new," Chema said. "There has been no activity."

Constructing a 10,000-seat soccer stadium is considered essential to Cleveland landing a United Soccer League franchise. Brothers Greg and Shaw Abrams, co-owners of six Force Sports fitness centers, are teaming up with investors to find $5 million to pay the USL's franchise expansion fee.

The effort was negatively affected when Force Sports centers were forced to close this past spring. Some programs were offered this summer, namely outdoor sports like volleyball, baseball, lacrosse, tennis and soccer. Indoor programs are restarting albeit with restrictions. 

If the USL fee is paid and a stadium is provided, the team will be called the Cleveland Force. The Abrams brothers acquired the naming rights to the Force, an indoor soccer league team that thrived at the since-demolished Richfield Coliseum from 1978-88. Indoor soccer plans to return as the Cleveland Crunch in November 2021.

The Abrams have not publicly confirmed anything since NEOtrans first reported the story last year.

"Our goal is to make sure that a stadium deal can be announced at some point soon," Greg Abrams said in the March 30, 2019 article. He said announcements will be made as soon as he gets the OK from his partners.

END

Seeds & Sprouts XII - Early intel on real estate projects

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

Views of the proposed new headquarters and multi-purpose facility
for the Original Glorious Church of God in Christ of the Apostolic
Faith at 7007 Superior Ave. The top view is from the north or rear
side of the building. The bottom view, looking generally northeast,
is the south or front side of the building along Superior (B&H).
CLICK IMAGES TO ENLARGE THEM

Church HQ project to add daycare, market, offices

A Cleveland-based religious organization is proposing a new headquarters and multi-purpose facility totaling 57,538 square feet in the city's St. Clair-Superior neighborhood. The Original Glorious Church of God in Christ of the Apostolic Faith plans to demolish and replace its existing, decaying facilities at 7007 Superior Ave. and raze surrounding buildings.

Proposed in a new two-story building is a 9,702-square-foot grocery store dubbed Superior Market. Also planned is a 12,932-square-foot, 12-classroom day care center called the Original Glorious Academy. Two kitchens and a cafeteria also are proposed.

But the project is ultimately intended to be a headquarters for the multi-state religious organization. It would have a 21,796-square-foot worship sanctuary/assembly hall with 568 seats called the Original Glorious Convention Center.

On the second floor will be a business office for the church organization. Plans also show a 179-space parking lot behind or north of the building and extending back to Bayliss Avenue. Although a dollar amount for the proposed development is not listed on the city's documents, at a unit cost for church construction of $200 per square foot plus site preparation, the project could cost about $15 million.

Those plans for the mixed-use development were submitted to the city in late September and are undergoing a site plan and zoning review. The proposed 4-acre site, of which the church owns about half of the land, is zoned entirely as multi-family with building heights limited to 35 feet and the maximum floor area can use only up to half of the lot.

Although the Original Glorious Church of God in Christ of the Apostolic Faith is headquartered in Cleveland, it was founded 99 years ago by Mother Lula Phillps in Huntington, WV. Today, it is led by General Bishop is Charles M. Laster, Sr. However, tax filings are directed to Bishop David Blount of 4425 E. 142nd St. in Cleveland, a property owned by Blount Properties and Holdings Ltd., public records show.

Contact person for the project is John Prabhudoss, chairman of the board at the Federation of Indian American Christian Organizations. He could not be located for comment. Architect for the project is Paper Plane Architecture, LLC of Brooklyn, NY. The owner's financial advisor is Dunhill Inc. of Houston, TX, according to the plans filed with the city.

The proposed BigHaus development by Brickhaus Partners at
the southwest corner of Clifton and West Boulevards (CPC).

Brickhaus plans townhouses near Edgewater Park

After several fits and starts by less experienced developers, a highly visible yet vacant property on the southwest corner of Clifton and West boulevards was sold last week to an affiliate of Brickhaus Partners for a five-unit townhouse development called BigHaus. The 0.38-acre site has an address of 10011 Clifton.

On Oct. 7, BigHaus Development LLC acquired two parcels for $200,000 from F.W. Pinard Building Company LLC. F.W. Pinard bought the land through an affiliate, Kearny 17212 LLC of Alton, NH in February 2014 and divided it into two parcels in 2016. Two townhomes were proposed but neighbors fought the plan, saying its design didn't mesh with its surroundings.

The site is one block south of Edgewater Park. There, Brickhaus plans to build 11,300 square feet of attached, for-sale housing designed like several large, nearby single-family homes. Four of the five townhouses will face the boulevards with the fifth or smallest unit behind. The smallest towhouse will measure 1,780 square feet with two each at 1,820 and 2,940 square feet.

The ground floor of each three-story unit will have a two-car garage, hidden from the boulevards, as well as living space facing the street. A common access drive for all five units will be from West Boulevard and enter the townhouses complex from behind. Like the existing homes, the new townhouses will be set back from West Boulevard. The land has sat vacant since a house on the site burned down in the mid-1960s.

In the last few years, Brickhaus developed two multi-unit townhouse projects in the Edgewater-Cudell neighborhood. Both were on the sites of closed churches. The first was 95 Lake, located in the 9500 block of Lake Avenue. It replaced Bethany English Lutheran Church, 9509 Lake Ave. The other was One Seventeen, built on the site of the former Fifth Church of Christ Scientist.

The Woodhill Station development is a two-phase project with
the first phase at left and the second at right. Both are across
Buckeye Road from the Buckeye-Woodhill light-rail station
that was rebuilt in 2012 (City Architecture).

Woodhill Station development plans revised

The Community Builders, developer of a mixed-income apartment complex at 9511 Buckeye Rd., submitted revised plans to the city for the first phase of the project, called Woodhill Station. Plans show an enhanced plaza area outside the 120-unit apartment building's entrance and refinements to the exterior cladding. The plaza has more landscaping features to make it more attractive and useful to residents.

NEOtrans broke the story about the planned development in early August, noting that site preparation could begin in November. However, structural construction work may not begin until the spring, according to the Dodge Reports.

The revised plans also include a massing that reveals the proposed scale of the next phase of development -- a multi-story residential structure at the corner of Buckeye and East 93rd Street that's almost as large as the first phase. The second phase would have a commanding street presence at the corner, including potential ground-floor retail spaces and a glassy, bright lobby. 

The location is across the street from the Buckeye-Woodhill Blue/Green line light-rail station that was completely rebuilt in 2012. Putting more residents near rapid, high-frequency transit increases access to jobs for more residents. Because of urban sprawl in Greater Cleveland, only one out of every three jobs is within a 90-minute one-way transit trip of Cuyahoga County residents.

END

Cleveland-area offices shrinking, growing, moving and uncertain

Uncertainty is the word describing the future of corporate office sizes,
locations and design in Cleveland in the post-pandemic era. There are
 many things up in the air when it comes to that future. But every chal-
lenge has an opportunity, including designing offices to be more like
home or even building residential for employees next to or within new
office developments. One of Cleveland's best known office designers
is Vocon Partners. This is their new offices on Prospect Avenue in
Cleveland's MidTown neighborhood (officelovin.com).
CLICK IMAGES TO ENLARGE THEM

UPDATED OCT. 10

The real estate market is divided into four basic end-users -- residential, hospitality, retail and office. Although the retail market has been shrinking for years, it is basically on hold during the pandemic with some exceptions. The hospitality market is pretty much in a coma but it will probably return healthy once it regains consciousness. Only the residential market has shown a great deal of resiliency throughout the pandemic.

And then there's the office market. If there ever was a period of uncertainty for any end-user market, it's the office sector.

You will also find some very strong feelings from some people about the future of the market, even though no one has seen the future. Yet, you will find some who are certain of what the future holds -- that notion of commuting to work in the morning, laboring in an office building all day, and then commuting back home in the evening is a pandemic fatality. "Or at least that's the way it should be, dammit!"

"Place-based work culture mattered before the pandemic, it matters now, and will matter post-pandemic," countered Downtown Cleveland Alliance Executive Vice President of Business Development Michael Deemer in an Oct. 10 tweet. "Endless screen time can’t match the productivity, collaboration, innovation, and mental health benefits that comes from in-person interaction."

The 3rd Quarter 2020 Cleveland office market report from Newmark Knight Frank takes a middle approach, especially when discussing the downtown Central Business District (CBD) market.

The Cleveland CBD is still considered a desirable location for prominent local, regional and national companies, though it is estimated that Downtown Cleveland has seen an 80 percent reduction of office workers during the pandemic. Office trends, such as unassigned seating, coworking and large "bullpens" of worker cubes, have companies rethinking safe reoccopation strategies, and leasing activity in the CBD from April through September was as sluggish as it has ever been. This past quarter's statistics already bear out that it might become more expensive to lease space in the future, especially at the Class A and B levels. As office employees will want to work from home more often, companies might considering (leasing) more space per person to keep germs from spreading. The outlook for the rest of 2020 is uncertain.

The biggest potential office development in Cleveland is the upcoming
announcement about Sherwin-Williams' new global headquarters down-
town. Word is that it could rival the height of Key Tower, Ohio's tallest
skyscraper. This is an official massing of the Sherwin-Williams HQ, as
seen in orange in the center of this image (Geowizical).

And that's the one-word takeaway when it comes to the office market -- uncertain. Add to that the large number of companies that are prepared to make moves in the next year or so and you have a lot of pieces thrown up into the air. How and where they will land will be incredibly interesting to watch.

One of the largest companies that will be making a move is Sherwin-Williams. The 154-year-old company takes a long view towards its business. Its CEO John Morikis recently eased concerns about the possibility of having more of its office employees work from home and thereby shrinking the size of its new global HQ.

"We recognize that the development, engagement and sense of community our employees share has been essential to our success for more than 150 years and would be difficult to sustain over the long-term with a remote-based workforce," Morikis said.

There are more reports coming out about Sherwin-Williams' new HQ building on Public Square. NEOtrans reported that the HQ will be one of Cleveland's four tallest, reaching about 45-55 stories high. According to some suppliers, they were told by the HQ's construction manager Welty Gilbane that the new skyscraper could rival Key Tower. Morikis reportedly considers the new HQ's location and design as essential to attracting young talent to the company.

Another old and large Cleveland company, 173-year-old Cleveland-Cliffs, is also facing an office space crunch at its downtown Cleveland headquarters at 200 Public Square. It just bought two steelmaking firms larger than itself -- Cincinnati-area-based AK Steel and Chicago-based ArcelorMittal USA.

After Cleveland-Cliffs' recent buying spree, it may have become too
large to remain in its current headquarters in 200 Public Square. But
it is soon to know where its new home might land (Google).

Absorbing those two firms over the coming years will likely prompt the firm to move out of its crowded 46-story tower on Public Square. Where could Cleveland-Cliffs and its roughly 300,000 square feet of potential office space needs land? It will probably be a year or more before that question is answered.

The Newmark Knight Frank office market report noted two reasons why office needs might shrink (remote working) and why they might grow (social distancing). But neither of those may be enduring, long-term trends.

A trendsetting change that could endure is what CrossCountry Mortgage is seeking. Relocating its HQ to downtown Cleveland from the suburbs (Brecksville) isn't the trendsetting move. Many companies are going downtown to lure more young talent to their workforces. Recently, Goldwater Bank announced its move from Beachwood to downtown, shortly after digital marketer Fathom said it is moving from Valley View to the Flats. 

The trendsetting move by fast-growing CrossCountry Mortgage is to add a residential component to its HQ plan for renovating several historic warehouse buildings on Superior Avenue in the East 20s. The apartments will be marketed first to HQ employees, according to a presentation to the city by Vocon Partners, architects hired by a joint venture led by CrossCountry Mortgage CEO Ron Leonhardt.

Imagine working from home but next door to your office building. It offers the productivity and collaboration benefits of working at the office while also giving employees the privacy of working from home -- with an incredibly easy commute regardless of the weather or traffic. The city and CrossCountry are finalizing a deal for $2 million in public incentives for the first phase of the six-acre development.

Site plan of the proposed first phase of CrossCountry Mortgage's
new Cleveland headquarters. North is to the left in this image, as
is Superior Avenue with Payne Avenue to the right and East 21st
Street at the bottom. The shaded building to the lower left will
be converted into apartments and marketed first to company em-
ployees. The rest of the site is comprised of historic warehouses
to be converted into offices for 700 workers (Tyler Kapusta).

Although the Dodge Reports say renovation work may not begin until 2022, a four-story brick building at 2110 Superior Ave. is due to become a 40-unit apartment building. The first phase of CrossCountry Mortgage's offices for about 700 employees will be along East 22nd Street in the former warehouses of Tap Packaging Solutions (ex-Chilcote Co.). Tap is a 108-year-old firm that moved its 125 jobs to Brooklyn. Construction on the office component is due to start early next year.

But CrossCountry Mortgage is in growth mode. That 700-employee figure is restrained from growing faster by the firm's small offices in Brecksville as well as by its lack of suburban marketability to younger people. In five years, after the move to larger offices in downtown Cleveland, the company expects to have 2,000 employees, according to a CrossCountry executive who spoke off the record.

Like Cleveland Cliffs, a growing Benesch, Friedlander, Coplan & Aronoff LLP is also looking to move out of 200 Public Square. Unlike Cleveland Cliffs, it knows where it wants to go -- the 25-story nuCLEus office tower proposed on a huge parking lot on East 4th Street in the Gateway District by a partnership of Stark Enterprises and J-Dek Investments. Benesch wants to be nuCLEus' anchor tenant.

Unfortunately, nuCLEus doesn't have enough office tenants yet for Stark to get a construction loan and start work. It's not for a lack of potential tenants sniffing around. Word is that at least two medium-sized tenants now at one downtown building are considering relocating to nuCLEus. Together, the two potential tenants would be a little larger than Benesch's 300 employees. But "potential" isn't nuCLEus' problem -- it's about getting enough tenants signed.

Additionally, keep an eye on Erieview Tower whose new owner James Kassouf and partners are converting 13 of the office building's 40 floors to residential. Law firm Weston Hurd LLP is moving to AECOM Centre across East 9th Street. And it probably won't be the only defection from Erieview. Look for more big tenants to step out and invest in new digs -- including possible new construction.

Between law firm Benesch and development firm Stark, the
proposed 340,000-square-foot nuCLEus office tower has about
200,000 square feet of space spoken for. But that's not enough
for Stark Enterprises to start construction. Reportedly, there
are potential office tenants considering locating at nuCLEus
that are large enough to trigger its construction (Stark).

Increasingly, downtown tenants want to be in trophy-class buildings -- not just Class A. They want top-notch finishes and technology. They want reserved spaces for executives under the same roof as their offices. They want fitness rooms and quiet, comfortable outdoor decks to think and/or decompress. And they want their company's name and logo to be on the outside and inside of the building for everyone to see. Or at least that's what real estate brokers and developer say prospective clients are telling them.

Going back to the suburbs, this time in North Olmsted, two companies are hunting for new space. The largest is Moen Inc. USA which has outgrown its 27-year-old, 141,221-square-foot office building at Interstate 480 and Great Northern Blvd. But it hasn't outgrown its 16.5-acre property, only two-thirds of which is developed and most of that is for surface parking.

More than 600 people work at Moen's North Olmsted offices which have expanded into leased office spaces along Country Club Boulevard on the other side of I-480. According to sources, Moen is looking at new construction in Greater Cleveland and elsewhere for its expanded U.S. HQ. Its landing spot is far from settled.

In the meantime, Moen will renovate its existing building to become COVID-compliant. Moen reportedly is eager to get its employees back in the office. How many more companies are similarly eager to get their employees back in the fold and what are they willing to do to achieve that?

Also in North Olmsted, FM Global, a Providence, RI-based insurance firm, is looking for a more urban setting for its 90-plus employees. It was ready to relocate to One Lakewood Place until Carnegie Management and Development Corp. walked away from the project. The city reached a settlement with Carnegie and will consider a new developer. FM Global has put its office search on hold during the pandemic.

Moen Inc. USA's headquarters in North Olmsted has more than 600
employees. The company has outgrown this building on the south
side of Interstate 480 and expanded into leased offices on the
north side of the highway. Company officials are reportedly
looking into expanding the existing building or possibly
constructing a new headquarters elsewhere (Google).

So has AmeriGas Partners L.P., which was recently acquired by UGI. As part of a corporate restructuring, AmeriGas considered tripling the number of its jobs here in Greater Cleveland to more than 300. Its offices are located in Westlake and more space has been added in Brooklyn Heights. But the jobs increase is far less than what was planned before the pandemic. In the future, AmeriGas' actions are worth watching.

On the other side of town, Beachwood-based Tremco Inc., a 92-year-old manufacturer of sealants, would like to unite its two east-side manufacturing plants and possibly its suburban headquarters into the same facility. To stay close to its existing workforce, Tremco could be a candidate for relocation to the Opportunity Corridor. But no site has been decided, yet.

The wildcard for some of the office moves around town is the completely vacant, former headquarters of Ameritech built in 1983. Called The Ellipse and located at 45 Erieview Plaza (corner of East 9th Street and Lakeside Avenue) in downtown Cleveland, the 16-story, 496,000-square-foot building was the subject of an August auction. The building has been difficult to lease because its floorplates are large, averaging 31,000 square feet.

An unidentified buyer won the auction and the chance to pay a mere $14.9 million for the property, according to a source. But the buyer walked away during the due-diligence period prior to taking title. It is not known why the purchase did not go through. 

The current owner, New York City-based private equity firm Somera Road, is back to square one in its disposition of the office building and attached parking garage. Somera Road bought the property in 2016 for $36 million nine years after MB Cleveland Erieview LLC acquired it for $53 million.

END

Flats East Bank to begin massive expansion in early 2021

 

A conceptual massing study shows a new, long-term vision for
the Flats East Bank near where the Cuyahoga River meets Lake
Erie at the edge of downtown Cleveland (DCA/Wolstein).
CLICK IMAGES TO ENLARGE THEM

Developer Scott Wolstein announced that he plans a tentative "early 2021" groundbreaking for an 11-story mixed-use building on Flats East Bank. But future phases could bring the total as many as a half-dozen residential towers with thousands of residential units in the downtown waterfront district.

The next phase of development, which Wolstein as CEO of the Wolstein Group has been pursuing with Chicago-based Akara Partners, is a building featuring apartments along West 11th Street between Main Avenue and Front Street called Kenect Cleveland. Kenect is Akara's brand of development products.

The plans were revealed Oct. 8 during Downtown Cleveland Alliance's Episode 22 of its "Downtown Now!" Webinar. Wolstein followed up his presentation in an e-mail interview with NEOtrans today.

"The buildout in the Flats will take several years," Wolstein said in the e-mail. "The potential exists for upwards of 1,500 to 2,000 additional units and we would never bring in more than 300 new units on the site at one time. We hope to break ground on the first 300 units early next year."

With a groundbreaking targeted for early 2021, the next phase of
development for Flats East Bank would feature more than 300
micro-unit apartments over coworking office spaces and retail.
This view looks southeast, with Front Street on the left and
West 11th Street on the right (DCA/Wolstein).

For that next phase, Wolstein and Akara originally planned 325 micro apartments, a 48,000-square-foot cinema, 25,000 square feet of Kenect coworking space, 22,000 square feet of ground-floor retail and structured parking within a 12-story building. Everything but the theater is being retained.

"The theater deal died because of industry issues," Wolstein said. That follows the Aug. 31 permanent closure of the 10-screen Tower City Cinemas. It and other movie theaters closed temporarily in March because of the pandemic.

Later phases of Flats East Bank would be added based on demand and market conditions and be valued at about $550 million. In the 2010s, Wolstein and his original Flats partner, the Fairmount Group, built nearly $500 million worth of buildings, streets, boardwalks and supportive infrastructure. In other words, at full buildout, the total investment in the Flats East Bank could exceed $1 billion.

"I'm excited about the future plans for growth in the Flats East Bank and the continued improvement and revitalization of our riverfront," said Ward 3 Councilman Kerry McCormack. "We've got to continue opening up our waterfronts to people, housing, business and visitors. We've got to maximize the potential of our God-given assets."

The scale of investment in past, current and future phases of Flats
East Bank development is shown here. Phase 1 consisted of the
21-story Ernst & Young office tower plus 8-story Aloft Hotel. In
the second phase were 20 restaurants topped by a six-story apart-
ment building. The third phase is underway with a $17 million
expansion of restaurants and clubs along the river. Next will be
a $200 million, 11-story, mixed-use building between the first
and second phases starting in early 2021 (DCA/Wolstein).

At the same time, Wolstein is seeking to double the length of the district's existing, 30-year tax-increment financing deal enacted in 2009. The purpose of the extension is to increase the financial liquidity of the existing Flats East Bank development. The city has yet to approve it.

"It's being considered but the two (TIF extension and next phases of development) have nothing to do with each other," McCormack said.

In the Downtown Cleveland Alliance's webinar, Wolstein said recent changes in the residential market nationally are affecting Cleveland. He said that live-work-play opportunities like Flats East Bank and other developments in the city are making Cleveland more attractive to young people.

"I have four millennial children," he said. "It was in vogue for children of that age to pick up their roots to go Chicago, New York, San Francisco and so forth. I think we've gotten to the point where people are giving a second look to Cleveland: 'You know what, I really don't need to leave. I can live here and make a good life in Cleveland.'"

This is an updated site plan for Flats East Bank with emphasis on upcoming
phases of development, primarily along the lakefront railroad tracks and
the Waterfront Line light-rail to Shaker Heights. The Greater Cleve-
land Regional Transit Authority proposed to expand the route as
a downtown loop but dropped the idea during the early 2000s
 recession despite the loop's feasibility (DCA/Wolstein). 

Downtown Cleveland's population has grown to 20,000 people with more developments on the horizon. Most of the residential products downtown have been carved out of historic, obsolete office buildings subsidized by historic tax credits. That's starting to change as rents grow and the availability of old, underutilized office buildings for conversion dwindle.

Increasingly, more downtown residential inventory is coming from new towers like The Beacon, The Lumen and, soon, The City Club Apartments. The latter, which is due to start construction in December, will feature smaller, more affordable apartments -- a trend that Flats East Bank's next phase will embrace.

"In the last five years downtown Cleveland's population has grown 48 percent," said Mike Deemer, executive vice president of business development at the ‎Downtown Cleveland Alliance. "The fastest growing suburb (Westlake) in Cuyahoga County has grown 3 percent."

The first phases of development at Flats East Bank by Wolstein and Fairmount Properties included the 21-story Ernst & Young office tower in 2012 -- downtown Cleveland's last new-construction office tower. It also featured an eight-story Aloft Hotel and a six-story apartment building over or next to 20 restaurants.

Looking west along Front Street from West 9th Street, up to five
high-rise apartment buildings above shops and townhouses are pro-
posed in later phases of the Flats East Bank project (DCA/Wolstein).

The Flats East Bank development is next to a station on the Greater Cleveland Regional Transit Authority's Waterfront Line -- an extension of the Blue-Green light-rail lines from Shaker Heights. 

"The Flats East Bank project really led us out of the last recession," Deemer said.

Wolstein reportedly is involved in the embryonic stages of another downtown Cleveland mixed-use tower, this time in the Warehouse District near the site of the planned Sherwin-Williams headquarters. In contrast to the Flats East Bank development's next phases, he refused to comment on the tower.

"Unlike a lot of developers, I prefer not to discuss future projects unless and until I have all the pieces in place," Wolstein said in the e-mail to NEOtrans. "Timing depends on a variety of issues including market demand, entitlements, subsidies, availability of financing, etc."

END

Could Cliffs' acquisitions bring another downtown tower?

Although Cleveland-Cliffs' name adorns the atrium of 200 Public
Square, its headquarters plays second fiddle to the building's lar-
gest tenant -- Huntington Bank. Cleveland-Cliffs may not remain
in this tower much longer as it continues to expand with a pair of
recent, significant corporate acquisitions (Google).
CLICK IMAGES TO ENLARGE THEM

When you look at several critical aspects behind Cleveland-Cliffs Inc.'s recent acquisitions of AK Steel and ArcelorMittal USA, you can see how it's possible, if not probable, that Cliffs won't be a tenant of 200 Public Square for much longer.

The critical aspects behind the acquisitions include the post-assimilation staffing needs of the combined company measured against the office space vacancies in Cliffs' headquarters building. The data for populating this equation were gathered from online sources and by interviewing Cliffs staffpersons, real estate brokers and others familiar with Cliffs and its acquired companies.

Cleveland-Cliffs is an old company in an old line of work. It was founded by Samuel L. Mather in 1847 -- back when ironmaking and later, steelmaking, were high-tech industries. That was back when Cleveland, Youngstown, Pittsburgh, etc. were the places where raw materials like iron ore from the northern Great Lakes and coal from Appalachia collided to create metals, incredible population growth and economic wealth. 

As we all know, steel faded under the strain of aging mills, foreign competition, increased use of plastics and environmental protection. The Great Lakes-Northeast industrial belt, with some of the highest blue-collar wages in the world, soon decayed into the Rust Belt.

Cliffs is one of the survivors of that downsizing, focusing on mines and shipping that delivered raw materials to the mills. Its second-largest customer is AK Steel of West Chester, OH, near Cincinnati. Cliffs acquired AK Steel, completing the transaction in March. The firm has roughly 700 employees at its West Chester headquarters.

Earlier this year, Cleveland-Cliffs finalized the acquisition of AK
Steel, headquartered in this West Chester building in the northern
suburbs of Cincinnati. Most of the roughly 700 employees in this
 building have yet to move to Cleveland-Cliffs' HQ (Google).

By creating an integrated company, from mining to shipping to steel production to marketing, Cleveland-Cliffs has greater control over its market. AK Steel also was the only remaining U.S. manufacturer of electrical steels that form the cores of electric motors, transformers and generators. They are easy to magnetise and demagnetise, resulting in lower temperatures that reduce power loss.

Cleveland-Cliffs continued shopping last week, acquiring a majority of the U.S. operations and assets of its largest iron ore customer -- ArcelorMittal, based in Luxembourg. ArcelorMittal has its US headquarters in downtown Chicago plus a regional headquarters in Richfield, between Cleveland and Akron. In the two offices they have about 300 employees -- although the official numbers cited for the Richfield office may be low.

With this latest acquisition, Cleveland-Cliffs will become the largest manufacturer of flat-rolled steel in the USA. This steel is used primarily in automotive markets -- a similar area where AK Steel excelled, albeit for engine components.

And that's what these acquisitions are all about -- the automotive industry or, more specifically, the future of it. That future includes new government fuel economy standards that take effect in 2025, requiring the production of stronger, lighter steel in cars. It also means increased production of electric cars, and Cleveland-Cliffs is now the only U.S. maker of electrical steels.

Steel produced in blast furnaces is much higher quality than that which is produced in electric arc furnaces (typically remelts scrap metals). Blast furnaces, like those that Cleveland-Cliffs just bought, are ideal for producing steel for the cars of the future. And those blast furnaces will become cleaner and more efficient under Cleveland-Cliffs ownership.

ArcelorMittal USA's regional headquarters occupies a signifcant
part of an 82,217-square-foot building built on 8 acres of land in
1996 on Kinross Lakes Parkway in Richfield, OH (LoopNet).

Cleveland-Cliffs feeds blast furnaces from its iron mines and shipping. Its first hot-briquetted iron production plant, under construction in Toledo for $700 million, will position the firm as the dominant player and sole supplier of merchant iron units to blast furnaces in the Great Lakes.

Cleveland-Cliffs has done a lot more than just make itself the second-largest Fortune 500 company headquartered in Greater Cleveland (Cleveland-Cliffs' annual revenues of $2 billion; AK Steel's $6.3 billion, and ArcelorMittal USA's $10 billion = $18.3 billion), trailing Progressive Insurance's $39 billion. The integrated firm is now positioned for growth.

Despite its revenues, Cleveland-Cliffs doesn't have a huge staff in its downtown Cleveland corporate headquarters. By some estimates, it's just over 600 employees. The firm is spread out among three floors (6, 33 and 34) in 200 Public Square, the former BP America tower.

Those are large floors however. The sixth floor is about 50,000 square feet which Cleveland-Cliffs uses for training and conferences. The floor plates in the main part of the tower offer about 29,300 square feet of usable space. Cleveland-Cliffs had more space in the tower until it downsized by half in the early 2010s, and subleased the 31st and 32nd floors to the Gottlieb Group, Northern Trust and AML RightSource.

A breakdown of available spaces in 200 Public Square
as reported in a brochure about the property (Colliers).

Parts of the 32nd floor remain open. So while Cleveland-Cliffs hasn't moved AK Steel's staff up to Cleveland yet, it is replacing departing AK Steel administrative employees in West Chester with new hires in Cleveland. Part of that delay in assimilation is due to the coronavirus pandemic. But is also due to the fact that 200 Public Square has only three open floors (10, 13 and 41), a large fourth floor that is mostly available, a few half-empty floors (12, 26 and 38) and a smattering of vacancies elsewhere.

In a big building, companies want contiguous office spaces, not offices scattered all over the place. So while Cleveland-Cliffs could move employees from its acquired companies into 200 Public Square today, it wouldn't be in a very efficient or orderly way.

How many employees might it add? When a company acquires or merges with another, it typically reduces total employment by 10-30 percent. So when Cleveland-Cliffs acquired AK Steel, the total office employment exceeded 1,300. Considering these were dissimilar companies, the reduction in office staff was probably closer to 10 percent, dropping the combined office staff to about 1,200 people.

But when Cleveland-Cliffs acquired most of ArcelorMittal USA, its 300 office workers in Chicago and Richfield will probably get reduced to about 200 people. That makes the reduction closer to 30 percent given the redundancies with AK Steel and given the fact that Cleveland-Cliffs didn't acquire ArcelorMittal's tubular plants, its Calvert, AL mill and its research center in East Chicago, IN. 

ArcelorMittal USA's HQ is located in One South
Dearborn, a 39-story, 828,538-square-foot tower
 built in 2005 in The Loop (IP Design Group).

In total, Cleveland-Cliffs headquarters staff may amount to roughly 1,400 people by the time everything shakes out. And that doesn't take into account the business growth that Cleveland-Cliffs is counting on as a result of these acquisitions.

"We don’t acquire to cut, we acquire to grow," said Cleveland-Cliffs CEO Lourenco Goncalves.

Considering that Cleveland-Cliffs is taking a long view on its business, it may not be unreasonable to assume a 20 percent growth factor in its office employment going forward. A headquarters staffing count of perhaps 1,700 people in the next 5-10 years is possible. At 150 to 200 square feet per employee, that's 255,000 to 340,000 square feet total. There is only about 207,000 square feet available at 200 Public Square -- again, scattered throughout its 46 floors.

And that's why Cleveland-Cliffs probably can't stay where it is.

Where could it go? Potentially, anywhere. But if anything, the company has been committed to Cleveland for its entire 173 years, supporting local civic and charitable initiatives. And of course, it would be blasphemous for a company with Cleveland in its name to be headquartered anywhere but in Cleveland.

The Steamship William G. Mather, now a floating museum, is named
after the son of Cleveland-Cliffs founder Samuel L. Mather. William
was Cleveland-Cliffs' president and chairman from 1890-1947 (KJP).

Practically, however, its corporate executives aren't as dependent on international air service as other local companies such as Sherwin-Williams, a global company that chose to build its new HQ in Cleveland. Most of Cleveland-Cliffs' customers and operations are within a day's drive or at most a couple hours flight from Cleveland.

On the other hand, it's less clear as to whether a consolidated, growing Cleveland-Cliffs could warrant the construction of a new office tower in downtown Cleveland. Consider these numbers...

Downtown Cleveland office towers built in the last 30 years have average floor plates of 20,000 to 25,000 square feet. If Cleveland-Cliffs needs 255,000 to 340,000 square feet of office space in the coming years, that could require an office building measuring anywhere from 10 to 17 stories high -- not exactly a skyscraper.

There aren't any existing Class A office buildings downtown that could easily accommodate Cleveland-Cliffs' office needs in contiguous spaces. One that could -- The Ellipse, the completely empty, 496,000-square-foot, 16-story former Ameritech Building constructed in 1983 at 45 Erieview Plaza -- had its lease listing deactivated from some Web sites last month. It has been the subject of auctions and could be subjected to another. If so, it could be a suitable building for Cleveland-Cliffs including an unobstructed view of Lake Erie which its ships plied since the 19th century.

But if we want to dream, perhaps Cleveland-Cliffs could be the anchor tenant someday in a trophy-class tower it shares with other, smaller tenants and reach 20 to 30 stories high. It wouldn't stand up to the possibly Key Tower-rivaling height of the new Sherwin-Williams headquarters. But it might add to the city's skyline and get rid of another windswept, life-sucking surface parking lot in the process.

END

Dream Hotel development delayed more than a year

Construction of a 19-story Dream Hotel next to the Masonic Temple
at 3615 Euclid Ave. has been delayed by more than a year (Bialosky).

Given the current state of the pandemic-ravaged hospitality industry, it probably shouldn't come as a surprise that the proposed 19-story Dream Hotel next to the Masonic Temple in Cleveland's Midtown has been delayed.

According to the construction database The Dodge Reports, the delay will be more than one year. The site reported that design work on the hotel will be on hold until Summer 2021. That means the earliest construction could start would be Summer 2022, it said. Last spring, officials at New York-based Dream Hotels hoped to start construction in early 2021.

Dream Hotel spokesperson Megan O’Malley, who works for Rubenstein Public Relations in New York, was out of town an unable to comment on the report. A secondary contact at Rubenstein, Kati Waldenburg, did not respond to an e-mail prior to publication of this article.

MidTown Inc. Executive Director Jeffrey Epstein confirmed the news today by e-mail, saying he was aware of the delay.

Site of the proposed Dream Hotel and Masonic Temple (Google).

When the $60 million project was announced in May, Epstein said the Dream Hotel and adjoining Masonic Temple, 3615 Euclid Ave., could be a destination unto itself. In other cities where Dream Hotels are tied into Masonic halls, visitors come to see unique musical and theatrical performances, enjoy on-site meals and nightlife, and stay the night in the adjoining hotel.

Beaty Capital Group of Fort Smith, AR acquired Cleveland's 99-year-old, 2,300-seat Masonic Temple and an adjoining parcel for $725,000 in 2017. It renovated the auditorium last year for $8 million and plans another $10 million worth of improvements. That activity attracted attention.

Epstein said real estate investors began proposing projects in the surrounding area, although he could not identify the projects several months ago because they were in early development. He still can't identify them now because the projects remain active despite Dream Hotel's delay.

"Everything else we’re working on is still full steam ahead," he said.

One development project could be a renovation of the 10-story University Hotel and Suites, across the street from the Masonic Temple at 3614 Euclid. An affiliate of Crimson Rock Capital acquired the property last year and may renovate the 56-year-old building by tapping historic tax credits. That part of MidTown, from the Inner Belt to East 55th Street, was recently designated by the City Landmarks Commission as an historic district.

Another view of the proposed Dream Hotel, this time looking
west with the Masonic Temple directly behind it (Bialosky).

Crimson Capital's Web site says it "invests in properties for experiential travelers in emerging neighborhoods and up and coming U.S. domestic markets." It is a global company based in Atlanta.

Other developments in the surrounding blocks may include new-construction mid-rise apartment buildings. Renovations of additional historic and post-war, international-style office buildings are already under way. One of the largest is an eight-story office building being converted into The Midtown apartments by the Inspirion Group at 3101 Euclid.

Dream Hotel officials propose a 207-room lifestyle hotel including restaurants, nightlife venues, a fitness center and 100,000 square feet of meeting and event space. The project, called TempleLive, will also include a 400-space parking deck. Beaty Capital Group acquired the auditorium and adjacent property via an affiliate named TempleLive Cleveland LLC.

"It is exciting to look beyond this recent period of anxiety and uncertainty to bring such an iconic project to MidTown Cleveland," said Lance Beaty, president of Beaty Capital Group, in a written statement last May.

END