Seeds & Sprouts XV - City Club tower groundbreaking & more

This is the Fifteenth 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.

Construction on the 23-story City Club Apartments on Euclid
Avenue is now due to start in March and take about 15-18
months to add more than 300 apartment downtown (Vocon).
CLICK IMAGES TO ENLARGE THEM

City Club Apartments groundbreaking due in March

Look for activity to get underway in about two months at the surface lot at 720 Euclid Ave. And we're not talking about more commuters returning to the downtown Cleveland parking area.

According to a source who was not authorized to speak publicly, groundbreaking on the new City Club Apartments tower is due to occur at the end of the first quarter of 2021. That would put the start date towards mid- to late-March.

The project has been delayed by nearly a year generally due to the pandemic and specifically to a shortage of construction materials. There was no publicly visible planning activity surrounding the project throughout the spring and early summer last year. That changed in August when the project appeared on City Planning Commission's docket and was given final design approval.

NEOtrans broke the story that the project was active again and that a November groundbreaking date was anticipated. That was pushed back to January and, now, to March due to difficulty in getting construction subcontractors lined up, the source said.

City Club Apartments are planned with about 313 market-rate units, roughly half of which will be 400-square-foot studio apartments. The smaller units will be marketed to younger residents who have been priced out of the downtown market. This will be the first Cleveland development sought by the Michigan-based City Club chain. 

The building will be 23 stories tall, or about 250 feet high. It will measure 250,000 square feet and cost up to $100 million to build. City Club Apartments will be the third new-construction residential tower built on Euclid Avenue since 2019, following opening of the 28-story Beacon and the 34-story Lumen.

Expansion of The Shoreway Apartments overlooking Edgewater
Park and Lake Erie is proposed by J-Roc Development (J-Roc).

West Side residential projects to add units

Several small new residential expansions are planned in the Detroit-Shoreway and Ohio City neighborhoods. Together, one renovation and two new-construction projects will add several dozen housing units.

The most visible of these is a proposal to add 16,800 square feet to The Shoreway Apartments, 1200 W. 76th St., overlooking Edgewater Boulevard, formerly the West Shoreway, and Edgewater Park. Based on the proposed square footage, the expansion could result in the addition of about 16-17 units to the 45-unit apartment building.

Seeking the expansion is J-Roc Development which redeveloped the former Pat Catan's warehouse into housing in 2013. J-Roc attorney Nick Catanzarite, whose family owned the Pat Catan's craft store chain until it was sold in 2016 to Michaels, acknowledged receiving an e-mail from NEOtrans seeking information about the project but otherwise didn't respond to it.

On Dec. 16, J-Roc's Development Director Aaron Taylor and project architect AoDK Architecture of Lakewood received an e-mail from the city's Building Department that the developer's request for a building permit was denied due the lack of a submitted site plan.

Most submitted site plans are denied by the city anyway because they require zoning variances to conform to the city's antiquated zoning code. But the permit application remains active while the zoning review of the site plan continues.

"At this time your application is declined, however, once I receive the site plan, I can continue the zoning review," wrote Lisa Ray, assistant plans examiner for the city's Building Department, in an e-mail available on the department's Web site. "Failure to respond within 30 days from the date of this letter, your application will become null and void and will be discarded."

Presumably, the addition will be to the west of the existing four-story Shoreway Apartments, above a portion of a 40-space parking lot. There is also a 40-space indoor parking area. That location west of the existing building is already owned by the apartment complex and would provide residents with views of Edgewater Park and Lake Erie.

Several blocks to the east, at 1331 W. 65th St., Apt Development Group, LLC of Cleveland proposes to demolish a two-story, four-unit brick apartment building for a new 16,450-square-foot residential structure, according to city building records. That's enough floor space for about 16 residential units.

Last September, Apt Development Group affiliate Apartment 92-Gordon Square, LLC acquired the century-old apartment building and two parcels totaling 0.21-acres for $380,000, county records show. The property has enough room to accommodate two 8,250-square-foot floors over about 20 parking spaces.

Jake DeScenna, vice president of development at Apt Development Group, did not respond to an e-mail seeking more information prior to publication of this article. The firm primarily manages residential properties for The Landmark Companies, founded by John Carney.

To the south, at 4431 Lorain Ave., Cleveland Bricks LLC of Cleveland proposes to renovate the second floor of a small mixed-use building into three apartments over a first-floor bar-tavern space, according to plans submitted to the city.

In 2016, Cleveland Bricks acquired 4431 Lorain and the neighboring 4441 Lorain, totaling 0.12 acres for $200,000, county records show. According to Reddit, 4431 Lorain was listed for sale last year by Cleveland Bricks for $200,000. It was built in 1890, according to LoopNet. 

The BP gas station at East 9th Street and Carnegie Avenue in
downtown Cleveland will see its convenience store triple in
size and add four leasable retail spaces (LoopNet).

Downtown gas station to add retail spaces

One of downtown's main entrances will soon gain some new business activity. The BP gas station at Carnegie Avenue and East 9th Street plus the adjacent Carnegie Ballroom are proposed to be renovated with up to four retail spaces, available for lease, according to a LoopNet listing.

The pending renovation follows the November acquisition of the Carnegie Ballroom by Four Aqua Holdings LLC which has owned the gas station since 2008. Four Aqua Holdings of Wadsworth bought the ballroom for $950,000, county records show.

The 11,391-square-foot, 108-year-old ballroom is connected by an enclosed walkway to the neighboring Hilton Garden Inn which sold in late 2019, a story NEOtrans also broke. The BP gas station's convenience store (aka C-Store) will be relocated into the ballroom's first floor and tripled in size. The existing BP store will be demolished. 

According to its real estate listing, the retail spaces that will become available total 4,000 square feet. There is also a 2,600-square-foot kitchen with elevator as well as 19 parking spaces next to the ballroom, just north of Interstate 90. The property owner reportedly hopes to start renovations this year.

END

Sherwin-Williams HQ design concept comes into focus

Based on input from Sherwin-Williams' headquarters development
team, this is an unofficial rendering of what the HQ could look like.
While the design may differ, the scale of buildings is the important
thing to note here. A 27-story base HQ building on Public Square
with a roughly 20-story secondary office building on the west side
of West 3rd Street is proposed. Other structures include large park-
ing decks, a hotel and corporate training facilities (Ian McDaniel).
CLICK IMAGES TO ENLARGE THEM

Three sources have confirmed it -- the new Sherwin-Williams (SHW) base headquarters (HQ) tower on Public Square will reportedly top out at 27 stories -- or more than 400 feet high. Plus, there will be a second headquarters office building of about 20 stories tall exceeding 300 feet in height.

Turns out this basic concept -- two 20-something-story HQ buildings -- has been SHW's plan all along.

There are also likely to be other significant structures on SHW's 6.8-acre planned urban campus that is now a swath of lifeless parking lots in downtown Cleveland's Warehouse District, based on what sources have said this week.

Those structures include as many as two massive parking garages plus a training center and possibly a hotel. Some ground-level spaces and/or roofs of parking decks will be left undeveloped for future expansion.

How those structures will be arrayed across the former Jacobs and Weston lots is the subject of much speculation beyond the secretive SHW HQ development team. But team members aren't completely successful in their secrecy, otherwise NEOtrans would not be aware of the basic HQ concept or the potential additional land uses.

How the skyline of downtown Cleveland could look in a few
years, as viewed from the south. The new SHW HQ complex
is visible in blue at the left side (Ian McDaniel).

The building heights are less than what was shared in earlier reports and less than what many Clevelanders have hoped. But the sharpening vision for the SHW HQ is revealing an urban campus that the global coatings giant hopes to use as a recruiting tool to lure creative young talent to work for the company here.

In the summer of 2019, SHW's HQ consultant Welty Building Co. reached out to major general contracting firms and a select few property owners. It asked for design and cost proposals for an HQ and research facilities totaling 1.6 million to 1.8 million square feet. The scope of the HQ was to be at least 1 million square feet divided among two connected buildings, each in the 20- to 30-story range.

Through Welty, SHW told the respondents that it wasn't interested in an iconic skyscraper. In fact, in communications to respondents that included an SHW executive, that executive reminded respondents that the 1866-founded company didn't achieve such a high stock price (then about $600 per share, now above $700) by abandoning its conservative values.

The executive also passed along HQ preferences from SHW CEO John Morikis. After touring them, Morikis reportedly liked the cozy, collaborative design of Goodyear's new HQ in Akron but apparently didn't like the sterile, monolithic design of Eaton's new HQ in Highland Hills.

Although there was one notable aspect Morikis did like about Eaton's HQ, a source said. The CEO's office isn't at the top of the building. Instead, it's on the fifth-floor -- not even higher than the trees surrounding the Eaton HQ. Then-CEO Sandy Cutler didn't want height. He wanted a campus-style HQ with quick access to the parking garage and a better view of the trees and ground, not the sky.

An aerial looking from the north above downtown Cleveland,
this unofficial view shows how dominant the parking garages
(seen in dark gray) would need to be in order to accommodate
up to 3,000 parking spaces. If these parking structures were
any shorter, they wouldn't leave much room on the SHW
HQ site for anything else, including a hotel, training
center or future growth (Ian McDaniel).

Those are some of the reasons why SHW stayed with their basic concept for the HQ throughout the development process. According to reports from persons representing different roles on the SHW HQ development team, the basic form of the HQ complex west of Public Square will apparently be as follows:

• A 27-story, 400-plus-foot-high, 500,000- to 600,000-square-foot base HQ building with an address on Public Square. Depending on the floor heights and any rooftop decorative elements, this building could range in height somewhere between the Justice Center Courthouse Tower (410 feet) to the Erieview Tower (529 feet).
• A 20-story (approximately) secondary office building that is 300-plus feet high with 400,000- to 500,000 square feet bounded by the west side of West 3rd Street, Superior Avenue and Frankfort Avenue. It may be connected by overhead walkway or tunnel across West 3rd to the base HQ building.
• A training center as sources said SHW plans to relocate all training of vice presidents, salespeople, information technology, human resources and other on-the-job development will all be consolidated from the southwest suburbs and University Circle to the new headquarters site.
• Potentially an on-site hotel; if an extended-stay hotel it selected, it would require more space and height to accommodate.
• At least one (more likely two) massive parking decks. One will accommodate most of the initial 3,000 SHW workers. The other will make up for the 1,000 surface parking spaces lost to the SHW HQ development.  

Drilling crews this week continued to measure distances to bed-
rock below the future site of the SHW HQ campus in downtown
Cleveland's Warehouse District. This week they worked north
of Frankfort Avenue and just west of West 3rd Street (KJP).

While the exact locations of these parking decks aren't known, their scale and the remaining site leaves little wiggle room for them to be built elsewhere but near the center of the Superblock bounded by Superior, West 3rd, St. Clair Avenue and West 6th Street.

To fit two parking decks totaling 3,000 spaces on the Superblock while still leaving space around their perimeters for additional development might require two 10- to 15-level decks, each covering about an acre of land.

Limiting parking garage vehicular access to a secondary street like Frankfort would conform to the Superblock's Urban Overlay District zoning. So would hiding parking decks behind usable spaces like offices, hotel rooms, training facilities -- or at least having ground-floor commercial spaces like restaurants and retail.

"The Urban Overlay (UO) District is established to foster a high level of walkability and design quality for Cleveland's urban streets," according to the City Planning Commission Web site. "The UO will do this by requiring pedestrian-oriented building features, preserving and enhancing the architectural character of new and existing buildings and protecting public safety by minimizing conflicts between vehicles and pedestrians."

It is unlikely that the parking would be put below the HQ buildings, adding 27 and 20 stories above a dozen levels of parking and making the overall structures appear taller.

The reason is that one of the sources expressed disappointment about the 27-story tower. He didn't qualify his remarks by saying something along the lines of "at least it will be on top of a tall parking garage, making the combined structure look more like a 40-story building." The exception may be a limited amount of subterranean parking for executives below the base HQ tower.

Several buildings in downtown Cleveland will be vertical con-
temporaries of the new SHQ HQ buildings. The Stokes Federal
Courthouse Tower at far right, the Celebrezze Federal Building
at far left, and the Justice Center tower to the left of Key Tower
(tallest building) will likely be the height of the new SHW's
base HQ building on Public Square. SHW's secondary office
tower will likely be similar in height and square footage to
the Ernst & Young Tower in the foreground-left (Google).

Although a dozen-level parking structure is a tall garage (and heavy when fully loaded with vehicles), shorter parking decks would gobble up too much space. It could be the tallest parking garage in downtown Cleveland, eclipsing the 11-level Ontario Street Parking (formerly the May Co. garage), 2047 Ontario St. at the northeast corner with Prospect Ave.

At the request of SHW's development team, Ohio TestBor of Hinckley continues to drill down to bedrock at multiple locations on the HQ campus site. This week, they're boring holes just west of West 3rd and north of Frankfort. They've already drilled south Frankfort just west of West 3rd, as well as on the former Jacobs lot on Public Square.

Such drilling is an indicator where SHW may put tall and/or heavy buildings in the first or later phases of HQ development. As noted in the last article on this subject, it may also be an indicator of where soil conditions cannot support even a medium-sized structure with a floating mat concrete slab foundation, thus requiring caissons dug to bedrock for structural support.

While many Clevelanders may be disappointed in seeing SHW build a 27-story HQ on Public Square, the number of floors don't always tell the tale as to how tall a building might actually be. Consider that average floor heights are 18.7 feet in the Stokes Federal Courthouse, 16.5 feet in Fifth Third Tower, 15.7 feet in Ernst & Young Tower and 15.5 feet in Key Tower. Those are the last four office towers built downtown.

Using those floor heights, the new SHW base HQ building would measure anywhere from 418.5 feet to 505 feet high. That would rank it somewhere from the fifth- to the ninth-tallest building in Cleveland. And that's without any decorative elements atop the structure.

The secondary HQ office tower, at about 20 stories and using the average floor heights noted previously, would reach anywhere from 310 to 374 feet high. Such a height would rank it somewhere between the 13th- and 19th-tallest building in Cleveland.

END

SHW's new HQ may not feature an iconic skyscraper

Sherwin-Williams covers the Earth, but will it scrape the sky
above downtown Cleveland or develop more of those lifeless
parking craters west of Public Square? There are now rumors
for each course of action, with legs beneath each (SHW).
CLICK IMAGES TO ENLARGE THEM

 
UPDATED JAN. 5, 2021

Throughout the last two-plus years at the Sherwin-Williams (SHW) rumor mill, one of the favorite items of scuttlebutt has been the potential height of the new headquarters (HQ) building -- or buildings.

Rumors have pegged the height of SHW's tallest HQ structure ranging anywhere from 40 to as much as 55 stories. Depending on floorplates and floor heights, the base tower (having a Public Square address) was rumored to approach if not overtake the height of one or more of its Public Square neighbors. They are the 658-foot 200 Public Square, the 708-foot Terminal Tower and the 948-foot Key Tower.

One source, a specialty contractor, was instructed by SHW's development team lead by a joint venture of Welty-Gilbane to prepare a bid for work on the HQ building. Their scope of work, the contractor was told, was to prepare for a building that rivaled the height of Key Tower.

And then there's the latest rumor which goes in the opposite direction, height-wise. Three sources informed NEOtrans this week that SHW has considered two initial office buildings on its 6.8-acre HQ site. And neither one might top 30 stories, they said.

Specifically, the rumor has the base HQ building on the former Jacobs Lot on Public Square topping out at up to 27 stories. Averaging about 16 feet per floor, that could result in a building height of roughly 430 feet -- barring any rooftop decorative elements. That would be equal in height to the Stokes Federal Courthouse at the corner of West Superior and Huron Road.

According to new rumors, SHW's new head-
quarters will feature a 27-story building on
the block, formerly called the Jacobs Lot
next to Public Square Square. A 20-story
building will reportedly be built across
West 3rd Street from it with structured
parking and future buildings on the rest
of the SHW properties -- formerly the
Weston lots (SHW).

The second office building would be on the west side of West 3rd Street, between Superior and Frankfort avenues. It would top out at 20 stories, the two sources said. At an average floor height of about 16 feet, that might be approximately 320 feet tall.

It's not the first time we've reported that SHW wasn't interested in an HQ with a commanding presence downtown. After all, a visitor to downtown might have difficultly finding their existing HQ without directions. More than a year ago, NEOtrans reported that the conservative, if not stodgy SHW wasn't interested in an "iconic" tower exceeding 40 stories on its proposed urban campus.

But there's some substance behind this latest rumor.

A well-placed source in the SHW HQ team confirmed that when SHW was searching for a downtown HQ site, it asked respondents for proposals that included two 20-something-story buildings with a pedestrian connection between the the two.

How does that square with the latest information that geotechnical firm Ohio TestBor of Hinckley was drilling to bedrock at the SHW HQ site? City officials and drilling workers confirmed the drilling crews were boring multiple holes to identify the depth to bedrock at two potential building sites. One was at the former Jacobs Lot on Public Square and the other on part of the former Weston lots, a site just west of West 3rd.

In 2008, before the Great Recession killed it,
the Jacobs Group and Hines Inc. proposed a
21-story, multi-tenant office building on the
site where SHW may now be considering a
27-story HQ building (Jacobs Group).

Drilling to bedrock at two distinct locations suggests two skyscrapers of 30 stories or more.

Why would SHW's HQ development team request drilling to measure the depth to bedrock if they weren't planning on building structures taller than 30 stories?

After all, the rule of thumb is that a building shorter than 30 stories would be light enough so its foundation could be constructed of a less-expensive "floating mat" concrete pad. Otherwise, a taller and heavier building would require reinforced concrete caissons extending 200 feet or more to bedrock.

But that depends on the type of soil conditions below SHW's proposed HQ site, a construction-engineering source said.

"Drilling to bedrock should indicate something larger, but even a 25-story building might require caissons," the source said. "It all depends on the structural load paths and bearing capacity of the soils."

In its permit applications to the Cleveland's Division of Water Pollution Control and Northeast Ohio Regional Sewer District, Ohio TestBor said it would be drilling through sand and clay to bedrock.

The SHW HQ site includes all of the parking lots
visible in this eastward view from the Rockefeller
Building. The parking lot in the background of
this photo is the former Jacobs Lot on Public
Square on which SHW's base HQ office building
will rise. The block in the foreground is part of
the former Weston lots. West 3rd Street separates
the lots and what may be the two tallest buildings
in SHW's HQ campus, based on recent drilling.
For reference, 55 Public Square at left is 22
stories and 300 feet tall (Garfield-12323).

Contractors working for SHW's development team had been gathering core samples to learn about subsurface conditions below the Weston and Jacobs lots since November and December of 2019. More subsurface investigatory work was done in July 2020.

So if buildings with desired heights of about 300 to 400 feet tall couldn't be supported by the soil conditions, SHW would have discovered it from that core sampling in late 2019 and mid-2020.

It also squares with what the Ohio TestBor drilling crews said in December. They said they weren't taking core samples; they were measuring the depths to bedrock. SHW knew what they were getting into, soil-wise. Although the EnviroProbe workers drilling last month just east of West 6th and north of Superior were taking core samples -- likely for a shorter structure.

And if the rumor is correct, that 27- and 20-story buildings are planned, what does that include?

Drilling crews bored their way to bedrock on both sides of West
3rd Street, north of Superior Avenue, indicating two tall struc-
tures are planned. But it may also indicate that the soils below
these parking lots could not support medium-sized buildings
without caissons beneath them dug to bedrock (Ian Meadows).

It isn't known if parking would be contained within the towers on both sides of West 3rd, or if levels of parking counted toward their rumored heights. If the rumored building heights were just for the offices and not the parking on the lower levels, it would make them taller than a building having just 27 and 20 stories of office uses.

SHW has said publicly several times that its HQ will measure about 1 million square feet -- a figure that has never included parking. Every real estate insider NEOtrans has spoken with expects the SHW HQ to include a significant amount of structured parking -- not just for many of the 3,000 HQ employees, but also to make up for the 1,000 surface parking spaces in the former Jacobs and Weston lots that will be developed.

So there could be one or more parking garages totaling thousands of parking spaces either within the frames of the new HQ office structures or in separate parking garages or both. Two thousand parking spaces could involve 700,000 square feet of structured parking, for example. Three thousand spaces could bring more than 1 million square feet of structured parking.

This rumor is the latest among several about the potential size of this Cleveland real estate whale. But, like the others, there are some legs to this rumor -- and they're not just caissons. Fortunately, each day brings us closer to seeing the actual plans for the HQ project.

END

Counting Cranes -- predicting TMUD's impact on Cleveland

The view from Lake Erie of downtown Cleveland's skyline is
going to look quite different in the next few years. Potentially
nine buildings at least 15 stories tall could be underway or fi-
nished by 2025 with a half-dozen resulting from a new mega-
projects tax credit program created by the state (KJP).
CLICK IMAGES TO ENLARGE THEM

One of the most impactful actions to boost downtown Cleveland in the New Year and beyond was made in recent weeks and months 125 miles to the south in our state capital. It culminated with Gov. Mike DeWine signing a piece of legislation last week. In a state legislature that has gained a reputation for harming Ohio's largest urban centers, it actually helped them this time.

How do we know for sure? We don't. We're talking about the future. The great unknown. As many of you know, I hate making predictions. I possess no great insights on the future. If you saw my stock market picks, you'd agreed with me.

But some predictions aren't hard to make. If you're driving toward a cliff with no sign of slowing down, it's easy to predict the outcome barring any changes. Conversely, with Ohio soon offering up to $320 million in tax credits available for megaproject developments in Ohio's largest cities in the next three years, the odds are pretty good that quite a few big projects are going to move forward.

How many and where? Now we're getting in tougher prediction territory.

On Dec. 29, NEOtrans broke the story that DeWine had signed into law the Transformational Mixed Use Development (TMUD) tax credit program. Property owners and insurance company investors supporting projects certified by the Ohio Tax Credit Authority (OTCA) as TMUDs are eligible to receive up to $40 million in tax credits as part of their project's equity contributions.

Stark Enterprises' desire to fill a gap in its capital stack for
the nuCLEus development became the motivation for
Stark to seek the TMUD tax credit (Stark).

In or within 10 miles of an Ohio city having a population of 100,000 or more, a TMUD is a $50+ million project that is either:

• At least 15 stories tall;
• At least 350,000 square feet of new building or a renovated previously vacant building on a single parcel;
• At least 350,000 square feet total of development among two or more buildings that are connected to each other, are located on the same parcel or are on contiguous parcels;
• Will be the site of employment accounting for at least $4 million in annual payroll;
• And must include any combination of retail, office, residential, recreation and structured parking.

Smaller developments that are more than 10 miles away from a city of 100,000 people may be considered TMUDs and eligible for up to $80 million in tax credits. The TMUD program is due to sunset June 30, 2023. Any tax credits not used may be carried forward for up to five years.

For details, see the legislation as an enrolled law here or read the Legislative Services Commission's analysis of the final version of TMUD tax credit program.

Although The Centennial project may get underway this year,
additional subsidies will be needed to finish it (Millennia).

But the program is likely to be highly competitive. That's especially true for the urban portion that applies to Ohio's six metro areas that have a 100,000+ population city at their core -- Akron, Cincinnati, Cleveland, Columbus, Dayton and Toledo.

There are at least a half-dozen pending/emerging projects in each of Ohio's 3-C cities that may be seeking TMUD credits. In the second tier of Ohio's largest cities -- Akron, Dayton and Toledo -- each appears to have only 1-3 pending/emerging projects that might quality.

That's 25-30 projects statewide right there. I think Greater Cleveland could account for 10 of them.

Consider that tax credit awards will be capped at 10 percent of a project's cost and that the minimum project cost to qualify for the tax credit is $50 million. A price tag of $50 million is barely enough to afford a 15-story residential or office building with a reduced amount of structured parking.

But the TMUD tax credit program with $80 million per year could afford supporting 16 of those 15-story buildings annually -- or eight 30-story buildings per year. And while Cincinnati and Columbus developers are planning buildings mostly in the 15- to 25-story range, Cleveland developers are considering TMUD-eligible projects even larger -- and more numerous.

Another project due to get underway this year but needing
help to get finished is the Circle Square project. An office
building and tall apartment tower on the right side of
this view may need a TMUD tax credit (MDP).

With the TMUD program, a lot of those projects that win credits are going to attract other funding and are going to get built.

Before I get into prognosticating and my methodology for doing so, it's important to understand how the program will work.

The tax credit award process is two-tiered. A property owner/insurance company investor gets preliminary approval of a tax credit award by the OTCA. Awarding of the tax credit remains contingent upon completion of the TMUD as described in the development plan. The credit amount is subject to change based on actual development costs and on the increase in tax collections at the project site and in the surrounding area calculated upon completion of the project and in the years that follow.

Thus, applicants will likely seek the maximum tax credit allowed and force the OCTA to divvy up the annual $100 million TMUD tax credit pie based on the aggregate dollar amount among all applications and the available tax credits. And, as noted, $80 million of the total tax credits per year will go to Ohio's six largest metro areas.

Under construction in 2019, The Lumen apartment
tower may not be the last mostly residential build-
ing of 30 stories or more constructed in down-
town Cleveland (APPhotoshopman).

Of course, not every project is going to win tax credits. And some projects are going to win most if not all of the credits they requested. Those projects with a larger projected economic impact are likely to fare better. And, as noted above, just because a project promises big impacts doesn't mean it's going to get what it asked for or what it was preliminarily awarded.

If a project wins $20 million in tax credits based on promised economic impacts (as measured by local tax revenues generated) but its projected economic impact is actually less, the final tax credit award will be smaller than $20 million. The excess can be awarded to other projects.

So, for simplicity's sake, let's consider this example to imagine the potential scale of how many TMUD  projects could benefit. And remember, a TMUD is by its very definition is a big project. It's going to be hard to miss in our city's skylines.

If 25 applicants from among the six metros win tax credits in the first year, that's an average of $3.2 million in tax credits per project. That probably won't be enough to move some projects forward. But since not every project is going to win funding in the first year, that average dollar amount will probably be higher -- perhaps double or triple or quadruple.

Looking west on Front Street at the East Bank of the Flats,
new towers adding 1,500+ residential units, co-working
spaces and restaurants/retail qualifies as a TMUD (HSB).

Thus, let's consider things over the life of the TMUD program. If 25 applicants win tax credits over three years of the program, that's $9.6 million per project. If OCTA determines that the fiscal year 2020 (ended June 30, 2020) should be part of the program, 25 winners could average $12.8 million per award.

Given those assumptions, I think the average amount awarded per project over the next three years could be in the neighborhood of $10 million.

It should be noted that $12 million was the amount of a forgivable loan that Stark Enterprises sought from the city of Cleveland to fill the gap in its capital stack for the $350 million nuCLEus project. That fell through, as did a previous idea for a tax increment financing arrangement with the Cleveland Metropolitan School District. After that, Stark officials in 2018 came up with the TMUD tax credit.

It isn't known if Stark is still looking for $12 million to complete its capital stack. Perhaps it's more since $12 million is just 3.4 percent of the overall project's cost and the TMUD program allows the state to award up to 10 percent of a project's cost. Stark's project has changed since it sought the city loan.

Outlined in red, the Lutheran Hospital parking lot in Ohio City 
is proposed for development, if someone can come up with the
money to put the 530 parking spaces into a deck (Google).

As noted above, let's assume the average award will be about $10 million. With that assumption, and based on my prediction that 10 Cleveland-area projects could win TMUD tax credits by the time the program is wrapped up in 2023 (assuming no unused tax credits are left over or the program isn't extended), I present the following stabs in the dark, or at least in the pre-dawn light.

They are (in alphabetical order):

THE CENTENNIAL -- The Millennia Companies anticipate starting the renovation of the 1.36-million-square foot former Huntington Bank at 925 Euclid Ave. this year with the incentives it has in hand. But later phases of the project might need a small- to medium-sized TMUD tax credit of about $10 million.

CIRCLE SQUARE -- Midwest Development Partners' creation of a second downtown between Euclid and Chester avenues at Stokes Boulevard is due to start this spring without the TMUD program. A building in the later phase -- namely a proposed office tower -- could benefit from a small TMUD credit of about $5 million.

EAST 9TH-BOLIVAR -- A residential or mixed-use tower is under consideration for the former New York Spaghetti House property. This 0.314-acre property, which also has a neighboring parking deck that needs to be replaced, is owned by an affiliate of the Geis Companies. It is possible that a small tax credit of about $5 million might be enough to move the needle on whatever Geis has in mind here.

FLATS EAST BANK -- The Wolstein Group and Akara Partners have big plans for the Flats, requiring more structured parking and complicated site preparation to accommodate the addition of 1,500 to 2,000 units. In the absence of significantly more daytime workers to keep the parking decks full around the clock, the project might need a small- to medium-sized tax credit of about $10 million.

LUTHERAN HOSPITAL PARKING LOT -- The Weston Group and the Kertesz family want to develop the hospital's 5-acre parking lot on West 25th Street. But building a parking deck to densify its 530 spaces won't financially benefit the developers or Cleveland Clinic. The answer might be a medium-sized tax credit of about $15 million.

While Stark Enterprises and Magellan/Weston propose similarly
scaled projects, Magellan/Weston would add a residential/hotel
tower now and an office building later, Stark proposes the office
building now and a residential building later (Ian McDaniel).

MAGELLAN-WESTON PROJECT -- Another partnership involving the Weston Group, this time with the Chicago-based Magellan Development Group, could feature two buildings over a pedestal of parking in the Warehouse District. One would be a skyscraper with apartments and a five-star hotel. The other would be an office building of unknown height. If the Marion Building and historic tax credits are a part of the development, it might require a small- to medium-sized TMUD tax credit of about $10 million.

NAUTICA WATERFRONT/1250 RIVERBED -- Both developments as well as the removal of parking atop Superior Viaduct to avail a Highline-type linear park could benefit from a multi-story parking garage with a green roof, level with the roadway deck of the adjacent viaduct. The parking deck might cost $25 million with roughly half funded by a medium-sized tax credit of about $13 million.

NUCLEUS -- The TMUD program's mother project will be seeking a tax credit to fill a gap in its capital stack. While the amount is unknown, Stark Enterprises sought a forgivable city loan in the amount of $12 million. If that is still the gap, then adjusted for inflation a medium-sized tax credit of about $15 million might be needed.

VAN AKEN DISTRICT PHASE 2 -- RMS Corp. seeks an office building at the corner of Warrensville Center Road and Chagrin Boulevard in Shaker Heights. While the office building would be too small to be called a TMUD, a proposed 15-story apartment building on Farnsleigh would be eligible for a tax credit, possibly a small one of about $5 million.

An office building and residential high-rise are both proposed
for the next phase of the Van Aken District. But only the
15-story apartment tower in the upper-left part of the
 development might be a TMUD (RMS).

WESTINGHOUSE PLANT -- The amount of costly remediation and partial demolition has kept this waterfront property from being redeveloped. While it probably needs more TMUD tax credit help than it might be able to muster, it can get some more financial assistance from historic tax credits after the unsalvageable structures are removed and developed with some vertical structures. A medium-sized TMUD tax credit of about $12 million might move a redevelopment forward.

There are at least 20 other potential TMUD projects just in Greater Cleveland whose developers could tap into this program to help make them become a reality. And there are certainly others flying below the radar that could swoop in unseen until the last moment to scoop up a preliminary TMUD award. And who knows what projects may emerge in Ohio's other cities?

So that's why I don't like making predictions. But I thought it might be fun showing people how bad I am at making them. So hold on to this article and check back with me in a few years to have a nice laugh at my expense.

There are three more predictions I'm fairly confident in making. First, there are going to be a lot more cranes in the skies over Ohio's downtowns, perhaps one dozen or two dozen more as a result of this program. Second, Ohioans in each of the 3Cs are going to be keeping a running, competing tally of how many TMUDs and cranes each city will get. And, third, expect the unexpected.

END

Report: Downtown Cleveland office market withstood 2020

Insurer FM Global is the latest to move its offices downtown

At the start of the new year, downtown Cleveland looks to re-
bound from a languid 2020 in which tens of thousands of em-
ployees worked from home. In 2021, many workers will return
to the office to at least collaborate on projects (Michael Collier).
CLICK IMAGES TO ENLARGE THEM

In its latest Skyline Report, real estate services firm Jones Lang LaSalle (JLL) said downtown Cleveland's office market is far healthier than some had feared. Its report had some interesting data to share, showing that downtown is quietly waiting for the all-clear from pandemic-related restrictions to resume its renaissance.

The report also suggests that downtown Cleveland is in need of more Trophy Class or Class A multi-tenant office space either by renovating older buildings or, more likely, building new ones. With Ohio's passage of the Transformational Mixed Use Development tax credit program, developers may soon have the resources to add high-end, competitive office spaces downtown.

JLL reported that, even with some employees working remotely, "the purpose of the office will transform from a place to complete routine tasks into an environment that encourages collaboration, innovation, and social interaction."

Sherwin Williams (SHW) continues to press ahead with development of its 1-million-square-foot, single-tenant global headquarters in downtown Cleveland. A groundbreaking by the end of this year is reportedly the goal. SHW has signaled no plans to scale back the size of its project in any way.

"Driven by our continued need to serve our customers at the highest level and retain and attract top talent, we intend to build a next-generation headquarters in downtown Cleveland that ignites creativity, collaboration and industry-leading innovation," said SHW Chairman & CEO John Morikis in a written statement.

In fact, pre-development activity for SHW's HQ suggests two skyscrapers just west of Public Square along Superior Avenue. The office tower may rival the height of its Public Square neighbors. However, some are speculating that the second tower may not be an office building but a hotel built atop a parking garage.

Some of the highest-quality, most-expensive office buildings
in downtown Cleveland have the best occupancy rates. Black
floors show leased spaces. Red is vacant. Blue is hotel. Gray
is casino. Orange is a vacant sublease. Light brown is a resi-
dential conversion either existing, underway or planned (JLL).

Increasingly, downtown's new or existing offices will be built or redesigned to obtain a Healthy Building designation by providing superior standards for air quality, ventilation and natural light. Healthy buildings also help reduce the spread of bacteria and viruses by leveraging touchless technologies in high-traffic areas, JLL said. 

Despite some media reports saying downtown buildings will see a significant increase in sublease space due to the economy and remote working, JLL's research team has not seen this yet.

"Through the first nine months of the year though, this has not been the case. The amount of sublease space on the market is relatively unchanged from the end of 2019," JLL's report said.

Over the past decade, tenant demand has been disproportionally skewed towards Trophy and Class A inventory. Because of historic tax credits, 23 obsolete office buildings have been redeveloped since 2010, eliminating more than 6.1 million square feet of downtown office space.

The only multi-tenant office tower built downtown in the last decade was the 2013-built, 470,000-square-foot Ernst & Young Tower, 950 Main Ave. As a Trophy Class property, it has the third-highest rents in Cleveland yet is 97 percent leased, according to JLL.

The real estate services firm points out that a significant number of tenants have migrated from the suburbs to downtown Cleveland "to take part in the renaissance of the urban core." With the recent challenges of downtown, from COVID-19 to remote employment to civil unrest, some are speculating that companies will move back to the suburbs.

A rendering of FM Global's proposed reception area at its new
downtown Cleveland offices in the North Point Tower (HOK).

This is not likely to be the case, JLL said. It conducted a survey which found a resounding 93 percent of business leaders who currently have offices downtown have no intention of relocating to the suburbs.

Instead of offices moving to the suburbs, the exact opposite appears to be occurring.

FM Global, a Providence, RI-based commercial property insurer, will be relocating more than 100 employees from the Great Northern Corporate Center in North Olmsted to downtown Cleveland. It is leasing 32,915 square feet in the 19-story North Point Tower, 1001 Lakeside Ave., according to plans filed with the City of Cleveland. Those plans show an office layout accommodating 138 seated workers.

Last year, sources said FM Global was destined for the proposed One Lakewood Place mixed use development to give its employees a more connected, urban setting. But when Carnegie Management & Development walked away from the project, FM Global resumed its search for a more urbanized location to attract young talent.

It will spend nearly $2 million to white-box and renovate the 11th floor and part of the 12th floor of the North Point Tower, built in 1989. FM Global will also be adding new data infrastructure, an employees cafe and other amenities, plans show.

This follows news that NEOtrans broke in 2020, that Fathom marketing and Goldwater Bank N.A. Mortgage Division are relocating their offices and about nearly 150 jobs total from the suburbs to downtown.

And the biggest relocation of all is that of CrossCountry Mortgage, LLC. It intends to bring its headquarters and more than 500 employees from Brecksville to downtown Cleveland. It will renovate for $40 million the former Tap Packaging (previously The Chilcote Co.) complex in the 2100 block of Superior Ave.

Sources said the fast-growing company will likely add another 200 jobs at its new headquarters. And, in the near future, company officials reportedly anticipate increasing its headquarters workforce to 2,000 employees. Long term, one of the buildings they're looking at expanding into is the former Plain Dealer building, 1801 Superior Ave., a source said.

END

Saucy Brew Works adding new brewpub, triple production

With property acquired this week, Saucy Brew Works hopes to
start construction this summer in Independence on its second
production facility and its sixth brewpub (Saucy Brew Works).
CLICK IMAGES TO ENLARGE THEM

It's been a banner couple of years for Saucy Brew Works and their founders, Brewmaster Eric Anderson and entrepreneur Brent Zimmerman. And the long-time craft beer fanatics are teaming up for their biggest expansion yet.

Earlier this week, they closed on a property deal in suburban Independence where they plan to build a new $15+ million brewpub and production facility that will allow them to more than triple their beer-making capabilities.

Located at 5810 Rockside Woods Boulevard, the site is a 3.2-acre parcel between the Embassy Suites by Hilton and the Topgolf Cleveland which opened a year ago. That location, above the ramps linking Interstate 77 and 480, is visible from one of Ohio's busiest highway interchanges. It's why Zimmerman wanted to build there.

The Independence Saucy Brew Works will measure about
25,000 square feet, making it the largest expansion by the
four-year-old, Cleveland-based brewpub chain (SBW).

"There's 111 million cars pass that by that site each year," he said. "It's the highest traffic point in the state. Topgolf didn't pick that site by chance. There's also thousands of hotel rooms nearby and lots of businesses. It's a pretty central location."

From that location, Saucy expects to double its beer production activities and will enable the distribution of its product to three states, not just Ohio. The brewpub chain which is also noted for its pizza has grown from its first location it opened three years ago in the renovated Steelman Building, 2885 Detroit Ave. in the Hingetown section of Cleveland's Ohio City neighborhood.

It has since added taprooms at Pinecrest in Orange Village, the Rocket Mortgage FieldHouse downtown, Columbus' Victorian Village and will open in March in downtown Detroit. Independence will be the first new taproom since opening its flagship spot in Ohio City to include a production facility, creating more than 60 jobs in the proposed 25,000-square-foot building. Of that, about 11,000 square feet will be for production, Zimmerman said.

This is the ground-floor plan for Saucy Brew Works'
new Independence location. It will have a brewery
hall, lodge dining/lounge, two small ground-floor
event spaces and a large event space upstairs, a
store and several year-round outdoor patios as
well as a tripling of the brewpub chain's pro-
duction and distribution capabilities (SBW).

"There will be no real changes to the existing (Ohio City) facility and no reduction of employment," he said. "We will shift some production of beer to these larger facilities. We have 20 different beers available at our taprooms. So our core production will be in Independence while other beers will be brewed downtown (in Ohio City)."

Saucy Brew Works Independence LLC has already received city approvals to build. But since the City of Independence's building permit requires construction to start within six months of issuance, Saucy will have to go through the approvals process again.

Zimmerman said he didn't expect any hang-ups as Independence city officials reportedly support the project. Cuyahoga County also awarded a $1.5 million low-interest loan to aid in the project's construction earlier this year. If city approvals are given this winter, Zimmerman said he hopes to break ground in late-Spring or early-Summer. Construction could take 12-15 months.

Site plan for Saucy Brew Works' new Independence
location with nearby reference points added (SBW).

"We'll certainly have our core menu at the new location, but with some nuances as it relates to a much larger lunch crowd," he said. "There's a bunch of other things we're kicking around."

Some of the planned features include an event space for meetings and weddings. There will be roughly 2,000 square feet devoted to E-sports gaming. And Zimmerman plans an active, heated, 20,000-square-foot outdoor area with a climbing wall, children's playground, dog walk and a coffee shop.

According to its Web site, Saucy Brew Works has seen its beer production increase dramatically since it opened its Ohio City production facility in the summer of 2017. It grew from 799 barrels in its first year to 4,966 barrels last year. With the Independence production facility and the opening of new brewpubs, Zimmerman said production could grow to 15,000 barrels per year in a couple of years.

END

Campus District asks GCRTA for Downtown Loop study

The Waterfront Line could attract more ridership and boost
development on the east side of downtown Cleveland if the
light-rail line went somewhere other than a parking lot on
the city's windswept lakefront, said a community develop-
ment corporation in a letter to the transit authority (KJP).
CLICK IMAGES TO ENLARGE THEM

 
In a recent letter, a downtown Cleveland community development corporation (CDC) urged the Greater Cleveland Regional Transit Authority (GCRTA) to revisit its 2000 Waterfront Line Phase II study that found extending the light-rail line as a Downtown Loop to be feasible.

The letter, sent Dec. 21 by the Campus District to GCRTA General Manager and CEO India Birdsong, followed a Dec. 11 vote by the CDC's board of trustees to make the request of the transit authority. The CDC joined with the statewide nonprofit organization All Aboard Ohio in asking for a reevaluation of the proposed Downtown Loop as a 2.5-mile extension of the 2.2-mile Waterfront Line.

"We believe this could be a catalytic project for our neighborhood and would better connect our anchor institutions with each other, as well as connect the greater community to a thriving downtown," Campus District Executive Director Mark Lammon wrote in the letter to GCRTA.

The Waterfront Line was built in 1996 for $70 million as an extension of the Shaker Heights-Tower City light-rail Blue and Green lines. Despite early ridership exceeding GCRTA's projections, the Waterfront Line has not lived up to expectations since.

All Aboard Ohio, a passenger rail and transit advocacy association, argued that the rail line was never intended to end in the Municipal Parking Lot. The group said a range of options should be considered for the future of the rail line, but it favored the Downtown Loop.

Stations on Cleveland's rapid transit
system are within a 5-minute walk
of only about one-third of the cen-
tral business district. A Downtown
Loop on East 17th Street could put
two-thirds within a 5-minute walk,
while a routing via East 13th Street
could put about 90 percent within
that 5-minute walk (AAO).

The Waterfront Line is shut down for the winter as GCRTA began a major track reconstruction project in the Tower City Center station. The work has cut off track access to the Waterfront Line. But GCRTA opted not to provide interim bus service to Waterfront Line stations. The transit authority also will be refurbishing for $4 million a light-rail bridge over Front Street and the Norfolk Southern railroad tracks.

Abandonment of the Waterfront Line probably isn't realistic. GCRTA would have to refund to the Federal Transit Administration up to $10 million in state-of-good-repair grants it used in the past decade to keep the rail infrastructure in a safe and operable condition, All Aboard Ohio contended in a briefing paper. 

“GCRTA should consider expanding the Waterfront Line, as originally intended, to reach important destinations in and near Downtown Cleveland,” said All Aboard Ohio Executive Director Stu Nicholson in a written statement on its Web site. “Continuing the status quo is the only option GCRTA should not be embrace.”

At the Dec.11th board meeting of the Campus District, its directors voted to join with All Aboard Ohio in endorsing the reevaluation of the proposed Downtown Loop as an extension of the Waterfront Line. In 2000, GCRTA identified a preferred routing for the Waterfront Line Phase II, via East 17th Street, Prospect Avenue, East 22nd Street, Community College Avenue and East 30th Street.

But development of all of GCRTA's major capital projects was halted in the recession of the early 2000s except for the HealthLine bus rapid transit on Euclid Avenue. It was already too far along to halt, Nicholson said.

GCRTA's newest capital projects have produced very good
results such as the 2015-built Little Italy-University Circle
Red Line rail station. New developments have popped up
near it since including two visible here -- the $70 million
Centric Apartments seen just beyond the station and the
$7 million Mayfield Station Apartments just finishing
up construction in the center of the image (KJP).

"The investments that RTA has made in the Campus District have led to significant economic development," Lammon continued. "The HealthLine was transformative to Euclid Avenue and continues to see development today. The Stephanie Tubbs Jones Transit Center and the reconstruction of the Tri-C-Campus District Rapid Station (at East 34th Street) have ensured that the district remains a transit hub.

"We believe that extending the Waterfront Line to the Campus District Rapid Station through our neighborhood would also continue this return on investment," Lammon said.

He said the Downtown Loop will open new entryways into the central business district, expanding access to the Campus District's vital jobs centers and diminishing the infrastructural divides leftover from redlining. 

"We understand the challenges facing RTA today, however we believe that at least revisiting the 2000 Downtown Loop Study and determining its feasibility is worth considering the impact to our neighborhood and all of downtown," Lammon concluded.

All Aboard Ohio said consideration of a Downtown Loop could be included as part of GCRTA’s ongoing Next Gen system planning and 2030 Strategic Planning processes. According to both groups, GCRTA has not yet responded to the Campus District CDC's letter or to All Aboard Ohio's Nov. 30 letter.

The Waterfront Line attracts crowds for special events like the
2018 Cleveland National Air Show, Cleveland Browns games,
and waterfront festivals at North Coast Harbor and the Flats.
But the Campus District said it could help turn downtown
into more of a 15-minute city in which all of its neigh-
borhood assets are accessible within a 15-minute
walk, bike ride or transit trip (KJP).

The 2000 Waterfront Line Phase II study showed that a Downtown Loop could produce enough ridership at relatively low costs to justify federal construction funds. Back then, the Federal Transit Administration looked favorably on transit expansions that had a cost per new rider lower than $20. The Downtown Loop was estimated at a cost per new rider of less than $14.

“That was before Downtown Cleveland increased its residential population by more than 100 percent, saw downtown employers grow with more than $7.25 billion worth of investment, and attracted new corporate offices from the suburbs and other metro areas,” Nicholson said. “And it was well before GCRTA considered replacing its rail fleet with a standard rail car that can travel on any of its five lines, plus future ones.”

Nicholson said that a significant part of a local funding share for the project might be raised from a short-term tax-increment financing district along the Downtown Loop. The 2000 study estimated that the Downtown Loop could attract 2.2 million square feet of nonresidential development, nearly 1,000 housing units, $441 million in overall development (in 2000 dollars), nearly 9,000 permanent jobs, $250 million in new payroll and $17.8 million in new local tax revenues per year.

Thanks to the federal CARES Act, GCRTA's board recently passed a budget that could allow it to end 2021 with a $49 million reserve that will protect it from further emergencies and will probably also help it reduce its borrowing costs for major capital projects.

All Aboard Ohio also recently noted that Greater Cleveland will receive about $74 million in transit stimulus funds from the second round of federal pandemic aid. The advocacy group is urging that some of that money be used for transit-oriented developments near rail and bus stations, as well as reducing GCRTA's significant state-of-good-repair backlog.

END