Wednesday, January 15, 2020

Ohio real estate megaproject tax credit may advance in February

Lots of great ideas for redeveloping our cities never see the
light of day because the financing for them is often difficult
to obtain due to Ohio's high construction costs and its low
rents. A tax credit to help facilitate megaprojects may move
forward next month in Ohio's General Assembly (AODK).
Legislation that would aid Ohio real estate megaprojects and create thousands of jobs could advance in the Ohio House of Representatives next month, according to a spokesman for State Rep. Paul Zeltwanger, chair of the House's Workforce & Economic Development Committee.

The committee is scheduled to meet again on Feb. 5 to vote on whether to accept a substitute Senate Bill 39 which contains multiple amendments. News and details about those amendments were exclusively reported here at NEOtrans in December.

Six amendments to a proposed Transformational Mixed-Use Development (TMUD) tax credit bill were accepted Dec. 11, 2019 by the House's Workforce & Economic Development Committee. The committee then adjourned for the holidays.

"The plan is to accept a hopefully final substitute bill for SB 39 on the 5th (of February) that will make all parties reasonably happy," said Josh Ferdelman, legislative aide to Rep. Zeltwanger. "I can’t make any promises, but we hope to have a final committee vote Feb. 12."

He added that the committee might not accept testimony at the committee's Feb. 5th meeting. But if the committee votes to accept the substitute bill, it could take testimony on that amended legislation on Feb. 12 before deciding whether to refer it to the full House for a floor vote.

If the House votes to pass a Sub. SB 39, it sets up a possible conference committee to iron out differences with the Ohio Senate that already passed an earlier version of the TMUD tax credit legislation by a 32-1 vote on June 25, 2019. A still-older version of the bill unanimously passed the Ohio House in 2018 but the legislative session expired before the Senate could act on that version.

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

Six years after nuCLEus was first announced, Stark continues to pursue the megaproject that would consist of two 24-story towers. One of those would feature 250 apartments and other 400,000 square feet of offices. They would be built atop a pedestal of 1,300 parking spaces and 80,000 square feet of commercial/retail space.
Stark Enterprises says it needs the TMUD tax credit before it
can afford to start construction on its large nuCLUS develop-
ment in downtown Cleveland's Gateway District (Stark).
In its promotional materials, Stark says nuCLEus would "serve as a significant connector to other key developments while acting as a catalyst that 'connects the dots,' creating a vibrant network of urban energy." That's why Stark contends its project should win a TMUD tax credit if Sub. SB 39 is passed.

Ezra Stark, chief operating officer of Cleveland-based Stark Enterprises, acknowledged receipt of an e-mail seeking more information for this article but did not comment.

Stark Enterprises and other real estate developers said in their testimony to House and Senate committees that major developments in Ohio's larger downtowns cost nearly as much to build as those in larger cities like New York and Chicago. However, Ohio developments command rents that are one-half to two-thirds less.

To offset the cost of "transformational" developments in Ohio, the proposed tax credit would refund to insurance companies up to 10 percent of their investment in TMUDs, as defined by the bill.

TMUDs include projects whose new or to-be-renovated connected buildings are at least 15 stories tall, measure at least 350,000 square feet and contain any combination of retail, office, residential, recreation, structured parking or similar uses.

Numerous business and civic groups testified in support of the bill. They included the Ohio Municipal League, Ohio Mayors Alliance, Ohio Chamber of Commerce, City of Hamilton, Ohio Insurance Institute, NAIOP of Ohio (Commercial Real Estate Development Association) as well as The Millennia Companies of Cleveland and Stark Enterprises.

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

"Substitute Senate Bill 39 is designed to provide a unique tax credit that will foster mega-development projects that will transform Ohio's downtowns with new and robust economic development," said State Sen. Kirk Schuring (R-29, Canton), in recent testimony on the bill.

Sen. Schuring is the bill's original sponsor. He also submitted the six new amendments that were accepted by the House's Workforce & Economic Development Committee last month.
Passage of the TMUD tax credit legislation in the Ohio State
Ohio this year could open the floodgates of public and private
capital funding for real estate megaprojects in Cleveland and
other cities throughout Ohio (State of Ohio).
Most of the legislation's changes would link the release of tax credit awards more closely to the amount of state and local taxes generated by the credit, according to a summary explanation on the committee's Web page.

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

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

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

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

Another change wouldn't allow the state to release the 10 percent tax credit to recipients all at once. Instead, the first 5 percent credit would be issued upon the completion of construction. The remaining 5 percent would be issued as evidence is submitted showing the new state and local taxes that were caused by the project and its surrounding area.

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

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

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


Two more apartment buildings coming to Battery Park

A Columbus-based developer is pursuing its first
Cleveland-area development at Battery Park. This
site plan for the proposed Battery Park Apartments
shows they are proposed to be built between West
70th and 73rd streets, south of Edgewater Park
As first reported here at NEOtrans last month, a Columbus developer is pursuing its first Cleveland real estate project in the Battery Park section of the Detroit-Shoreway neighborhood. The site is south of Edgewater Park and north of Gordon Square along West 70th and 73rd streets.

Following the recent leasing success of the 82-unit Battery Park Lofts, the Avenue Partners proposed to construct two large apartment buildings totaling 250 units with underground parking and a separate clubhouse and pool.

That's according to the Avenue Partners' building permit application filed with the city as well as conceptual building plans submitted to the City Planning Commission. The commission's Design Review Committee will hear a presentation by the developers on Jan. 17.

Jason Snyder, president of Avenue Partners did not respond to an e-mail earlier this week seeking additional information about the firm's proposed project.

View of one of the two apartment buildings proposed
by Avenue Partners in Battery Park. This is the view
from the street that connects to Edgewater Park and
the Shoreway (Avenue Partners).
The site for the proposed expansion of Battery Park is at 1275 W. 73rd St. The two new apartment buildings would be on the east side of West 73rd. Avenue Partners is buying the land from Marous Brothers that began the massive Battery Park development.

Battery Park was built on the former site of an Eveready Battery plant that had significant environmental issues. The city, state and federal government spent millions to clean up the multi-block site.

Square footage of the new buildings that Avenue Partners proposes is not available. But for size comparison, the Battery Park Lofts built in 2018 at 1250 West 75th St. measures 105,000 square feet.

The Battery Park Lofts are currently fully leased. Recent but expired listings show its two-bedroom apartments, some with one bathroom and others with two bathrooms and measuring from 1,089 to 1,290 square feet, were being offered for anywhere from $2,054 to $2,359 per unit.

From the next block east, along West 70th, would be
this new apartment building. West 70th and 73rd will
soon be connected by a new street (Avenue Partners).
Other units at the already-built Battery Park Lofts are as small as 677 square feet, but pricing for those apartments could not immediately be located.

Pricing may differ somewhat for the Battery Park Apartments that Avenue Partners is proposing, especially considering the larger number of units planned and the maturation of the market.

Separately, the city of Cleveland will extend Battery Park Boulevard east of West 73rd to West 70th, through the former property of Elite Medical Transportation/Mobile Martin EMS property. That will improve access to Edgewater Park for the West 70th building as well as others south of Father Caruso Drive.


Monday, January 13, 2020

Cleveland's industrial past may shun Sherwin-Williams R&D; but HQ is safe

Past the Tower City Center parking lot and the Cuyahoga
River beyond is Scranton Peninsula and Sherwin-Williams'
favored site for its new, consolidated research facility. Its
current research facilities, the John G. Breen Technology
Center, is at right (KJP). CLICK IMAGES TO ENLARGE
In an old, post-industrial city like Cleveland, toxins from its manufacturing past exist below the surface and slow the city's efforts to revitalize. The latest project affected is Sherwin-Williams (SHW) proposed site for its new, consolidated research facilities.

While the downtown headquarters site SHW picked is secure, the near-downtown research and development site and as many as 1,000 jobs may not be. Instead, the jobs could land on a newly cleaned property in suburban Brecksville, according to two sources.

The sources spoke off the record because they were not authorized to speak publicly about SHW's pursuit of a new headquarters plus research and development (HQ+R&D) facilities.

SHW planned to announce its HQ+R&D decision next week, another source said. It isn't known if SHW's last-minute discovery of polluted land at the favored R&D site will delay the global coatings firm's announcement.

It should be emphasized that this situation has not affected SHW's decision to build its massive new global HQ on the west side of downtown Cleveland's Public Square. The new HQ would consolidate up to 5,000 jobs from multiple locations into 1.45 million square feet of offices to be built on 6.82 acres of parking lots owned by the Jacobs and Weston groups.

The site SHW wanted for its new, 350,000-square-foot R&D center is approximately 9.4 acres of land along Carter Road at the north end of Scranton Peninsula. It is located just across the Cuyahoga River from Tower City Center and SHW's current HQ+R&D.
A 1968 aerial view of Scranton Peninsula and the
Cleveland Union Terminal Group (now Tower City
Center). The top of the image is north, with Public
Square at the upper right. Republic Steel's Bolt &
Nut Division is at lower left. The Northern Ohio
Lumber & Timber Co.'s property, now Sherwin-
Williams' favored site for its new research facili-
ties, is at the center of this image, to the left of
the Cuyahoga River's Collision Bend (ODOT).
Last week, geotechnical tests of SHW's favored location for the R&D facility reportedly discovered unacceptably high levels of pollutants in the soil. The sources weren't aware of what pollutants were found or where they came from.

However, the R&D site that SHW favored was used from 1864 until 2003 for sawmill operations, the manufacture of wood products and lumber storage, according to the Western Reserve Historical Society. Through various predecessor companies, Scranton Averell Inc. has owned this and other land on Scranton Peninsula going back to as far as 1828.

A chemical, Chromated Copper Arsenate (CCA), was commonly used as a pesticide and preservative to treat fresh-cut wood for residential uses by lumber companies from the 1940s until it was banned by the Environmental Protection Agency in 2003. CCA poses a potential exposure to toxins including arsenic, chromium and copper.

The sources said it is very expensive to clean soil contaminated by these toxins.

Also on Scranton Peninsula was the former Republic Steel Bolt & Nut Division that generated additional toxins including chromium, lead, sulfur dioxide and other pollutants into the air, soil and groundwater from 1872 until the plant was sold off piecemeal and ultimately razed through the 1970s and into the early 1980s.

But the former steel mill property was on the west side of Scranton Peninsula. That 22 acres of land was cleared and cleaned in recent years, including with layers of new fill dirt, and is now being redeveloped with mixed use including residential, called Thunderbird.

The sources said City of Cleveland officials are scrambling to either identify environmental clean-up funding for the Scranton Peninsula site or to find and secure a new site in Cleveland for SHW's consolidated R&D facilities.
Sherwin-Williams' old and new sites
for its headquarters plus research &
development facilities are near to
each other in downtown Cleveland.
If the city can clean SHW's favored
site for its new R&D center, the faci-
lities will allow the growing firm to
consolidate its employees in fewer
and more modern sites (Google).
SHW reportedly is considering putting the R&D facility on the site of the former Veterans Administration hospital that closed in 2011 and was relocated to Cleveland's University Circle. The VA donated the 103 acres of land to the City of Brecksville's Community Improvement Corp.

DiGeronimo Companies won the rights to develop the former VA hospital campus, renamed Valor Acres, over 15 years. As part of the deal, DiGeronimo paid $5 million to the city to demolish more than a dozen hospital buildings and remediate environmental contaminants, such as asbestos and lead paint. The clean-up work was conducted in 2018-19.

SHW's new R&D facility could consolidate nearly 1,000 jobs under one roof. About 400 employees would be relocated from SHW's 140,293-square-foot John G. Breen Technology Center, 601 Canal Rd.

Also likely to relocate are 400 Valspar R&D employees from Minneapolis and possibly several hundred workers at SHW's Automotive and Performance Coatings groups at 4440 Warrensville Center Rd. in Warrensville Heights, a source said.

Interestingly, Valor Acres is as large as SHW's Warrensville Heights research campus -- also about 100 acres-- with roughly half of it still undeveloped. It has 388,766 square feet of offices, laboratories and training areas. SHW acquired that campus from BP America Inc. for $8 million in 2000, according to county records.

"The Sherwin-Williams 'factor' is huge for the future of Cleveland. Thousands of jobs, many millions of dollars in real estate transactions, increased hospitality, multifamily and retail developments nearby and a potentially altered skyline are all on the line," said real estate brokerage Newmark Knight Frank in its Fourth Quarter 2019 Cleveland Office Market Report.


Friday, January 10, 2020

Another residential tower continues Euclid Avenue's boom

The proposed 23-story City Club Apartments would fill the last
undeveloped gap in Euclid Avenue's streetscape, rising where
the Hippodrome Building stood before 1981. The new tower
would add more vitality to a street that has seen an incredible
amount of investment in the 2010s, with more development
The Michigan-based chain of City Club Apartments has acquired enough capital to move forward with a proposed 23-story apartment tower at 720 Euclid Ave. in downtown Cleveland. It would be the third new-construction apartment tower to rise on Euclid Avenue downtown since 2018.

Based on preliminary, conceptual designs submitted to the City Planning Commission for approval Jan. 16, the new tower would measure about 250,000 square feet and offer 310 apartments over a two-level retail/lobby base. Proposed retail includes a restaurant and a doggy day care business.

At this early stage of planning, the high-rise would offer 180 studios, 78 one-bedroom apartments, 42 two-bedroom apartments and 10 three-bedroom apartments. Prices for those units are not yet available.

Based on the per-square-foot construction costs of the other two apartment towers built recently -- the 29-story Beacon and the 34-story Lumen -- the construction cost of the City Club Apartments could be less than $85 million.
Looking southward on East 9th Street toward Euclid Avenue,
the City Club Apartments (right) would tower over its neigh-
bors, the City Club Building and the Schofield Building (left)
with the current view of the site seen below (Vocon, Google).

Although details of the City Club Apartments' financing aren't known, a significant portion of the funding came when the firm sold an apartment building in St. Louis for $48 million and exited that market, in part to help capitalize his Cleveland project.

“We have a responsibility to our investors, lenders and partners to perform at the highest level and we are reallocating our financial and human capital to several accelerating markets including Cleveland,” City Club Apartments co-founder and CEO Jonathon Holtzman said in a written statement.

The downtown Cleveland real estate market is stronger now than when The Beacon and The Lumen were first planned in the mid-2010s. Rents are higher, occupancy rates have held steady and this latest project can benefit from the new Opportunity Zone program.

The new federal O-Zone program increases liquidity by reducing investors' tax burdens when they reinvest their capital gains in projects that are in designated O-Zones. Downtown Cleveland is in such a zone.
The City Club Apartments, as proposed, would add a splash
of color to downtown's palette which is dominated by brown
and grey buildings. The new tower would also offer to resi-
dents an amenity deck on the roof (Vocon).
City Club Apartments was able to keep construction costs low by not having to purchase any land or build any parking for the new building. That likely trimmed $10 million to $15 million from the tower's development costs.

Instead, Holtzman worked out a deal with the property's current owner David Goldberg to not only build on the Goldberg site but to also dedicate parking spaces to City Club Apartments residents in a six-story, 540-space garage. That parking deck is mostly full during the day but mostly empty at night. The new apartment building would be connected to the existing garage with a new, enclosed walkway.

A similar arrangement made The Beacon financially doable a few years ago. The Beacon had the benefit of not needing any new parking because it was built on top of a nine-level parking deck that was filled during the day and empty at night.

Also, The Beacon's developer Stark Enterprises didn't buy any land to build its tower. It formed a partnership with Reuven Dessler, the managing partner of an investor group that owned the 515 Euclid parking structure atop which The Beacon was built.
Vocon's plan for the City Club Apartments shows a vibrant
and active street-level, with a two-story pedestal enclosing
a restaurant, doggy day care, lobby, fitness center, theater,
business center, mail room plus building management and
residential support offices (Vocon).
The same strategy is being arranged in Playhouse Square. There, The Lumen's developer, the Playhouse Square Foundation (PHSF), has designed that apartment tower to potentially set the stage for a second residential tower.

The Lumen's parking garage was intentionally overbuilt, offering 540 spaces -- more than were necessary for the 318-unit apartment building. The parking will also serve theatergoers and area businesses. That should also free up spaces in the parking deck off Chester Avenue and the behind the theaters.

The freed-up spaces could support a second residential tower on land PHSF bought in 2016 at East 13th Street and Chester. Word is that the foundation is already setting aside financial resources just in case leasing activity at The Lumen indicates there is market demand for a second tower.

The new City Club Apartments tower is proposed for a surface parking lot next to the City Club Building. But that's not why the proposed high-rise has the City Club name. Instead, it's the name of national developer City Club Apartments.

It's a coincidence that this last undeveloped site along Euclid Avenue between Public Square and Playhouse Square is next to the City Club Building, historically called the Citizens Building which features the City Club where meetings and speeches are held. The upper floors of the building includes tenants such as law firms, marketing agencies and wholesale jewelers.


Thursday, January 9, 2020

Sherwin-Williams picks Cleveland sites for HQ, R&D facilities; announcement "imminent"

Sherwin-Williams' old and new sites
for its headquarters plus research &
development facilities are near to
each other in downtown Cleveland.
They will allow the growing firm
to consolidate its employees in fewer
and more modern sites (Google).
According to multiple sources, Sherwin-Williams (SHW) has made its decision on where to build its billion-dollar new headquarters buildings and new research & development facilities. The same sources, who spoke off the record because they were not authorized to speak publicly yet, said the announcement of the locations will be made in two weeks.

SHW will consolidate up to 6,000 office and research jobs from around Greater Cleveland and even around the country to downtown Cleveland. SHW currently has 3,500 full-time employees downtown already. The consolidation of up to another 2,500 jobs here will be a huge boon to downtown and surrounding areas.

The sites that the fast-growing global coatings firm has chosen for its HQ+R&D is both a surprise and not a surprise. The unsurprising part is that SHW's 1.45 million square feet HQ will be built on the parking lots owned by the Jacobs and Weston groups on the west side of Public Square.

The site for the 350,000-square-foot R&D facility is a surprise, however -- on Scranton Peninsula across the Cuyahoga River from SHW's existing John G. Breen Technology Center and SHW's existing HQ in the Landmark Building.

The property would reportedly be, at minimum, the 9.4 acres of land owned by Scranton Averell Inc. north of Carter Road and west of Fire Station 21, 1801 Carter Rd. Additional property may ultimately be added, however.

The R&D facilities alone could account for nearly 1,000 jobs. Not only would about 400 employees from the 140,293-square-foot Breen Center be relocated there, but also another 400 Valspar R&D employees from Minneapolis and possibly several hundred workers at SHW's Automotive and Performance Coatings groups currently located in Warrensville Heights.

The amount of consolidation may demand further property acquisitions from Scranton Averell south of Carter and east of the under-construction Thunderbird development. With SHW's neighboring investment, a remaining 4-acre parcel in the Thunderbird development may go quickly.

The fate of the existing Breen Center and the 9 acres on which it sets isn't known. It is assumed by local real estate investors that SHW will sell the Landmark Building, which also houses about 100,000 square feet of non-SHW office tenants. It could be converted primarily to a residential use.
View of Sherwin-Williams' HQ (center) of the last 90 years,
seen from across the Cuyahoga River from SHW's proposed
 new site for the coatings firm's consolidated research facility
on Scranton Peninsula (Iryna Tkachenko). 
The HQ facilities will reportedly be comprised of a roughly 30-story tower on the 1.17-acre Jacobs lot on Public Square, with shorter office buildings and hundreds of thousand of square feet of parking structures spread across the 5.65-acre Weston-owned parking lots. Construction would likely start early next year. Conceptual renderings will apparently be provided in SHW's public announcement.

SHW executives, according to sources, said they weren't interested in building an iconic tower to rival the height of neighboring Key Tower, a 57-story, 888-foot-tall, 1.3-million-square-foot skyscraper.

The reason is that a building that tall would greatly increase the cost of construction and there was sufficient undeveloped land available to spread out the HQ facilities over a wider area while still providing a dense, vibrant urban setting.

As one SHW executive explained when he was asked why the conservative company wasn't considering an ostentatious skyscraper on the Jacobs lot, "Our stock value is up to nearly $600 per share because we're conservative," he said.

SHW has been investing large sums to research the Jacobs and Weston lots in recent months, doing soil and groundwater surveying and testing, as well as cleaning up legal leftovers from prior uses.

For example, a "dead" street called Broom Court N.W. was recently vacated, located off West 3rd south of the former Stark Enterprises HQ. There is no information that Stark's old HQ, now owned by Realife Real Estate Group, will be part of SHW's HQ project.

And, last fall, Weston consolidated and relocated its parking leases from the so-called Superblock bounded by Superior and St. Clair avenues, as well as West 3rd and West 6th streets, to a smaller parking lot Weston owns at the northwest corner of West 3rd and St. Clair. Weston cleared out the leases to remove any encumbrances to their sale to SHW.

Geotechnical survey holes marked
in the pavement of the Jacobs Group-
owned parking lot on Public Square,
soon to be the site of SHW's new
headquarters tower (KJP).
The next-closest rival to winning SHW's HQ site was the Riverview phase of CityBlock, behind Tower City Center, two sources said. Dan Gilbert and his Bedrock Cleveland Inc. made a strong push that gave the Jacobs/Weston groups the most competition. But the location and relative ease of developing of those large, flat parking lots in the heart of the central business district were too attractive to pass up.

SHW's existing headquarters is in the 900,000-square-foot Landmark Building, 101 Prospect Ave. But it also has about 51,000 square feet of additional offices in the neighboring Skylight Office Tower. And SHW has expanded its office space to a 151,000-square-foot flex space at 4780 Hinckley Industrial Parking on Cleveland's south side.

SHW training facilities for executives, managers, sales people and store employees are scattered among Strongsville, Baldwin-Wallace University in Berea and Case Western Reserve University in Cleveland's University Circle area. All of these will be consolidated downtown, demanding an average of at least 100 more hotel rooms per night.

SHW was a strong, growing company before it acquired a coatings rival, Minneapolis-based Valspar Corp. in 2017. Since then, however, SHW has seen its revenues grow 42 percent from the end of the second quarter 2017 to the same period a year later.

Although SHW was entertaining offers from cities around the country for its new HQ+R&D facilities, it directly approached downtown Cleveland property owners for the HQ+R&D.

The only non-downtown property owner SHW reportedly approached was the DiGeronimo family who is developing the former Veterans Administration Hospital in Brecksville. But that was only for the R&D facility, not the HQ, sources said.


Sunday, December 29, 2019

25 on 25: twenty-five developments along/near West 25th

Cranes fill the sky over MetroHealth's $1.25 billion new main
hospital campus on West 25th Street. While it is the dominant
development in the West 25th corridor, it is by no means the
only development. Another two dozen projects exceeding
$500 million worth of investment in total were recently
completed, underway or planned here (UrbanOhio).
If it seems like there's been a lot of news lately about developments along West 25th Street between the Cleveland neighborhoods of Ohio City and Brooklyn Center, you're right. And there's more to come in that 2.5-mile-long corridor.

A rough count of development projects recently completed, underway or planned in this corridor reveals 25 notable real estate construction or renovation investments valued or potentially valued at more than $1 million. In total, it features up to 1,700 housing units and hundreds of thousands of square feet of new commercial space.

This doesn't include many small-scale storefront renovations, residential renovations or single-family family homes that aren't part of a larger development. At the other end of the scale, it doesn't end with the $1.25 billion, 650,000-square-foot new MetroHealth Medical Center.

Nor does it include transportation projects like the $2.2 million redesign of Scranton Road or a planned $40 million upgrade of the Greater Cleveland Regional Transit Authority's (GCRTA) MetroHealth Line into a smaller version of the HealthLine bus rapid transit along Euclid Avenue. The MetroHealth Line is the city's second-busiest bus route behind the HealthLine.

The Clark-Fulton neighborhood is the subject of a development masterplan to coordinate community investment to maximize its effectiveness and benefits. The north end of the West 25th corridor is in the southern area of the Ohio City and Tremont planning districts.

As with many other Cleveland neighborhoods, this one is changing rapidly too, but less so because of Millennials and empty-nesters moving in. Instead, this corridor's population is growing because of immigration.

Increasingly, West 25th and the parallel Scranton Road are losing their strip clubs, prostitutes, drug dealers and other blights that have plagued this corridor for five decades. There are still trouble spots, but they are rapidly being replaced by a mix of public- and private-sector real estate investments.

Today, the West 25th corridor is attracting a wide variety of businesses and residents, including a Latino population that grew nearly 14 percent in the last decade. This corridor is the heart of Northeast Ohio's Latino community, or La Villa Hispana.

West 25th corridor projects
Here is a list of the 25 developments having a value or potential value of $1+ million in and near the West 25th Street corridor. The numbers preceding each development correspond with the numbers on the map above:

(1) 2011-2109 W. 25th -- Market Square; Harbor Bay Real Estate Advisors LLC; $175 million (all phases); 260 apartments, 75,000 square feet of retail, 150,000 square feet of offices, 560 parking spaces; groundbreaking for phase one (7-story apartment building over retail/parking) due by the second-quarter of 2020.

(2) 2070-2230 Columbus Rd -- Ohio City Transit Oriented Development; Carnegie Management & Development Corp.; dollar amount unknown; mixed-use development including public spaces next to and above GCRTA's Red Line station including a possible new station; in early development.

(3) 2168 W. 25th -- Voss Industries redevelopment; R&L Ohio City LLC/Casto; dollar amount unknown; possible residential conversion of historic industrial building; in early development.

(4) 2306 W. 17th St. -- Fairmont Creamery; Sustainable Community Associates; $15 million; residential conversion of historic industrial building; completed in 2015.

(5) 2342 Scranton Ave. -- unidentified future development; Gustave Development; dollar amount unknown; in early development.

(6) 2410 Scranton -- The Lincoln; Sustainable Community Associates; dollar amount unknown; construction of about 83 residences over 6,000 square feet of commercial space and underground parking; conceptual plans approved Nov. 27 by the city's Local Design Review Committee.

The Tappan apartments, under construction on Scranton Road,
is next to Sustainable Community Associates' Wagner Awning
residential conversion, seen at left (GISguy/UrbanOhio).
(7) 2329 West 16th Place -- Due North Townhomes; David Ferrante; dollar amount unknown; construction of eight townhomes; conceptual plans approved Dec. 11 by the city's Local Design Review Committee.

(8) 2321 Scranton -- Eleven Scranton; Gustave Development; $5+ million; 11 new-construction townhomes; completed in 2019.

(9) 2461 W. 25th -- unidentified future development; Solo Development DBA Sass Real Estate LLC; dollar amount unknown; in early development.

(10) 2554 W. 25th -- St. Joseph's Commons; Front Steps Housing & Services/PIRHL; $12.1 million; construction of a 68-unit apartment building; under construction and to be completed in 2020.

(11) 2570 W. 28th St. -- unidentified future project but is likely to be residential as the prospective buyer has hired RDL Architects; unidentified developer; dollar amount unknown; in early development.

(12) 3100 Barber Ave. -- unidentified future development that could expand north to eliminate the junkyard at Train Avenue and West 30th Street; Ben Beckman; dollar amount unknown; in early development.

Foran's Astrup Building redevelopment on West 25th, showing
a "new apartment site" at the corner of Castle Avenue that Foran
bought in December 2019 from John Zubal (CityArchitecture).
(13) 2707 Barber -- 2707 Barber Ave Apartments; $7+ million; Ben Beckman; conversion of former J. Spang Baking Co. building into 69 market-rate apartments; construction is nearly complete.

(14) 2658 Scranton -- Wagner Awning Building; Sustainable Community Associates; $14 million; conversion of historic industrial building into 59 apartments and basement office space; completed in 2018.

(15) 2703 Scranton -- Tappan Building; Sustainable Community Associates; $23 million; construction of a 95-unit apartment building with ground-floor commercial (bakery); under construction and to be completed in 2020.

(16) 2885 W. 25th -- Tremont Animal Clinic; TAC Holding Co. LLC; $10 million; construction of a new, larger animal hospital that is currently located on West 14th St.; under construction and to be completed in 2020.

(17) 2937 W. 25th -- Astrup Building; Foran Group Develoment LLC; $16.1 million; renovation of the former Astrup Awning Co. into 86,000-square-foot community arts center with a second, larger location for the Rincon Criollo restaurant plus a future new-construction residential building; under construction and to be completed in 2021.

The ornate former St. Michael School on Scranton is due for
redevelopment as The Arc On Scranton following its 2019
acquisition by a firm managed by Eric Lutzo (Google).
(18) 3160 W. 33rd St. -- Northern Ohio Blanket Mill; Levin Group/Derek Ng; $15 million; residential conversion of historic industrial building with 60 units of affordable housing; renovation to begin in 2020.

(19) 3140 W. 25th -- El Mercado; Northeast Ohio Hispanic Center for Economic Development ; $12 million; conversion of former H.J. Weber Co. industrial buildings totaling 32,500-square-feet into a 21-kiosk marketplace for businesses selling food and crafts; renovation to begin in 2020.

(20) 3146 Scranton -- The Arc On Scranton; Eric Lutzo et al; dollar amount of redevelopment unknown; unidentified redevelopment of 64,000-square-foot former St. Michael School; in early development.

(21) 3335 W. 25th -- Metro North mixed-use development; MetroHealth/NRP Group; $30 million in both phases; construction of two buildings totaling about 150 affordable apartments with 72 units over a Tri-C workforce development center in the first phase; construction to begin in 2020.

The largest single investment in the West 25th corridor is the
new MetroHealth main hospital building. But the hospital is
also partnering with NRP Group to build 250 apartments
over commercial uses along West 25th to help boost the
surrounding neighborhood (MetroHealth/RDL).
(22) 3400 W. 25th -- Metro South mixed-use development; MetroHealth/NRP Group; $30 million; construction of two buildings totaling 100 market-rate apartments over street-facing retail; construction to begin in 2020;

(23) 2500 MetroHealth Dr. -- MetroHealth Medical Center; MetroHealth System; $1.25 billion; construction of a 650,000-square-foot, 11-story main medical campus and associated structures, parking and greenspace to replace outdated facilities; construction underway and to be completed in 2022.

(24) 3857 W. 25th -- Ariel Selzer Center; Ariel Ventures LLC; dollar amount unknown; construction of a new international community center; in early development.

(25) 3881 W. 25th -- Emerald Alliance XI; CHN Housing Partners & EDEN, Inc.; $12.9 million; construction of 71 affordable apartments on the site of the former Brooklyn YMCA; construction to be completed in 2020.

Total investment in all of these projects, is estimated at more than $1.75 billion, although $1.25 billion of that is invested in the new MetroHealth main campus development. Even without the new hospital, the $500+ million in new development will transform the West 25th Street corridor and likely instigate additional investment in the 2020s.


Monday, December 23, 2019

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

Several major residential construction
projects are visible in this October 2018
view looking east down Euclid Avenue,
including construction cranes for the 34-
story Lumen (foreground) and 29-story
Beacon. Plus the construction elevator
guideway on the side of The Athlon, a
conversion of the 15-story Cleveland
Athletic Club, is also visible. The 10-
story Edge Apartments that opened in
2018 is at left. The May Company
residential conversion is just out of
view (
When John Knopfler and his spouse moved into their Tremont house where a large family had just moved out, each did what many are doing in Cleveland these days. They're participating in the city's Fifth Migration, bringing with it socio-economic changes unlike any experienced from the previous four migrations in the past 223 years.

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

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

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

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

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

Downtown, Detroit-Shoreway, Edgewater, St. Clair-Superior, Midtown, University-Little Italy, and even Glenville, Fairfax and Hough are seeing increased incomes and a resultant physical change in the landscape.
Some parts of Cleveland sparkle and could soon shine even
more. This is the scene on Huron Road at Tower City Center
which could see a multiple-phase development called City-
Block featuring a business incubator alongside the city's
rail transit hub plus new offices and apartments (KJP).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"Thanks to its strong economy, people from Ohio are flocking to Cleveland," he added. echoed the Apartment Guide report, but added more detail by showing the one-bedroom apartment rent increases by neighborhood. Most of the largest increases were either downtown or in and near booming University Circle, a planning district that includes Little Italy.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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