Saturday, January 18, 2020

Cleveland & Brecksville vie for Sherwin-Williams R&D after deal dies

Scranton Peninsula is a blank canvas waiting for developers
to make their mark. That is starting to happen on the 22 acres
of the Thunderbird site in the foreground. But another 60 acres
belong to Scranton Averell and lack any development plans.
Nine of those acres were sought by Sherwin-Williams for its
new research center but that deal is now dead (Aerial Agents).
Three sources confirm that a deal for Sherwin-Williams' (SHW) favored site in Cleveland for a consolidated research and development (R&D) facility is dead. Now, the question is where will the facility staffed by about 1,000 scientists, engineers and researchers land?

City and state officials, including Mayor Frank Jackson, met with SHW executives at least twice in the past week upon learning that the planned new R&D facility was at risk of leaving Cleveland, two of the sources said. But there is no word that any new sites in Cleveland were of interest to SHW.

The clock is ticking, however. SHW executives reportedly want to announce their new headquarters (HQ) and R&D facilities in the coming week.

It is worth noting that this uncertainty doesn't extend to SHW's HQ. The massive, 1.45-million-square-foot HQ will be on the parking lots owned by Jacobs and Weston groups west of Public Square in downtown Cleveland, multiple sources say. The HQ will consolidate up to 5,000 employees from multiple offices throughout Northeast Ohio and even from other states.

The site SHW wanted for its new 350,000-square-foot R&D facility is on about 9.4 acres at 1840-1888 Carter Rd. on Scranton Peninsula in the Flats. It's a floodplain across the Cuyahoga River from Tower City Center that has been home to foundries and mills since before the Civil War.

And the site reportedly has lots of environmental problems wrought by 170 years of industrial activity. Toxins from that activity remain in the soil and must be cleaned and/or covered by new, clean fill dirt before new uses can be built there.

Landing a company with deep pockets and a thousand well-paid R&D employees seemed like a wonderful motivation to finally get that land cleaned and redeveloped after languishing for decades.

As seen from the Carter Road bridge to Scranton Peninsula,
Sherwin-Williams' Breen Technology Center is in the fore-
ground and its global headquarters is in the background, in
the Landmark Building at the upper right (Iryna Tkachenko).
But two sources said the land owner, Scranton Averell Inc., appears content collecting leases from tenants like a truck terminal and a boat storage facility. Not everyone agrees those are the highest and best uses for a downtown riverfront in a city trying to move forward in the post-industrial era, however.

A well-known Cleveland developer who agreed to speak off the record confirmed that the SHW deal with Scranton Averell was dead and put the onus on Scranton Averell President Thomas Stickney.

Another real estate source said that, while he would have liked to have seen SHW's R&D facility on Scranton Peninsula, he said that there are other developers who are pursuing many smaller-scale projects on numerous Flats properties nearby.

But when asked if that included Scranton Averell's other properties, he wrote "No...not at all LOL ...everything except their land." He described Scranton Averell's board meetings as being "like family reunions" and not held often.

An e-mail seeking comment from Stickney, sent to his Rocky River law firm's main email, was not responded to prior to publication of this article. The e-mail also included a read-receipt, to which there also was no response.

In fairness, Scranton Averell probably wasn't going to profit by spending millions of dollars to clean its land prior to a sale that might yield a similar amount. SHW probably wasn't going to spend that money either, not when cleaner alternative sites exist elsewhere in the city and even more in the suburbs.

That means that the city, county and state would have to come up with the cleanup funds. Ward 12 City Councilman Tony Brancatelli who chairs council's Development Planning & Sustainability Committee said the city has offered business development incentives to SHW but would not comment on the substance of discussions with SHW at this time.
Valor Acres is the former Veterans Administration Hospital
site in Brecksville, located in southern Cuyahoga County.
Planned are hundreds of thousands of square feet of offices,
restaurants, shops and parking (DiGeronimo Companies).
Cuyahoga County has hired Ulmer & Bern LLP to finalize a framework of as yet unidentified incentives pledged to SHW for its new HQ and possibly its R&D facility as well.

Last spring, a representative of the DiGeronomo family said they were in contact with SHW about locating its R&D facility and possibly the HQ at Valor Acres in Brecksville, set in southern Cuyahoga County.

Valor Acres is the former Veterans Administration Hospital that was closed in 2011 and relocated to Cleveland's University Circle. The VA Hospital land was donated to the City of Brecksville.

DiGeronimo Companies won the rights to develop the 103-acre VA site. The company also spent million of dollars over the last two years to clear and clean the property so that it is development-ready.

The DiGeronimo representative would not comment on whether SHW has chosen Valor Acres for its R&D facility.

That facility would consolidate 400 research jobs out of SHW's John G. Breen Technology Center on Canal Road in downtown Cleveland, up to 400 former Valspar Corp. R&D jobs out of Minneapolis, and potentially several hundred research jobs from SHW's Automotive and Performance Coatings groups in Warrensville Heights.

David Ebersole, Cleveland's director of economic development, also would not comment.


Friday, January 17, 2020

Two new jobs that could change Cleveland's landscape forever

Cleveland State University's $48 million, 100,000-square-foot
Center for Innovations in Medical Professions Building that
opened in 2015 was a toe in the water for the university. It is
taking a deeper dive into health care research and education
that, along with another new bit of news, could transform the
region's economy (CSU). CLICK IMAGES TO ENLARGE
The creation of two jobs can change a region in a significant way. Cases in point are two medically related positions -- one that was just filled and the other that was recently advertised.

Yesterday, Cleveland State University (CSU) hired a new employee that will probably be a game changer for Cleveland and Northeast Ohio. It could ultimately lead to thousands of new jobs. Yes, thousands.

And, weeks ago, Canon Medical Research USA Inc. posted a job listing for a new position at its Cleveland-area offices -- director, magnetic resonance imaging (MRI) research and development (R&D). It could also lead to thousands of new jobs in the future.

First, let's delve into the more immediate news that CSU has hired Forrest Faison III, former U.S. Navy Vice Admiral and served as the 38th Surgeon General of the Navy and chief of the Bureau of Medicine and Surgery from 2015 to 2019.

He was named senior vice president for research & innovation/chief healthcare strategy officer at CSU. According to a CSU press release, he will oversee the broad effort to unify and expand the university's educational, outreach and scholarship efforts in all aspects of health care, while spurring the continued growth of Cleveland as a center for medical innovation.

Consider that there is only one publicly funded medical school in Northeast Ohio -- the Northeast Ohio Medical University (NEOMED) way out in Rootstown, between Akron and Youngstown.

CSU recently partnered with NEOMED to create the NEOMED-CSU Partnership for Urban Health, which has its physical presence in the 2015-built Center for Innovations in Medical Professions Building at the southwest corner of Euclid Avenue and East 22nd Street.
With the hiring of Forrest Faison, CSU is launching a bold
and ambitious effort to position itself as one of the nation's
notable medical and health care research centers (Google).
The 100,000-square-foot, $48 million building also houses CSU's College of Sciences and Health Professions as well is the CSU School of Nursing. The first medical students to graduate from NEOMED-CSU were in 2018. And the program is small -- only 35 students. Consider that effort a toe-in-the-water for a grander vision that CSU has in mind.

Yes, Case Western Reserve University (CWRU) has a medical school but it's not a publicly funded school. Its tuition is beyond the reach of some potential applicants who end up in state schools in other cities.

While Cleveland Clinic gets medical students and interns through CWRU, University Hospitals Health System (UHHS) and the MetroHealth System have to import most of their medical students from outside the region.

That's part of what Faison will seek to address. He will develop new pathways and strategies designed to enhance the university’s status as a nationally recognized urban research university. Faison's national and even global stature immediately puts CSU on the medical education map.

Some potential outcomes?

Look for significant new medical school and research buildings constructed on CSU's downtown Cleveland campus in the coming years, said a source closely connected to this effort, but who was not authorized to speak publicly yet on it.

The new medical school and research facilities will likely feature thousands of students and research jobs and be a magnet for many millions of dollars of state and federal funding for education and research.

Not only will CSU's effort provide a steady and voluminous supply of students and interns for UHHS and MetroHealth, but it will likely strengthen the region's already robust healthcare research scene, the source said.
Cranes tower over MetroHealth's new $1.2 billion campus on
West 25th Street in Cleveland. It is probable that a similar
scene will soon exist on CSU's campus as the university
greatly expands its medical education and health care
research presence in Cleveland (UrbanOhio).
“(Faison's) leadership will also be critical to further our efforts to create the health care programs, technologies and workforce that will improve the lives of people throughout the community and enhance the continued advancement of the regional economy,” said CSU President Harlan Sands.

"Welcome to Cleveland, Forrest," said Akram Boutros, president and CEO of MetroHealth on Twitter. "All of us at MetroHealth look forward to working with you and your team at CSU."

Simultaneously yet independently, Canon Medical Research USA's desired hiring of a director of MRI R&D could also have significant future ramifications for Greater Cleveland's economy. First, let's consider where Canon is coming from.

Canon, long known for cameras and copiers, has wanted to expand its presence in the medical imaging business in a big way. So in 2016 they acquired industry giant Toshiba Medical Systems for $6 billion. Underneath Canon Medical System's big umbrella is tiny Canon Medical Research USA, based in Greater Los Angeles.

And last fall, Canon acquired Quality Electrodynamics LLC (QED) of Mayfield Village. Canon has designated its medical business as a new business that will expand and drive future growth for the company. The acquisition of QED furthers this strategy.

“This new relationship is a tremendous opportunity for QED and its 175 associates to continue to add new customers and products and will further drive QED’s growth and employment levels in northeast Ohio,” said QED Board member Albert B. Ratner in a written statement.

Canon's goal is to develop its research arm so that it isn't tiny anymore. Indeed, they want it to be a giant in medical imaging and an expanded R&D program will get them there. Interestingly, between Canon Medical Research USA's two principal R&D locations -- Chicagoland and Greater Cleveland -- the site where this director of R&D will be based is in Greater Cleveland.

That's a great sign for the potential expansion of this significant R&D activity. And, when combined with CSU's commitment to medical education and research, as well as CWRU's and Cleveland Clinic's established medical research capabilities, it's a sign that Greater Cleveland is on a path to strengthen its global position in this growing field.


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.