Coronavirus crisis casualties in Cleveland real estate

The 12th+AVE condos on East 12th Street downtown will
instead be apartments as Geis Companies anticipates that
renting the homes will be easier than selling them in the
economic aftermath of the coronavirus crisis (GLSD).
CLICK IMAGES TO ENLARGE THEM

UPDATED APRIL 10, 2020

While the temporary scaling back of spending for the Sherwin-Williams’ (SHW) new headquarters+research (HQ+R&D) project is probably the most notable impact from the coronavirus crisis, it isn’t the only one in Greater Cleveland.

It’s important to note that no real estate development project, so far, has completely succumbed to the crisis. But several have been delayed or modified to deal with our suddenly changed economic reality.

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With the SHW HQ+R&D project, CEO John Morikis said in a video and a letter to employees this week that its sales remain solid during the crisis. However, SHW is reducing spending on HQ+R&D consultants to support the company’s social distancing and remote staffing activities.

The need for the HQ+R&D remains — to consolidate employees from multiple locations into fewer facilities — and SHW staff continue to work on it. So SHW’s plan to move into its new HQ+R&D facilities in 2023 also remains intact.

A preliminary massing of the Sherwin-Williams headquarters
in downtown shows a potential first phase in blue/green with
later phases in red and yellow. The project continues albeit
with less use of outside consultants to save money for the
company’s coronavirus recovery efforts (WKYC).

The London Stock Exchange Group’s (LSEG) ELITE initiative headquarters project has reportedly been pushed to the back burner during the crisis. The international business support program had hoped to establish its Cleveland’s presence in the first quarter of 2020.

A downtown office with about 40 employees at the outset was envisioned — and reportedly still is. But with domestic travel severely reduced, international travel virtually halted and the need to help businesses and employees recover from the crisis, the LSEG’s attention is not focused on expansion at this time. There is every reason to believe that its Cleveland headquarters project will restart when the “all-clear” is given.

A Transformational Mixed Use Development (TMUD) tax credit pending in the Ohio House of Representatives isn’t likely to pass anytime soon, due to the crisis.

Backers had hoped that the legislation could be moved out of the House’s Economic and Workforce Development Committee and passed by the full House last month, with a possible signature by the governor in early April. That could allow three years of tax credits, starting before the end of the state’s current fiscal year that ends June 30.

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Renovation of 925 Euclid into The Centennial would get a big
boost from the passage of the Transformational Mixed Use
Development tax credit pending before the Ohio General
Assembly. Unfortunately, the legislation isn’t going any-
where anytime soon as all non-essential work by the
legislature has been halted. But an Ohio economic
recovery program may offer a boost (LoopNet).

But the Economic and Workforce Development Committee hasn’t met since Feb. 12 and won’t be meeting again anytime soon. Not only has the crisis suspended all non-essential activity by the state legislature, but committee Chairman Paul Zeltwanger was named on Monday as chairman of the Ohio 2020 Economic Recovery Task Force.

“I cannot answer any questions about when the Economic and Workforce Development Committee will meet again or what will be on the agenda. I genuinely do not know and would not want to speculate,” said Josh Ferdelman, Rep. Zeltwanger’s legislative aide.

However, Ferdelman said the new task force and Rep. Zeltwanger’s leadership of it could move forward some new economic development initiatives to spur growth in the wake of the crisis.

“I imagine there?s significant overlap of interest between the two committees,” he said.

Two Cleveland projects that were considered candidates for the TMUD tax credit were Stark Enterprises’ nuCLEus and Millennia Group’s The Centennial. However, both reportedly had secured other equity to possibly move forward as early as this summer. It is not known if either project is still a go as there was no response to e-mails seeking comment from principals of both companies.

Proposed since 2014, Stark Enterprises’ nuCLEus development
in downtown Cleveland may have hit a new snag as the corona-
virus crisis has slammed?the retail sector. That comprises a sig-
nificant portion of Stark’s business revenues (KJP).

More recently, Chief Operating Officer Ezra Stark didn’t respond to an e-mail requesting more information about Stark Enterprises’ financial and employment situation. Rumors have swirled recently about layoffs of property managers and other staff as the company owns many retail properties whose tenants had to close under governmental orders and may not be able to pay their rent.

Of Stark’s 36 properties, 19 are retail centers and three are student housing complexes. That doesn’t include Stark Restaurant Group’s ownership and operation of 11 Menchie’s Frozen Yogurt franchises in Ohio and Pennsylvania which are still open for take-out, pick-up or delivery.

Another sign of the times is that Geis Companies’ 12th+AVE condominiums, now under construction on East 12th Street and Hamilton Avenue in downtown Cleveland, won’t be marketed as condos. Instead, Geis will rent them out as apartments due the economic fallout from the coronavirus crisis as fewer buyers are likely to have the money to afford the condos when they hit the market. Previously, 31 condos were planned.

“We?ve decided to move forward with the building as an apartment project rather than a condominium project,” said Mollie Neale, executive vice president of Geis Residential Management, LLC. “The property will be comprised of 35 one- and two-bedroom units with high-end features and finishes. We have not finalized pricing yet. However, the units will be around $1.90 per square foot and we anticipate opening winter 2020-21.”

Construction on the 12th+AVE building at left has been under-
way since December. But the building will be marketed as
apartments rather than condos. That’s a similar fate to
the building at right that was constructed in 2008
as condos but is now apartments (KJP).

Condos were removed from the Multiple Listings Service and the?12th+AVE Web site?has been taken offline to redesign it around the apartment offerings. Condos were to range in size from 1,147 to 2,495 square feet with list prices from $300,000 to $685,000.

Construction continues as it has since December. It is doubtful that a full recovery from the coronavirus crisis will occur by the time the time the building opens. That is what makes it different from a?more expensive condo development in Rocky River?which could see construction start by summer. It isn’t due to be completed until mid- to late-2021, hopefully after an economic recovery is underway.

Ironically, 12th+AVE is next to a 62-unit, 10-story residential building in the Avenue District that hit the market as condos at the start of the Great Recession in 2008. Difficulties in selling the condos and other financial problems forced then-developer The Zaremba Group to market the remaining units as apartments.

It was another blow to efforts?intent on developing a stronger for-sale residential market in downtown Cleveland. Geis bought the 10-story building, which cost Zaremba $25 million to build in 2006, for $15 million last year. There, monthly apartment rents range from $1,450 for the smallest one-bedroom unit to $3,675 for a penthouse, according the Avenue District Web site.

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