Erieview, Galleria redo: steps forward, back

Proposed uses and activities for the Erieview Tower and associated Galleria were updated this week in a presentation shared by a development team led by James Kassouf as part of a request for tax abatement from the city (Berardi). CLICK IMAGES TO ENLARGE THEM.

Another big office tenant departs

A $193 million redevelopment of half-empty Erieview Tower and its associated and similarly vacated Galleria shopping mall, 1301 E. 9th St.,  is the first big project to request a scaled-down tax abatement from the city under Mayor Justin Bibb’s new abatement policy. That policy reduces the amount of tax abatement for new construction or renovation in stable, wealthier neighborhoods in Cleveland, including downtown.

The proposed abatement, a 10-year, 75-percent property tax reduction on structures only, was submitted to Cleveland City Council last month. Previously, the maximum residential tax abatement citywide was 100 percent over 15 years. The legislation would authorize the Bibb Administration to enter into an Enterprise Zone Agreement with Erieview Holdings LLC under terms of the mayor’s new abatement policy. That also includes signing a community benefis agreement such as hiring local and minority/disadvantaged/women workers. As a matter of course, the tax abatement request was referred to City Planning Commission to weigh in on the request as it is scheduled to do so today.

The estimated value of the abatement in year one is $2,167,866, according to a project summary provided by the city. The price tag of the redevelopment has gone up to $193 million, of which an estimated $123 million in total costs will be attributed to the hotel conversion and office improvements, the summary continued. Including the Galleria, $176.5 million worth of improvements are proposed to the property. Anywhere from 100-200 new permanent jobs with an average annual pay of $39,309 are to be created by the project, resulting in $182,787 in new payroll taxes in the first year. After the 75 percent tax abatement on the buildings only, not affecting land, the annual property tax revenue over 10 years is projected to be $722,622.

“The project is absolutely moving forward and financing has been secured and rate-locked — well below current rates,” said Jon Pinney, managing partner at TurnDev and at law firm Kohrman Jackson & Krantz LLP (KJK) in a June interview. Pinney is working with Erieview Holdings on the project. “The capital stack is complete and we are working with the city in partnership on a daily basis.”

Rendering of the Galleria, proposed to be redeveloped as a lifestyle center and parking, looking toward Erieview Tower, to be redeveloped with residences, hotel, Class A offices and restaurant (Beyer Blinder Belle).

As part of the referral, Erieview Holdings and its architect Berardi+ Partners submitted new information about the project including an updated use/activity plan for the two buildings — the 40-story, 529-foot-tall office tower that dates from 1964, and the 133,663-square-foot Galleria mall added on in 1987. The use stacking plan shows renovated offices totaling about 300,000 square feet above and below about 227 residences branded, leased and managed by the W Hotel chain.

W Hotel also plans 210 rooms of luxury lifestyle lodging on the lower one-fourth of the building. A high-end restaurant and bar is proposed near the top of the 703,000-square-foot tower with one floor of penthouse residences above that. More than 500 parking spaces will be provided, including existing spaces below the Galleria and by converting the first floor of the Galleria along St. Clair Avenue into indoor parking, plans show.

“The developer has entered into a contract with Marriott International to develop the project as a W Hotel and W Residences property that is expected to feature a spa, restaurant, rooftop bar, refreshed lobby entrance with access to both the residences and hotel that will have a living-room concept feel with a bar and cafe,” according to the project summary from the city.

The property was acquired by James Kassouf in 2018 from a former lender RAIT Financial Trust of Philadelphia for $17.7 million and refinanced in 2020. At the time of the acquisition, the office tower was more than 50 percent vacant. The tower has continued to lose office tenants including another high-profile business announced earlier this week.

The East 9th Street facade of the Galleria is also proposed to be renovated and simplified, including the removal of decorative masonry elements shown here (Beyer Blinder Belle).

Defense and aerospace contractor TransDigm, whose headquarters occupies about 20,000 square feet on the entire 30th floor of Erieview Tower, will depart next year for 25,983 square feet on the top two floors of the US Bank Centre, 1350 Euclid Ave., according to a mid-year market update by Downtown Cleveland Inc., formerly the Downtown Cleveland Alliance. TransDigm was ranked this year by Forbes Magazine as the 613th-largest company in the USA by annual revenues.

Other large office tenants have departed Erieview Tower in recent years for new downtown addresses. They include law firms Walter Haverfield, which is in the process of leaving now, and Weston Hurd that moved out in 2020. That meant the loss of nearly 80,000 square feet of paying tenants. Kassouf had hoped to ease that setback by landing co-working partner Industrious to fill nearly the entire 14th floor but the company walked away from the redevelopment project earlier this year.

“Our focus is on the conversion of the vacant floors to hotel/residential use,” said Anthony Delfre, managing director and principal at brokerage Brown Gibbons Lang & Company in a June e-mail to NEOtrans. “The remaining office space will benefit from the adaptive reuse of those floors that will allow for additional class A tenants. KJK is finalizing the city incentive package which is the final piece of the project’s capitalization in order to close.”

The developer has won $23 million in tax credits in the last few years to finance the tower’s redevelopment. ​​In separate awards last December, the Tower at Erieview and Galleria won a $13 million Transformational Mixed Use Development (TMUD) tax credit and then, later that same month, a $5 million state historic tax credit. This followed a $5 million historic tax credit award from August 2020. Erieview was able to win historic tax credits twice thanks to Senate Bill 225 that was passed last summer. Erieview Tower is on the National Register of Historic Places and the surrounding district is similarly registered.


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