In recent years, numerous developments, worth hundreds of millions of dollars, have helped reinvent Cleveland and boost local economy. Now, a new project will change the city’s lakefront. At a cost of $700 million, it is one of the largest to ever be developed in Cleveland.
At the start of June, Cleveland City Council approved plans to develop more than 20 acres of property close to the central business district. The project calls for the construction of more than 2.2 million square feet, including more than 1,000 apartments, 800 parking spaces, 80,000 square feet of office space, 60,000 square feet of retail space, a boutique-branded hotel and a charter school serving downtown Cleveland residents. The development team consists of Cumberland Development, Trammell Crow Co. and Bellwether Enterprise Real Estate Capital L.L.C.
Ross Halloran, senior vice president of Bellwether, and Dick Pace, president of Cumberland Development, have agreed to answer some of CPE’s questions and tell us more about this impressive project.
CPE: How long have you and your partners been working on putting the project together?
Ross Halloran: Dick Pace, CEO of Cumberland Development, along with Bellwether Enterprise Real Estate Capital, L.L.C. which is originating the financing, and Gilbane, Inc. which is providing the construction, have been involved for well over a year on this development plan. Dick Pace has been involved in the development of downtown Cleveland for over 20 years and is actively involved in the Great Lakes Science Center and Rock & Roll Hall of Fame which are situated amongst the project site. Trammell Crow, the development partner, came together about a year ago to team up with Cumberland Development to respond to the RFP for the project. Trammell Crow brings national expertise paired with Cumberland Development’s local knowledge to make a strong team.
CPE: It sounds like quite an opportunity. How did you come together to work on it?
Ross Halloran: Bellwether Enterprise has had an advisory and financing relationship with Dick Pace and Cumberland Development for many years. Dick has always tackled complex projects that require a lot of vision and patience to complete. We look forward and are honored that he has tapped us once again to assist him on this transformational project for Cleveland.
CPE: What is the timeline for the three phases? When is construction set to begin, and when will you start delivering the phases?
Ross Halloran: Although there is still much to do, including negotiating the ground lease, preparing architectural plans and other development items, the development team anticipates closing on financing in the fourth quarter of this year with a groundbreaking early next year.
CPE: You were quoted as saying the project is 25 years in the making. What kinds of challenges have you encountered? And what still needs to be surmounted?
Dick Pace: The difference now from 25 years ago is that Mayor Jackson and the city have laid the groundwork for the project to be successful. Twenty five years ago, the land was controlled by the Port Authority, now the city controls the land and has made it available for a long-term lease to a developer. Additionally, the environment in Cleveland is dynamic right now and there is a surge for people wanting to live and work downtown. Young professionals and companies are moving to the downtown area.
We still have to go through due diligence, lease negotiations and construction on the project.
CPE: What will be the city of Cleveland’s involvement? Is there a public-private partnership aspect?
Dick Pace: Yes, any project this complex requires a public-private partnership. We are developing on public land and providing public access to the water so it’s a very important public project. We are not asking for public subsidies from the city, however the city is providing all the infrastructure within the right-of-ways.
CPE: How is the project financed?
Ross Halloran: There will be three phases of the project. The first phase will include at least five different buildings with four different uses. The financing will most likely be broken down into 4-5 subprojects with each having separate financing sources. For example, the Charter School will likely be a combination of public and private partnerships, while the apartments will be financed utilizing more traditional debt, equity and mezzanine financing. Each piece will require a different combination and will be attractive to different lenders and investors.
Bellwether Enterprise began conversations with pension funds, institutional investors and lenders last year and has a number of groups that continue to look for a role in the financing of the project. A more comprehensive project financing request will be available for discussion once the ground lease is finalized.
CPE: What economic impact do you expect the project to have on the city of Cleveland? And what other benefits do you anticipate it having for the city?
Dick Pace: The impact is this development will create another vibrant, mixed-use neighborhood within the city. We will be able to retain young families with school-aged children in the city, who have previously been moving out to the suburbs, because of the Charter School and the high quality education available.