Issuu

VOL. 39, NO. 19

MAY 7 - 13, 2018

Source Lunch

Ron King, GM of convention center and global center Page 27

Focus: Real Estate

CLEVELAND BUSINESS

Builders are bullish on the Cleveland housing market. Page 13

DINING

THE NEW ANCHORS Restaurants are key to lifestyle centers’ live-work-play style By JOE CREA clbfreelancer@crain.com

Remember when food courts were super cool? Me neither. At best, they remain a fixture in shopping malls across the land, an oasis where almost every member of the family can find something appealing to eat, then keep on shopping. In a one-size-feeds-all world, food courts represent a source of quick fuel served fairly cheaply. And there’s a sort of safety in their sameness. Whether you’re in Orlando, Memphis or Seattle, just about every suburban retail shopping mall seems to boast a Sbarro, Chick-fil-A, Panda Express and Cinnabon. They’re as emblematic of old-school retail as the big-box department stores that anchor the malls’ corners. Except those brick-and-mortar monoliths are endangered, as witnessed by scores of headlines heralding bankruptcies and closings. Online shopping and shifting consumer behavior are giving way to a different model: lifestyle centers boasting a fresh, new message. SEE ANCHORS, PAGE 8

Restaurants such as Bar Louie in Crocker Park are an increasingly essential part of the draw of lifestyle centers. (Tim Harrison for Crain’s)

EMPLOYMENT

FINANCE

Wanted: Entry-level candidates Third Federal sticks Team NEO report says demand for such positions is exceeding supply with its 80-year plan By JAY MILLER

jmiller@crain.com @millerjh

New data in an updated report from Team Northeast Ohio, the regional economic development nonprofit, finds that the region isn’t keeping up with the demand for entry-level job candidates in the fields

that will have the greatest need for new workers between now and 2020. Having a pool of available, qualified talent is often critical in decisions businesses make about where to expand. Michael Stanton, regional talent manager at Team NEO, said the hope is that Team NEO will be able to show growing businesses that they should consider expanding in Northeast Ohio because the region is paying

attention to their workforce needs. Another goal of the report, “Aligning Opportunities in Northeast Ohio,” is to make businesses, educational institutions, job seekers and students more aware of the both the opportunities available and the need to shore up the system that delivers technical education. In particular, one of its goals is to get businesses and the educational system working together better. “It’s going to take civic, business, higher ed and workforce all collaborating to figure this thing out,” said Jacob Duritsky, Team NEO’s vice president for strategy and research. “You talk to a business and they say, ‘I can’t find the right workers. They’re not graduating people with the skills I need to do what I need.’ Then you talk to a university and they say, ‘Businesses won’t talk to us. They won’t tell us what they need.’ ” SEE TEAM NEO, PAGE 21

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

As most banks target more aggressive growth and diversification, Third Federal Savings and Loan Association of Cleveland is more focused on serving the housing business that’s been its hallmark for the past 80 years. But that’s not a big surprise for a bank that prefers to operate out of its own playbook and succeeded along the way. “We just look at things a bit differently,” said Third Federal chairman and CEO Marc Stefanski. “I look at it in terms of impacting people’s lives in a positive way, and if we’re making a difference in people’s lives for the better.”

Clevelandfounded Third Federal, which at nearly $14 billion in total assets is the market’s largest thrift, is known in the market as a particularly conserStefanski vatively run bank. A prime example of this is the bank’s uncommonly high capital ratio. That’s the ratio regulators look at that compares a bank’s equity capital with its risk-weighted assets. Third Federal has a total capital ratio of 20.2% today, with a tier 1 capital ratio (i.e. core capital) of 10.6%. Regulators consider a bank “well-capitalized,” its best rating in that metric, at a tier 1 ratio of 6%. SEE STEFANSKI, PAGE 26

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CRAIN’S CLEVELAND BUSINESS

Clinic strengthens grip in Sunshine State By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

As Florida experiences a wave of independent hospitals looking for partners, Cleveland Clinic is seizing the opportunity to establish a network of hospitals in the southeastern region of the Sunshine State. While the Clinic has long had satellite campuses — in Toronto, Las Vegas, Abu Dhabi and Florida — this represents a new effort to build a regional system around one of the Clinic outposts. The system is looking at acquisitions as far as 130 miles north of its main Florida location in Weston, where the Clinic is also building a new bed tower to keep up with local demand. “You can start kind of thinking about how we could build a system in Southeast Florida that really values high quality care and at the same time works hard to decrease costs, and that’s a huge benefit to the community there,” said Dr. Wael K. Barsoum, CEO and president of Cleveland Clinic Florida. The system is in talks to bring four hospitals into the system — Indian River Medical Center and Martin Health System’s three hospitals. The Clinic has signed a letter of intent with both Indian River and Martin Health and is in negotiations with each to reach definitive agreements. The Clinic also is a finalist in Boca Raton Regional Hospital’s search for a partner, Barsoum said. “In all three of these hospital systems, all have very good clinical reputations,” Barsoum said. “I mean, they’re outstanding hospital systems. So again, they fit in with the kind of phenotype of the types of hospitals

Cleveland Clinic Florida’s academic medical center in Weston has more than 200 physicians with expertise in 40 specialties. The Clinic is adding a five-story bed tower to the campus. (Contributed photo)

that would like to join the Cleveland Clinic.” Meanwhile, Cleveland Clinic Florida is investing $328.5 million in a new five-story bed tower on the Weston campus, slated to open in August, and a 73,000-square-foot outpatient facility in Coral Springs, scheduled to open in July. The new bed tower adds 75 beds to the Weston facility’s often-full 155 beds. “In terms of being able to serve our patients with the best possible care, we recognized that we had to grow,” Barsoum said. The timing of multiple deals at once has been largely driven by the independent hospitals looking for partners, he said. Allan Baumgarten, a Minnesota-based consultant who studies health care markets, including in Florida and Ohio, said there are several hospitals in Florida currently going through the process of finding a

bigger partner. Remaining independent is increasingly challenging for such hospitals, which don’t have the leverage in negotiations with insurers, suppliers and more, and may have trouble raising capital to make major investments. “So you see a lot of these independent hospitals basically saying we can’t remain independent; we have to join one of the larger systems,” Baumgarten said. Steven G. Ullmann, professor and chair in the Department of Health Sector Management and Policy in the University of Miami’s School of Business Administration, wrote in an email that South Florida’s health care market is “highly competitive” with a range of types of hospitals and ownership models. Cleveland Clinic is currently a single hospital system, which he wrote is “a true rarity down here.” “And competition for the paying

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patient is significant, especially in a time of declining revenues in the health care arena,” Ullmann added. Florida has seen a lot of competition, especially for specialty care, Baumgarten said. Expanding through acquisitions of independent hospitals will help solidify the pipeline of patients from those geographic areas who will go to the Clinic when they need high-end specialty care, rather than Mayo Clinic in Jacksonville, Florida Hospital in Orlando or the Baptist Health System in South Florida, he said. “They want to benefit from having a greater system of feeders into their facilities and their specialty practices,” Baumgarten said. “It’s an expensive way to do it, but I think they see that given the fact that all these hospitals are in play and getting snapped up, that if they don’t make the investments and don’t make some of these acquisitions, then it will be the other

hospital systems that get the flow of patients coming out of those communities and not the Cleveland Clinic.” The Clinic was chosen in January to take over Indian River Medical Center, a county-owned hospital in Vero Beach, located roughly 130 miles north of Weston. The system reportedly offered up to $352 million in financial consideration for the hospital. Martin Health System — in Stuart, Fla., about 95 miles north of Weston — announced in March that it had entered into an agreement to explore opportunities to become a full member of Cleveland Clinic. The announcement came just two months after the Clinic and Martin Health System announced that they had entered into a cardiovascular affiliation with plans to explore other opportunities to work more closely together. Boca Raton Regional Hospital, which the Clinic is a finalist for in its RFP process, is located about 25 miles northeast of Cleveland Clinic Florida. “If you look at Northeast Ohio, we’ve built an incredible care delivery system where Cleveland Clinic quality care is available to just about everybody in their backyard,” Barsoum said. “Our goal for Southeast Florida is to be able to provide that same high-quality care locally and not just in Weston, and not just in our present Cleveland Clinic facilities.” The strategy in Southeast Florida has the potential to benefit Cleveland Clinic facilities throughout the system, including in Northeast Ohio, he said. “So I think there are key things in Florida that we can do well and that will benefit the entire health care system, just as today we’ll learn something from the group in Abu Dhabi or we’ll learn something from Cleveland.”

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Partnership could ease bankruptcy process By JEREMY NOBILE jnobile@crain.com @JeremyNobile

A service that has been described as the TurboTax of the bankruptcy process is being tested in Ohio through Akron’s Community Legal Aid in what’s a clear sign of technology’s slow but inevitable adaption in the legal world. While the Akron nonprofit is the only group in the state partnering with Upsolve for a one-year pilot program to help low-income clients facing bankruptcy, it joins several other legal aid groups doing so across the country. The programs are being paid for through grants from the American College of Bankruptcy and technology improvement grants from the federal Legal Services Corp., which funds local legal aid groups. The hope, said Community Legal Aid executive director Steven McGarrity, is that using Upsolve — which was designed by some Harvard University students and generally helps in the bankruptcy process by guiding people through more routine and procedural steps like filing paperwork — will free up attorneys to work with other clients and additional cases. Legal aid groups always are faced with more requests for help than they can serve, and their federal funding has been targeted by the Trump administration for cuts the past two years through the suggested elimination of Legal Services Corp. Resourc-

es already are stretched thin. Community Legal Aid gets more than 1,200 requests for bankruptcy support annually, McGarrity said, and “we just don’t have the staff to help all those.” With Upsolve, legal aid volunteers can work with low-income bankruptcy clients through what’s known as limited scope representation, which is exactly what it sounds like. Attorneys get involved in cases on a limited capacity only when they’re really needed, like reviewing completed paperwork or appearing in court. Critical information gathering, for instance, can be handled through Upsolve, including tasks like pulling tax records, credit reports and assembling a list of creditors. So it streamlines some parts of the process and guides the client through the steps, freeing up an attorney’s time. Consumer bankruptcy can still be very complicated and legal aid groups don’t advocate any client going through it alone. Mistakes can be quite costly, amounting to thousands of dollars or lost property. “But we are limiting it to people with really, really simple Chapter 7 bankruptcies,” McGarrity said. “If something blows up, we are there as backup. We’ll step in and provide assistance as needed.” He’s hopeful that the process could help Community Legal Aid increase the number of bankruptcy clients it helps by 50%. The partnership pilot started in January. So far, Community Legal Aid has applied limited scope repre-

“Any tool I can use that lets me competently and ethically solve someone’s legal problems, I’m willing to give it a try.” — Steven McGarrity, Community Legal Aid executive director

sentation and Upsolve to 10 cases, and there are 25 to 30 cases already lined up with a similar dynamic. A March training session attracted about 20 new volunteers to learn about the program. “Any tool I can use that lets me competently and ethically solve someone’s legal problems, I’m willing to give it a try,” McGarrity said. “We will know in a year if it really works. But I think it’s too important for the number of people we could help to pass up the opportunity.” There has been pushback, though,

by some attorneys who have argued that removing the attorney from a consumer bankruptcy case to any extent could be potentially detrimental. The American College of Bankruptcy has not taken a position on whether using Upsolve is a good or bad idea. Organizations that received its funding to support a pilot program, like Akron’s, encouraged the college to support them — and so it did. While that seems like a tacit endorsement of the service, the college is careful about saying that’s not exactly the case. “We see it as a way to enable their pro bono attorneys to do more,” said Janet Bostwick, pro bono chair for the American College of Bankruptcy Foundation. “They say this is one way they can do that, so we’re giving them money to try it out.” A January letter to the editor in the Akron Beacon Journal from Akron bankruptcy lawyer Marc Gertz argued that the intricacies of a bankruptcy case are so critical, nuanced and complicated that even something like paperwork shouldn’t be handled without attorney oversight. And McGarrity has personally addressed complaints from other lawyers who have admonished Community Legal Aid for promoting the service. At odds are the philosophical differences in how much of a role attorneys should play in a bankruptcy case. One concern might be whether this approach actually could take away work for some bankruptcy clients. As far as legal aid goes, though,

that wouldn’t really apply, as much as clients served by those groups are at such a low-income level they wouldn’t be able to afford a private attorney anyway. “Looking at the onset of technology is making these people nervous. That is true,” McGarrity said. “But my objective as an attorney (in legal aid) is different than an attorney in private practice. I want as much AI, as much automation as possible if it lets me serve more people.” Whether the technology will find its way into more typical bankruptcy cases could look more clear after Upsolve has a chance to be tested through various legal aid groups. So whether it could actually affect the profession, it’s too early to say. But as far as McGarrity is concerned, it’s not a bad thing if it does. And technology is bound to change the legal services industry more than it already is. “You can’t change the reality that technology is going to make it possible for some attorneys to help a lot of people if they switch their business model to do that,” he said. “People who will sit and wait in offices and represent people in traditional ways, well they just can’t afford that anymore. Eventually, they’re just not going to have any clients.” As far as how the pilot program should work in Akron, McGarrity feels positive. “We are optimistic it’s all going to work out well and have a big impact on the number of people we can help,” McGarrity said.

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CRAIN’S CLEVELAND BUSINESS

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Mike Kubinski took a risk when he left his day job as a graphic designer to help open Cleveland Clothing Co.’s signature store on East 4th Street. Now, with three stores and a Lakewood warehouse, CLE Clothing will be opening two more locations — one at Summit Mall in Fairlawn and the other at the Van Aken District in Shaker Heights — within a span of few months. “There’s always risk involved,” said Kubinski, who founded CLE Clothing with partner Jeff Rees in 2008. “No one would get anywhere without taking risk. That’s what we always go back on.” Still, he admits, “The retail world is kind of a scary time right now.” The industry has been beset by oversaturation and online competition. One segment that has consistently improved is custom T-shirts, which, according to IBISWorld, had an annual growth rate of 9.5% from 201217. But that study focused on online original designs, and IBIS noted that the industry has “become increasingly fragmented,” with the number of operators increasing by an average of 9.9% each year. Online revenue ranks a “close second” to the funds generated by CLE Clothing’s East 4th Street spot, which Kubinski said is the company’s “beast.” There, the company shows off its hometown pride, with shirts that tout Cleveland’s rock-and-roll status, a line of “The Land” gear and multiple tributes to the Buzzard (aka WMMSFM, 100.7). A few years after its signature store debuted, CLE Clothing opened its Uptown location on Euclid Ave. in University Circle, and a mini-shop at Crocker Park followed in the summer of 2016. (Its first store, Native Cleveland, which catered to local artists and opened in the Collinwood neighborhood in 2010, closed last year.) Kubinski said sales at CLE Clothing’s three brick-and-mortar locations jumped by an average of 42% in the first quarter of 2018, and online revenue soared 85% year-over-year. That was a welcome sign after a 2017 that, while solid, didn’t stand a chance when compared to 2016, when the Cavs won Cleveland’s first major sports championship since 1964 and the Indians finished a win shy of a World Series title. “We kept looking at our numbers for last year, and it wasn’t like 2016,” Kubinski said. “We eventually said, ‘Wait, that was an anomaly of a year.’ We started comparing it to 2015, and we felt better about ourselves.” A strong first quarter this year, combined with the upcoming expansion, has added to that belief. Kubinski said the two soon-to-beunveiled stores were the result of the locations recruiting CLE Clothing. “Nothing was ever really planned,” he said. “We just thought it was fun to do things. The downtown store opportunity came along, and everything changed after that. We never really sought out anything.” The Summit Mall location could open in June, and will likely be a “5050” split between Akron and Cleveland gear.

CLE Clothing Co.’s Uptown location on Euclid Avenue opened a few years after its flagship on East 4th Street. (Contributed photos)

“We hope it can turn into another East 4th Street for us,” Kubinski said. CLE Clothing has an “Ohio Love” brand that it launched in 2010 and “didn’t really work on its own,” Kubinski said. The hope is to incorporate that with its new Akron-centric designs. The space, which Kubinski envisions as “a cool connection between Akron and Cleveland,” will have a large map of Northeast Ohio on the floor. The move “makes a lot of sense for them and a lot of sense for the mall. People recognize that brand,” said Dean Phillips, the manager of Summit Mall. CLE Clothing’s store at Van Aken, a mixed-use development in Shaker, is tentatively slated to open in August. But Kubinski’s experience with new construction “is it’s never that set date.” Still, the response at Bloom & Buzz, an April 13 block party that gave visitors a preview of what’s to come at Van Aken, got CLE Clothing excited about the site’s potential.

“Nothing was ever really planned. We just thought it was fun to do things. The downtown store opportunity came along, and everything changed after that.” — Mike Kubinski, CLE Clothing co-founder

CLE Clothing Co. aims for its products to have a long shelf life.

“It was only three hours, and we looked back after it was over and said, ‘We did really good for three hours,’ ” Kubinski said. “We had only Shaker and Van Aken products there. The response was awesome.” Location No. 5 will be similar in size to the East 4th Street store, only this one will be deeper and have three walls — instead of CLE Clothing’s typical “two walls and a line of windows,” Kubinski said. The entrepreneur, whose retail business started “as a side-hustle hobby,” used to be CLE Clothing’s only designer. In the past few months, though, the company promoted Kayla Frisco and Jamie Boyer, its general managers at the University Circle and East 4th stores, to its “core” store operations team, which is led by director of operations Laura Kubinski (Mike’s wife). Assistant GMs Matthew Childers and Phoebe Thomas were also promoted to the core team to assist with graphic design, marketing, merchandising and social media. CLE Clothing — whose employees now number more than 50, the majority of whom are part-time sales associates — also has a private client business, Local Champion, that works on custom designs. When its signature spot opened its doors six years ago, CLE Clothing’s online sales “actually dropped,” Mike Kubinski said, as Northeast Ohio natives waited for trips home to buy more apparel. Now, the company, as it adds to its brick-and-mortar total, “is actively pursuing” an online bump, which the co-founder said is working. And while some companies in Cleveland’s rabid T-shirt industry fervently look for what Fresh Brewed Tees founder Tony Madalone calls the “home runs” — which Madalone told Crain’s “can pay the bills for a few months” but are “a lot harder” to hit in today’s fragmented marketplace — CLE Clothing takes a different approach. “Those things are cool,” Kubinski said of the big-money hits. “We’ve tried it, but it’s not really what we are and what we do. When I design a shirt, I think, ‘Am I going to wear this?’ But I also want to make something. “Are my kids going to see this shirt in a vintage store 20 years from now and think, ‘This is pretty cool’? ” he added. “We want our shirts to have a shelf life. We don’t just focus on sports. We try to work with the city’s history and the city itself.”

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Sandusky-based Civista Bank continues to evolve from a somewhat quiet community bank to one of the marketâ€™s more aggressively growing institutions. For example, the bank has a greater focus on commercial business, a heightened presence in Ohioâ€™s largest MSAs and a fresh acquisition unfolding in Greater Cincinnati that will increase its total size by about 30%. But thereâ€™s still more ground to cover. â€œWe think we compete well against our bigger brothers because they have more layers, and we should be able to respond quicker than them,â€? said Dennis Shaffer, who was minted as the bankâ€™s latest president and CEO at the start of 2018, accepting the reins from now-chairman Jim Miller. â€œWe think we are at this ideal size, but we want to continue to grow the bank because we think we can get a little more efficient." Civista, whose roots date back to 1884, recently announced an acquisition of United Community Bank, a firm founded in 1914 that offers an attractive, low-cost deposit base. The bankâ€™s $546 million of assets will grow Civista to a size of about $2.1 billion when the deal closes around the third quarter. UCB is about one-third of Civistaâ€™s size. And the deal, valued at $144.4 million, is being financed through a mix of cash and stock, with the shares carrying much more value than years past. That deal helps show how the bank has improved. Its last acquisition came in 2015, when Civistaâ€™s parent company acquired TCNB Financial Corp. â€” the holding company of Dayton-based, $102.5 million-in-assets The Citizens National Bank â€” for about $17 million in cash. In September 2014, when that TCNB deal was announced, Civista stock was valued at just less than $10 a share. As of May 4, it was trading at $22.73. The bankâ€™s increased value is a good reflection of a successful growth strategy and strong performance in the market. Civista has been an active acquirer for a bank of its size. But whatâ€™s different about the bank today is the improved platform from which itâ€™s operating. That points to a transformation of its business model, because the bank faced some stretched capital levels during the recession. â€œThey have, in recent years, modified their strategy a bit,â€? said Charlie Crowley, a managing director at Boenning & Scattergood. â€œThey havenâ€™t totally changed it, but they realized they had strong market share in good, solid markets like Sandusky, Norwalk and Shelby, but those markets werenâ€™t offering a lot of growth.â€?

Covering Ohio Under Shaffer â€” who joined Civista in 2009 from Huntington Bank, where he was a commercial real estate lender who ended up there through some of Huntingtonâ€™s acquisitions â€” thereâ€™s been an increased focus on commercial lending. The team of lenders and relationship bankers has grown, while locally Northeast Ohio market executive Bob Katitus, who joined the bank in 2010, has been bringing a similar

Civista Bankâ€™s Sandusky headquarters (Contributed photo)

approach to the Greater Cleveland region. The bankâ€™s model now is to control the rural Ohio markets where it has focused the past 134 years and is domiShaffer nant, and put those dollars to work in larger MSAs. It can do that in all the major cities, including Columbus, Cleveland, Dayton and now Cincinnati through its latest acquisition. That deal also branches the bank into parts of Indiana and the northern tip of Kentucky. â€œItâ€™s an interesting strategy,â€? Crowley said. Itâ€™s not unlike what we are seeing from, for instance, some Pennsylvania banks or Mahoney Valley banks looking to get more in markets like Cleveland, Akron, Canton, Columbus, where there has been a little more loan growth that can be complementary for a good deposit base in slightly more mature markets.â€? Shaffer acknowledges he and his colleagues have been shaping lending to have a greater commercial focus while the bank continues to serve its bread-and-butter rural markets, simultaneously adding bankers and offices throughout Ohio in places like Mayfield Heights and Westlake. â€œWe do now almost operate like two different banks,â€? Shaffer said. â€œOur model is to gather deposits in the rural markets where there is less competition, take those, serve the needs of the community, then lend out those excess deposits elsewhere.â€? Thatâ€™s the idea with United Community bank, too, which Shaffer said was a compelling deal for various reasons. It completes Civistaâ€™s efforts to grow a footprint in Ohioâ€™s five largest MSAs, present fresh business opportunities outside the state and presents a low-cost base of loyal, sticky deposits â€” they tend to be loyal simply because thereâ€™s less competition in those rural areas, which also drives down deposit costs. That deal has other perks, too. Larger size means the bankâ€™s in-house lending limit will grow to about $20 million, with its legal lending limit edging $40 million, Shaffer estimates. Its loan-to-deposit ratio drops from 96% to 87%, and it lowers Civistaâ€™s total CRE to total risk-based capital ratio (the regulatory guidance is to not be much more than 300% there, and the deal will drop Civista to about 223%). All combined, besides gaining size and more deposits, the deal ultimately gives Civista even more runway to

continue its pursuit of commercial deals and larger projects. That strategy is why more development projects around Cuyahoga County are carrying the Civista name. Interestingly, the bank changed its name to Civista a little more than three years ago. It was previously known as First Citizens Banc Corp. But the bank faced name recognition issues because there were some 16 banks in Ohio and 360 nationwide with some form of â€œcitizensâ€? in the name. Shaffer recalls how the bank often fielded complaint letters that were meant for others. The name change was a sign of the bankâ€™s efforts to differentiate itself as it sought growth and commercial deals. The bank has made other strides from there. A pivotal moment came in June 2017, when Civista (NASDAQ: CIVB) joined the Russell 2000 Index and raised about $35 million of capital. Despite the ongoing challenges for banks facing increased technology and regulatory costs, Civista thinks the market is actually easier to do business in today â€” at least in terms of differentiating itself from the competition. Pushing nearly $2 billion in assets, Civista is positioning itself as one of the larger community banks in the market with control over some rural areas bigger banks arenâ€™t targeting. But in the larger markets, where Civista may even occasionally compete with the marketâ€™s biggest super regional banks â€” like KeyBank, Huntington Bank, JPMorgan Chase Bank, U.S. Bank and Fifth Third Bank â€” Katitus thinks that the landscape only lets the bank better separate from larger peers. â€œItâ€™s almost like, the more banked the metro is, (those banks) are competing against each other all the time. They treat customers the same way. We can differentiate there,â€? Katitus said. â€œThe more overbanked a region is from a super-regional perspective, then the greater our opportunity is.â€? Civista is in great shape to continue growing and poised to make other acquisitions after digesting its latest deal. There are no intentions of selling the bank while itâ€™s on this profitable path gaining value and market share. â€œI always want to operate in a position of strength, so thatâ€™s the whole driver of our growth,â€? Shaffer said. â€œI think we can continue to differentiate and bring something different to the market. As there is consolidation going on, we hope to be one of the survivors who can continue to tell the story weâ€™re telling today.â€?

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Sifco Industries hopes to turn the corner By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

Sifco Industries Inc. has witnessed a lot in its 100-plus years in Cleveland. But recent years have been tough. The stock has struggled. The company lost money in its last three fiscal years and again in the first quarter of its current fiscal year. Still, there are signs that things could be changing. Sifco’s net loss in the first quarter of this year — about $900,000, or $0.17 per diluted share — is significantly less than the like period in 2017, when the company lost about $2.6 million, or $0.48 per diluted share. Sifco makes forged components for the aerospace, military and energy markets, an emphasis that is both broader and more focused than it was a decade ago. The Cleveland facility has long been focused on the aerospace industry, mainly defense, said Matt Morrison, vice president and general manager for the plant. But in the past 10 years, the company has worked to diversify its product mix, adding commercial aerospace and ordnance to the markets served in Cleveland. And Sifco has pared down its business strategy in recent years to focus on its core business of forging, said Wendy Worthington, vice president of human resources. That meant selling businesses that didn’t fit into that strategy, like Sifco Applied Surface Concepts in Independence, and closing others. It also meant acquiring new businesses in the forging and value-added services spaces. For example, the acquisition of Quality Aluminum Forge in 2011 gave Sifco a plant with a focus on aluminum forging, Morrison said. The Cleveland plant has long focused on steel and titanium, though it has other capabilities as well. The company also acquired General Aluminum Forge in 2013 and consolidated those two companies into a new facility in Orange, Calif., last summer. Sifco then acquired C*Blade in 2015, giving it a plant in Maniago, Italy, that focuses on industrial gas and steam turbine finished parts. “You talk about direction for the company: It was first, get back to forging, you know, broaden the offering and do it in such a way that you’re linked to the key OEMs. And then find the right value-added services to make you more valuable to your customers,” Morrison said. But the acquisition and integration process — and making sure that all three facilities had processes in place that worked together — took up a lot of time and energy for the Sifco team, Morrison said. And there were hiccups. The C*Blade deal was part of an effort to add work in the energy market, as was the acquisition of a plant in Alliance in 2010. The Alliance plant closed in 2017 after the loss of a prime customer, Morrison said. The customer had moved some of its work to facilities that could offer finished machining, which Sifco didn’t provide at the time. Today, it does at its Italian plant. “It was an unfortunate situation, but I think we’re poised to rebound well,” Morrison said. President and CEO Pete Knapper, who joined the company in June of 2016, said Sifco doesn’t need to work in huge markets to succeed. It just needs the niches it serves to remain strong. He said Sifco has positioned itself well to serve the markets it believes will be strong into the future.

“We’re in a position where we’re trying to position ourselves in those markets on those platforms, so that no matter who wins the competition, it’ll be a good day for Sifco,” Knapper said. The company has seen signs of growth recently. Sifco held a career fair in February, which it hadn’t done in decades, Morrison said. Potential employees were invited to fill out applications, participate in interviews and talk with current employees. “These are hard jobs,” Worthington said. “This is heavy manual labor. And we wanted to be sure we were fairly representing the type of work that we do.” About 60 people came to the career fair, with about 14 being hired, Worthington said. Morrison said Sifco last year went through its first reduction in force in about nine years, the result of

“We’re in a position where we’re trying to position ourselves in those markets on those platforms, so that no matter who wins the competition, it’ll be a good day for Sifco.” — Pete Knapper, Sifco Industries president and CEO

external market forces and lessened demand from customers. Those employees have since been brought back, Worthington said, and the hiring is in addition to that. With the plant and corporate functions in Cleveland, Sifco employs about 175 in the city, Morrison said. And he expects to still need to fill another six or so hourly positions. Sifco has worked to centralize its marketing and sales efforts to serve

the plants in a cohesive fashion, rather than having sales groups specific to each facility. For example, the company now markets itself as 1 Sifco, said vice president of sales John Glover, instead of giving each plant its own name. The plants still have their own sales managers, but the broader approach to sales has let Sifco sign consolidated contracts with customers across plants, building on existing relation-

ships, Morrison said. And there are stronger possibilities for cross-selling between the plants when seeking out new contracts, he said. Overall, Sifco has put in years of hard work, and now the company is starting to see the benefits, Glover said. Diversifying the business at the Cleveland plant has been an eight- to 10-year process, Glover said. And during that time, there were challenges. Government sequestration affected military suppliers. Getting on new customer programs takes time to ramp up. Making acquisitions and integrating those companies takes time, too, as does centralizing operations that had once been separate. “It’s like a wave,” Glover said. “It starts out very small and it takes a long time to get from continent to continent.”

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ANCHORS CONTINUED FROM PAGE 1

“Eat, Shop, Play, Work, Stay, Live” — variations on that promise accompany most every center. Unlike the enclosed malls, those open-air warrens echo a kind of blue-sky freedom, one that goes beyond “shop and leave.” According to the Nielsen organization, such lifestyle centers are increasingly viewed as activity centers, “elevating their purpose beyond simply offering an outlet to buy groceries or pick up a new blouse,” a 2014 report states. Exuberant storefronts seem almost the least of lifestyle centers such as Legacy Village in Lyndhurst, Crocker Park in Westlake and Northeast Ohio’s latest entry, Pinecrest, under construction in Orange Village. These “mini-cities” are carefully conceived economic communities composed of elements of everyday life, from fitness centers and supermarkets to cinemas. JJThere are places to work, beyond the sales jobs that retailers offer. American Greetings Corp. relocated its international headquarters to a five-story, 655,000-square-foot building on an expansion of the Crocker Park property. Pinecrest promises 150,000 square feet of Class A office space. Legacy Village offers 20,000 square feet of offices on the third level of one of its buildings. JJThere are places to live. Pinecrest will lease 87 luxury apartments. Crocker Park Living, situated on Market Street in the heart of the center, offers a variety of one- and two-bedroom properties, as well as a trove of adjacent condominiums. JJThere are places to stay. Pinecrest will be home to a 145-room Marriott AC Hotel. Legacy Village and Crocker Park are home to, respectively, the Hyatt Place Cleveland/Lyndhurst and Hyatt Place Cleveland/Westlake. “As (they) remain prominent in our culture and consciousness, developers and retailers face big opportunities to activate communities and become a central gathering space for consumers,” the Nielsen report says. Enter restaurants. Residents in particular want something more than fast food burgers and similar offerings. Apart from the logistics of a food court enclosure, those who live on premises or nearby are drawn to places that appeal to the modern sensibilities of creative dining. Adam Fishman, principal for Fairmount Properties, which is developing the Pinecrest project, said food service operations no longer are merely an amenity to keep shoppers in a retail complex. They are an essential draw. “In many ways, restaurants have become the new anchor tenants for the kind of live-work-play environments we hope to create,” he said. “For us, we’re trying to create places, help make places, that have a sort of magical, social engineering to them. One of the best ways is to offer varying food options.” Stores such as Target and Whole Foods and specialty retailers such as REI, Pottery Barn and William-Sonoma are important consumer destinations, Fishman said. “But let’s face it: People like to go out to eat,” he added. “And they’re cooking less, at an increasing rate. Having a multitude of dining options is essential, so that a couple or family can say, ‘Let’s just go to Pinecrest and find a place to eat.’ “It creates a kind of energy, and that builds upon itself to make these districts sustainable — that they’ll

Rosewood Grill has restaurants that are adjacent to Crocker Park in Westlake (pictured) and SouthPark Mall in Strongsville. (Photographs by Tim Harrison for Crain’s)

work for a long time, and people will come to them for a long time.” The changing brick-and-mortar retail climate also forces the hand of existing retail center operators. Jerry Herman of Jerome J. Herman and Associates Commercial Real Estate Brokerage sees the rise of restaurants in lifestyle centers from a different angle. “A lot of the owners of malls in the country are finding a lot of space coming back to them through closings of retail. And a lot of them are saying, ‘We need lifestyle centers.’ “For a long time, restaurants were looked down among them,” Herman said. “Now they’re considered traffic-generators.”

Essential tenants Mitchell Schneider, president of First Interstate Properties LLC, which operates Legacy Village, calls restaurants “an integral component of the lifestyle center.” “Rather than a collateral benefit, a collection of great restaurants is an essential aspect of what (the property) offers,” Schneider said. “Whether primarily retail, or retail plus hotel, office spaces, etc., they’re intended to serve both members of the community and those lingering.” The presence of residents, hotel guests and office workers, as well as those who live in neighboring homes, increases the demand for a more diverse selection of places to eat, said Chris Kneeland, a managing partner for Rosewood Grill, which includes the eateries located adjacent to Crocker Park and SouthPark Mall in Strongsville. Rosewood is part of the Hospitality Restaurants Group based in Fairview Park. In opening its second and third Rosewood restaurants (the first was the converted Inn at Turner’s Mill in Hudson), the organization chose locations just outside of the centers. “Especially in the case of a Crocker Park, they’re a short walk,” Kneeland said. “Everything is within walking distance. In a very real sense, you pretty much don’t have to leave the property. You can leave your car parked, or drive to Avon Lake, Berea, Vermilion. Having a great selection of places to eat is important to people who decide to live in a lifestyle center.” That is why, Fishman said, it was important for Pinecrest’s developers

“We’ve been considering changes for some time,” said Brad Friedlander, chief operating officer of Red and Moxie. “With the likelihood of a fine steakhouse coming into Pinecrest, the decision was easy.” Fishman said that given the choice, his company would prefer to lace the complex with more local restaurants. “It’s a balance between nationals and locals,” he said. “The balance gives you credibility with your banks — they’ve heard of the big names — but what gives you the flair is the locals. The chefs are the rock stars. And you bring enough on the site, and you become rock star-heavy.” So Fairmount is still negotiating with prominent Cleveland restaurateurs. “In a market like Northeast Ohio that’s so replete with so many extraordinary restaurants, it makes sense to include them in our mix of places to eat,” Fishman said. “Clevelanders are increasingly sophisticated about food, and we know they’ll travel to eat at the best and most interesting places,” he added. That’s why Legacy Village’s operators landing an east side location for Wild Mango restaurant was such a big “get,” Schneider said.

Getting a spot in the mix

A server delivers desserts at the Cheesecake Factory in Legacy Village.

Online extra Go to crainscleveland.com for a list of restaurants at each of Northeast Ohio’s major lifestyle centers.

The Cheesecake Factory in Legacy Village debuted when the center opened in 2003.

to attract new operators unfamiliar to local retail shoppers. Pinecrest will be home to Northeast Ohio’s first Shake Shack, the massively popular burger chain that first gained acclaim in Manhattan. Pinecrest also will introduce City Works — featuring contemporary American cuisine, craft beer, artisan cocktails and wine-on-tap — as well as Firebirds Wood Fired Grill. First Watch, Bibibop Asian Grill, 3 Palms Pizzeria, Duck Donuts and Graeter’s Ice Cream will join the lineup. So will Red The Steakhouse, relocated from its long-standing space adjoining Moxie in Beachwood.

Stephanie Bacni and Liam Galvin, both of Sandusky, dine outside at Bar Louie in Crocker Park.

It’s not always easy for independent restaurants to get a foothold in a high-profile location, Schneider admitted. “Chains can risk the capital and spread (costs) over the entire chain,” Schneider said. “There is some aspect of risk management that chains that end up in lifestyle centers can afford. (Single-operator businesses) don’t have the same platform upon which to manage risk. “I don’t actually think it’s that they can’t afford the rent in these places,” he said, responding to the assertion by many independent restaurant operators. “Whether they can afford the rent ultimately depends on their volume. And if they can’t get the volume they think they need to, without loading their restaurant with a lot of liabilities, it is easier to open a one-off restaurant in another area.” Center operators declined to provide per-square-foot costs to lease space in their centers. As one explained anonymously, “the variability of quality and desirability of the tenant, size of space, the location of space, investment by the tenant, investment by the landlord, etc., makes it not a helpful metric to provide actual numbers.” Herman, who has been an intermediary for restaurant tenants for roughly 50 years and who represented Wild Mango chef-owner Jia Wei, said there’s plenty of latitude in price negotiations. “Frankly, it depends upon how much the owners (of the complex) want that business,” he said. “From a developer’s point of view, it may be a perfect restaurant, but will the people who eat at that restaurant also shop at its stores? Capital Grille is in front of Legacy Village, and it’s a very nice place. But I see Wild Mango as a better fit. “Why? It’s not so expensive that you’re not just going there to eat. You might say, ‘Let’s have dinner and then walk around and shop a while.’ But a lot of people who go to Capital Grille are going there to eat, drink and leave. And they’re going to have a wonderful experience. But as shopping center operators, you want places like Wild Mango, where you have money left at the end of the meal to spend elsewhere.”

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CRAIN’S CLEVELAND BUSINESS

Opinion From the Sections Editor

One’s love of the past should not prevent progress

Editorial

Go big or go home A few months back, we penned an editorial praising Matt Wilson for the work he had done at the University of Akron after stumbling unexpectedly into its presidency. A few minutes before that piece went to press, though, news broke that Wilson was a finalist for the presidency at the University of Central Florida. The announcement, which blindsided many in the Akron community and forced us to make a last-minute edit to our piece, was the beginning of the unraveling of the Wilson presidency. For the third time in five years, the University of Akron was looking for a permanent leader. Citing personal reasons, Wilson soon thereafter announced he would step down and return to the faculty. A few weeks later, he was named a finalist for the presidency at Utah Valley University. He didn’t get that job, either. Wilson, by all accounts, endeared himself to Akron’s students — the university’s most important constituency — by making himself readily available to field questions and even play some hoops. He managed to navigate the university’s precarious financial situation with relative finesse unlike his predecessor, avoiding any major revolt by faculty and staff. It almost seemed too good to be true when Wilson fell into the university trustees’ lap. His initial moves that pointed the university in the right direction confirmed as much. But once again, the board is on the prowl, and trustees undoubtedly expect this search will be a heavier lift. Trustees made the correct decision in launching a national search to find the University of Akron’s next leader. They should also be aware, however, that they might have to punch well above their weight when it comes to compensation in order to lure the type of transformational candidate needed. Of course, that can be a difficult pill to swallow given the school’s well-documented budget challenges and the fact that, if you include Wilson, three former presidents are still on the university’s payroll. Still, this is a search trustees simply cannot afford to bungle. The future of one of Northeast Ohio’s most important institutions hangs in the balance.

Speaking up

We don’t endorse in primary elections, but here’s a political idea that has our full support: a venture to create a statewide organization to convene and manage political debates to give voters more (and better) information when they cast their ballots. A group of about 50 media outlets, academic institutions and civic organizations is working on the project, which is supported by a $10,000 seed grant from the George Gund Foundation. The goal is to hammer out details so debates can be set up in statewide races ahead of the Nov. 6 general election. The problem it seeks to address is simple. “Debates in Ohio are broken,” says Dan Moulthrop, CEO of The City Club of Cleveland, which convened a meeting last month to kick off the effort. Political candidates increasingly are reluctant to debate their opponents, for reasons that are tactical, ideological and fearful (the worry of making a campaign-changing gaffe). What’s clear is that voters have fewer opportunities to see candidates take real questions and engage with each other, and instead see more political advertising. This isn’t a partisan issue. As Cleveland.com pointed out, in the current election cycle, Attorney General Mike DeWine “steadfastly has refused to debate Lt. Gov. Mary Taylor, his opponent in the Republican primary for governor, despite efforts by outside groups and a commitment from the Ohio Republican Party to set one up.” In 2016, former Ohio Gov. Ted Strickland wouldn’t debate his opponent in the Democratic primary for the U.S. Senate. And in 2014, Auditor Dave Yost, a Republican, was the only incumbent statewide elected official to debate his challengers at the City Club. Backers of the effort are looking at successes in other states, such as the Indiana Debate Commission and the Washington State Debate Coalition, as models for Ohio. They’ll have done a true service to the public if they create a system to persuade reluctant candidates to take the debate stage.

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com)

CLEVELAND BUSINESS

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Timothy Magaw (tmagaw@crain.com)

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I grew up in Firestone Park, a working-class neighborhood sitting a few miles south of downtown Akron. It was founded as a community for those working for Harvey Firestone’s rapidly growing tire empire, but the economic conditions shifted considerably as I came of age in the mid-1990s — and continue to do so today. Stores have closed, housing values plummeted. A handful of dimly lit pubs where our elders regularly camped out remain open for business. Some writers might characterize it as Rust Belt gore at its finest. Another fixture in the community is expected to shutter in the coming months: St. Paul School on Brown Street. Having attended the school from preschool through eighth grade, the announcement was bittersweet, though hardly surprising given its Timothy enrollment woes. The school’s K-8 enrollMagaw ment sits at a staggeringly low 126 students. In the 1960s, enrollment peaked at 1,600. When I graduated in 2001, it was alongside two dozen or so classmates. It wasn’t unusual for my classmates’ parents to pull them out of the school in favor of one the better-performing public districts in neighboring suburbs. The decline in enrollment, of course, is hardly unique to St. Paul’s. Since 2008, Catholic elementary school enrollment has declined by 27.5% in the 12 urban dioceses and 19.4% in the rest of the country, according to the National Catholic Educational Association. Based on reports in community news outlets and social media, the announcement of the closure certainly was bungled. Parents are scrambling to place their kids elsewhere, and the staff is wondering where their next paychecks will come from. As expected, the outcry on social media was fierce. Dedicated parishioners mobilized to try to save the school, though it appears the efforts were for naught. “As usual, it is all about politics and money,” a post concluded on SaveSaintPaul.com that admitted defeat. I’m not a parishioner — I don’t even live in Akron anymore — so I’d be lying if any said I had any inside information on the closure. But what struck me about the outcry over the closure was that it was representative of the thinking that’s become systemic in Northeast Ohio. Rather than looking toward the future, too many people in our communities attach themselves to institutions on downward trajectories and choose to focus simply on what once was — rather than what could be. Look no further than Lakewood, where a vocal group of citizens attempted — thankfully, unsuccessfully — to save a crumbling and soon-to-be obsolete hospital and scuttle a once-in-alifetime chance for development and a state-of-the-art health center in the dense West Side suburb. St. Paul School, meanwhile, is attached to a beautiful new church in a highly trafficked area of Akron. There’s certainly opportunity for development — or even green space — if the school is razed. That would be more worthwhile to a community than an old, tired building used to educate only 126 children. I haven’t walked the school’s halls since I graduated almost 20 years ago, but I can still recall every inch of that building, playground (a blacktop parking lot, actually, with a few spray-painted four square courts), chapel and reception hall in the building’s bowels where awkward family dances were held. I can still smell the incense burning from those weekday funeral masses. And when the final dismissal bell rings on Brown Street, those memories will certainly remain.

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes. Sound off: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.

CRAIN’S CLEVELAND BUSINESS

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PA G E 11

TAX LIENS The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federal government. The lien is a public notice to creditors that the government has a claim against a company’s property. Liens reported here are $10,000 and higher. Dates listed are the dates the documents were filed in the Recorder’s Office.

LIENS FILED JJ Zrin Properties LLC, Zrino Jukic

2065 S. Green Road, South Euclid Date filed: Feb. 21, 2018 Amount: $1,678,286.99 JJ Provident Financial Group Inc. 1900 E. 9th St., Cleveland Date filed: Jan. 30, 2018 Type: Corporate income Amount: $200,050.92 JJ National City Mortgage Services

4100 W. 150th St., Cleveland Date filed: March 1, 2018 Type: CIVP Amount: $187,900.00 JJ Creative Home Solutions 25120 Tryon Road, Oakwood Village Date filed: Feb. 23, 2018 Type: Employer’s withholding Amount: $93,850.48 JJ M&I Deli Market Inc. 2288 E. 55th St., Cleveland Date filed: Jan. 30, 2018 Type: Corporate income Amount: $71,177.08 JJ Personnel Plus of Cleveland LLC P.O. Box 93446, Cleveland Date filed: March 5, 2018 Type: Employer’s withholding, unemployment Amount: $38,095.57 JJ AKE Environmental & Construction Service Inc. P.O. Box 46237, Bedford Date filed: March 7, 2018 Type: Employer’s withholding Amount: $36,946.09 JJ Savor Inc. (Sweet Melissa) 19337 Detroit Road Date filed: March 1, 2018 Type: Employer’s withholding Amount: $36,586.76 JJ Anthony D. Monachino LLC

14493 Hartford Trail, Strongsville Date filed: Jan. 30, 2018 Type: Employer’s withholding, unemployment, CIVP Amount: $30,622.13 JJ A.Z. Medical Supplies Inc. 8894 Lake in the Woods Trail, Chagrin Falls Date filed: March 7, 2018 Type: Employer’s withholding Amount: $28,950.50 JJ Lakewood Phoenix Inc. (Phoenix Coffee) 15118 Detroit Ave., Lakewood Date filed: March 5, 2018 Type: Employer’s withholding Amount: $28,350.24 JJ Marble Builders Direct 4100 Brookpark Road Date filed: Feb. 23, 2018 Type: Failure to file complete return Amount: $21,546.91 JJ Farone Heating & Plumbing Inc.

6360 Maplewood Road, Mayfield Heights Date filed: March 5, 2018 Type: Employer’s withholding, failure to file complete return Amount: $19,607.83 JJ Victory Solutions LLC (two liens

over $10,000) 19571 Progress Drive, Strongsville Date filed: Jan. 30, 2018 Type: Failure to file complete return, employer’s withholding Amounts: $18,618.80, $11,920.59

JJ South Euclid Auto Repair Inc. 4185 Greenvale Road, South Euclid Date filed: Jan. 10, 2018 Type: Employer’s withholding, failure to file complete return Amount: $18,171.49 JJ M. Caserta Inc. 1140 SOM Center Road, Mayfield Heights Date filed: March 5, 2018 Type: Employer’s withholding, failure to file complete return, unemployment, corporate income Amount: $17,886.28 JJ Fraternal Order of Eagles, 2221

Aerie 532 E. 185th St., Cleveland Date filed: Jan. 10, 2018 Type: Employer’s withholding, unemployment Amount: $17,505.99

JJ Christopher Cartage LLC 14775 Bennett Road, North Royalton Date filed: Jan. 10, 2018 Type: Employer’s withholding Amount: $16,974.29 JJ Emerald Woods Golf Course 7951 Bronson Road, Olmsted Township Date filed: Jan. 10, 2018 Type: Employer’s withholding Amount: $15,004.75 JJ Cedar LP (Liquid Planet) 12413 Cedar Road, Cleveland Heights Date filed: Jan. 30, 2018 Type: Employer’s withholding, failure to file compete return Amount: $14,195.52 JJ 4725 Lorain LLC (City Wide Auto Mart) 4725 Lorain Ave., Cleveland Date filed: March 5, 2018 Type: Employer’s withholding Amount: $13,745.82 JJ RSP Electric Inc.

6313 Dunham Road, Maple Heights Date filed: March 5, 2018 Type: Failure to file complete return Amount: $13,666.38 JJ Artistic Renovations of Ohio LLC 479 Elm Court, Seven Hills Date filed: March 5, 2018 Type: Employer’s withholding, unemployment Amount: $12,887.80 JJ Walter E. Martens & Sons Inc. (Walter E. Martens & Sons Funeral Home) 9811 Denison Ave., Cleveland Date filed: March 5, 2018 Type: Failure to file complete return Amount: $12,836.84 JJ Nicole M. Gillota LLC (Gypsy Beans and Baking Co.) 6425 Detroit Ave., Cleveland Date filed: Jan. 30, 2018 Type: Employer’s withholding, unemployment Amount: $11,919.17 JJ Kowit Real Estate LLC (Kowit & Company Real Estate Group) 6009 Landerhaven Drive, Mayfield Heights Date filed: March 7, 2018 Type: Employer’s withholding Amount: $11,092.10 JJ Sun Shade Landscaping LLC 9901 Applewood Drive, North Royalton Date filed: Jan. 10, 2018 Type: Employer’s withholding, failure to file complete return, corporate income Amount: $10,441.57

LIENS RELEASED JJ Robert A. Hall Inc.

5240 Smith Road, Brook Park Date filed: Oct. 26, 2009 Date released: March 5, 2018 Type: Employer’s withholding Amount: $76,593.65 JJ C&D Truck & Equipment Services Inc. (three liens over $10,000) 4015 Jennings Road, Cleveland Dates filed: Dec. 1, 2014; Sept. 3, 2015; Sept. 3, 2015 Date released: Jan. 10, 2018 Type: Employer’s withholding Amounts: $68,510.10; $30,750.77; $29,382.58 JJ Peter Pan Donuts Inc. 14636 Euclid Ave., East Cleveland Date filed: April 30, 2008 Date released: Jan. 30, 2018 Type: Employer’s withholding, unemployment Amount: $47,996.65

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JJ T&C Services Inc. 9200 Wade Park Ave., Cleveland Date filed: March 22, 2010 Date released: Jan. 30, 2018 Type: Employer’s withholding, corporate income Amount: $41,709.54 JJ Brothers Equipment Inc. 1335 E. 171st St., Cleveland Date filed: July 18, 2014 Date released: March 5, 2018 Type: Corporate income Amount: $40,040.71 JJ Poelking Carpentry Corp. P.O. Box 470023, Broadview Heights Date filed: Dec. 12, 2017 Date released: Jan. 10, 2018 Type: Employer’s withholding, unemployment Amount: $38,320.86 JJ I & M.J. Gross Co. 14300 Ridge Road, Suite 100, North Royalton Date filed: Aug. 4, 2017 Date released: March 5, 2018 Type: Unemployment Amount: $36,489.15 JJ Wade Park Child Care & Enrichment Center (two liens over $10,000) 9200 Wade Park Ave., Cleveland Dates filed: Sept. 6, 2016; March 30, 2011 Date released: Jan. 30, 2018 Type: Corporate income, unemployment, employer’s withholding Amounts: $31,649.59; $10,301.85 JJ C-Mach Inc. P.O. Box 40057, Bay Village Date filed: Oct. 5, 2016 Date released: March 5, 2018 Type: Corporate income Amount: $28,500.25 JJ Manorbrook Homes Inc. 481 Greenhaven Drive, Chagrin Falls Date filed: Dec. 3, 2014 Date released: Jan. 10, 2018 Type: Unemployment, corporate income Amount: $26,878.65 JJ Elite Delivery Inc. 2269 St. Clair Ave. NE, Cleveland Date filed: June 5, 2013 Date released: March 1, 2018 Type: Employer’s withholding Amount: $24,529.67 JJ Parma Pre School Inc. (six liens

over $10,000) 17974 Potomac Drive, Strongsville; 5280 Broadview Road, Parma Dates filed: Dec. 11, 2015; July 11, 2015; March 28, 2017; Dec. 8, 2014; April 26, 2017; July 14, 2017 Date released: Jan. 10, 2018 Type: Employer’s withholding, unemployment Amounts: $23,936.30; $20,923.49 $17,933.37; $13,690.54; $13,024.45; $11,186.74

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CRAIN’S CLEVELAND BUSINESS

M AY 7 - 13 , 2 018

PA G E 13

Focus

REAL ESTATE

Fresh faces helping shape city’s revival Builder Matt Berges passes by two of his projects in the Duck Island portion of Cleveland’s Tremont neighborhood. (Photographs by Tim Harrison for Crain’s)

A new cadre of builders is cropping up in Cleveland as demand for urban projects surges By STAN BULLARD sbullard@crain.com @CrainRltywriter

Matt Berges got the thirst for building houses from serving a year as an AmeriCorps volunteer for Habitat for Humanity. His apprenticeship, you might say, came through several jobs, including as a project manager for Sutton Builders of Cleveland as it put South Side housing development on the map in the 1990s with Tremont Ridge. On his own now, Berges through his namesake firm Berges LLC is building a dozen homes this year and expects to build and sell 15 next year in the Duck Island portion of Tremont. Berges is one of several new faces to crop up building houses and townhouses in the city of Cleveland as urban projects regain their footing under the impetus of a shortage of existing homes, the continued resurgence of the building business throughout the region and growing acceptance of the city as a place to live. Berges and others are joining the stalwarts of urban redevelopment in the for-sale housing market, including Civic Builders of Cleveland, Knez Builders of Concord Township, Sutton Builders, Vintage Development Co. of Willoughby, Brickhaus Partners of Cleveland, and, with a new generation at the helm, Zaremba Cleveland Communities. Different backgrounds distinguish the new crowd as well as very different avenues leading to urban residential projects. Their backgrounds are more eclectic, and they didn't all grow up with a hammer in their

Berges is building a dozen homes this year and expects to build another 15 next year.

hands in a family of builders. Gusty Molnar, president of Cleveland-based Gustave Development, learned the property business as he bought, renovated and sold about 20 foreclosed homes in the suburbs as a sideline to his day job as a director of mortgage banking, where he leads a team of mortgage brokers at Quicken Loans. Molnar just moved into a new four-floor townhouse at his Skyline 7th project. He is in

“When people contacted me about building energy-efficient homes in the suburbs, I tried to sell them on Duck Island. Finally someone saw the vision.” — Matt Berges, builder

one of four units — all sold — on the 2100 block of West Seventh Street. He said he decided to build his place in Tremont because it was the first time he had ever gotten outbid on a property as he sought one to move into the trendy neighborhood from the suburbs. “I was used to buying at a sheriff's sale, not in the normal real estate market,” Molnar said. “I tried to buy a Tremont townhouse and my bid was rejected. I bid on another one and it was rejected. I said, ‘Forget this. I'm building my own.’” Now, with his first four Skyline 7th properties sold and occupied, Molnar's team is 30 days into building Gustave Development's next venture, Eleven Scranton at 2323 Scranton Ave. Foundations are going in on the three-floor townhouses costing upward of $399,000, which should be completed next year. Although Eleven Scranton will have terrific views of the downtown skyline and proximity to the Scranton Flats riverfront park, the project is in a part of Tremont where redevelopment is brewing. It's a block away from the Fairmont Creamery, a trailblazing apartment and commercial rehab of an old dairy, and sits atop the slope leading to Scranton Peninsula, where a major redevelopment of a 20-acre former industrial site is in the planning stages. Homes with flecked paint are across the street, near old industrial buildings. The scene was not off-putting to Molnar. "There was a nondescript, 4,500-square-foot industrial building used for storage on this site," Molnar recalled as he watched workers on the project. "It wasn't sexy. But I got hooked on the idea of the views of downtown." SEE BUILDERS, PAGE 14

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REAL ESTATE

BUILDERS CONTINUED FROM PAGE 13

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Molnar, 35, began buying foreclosures a decade ago as he started in mortgage lending and earned his finance degree at Cleveland State University. "Rehabilitating houses is good money, but I want to build something that people will notice and remember me by after I'm gone," Molnar said. "I want to build something someday that will shape the skyline â€” and I'm serious about that." To that end, with Eleven Scranton half committed to buyers, he recently snapped up the former Primo Construction building less than a block west on the northwest corner of Scranton and Willey Avenue. He's working up a way to develop flats on the site because he's confident they will sell. "I love every part of this," Molnar said, including working with neighborhood block clubs. That explains how Eleven Scranton wound up with 10 units. One townhouse was dropped from the plan to provide more parking, a total of 20 spots for 10 homes, to satisfy neighborhood concerns about parking. Moreover, talk about a street-wise approach. Molnar identified the architect for Skyline 7th, the late Barry Smith, and the designer of Eleven Scranton, Horton Harper Architects, by going to houses he liked in Tremont and finding out who designed them. He found his contractor, Blossom Homes of Cleveland, by finding out who built homes whose construction he admired. Although Berges worked on many city homes when he worked for builder Keith Sutton, his route to urban work on his own also was indirect. "I found Sutton because I was looking for a green builder after

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Gusty Molnar capitalized on views of the downtown skyline for his Eleven Scranton townhouses in Tremont. (Stan Bullard)

working at Habitat for Humanity. I'm trying to focus on the low-energy side of things, and that has been a big part of my success," Berges said. "I built a net zero-energy house for a client in Cleveland Heights. Because of that, I built energy-efficient homes for clients in the suburbs, such as Brecksville and Rocky River." The other side of the equation is what Berges said he did with the proceeds from those suburban sales. He bought homes that were demolition candidates in the Duck Island section of Tremont as well as empty lots. He estimates he razed about 30 homes in the area between Lorain and Abbey avenues near the Cuyahoga River valley. The choice was simple: be a slumlord with a house that was not marketable, he said, or scrap it. "When people contacted me about building energy-efficient homes in the suburbs, I tried to sell them on

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REAL ESTATE

Duck Island," Berges said. "Finally someone saw the vision." That breakthrough led to building and selling seven homes last year. He also worked with other builders active in Duck Island because they had to cooperate with each other. No one could get something going with a beat-up house next door. They formed the Duck Island Collaborative to promote the area. Now, Berges said, he dropped his own advertising this year because he was getting more calls for jobs than he could satisfy.

Inching inward Established homebuilders also are making forays into the city. Knez Homes, a Concord-Township builder has put a big stamp on the area with just-built houses and townhouses throughout Ohio City and Detroit-Shoreway. The familiar sign of Chardon-based Payne & Payne Builders has also been spotted in several city neighborhoods. Mike Payne, vice president, said

the family-owned building concern has built about a dozen homes in the city at sites as various as Little Italy, Ohio City and the tony Edgewater neighborhood. "We have seven projects going on now," Payne said, referring to single-family houses that will cost from $300,000 to $2 million to construct. "The styles range from contemporary to something more traditional that fits into the neighborhood." He estimates about 10% of the company's work is within Cleveland's boundaries. Two things took Payne into town, he said. One was that the company is a custom builder and had clients who wanted to build on lots in the city. The other was that Payne & Payne has an in-house design unit, which was joined recently by Michael Caito, an architect with experience designing houses and subdivisions in the city. "Not only is he a fantastic designer," Payne said, "he is well known in the city and brought a lot of memberships and associations with him." Meantime, the name Doug Gertz also has cropped up. He has operated Bay Village-based Gertz Builders for 35 years, most of that time building custom homes on individual sites in Bay Village, Rocky River and Shaker Heights. He operates the firm with his son Ben, a project manager, and builds a few home each year while spending most of his time on remodeling projects. He followed the market to the city because one of his clients wanted to build a $500,000 house on Literary Avenue in Tremont. The latest project for Gertz is a home with an estimated market value of $650,000 at Bridge Avenue and West 59th Street that fits the neighborhood from its design as a two-story colonial to a traditional front porch and a plank exterior.

Builders (from left) Ben and Doug Gertz started building in Cleveland after landing a contract for a home in Tremont. (Stan Bullard)

The project went in on a low-cost land bank lot, so he felt requirements the agency put on the sale were worthwhile, such as the front porch, the exterior material and even windows with traditional sashes. City planners also liked the company's plan for a two-car garage; They put a 1,000-square-foot one-bedroom rental in above it. "The city wants density," Gertz said. "And it will (help) pay the mortgage."

The Bridge Avenue house reflects some of the risk endemic to homebuilding. Originally, Gertz planned the house for a client, but the customer bought an existing house, which Gertz remodeled. As a result, Ben Gertz is building the Bridge house because he and his wife need more room for their newborn than their current home affords on Whitman Avenue in Ohio City. Gertz is pitching a lot he owns on West 65th

Street to a prospect, but he has another one where he's thinking about building a house for himself. Ted Theophylactos, the head of the Ted Team at Howard Hanna, said agents with experience on the West Side are excited about all the activity. He worries about there being softness above $500,000, so he's counseling builders and developers looking at diving in to aim for the $200,000 to $400,000 price range. "Above that, and it gets to be a thin market," Theophylactos said. But then he adds that as new units get built and suites are nearly move-in ready, he believes the high-end market will pick up. "We've never seen this level of activity before," said Theophylactos, who represents several West Side builders. "We're really thrilled to see it." David Sharkey, a member of Civic Builders which has been building in the city since 2001 â€” a company initially formed to meet unanswered demand for city projects â€” and president of the Progressive Urban Real Estate brokerage, said the new competition is good for the area. "There's demand and a new energy about building again," Sharkey said. "They bring new ideas. We're seeing infill (empty) projects go in and succeed where you would have never guessed they would go before."

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Real estate agents using drones to help lift sales By DOUGLAS J. GUTH clbfreelancer@crain.com

A sleek, spidery drone lifts off from Robert Nicholson’s driveway, strafing the front of his colonial-style home while he tracks the vehicle’s flight via a handheld view screen. The high-definition footage recorded by the drone’s swiveling camera gives the landscape a cinematic quality, potentially catching the eager eye of a prospective buyer should the owner put his house up for sale. Nicholson, founder of Aerial Visual Technologies and a recently minted real estate agent with Keller Williams, has no plans to sell anytime soon. But according to Nicholson and other area agents, drone photography and videos are becoming a potent industry tool — perhaps the most important innovation to enter real estate marketing since the internet — providing a visually compelling advantage in a marketplace congested with static two-dimensional photographs. “With drones we can scale a property, put it into a video, and give you exact measurements based on GPS coordinates,” Nicholson said. “As a seller, you can make it more functional for a buyer to say, ‘This is what I’m getting.’ In today’s society, I have about 25 seconds to get your attention. You have to give people something different, because they get tired of the same thing.” Real estate professionals are em-

“If you have 1,000 homes, you’ll have maybe 30 using aerial photos (in their listings). Drone photography is a unique way to market a property.” — Matt Gunn, owner of Gunn Photography Services

ploying these airborne cameras to produce swooping shots of homes or commercial buildings, showcasing properties from dramatic angles previously limited to expensive helicopter fly-bys. As the technology is still relatively novel, using drones can raise an agent’s profile and bring much-needed excitement to a listing, said Matt Gunn, owner of Gunn Photography Services, a Parma-based commercial drone company with a focus on real estate. “If you have 1,000 homes, you’ll have maybe 30 using aerial photos (in their listings),” Gunn said. “Drone photography is a unique way to market a property.” Gunn’s company also made a teaser video using a drone for commercial brokerage firm Avison Young. The two-minute clip offers a bird’seye view of the University Square shopping complex in University Heights, illuminating the 10-acre

parcel’s attributes as a mixed-use boon. Voice narration, graphics and low-key music lend the video an additional professional polish aimed at would-be development partners. “Drone footage helps us hype the property that we’re marketing,” said Avison Young vice president David Horowitz. “We want to stand out and catch people’s attention.” The technology has practical benefits as well. Cleveland production company Aerial Agents created a video of a large Avison-brokered industrial property on Cass Avenue, adding graphics to outline specific areas of the parcel ready for redevelopment. Still shots of the highlighted parcel were then used in the firm’s printed marketing materials. “It’s geared toward developers who could assess the parcel and know what they have to work with,” Horowitz said. “There’s not many brokerages using videos with different angles and zooms.” Most homebuyers begin their search online, so differentiating properties through a high-quality “virtual tour” is key, drone proponents said. Keller Williams’ Nicholson points to a ground-level photo of a lakefront colonial from a real estate magazine. While there’s nothing wrong with a traditional curb-appeal shot, some choice overhead images would make the property pop in the mind of a buyer, he said. “With a drone you could see the lake, the horizon, and the beach that sits behind the house,” said Nichol-

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Matt Gunn of Gunn Photography Services said using the technology can raise an agent’s profile. (Contributed photo)

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Drone photography such as this shot from Aerial Visual Technologies can help properties stand out in online listings. (Contributed photo)

â€œWith drones we can scale a property, put it into a video, and give you exact measurements based on GPS coordinates.â€? â€” Robert Nicholson, founder of Aerial Visual Technologies

son. â€œBut you canâ€™t because this house looks like every other house on the block.â€? Drone imagery also saves time, as it displays details of a property a buyer may not glean until they get on site. â€œMaybe a family doesnâ€™t want to deal with an in-ground pool because of the maintenance,â€? Nicholson said.

â€œIf Iâ€™m a buyerâ€™s agent, I donâ€™t want to drag them to 15 different houses theyâ€™re not going to want.â€? Howard Hanna real estate agent Susan Smith said drones are best suited for expansive single properties or sprawling developments. For instance, Howard Hanna flew a drone over the Bridgeport luxury home complex in Mayfield Heights, giving

viewers insight on individual dwellings along with the overall layout of the neighborhood. â€œItâ€™s exciting because itâ€™s interactive,â€? said Smith. â€œYou can start from a homeâ€™s entrance and literally pull someone through the property.â€? For all its benefits, a drone canâ€™t shoot all the photography and video needed to market a listing. The technology is not well suited for interiors of smaller spaces, or properties shrouded by trees and other buildings, noted Gunn of Gunn Photography. â€œI donâ€™t do interiors unless itâ€™s for large warehouses where I can fly safely inside,â€? he said. â€œIâ€™ve been asked to do mansions, but the risk isnâ€™t worth the reward. I donâ€™t want to crash into somebodyâ€™s chandelier.â€? Realtors hiring a drone photographer should be aware of legal and safety risks, area experts said. Any professional company will have a Federal Aviation Administration Part 107 UAV Operatorâ€™s certificate as well as liability insurance that specifically covers piloting a drone for commercial photography purposes. The National Association of Realtors even offers a guide to help agents navigate the ever-growing realm of flying cameras. Regarding privacy concerns, Nicholson will inform a clientâ€™s neighbors if heâ€™s shooting a house, and will make sure to block particular lines of site â€” if there are children outside, for example â€” upon request. With the spring home buying season underway, drones will continue to be a valuable asset utilized by the forward-thinking real estate company, he said. â€œThis technology is not going away; itâ€™s only getting better,â€? Nicholson said. â€œSooner or later, drones or going to take over the industry. Itâ€™s one of those things where you either jump on or you get left behind.â€?

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NOVEMBER 23 - NOVEMBER 29, 2015 Allyson O’Keefe started her legal career at Porter Wright in 2004 after completing a summer internship there as a Case Western Reserve University law student. Since then, she has worked on many significant deals across Cleveland, including Flats East Bank, The Metropolitan at the 9, Uptown in University Circle and Steelyard Commons, and has been promoted to real estateALLYSON partner. O’KEEFE, 37 “Young professionals who live downtown are so excited about the city,” said O’Keefe, a Partner; Porter Columbus native who lived downtown forWright 10 years before moving to Rocky River. “The ones who aren’t from here are often more excited about it. When you move here from somewhere else, you don’t for granted.” VOL. 36, NO. take 47 it Allyson NOVEMBER 23 - NOVEMBER NOVE EMBER 29, 29, 2015 201 O’Keefe started her legal career at Porter Wright in 2004 after completing a sumWhen O’Keefe is not working or spending time with her husband and two children, she can mer internship there as a Case Western Reserve University law student. Since then, she has be found volunteering on the boards of nonprofit organizations and watching college football. worked on many significant deals across Cleveland, including Flats East Bank, The Metropolitan at the 9, Uptown in University Circle and Steelyard Commons, and has been proWHAT INSPIRES YOU ABOUT YOUR WORK? moted to real estateALLYSON partner. O’KEEFE, Just seeing what Cleveland has gone through in the time that I’ve 37 been here, there’s obvious“Young professionals who live downtown are so excited about the city,” said O’Keefe, a ly a lot of excitement around real estatePartner; development. I started in 2004 when we were crazy Porter Columbus native who lived downtown for Wright 10 years before moving to Rocky River. “The ones busy with development. That was sort of the boom from ’04 through ’08. I saw it go through who aren’t from here are often more excited about it. When you move here from somewhere the downturn, then I saw it rise again, even stronger than before locally. else, you don’t take it for granted.” Allyson O’Keefe started her legal career eer at Porter Wright in 2004 after completing comple etin ng a sumsumWhen O’Keefe is not working or spending time with her husband and two children, she can mer internship as a Case Western Reserve University law student. Since tthen, hen, she sh he has has WORKED ON there ARE MIXED-USE URBANnPROJECTS. IS MANY OF THE PROJECTS YOU be found volunteering on the boards of nonprofit organizations and watching college football. worked on many significant deals across ss Cleveland, including Flats East Bank, The The THAT AN AREA OF EXPERTISE? Metropolitan at the 9, Uptown in every University and Steelyard Commons, and rsity d has has ha s been be een proproro Yes, definitely. Real estate is extremely interesting because deal Circle is differWHAT INSPIRES YOU ABOUT YOUR WORK? moted to real estate ent. You can never get bored because there’s so partner. much variety there, from tax Just seeing what Cleveland has gone through in the time that I’ve been here, there’s obviousown are O’Keefe e, a “Young who live downtown so excited about the city,” said O’Keefe, credits to historic renovations, from professionals ground-up development to rehab, from ly a lot of excitement around real estate development. I started in 2004 when we were crazy Rive er. “The “T “The ones ones mixed-use to residential. Columbus native who lived downtown for 10 years before moving to Rocky River. busy with development. That was sort of the boom from ’04 through ’08. I saw it go through who aren’t from here are often more excited xcited about it. When you move here from m somewhere som somew ewhere ere the downturn, then I saw it rise again, even stronger than before locally. else, you LEADERSHIP don’t take it for granted.” YOUR STYLE? HOW WOULD YOU DESCRIBE

CLEVELAND BUSINESS USINESS

O’KeefeI expect is not working or spending timeI work, children, she can with her husband and two child dre en, sh he c he an I definitely believe in leadingWhen by example. the people withding whom MANY OF THE PROJECTS YOU WORKED ON ARE MIXED-USE URBAN PROJECTS. IS be found volunteering on the very boards off nonprofit and watching college collle eg ge football. foo fo ottball. my associates, to work hard, and they see me working hard. For me, it’sorganizations all THAT AN AREA OF EXPERTISE? about working hard and doing good work. Yes, definitely. Real estate is extremely interesting because every deal is differWHAT INSPIRES YOU ABOUT YOUR WORK? RK? ent. You can never get bored because there’s so much variety there, from tax hrough th here e’s obviousobviousus Just WHAT seeingWAS whatITCleveland has gone the time that I’ve been here, there’s LIKE TO WORK WITHthrough O’KEEFEinON WHAT OTHERS ARE SAYING: credits to historic renovations, from ground-up development to rehab, from ly a lot of excitement around real estate te development. I started in 2004 when we we were were e crazy crazy THE FLATS EAST BANK PROJECT? mixed-use to residential. busy with development. of the boom from ’04 through ’08. I saw itt go go through th hrough “Allyson is extremely bright and quick witted, butThat whatwas trulysort distinguishes her the downturn, then I saw itpeople rise again, even from most successful attorneys is her exceptional skills. Shestronger has an than before locally. HOW WOULD YOU DESCRIBE YOUR LEADERSHIP STYLE? uncanny ability to encourage the ‘adversaries’ in her negotiations to work in I definitely believe in leading by example. I expect the people with whom I work, OF THE PROJECTS YOU YOU WORKED Wsaid ORKED ON ON ARE ARE MIXED-USE MIXED-USE URBAN URBAN PROJECTS. PROJECTS. IS IS concert with her to achieve win/win MANY solutions to difficult problems,” my associates, to work hard, and they see me working very hard. For me, it’s all THAT AN AREA EXPERTISE? TISE?of the Scott Wolstein, CEO of Starwood Retail Partners andOF co-developer about working hard and doing good work. e is extremely interesting because every deal deal is differdifferrYes, definitely. Real estate Flats East Bank project. ent. You can never get bored there, red because there’s so much variety the ere, ffrom rom m ttax ax — Lee Chilcote WHAT OTHERS ARE SAYING: WHAT WAS IT LIKE TO WORK WITH O’KEEFE ON credits to historic renovations, tions, from ground-up development to rehab, re ehab, from fro om THE FLATS EAST BANK PROJECT? mixed-use to residential. “Allyson is extremely bright and quick witted, but what truly distinguishes her

successfulInc. attorneys is reserved. her exceptional people skills. She has an Reprinted with permission from the Crain's Cleveland Business. © 2015from Crainmost Communications All Rights YOU DESCRIBE RIBE YOUR YOUR LEADERSHIP LEADERSHIP STYLE? STYLE? HOW WOULD ability to encourage the ‘adversaries’ in her negotiations to work in Further duplication without permission is prohibited. Visituncanny www.crainscleveland.com. #CC15040

I definitely believe in leading ding by example. I expect the people with h whom whom m I work, rk concert with her to achieve win/win solutions to difficult problems,” said my associates, to work hard, and they see me working very hard hard. d. For For me, me e, it’s all a Scott Wolstein, CEO of Starwood Retail Partners and co-developer of the about working hard and doing good work. Flats East Bank project.

— Lee Chilcote YING: WHAT WHAT WAS WAS IT IT LIKE LIKE TO TO WORK WORK WITH WITH O’KEEFE O’KEEFE ON ON WHAT OTHERS ARE SAYING: THE FLATS EAST BANK PROJECT? PROJECT? “Allyson is extremely bright right and quick witted, but what truly distinguishes dis stin nguish hes her hes

skills s. She She has has an ha successfulInc. attorneys her exceptional people skills. Reprinted with permission from the Crain's Cleveland Business. © 2015from Crainmost Communications All Rightsisreserved. ourage negotiatio ons to to work w wo orrk k in n ability to encourage the ‘adversaries’ in her negotiations Further duplication without permission is prohibited. Visituncanny www.crainscleveland.com. #CC15040

hieve win/win solutions to difficult probl bllem ms,” s,” said concert with her to achieve problems,” co-deve evel velo ve elo el ope pe er off the the e Scott Wolstein, CEO off Starwood Retail Partners and co-developer ct. Flats East Bank project. — Lee Le Ch Chilcote C

Reprinted with permission from the Crain's Cleveland Business. © 2015 Crain rain Communications nss IInc Inc. nc. nccc. All n Al Rights Rig rese reserved. rved d. Further duplication without permission is prohibited. Visit www.crainscleveland.com. ww.crainscleveland. and.c nd d.ccom. o om. m #CC15040

REAL ESTATE

Adviser: Jack W. Waldeck

Tax reform offers a mixed bag regarding like-kind exchanges Real estate and investor clients often turn to something called “likekind exchanges” to defer tax payments on gains from a recently sold property. Like-kind exchanges are a transaction or series of transactions that allow a sold asset and the acquisition of a replacement asset without generating a current tax liability from the first asset. The technique has been used widely for years, and although it was threatened during last year’s tax reform, like-kind exchanges for real property survived the new law. However, beginning this year, like-kind exchanges of personal property have been eliminated, except under transitional rules for some transactions dating back to 2017. The elimination of like-kind exchanges for personal property can negatively impact real property like-kind exchanges. Many clients have turned to cost-segregation studies of their real estate investments. This often results in depreciation schedules for certain elements of the property that are separate and shorter than the typical 39.5-year depreciation schedule for non-residential real property. For example, a study might identify energy-efficiency systems for heating, cooling and electricity that qualify for cost segregation. The depreciation schedule for these elements is shorter than those for the real estate. In fact, such elements probably qualify for immediate write off under the new allowable depreciation schedules. The segregated elements offset income from the property, which otherwise might have been taxable, had the segregated elements been depreciated on the usual real-property schedule. Cost-segregation studies have been performed with property acquired in a like-kind exchange after the exchange has been done. In fact, investors who have not segregated costs can now do so and receive a significant catch-up deduction. Then they can perform an exchange. Implementing the new depreciation schedules from these studies typically does not cause a taxable event. So, what happens when a cost-segregated property project is sold in a like-kind exchange deal? Even if there has been no cost-segregation study, what happens when personal property is included with real property in a like-kind exchange? Under the pretax reform rules, the party receiving personal property with value greater than the personal property that the party put into the exchange received taxable boot on that excess value. Some investors and owners took the position that parts of the project that were personal property, or had been put through the cost-segregation process, were still considered real property. As real property under this prior analysis, all sale proceeds were available for likekind exchange purposes. There would be no exclusion or allocation of proceeds to the cost segregated or personal property elements of the

Jack Waldeck is a partner and chair of the real estate practice group at Walter | Haverfield in Cleveland.

project, nor would any taxable boot be considered as received because of the personal property alone. Congress has now weighed in on this. All personal property received in a like-kind exchange is considered taxable boot. This is true even if the seller gives the buyer the personal property and no allocation of the purchase price is made to personal property. The point of a cost-segregation study is to move part of the real property cost to a shorter depreciation schedule, untied from the real property. Accordingly, the costs segregated from the overall property project, and the identified personal property relating to it, are now going to be considered taxable boot in a likekind exchange. Another item to be considered in computing the benefit of a like-kind exchange is the revised depreciation rules on certain types of personal property. The depreciation schedules have been accelerated under tax reform for many types of personal property. In some cases, they allow 100 percent depreciation in the first year. This benefit might well offset the tax hit taken in connection with cost-segregated personal property put through a like-kind exchange, provided that the project received in the exchange contains a personal property element. For example, assume an investor owns an industrial building with personal property inside. Assume further that the personal property is worth $100,000 and that the building and land are worth $900,000. The owner exchanges his property for raw land worth $1 million. The $100,000 of personal property will be considered boot, and taxes will have to be paid on any gain realized. Since there are no buildings or personal property on the raw land, the new owner of the raw land will have no depreciation to offset the gain realized on the sale of the personal property. From the perspective of the buyer of the building and land, the personal property will no longer qualify as real estate. Cost-segregation studies can provide a big deduction up front, both on the property already owned, and on the property acquired in a likekind exchange. However, the deal is not as good as it once was because the personal property identified in the cost-segregation study will now be subject to tax as boot in a like-kind exchange. Depending on the type of property received or acquired in the like-kind exchange, there may be some softening of this new tax burden.

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REAL ESTATE

List: Home sales exceeding $2M more than double in 2017 By SCOTT SUTTELL ssuttell@crain.com @ssuttell

If you've been involved in buying or selling a house lately in Northeast Ohio, you know the market is pretty hot. Just how hot â€” at least at the very top end of the price range â€” is underscored by the data in our list of the largest residential property sales of 2017 in Northeast Ohio. There are 10 homes on the 2017 list with a sale price above $2 million, compared with just four at that lofty level on the Crain's list of 2016 residential sales. Moreover, the top five sales of 2017 all were for prices higher than the largest sale in 2016 â€” a property at 22222 Lake Road in Rocky River that sold for $2.95 million in April of that year. (As a benchmark, the S&P CoreLogic Case-Shiller Indices report last month showed prices in the Cleveland-Elyria-Mentor area were up 4.1% in February from a year earlier, which is healthy for this market but still leaves prices below pre-recession levels.) The top sale of 2017 ventured into territory rarely seen in the Cleveland market: $4 million-plus. And it nearly joined the $5 million

Residential Sales: Find the list of the areaâ€™s largest residential sales in 2017 ranked by price on Page 22

club, as the 10,788-square-foot home at 2779 SOM Center Road in Hunting Valley sold for $4.8 million last September. There were four homes last year that sold in a range between $3.2 million and $3.455 million. One of those was in Hunting Valley, another was in Gates Mills, and the other two were in Rocky River. The names of those communities appear quite frequently at the top of the 2017 list. Indeed, of the top 12 property sales last year, reaching down to a $1.8 million sale price, there were three each in Gates Mills, Hunting Valley, Rocky River and Shaker Heights. That means the list was even more Cuyahoga County-centric than usual, since all those communities are in the region's largest county.

On the 2016 list, the top 12 sales included properties in Medina County (Wadsworth), Lorain County (Avon Lake) and Summit County (Hudson). The top non-Cuyahoga County sale of 2017 was at No. 21 on the list â€” a home at 32904 Lake Road in Avon Lake that sold for $1.585 million. Here are a few other tidbits about the print version of the 2017 list: J The oldest home sold was a property at 7151 Old Mill Road in Gates Mills that fetched $1.862 million. The 7,851-square-foot home was built in 1904. J The youngest home sold, at 32749 Fairmount Blvd. in Pepper Pike, was built in 2015. It sold for $1.375 million. J The largest home on the list was an 11,747-square-foot property at 28717 Weybridge Drive in Westlake that sold for $1.6 million. J Westlake and Hunting Valley tied for the most homes on the list at five. Just behind them were Gates Mills (four), and Chagrin Falls, Rocky River, Shaker Heights and Solon, all with three each. J Only one home in the city of Cleveland made the list: a penthouse suite at 701 Lakeside Ave., in the Pinnacle Condominiums, that sold for $1.475 million.

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REAL ESTATE

A new generation takes on downtown development By STAN BULLARD sbullard@crain.com @CrainRltywriter

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The early-1990s bear one big similarity to today: Real estate development downtown and in the neighborhoods is again the talk of Cleveland. This latest round of development is led by baby boomers, though the apartments are populated largely by millennials, in contrast to the prior period when the World War II generation was at the helm and pushing major projects like the opening of The Avenue at Tower City and Galleria as well as the construction of Key Tower, which punctuated the city’s skyline. Downtown developments today are led by people born after the war who now have the leadership roles and the equity to gain admission to downtown’s playing fields, from Millennia Cos. of Cleveland to K&D Group of Willoughby. They’re also joined by a host of other characters, including Cavaliers and Bedrock realty owner Dan Gilbert — the sole outsider — to Stark Enterprises founder Robert L. Stark, the Geis brothers and Independence-based Dalad Group’s Neil Viny. Dick Pace, president of Cleveland-based Cumberland Real Estate Group, has often reflected on the shift and even discussed it publicly. Now doing realty projects of his own such as the Harbor Verandas on the lakefront and other projects planned with Dallas-based Trammell Crow Co. on city-owned lakefront property, Pace was previously an architect and managing partner of van Dijk, Pace, Westlake, now DLR Group | Westlake Reed Leskosky. The firm did work as the local architect teamed with Cesar Pelli on Richard & David Jacobs Group’s 57-floor Key Tower and the conversion of the old U.S. Post Office to Post Office Plaza by Forest City Enterprises, now known as Forest City Realty Trust. “I have great respect for the Ratner family and the Jacobs brothers (the late Richard and David,) and the late Bertram Wolstein (founder of what’s now DDR Corp. of Beachwood) and all they did for the city,” Pace said in an interview. “They were big players nationally who started developing at home. And that meant the fights were fiercer.” All those groups had new office buildings fighting for tenants, with Wolstein developing U.S. Bank Centre in a partnership with Ross Farro, then an Independence-based office developer. “If Forest City landed a major office tenant,” Pace recalled, “that meant Jacobs and Wolstein did not.” Some of the competition went on behind the scenes. Both Jacobs and Forest City vied to land Nordstrom as an anchor tenant for their urban retail centers, according to Andi Udris, former Cleveland economic development director in the Voinovich administration. Forest City announced landing Nordstrom, but it didn’t come to Tower City, in part due to growing economic malaise and the recognition that the city had too few

The Avenue at Tower City is among a roster of Cleveland landmarks poised for a redo. (David Kordalski)

downtown residents to support a new department store. The biggest difference between the two generations of leaders generally boils down to their attitude toward downtown. “The World War II generation wanted nothing to do with downtown,” Udris said. “That’s why it took such great incentives for developers then to come downtown.” That was the era of U.S. Urban Development Action Grants, low or no-interest federal loans that, when paid back, were recycled by the cities getting them. Tower City and Key Center both had major loans. “Today the feeling about downtown is very different,” said Udris, a partner with developer Fred Geis in the Hofbrau Haus at Playhouse Square and director of economic development in Brooklyn. “At that time we were trying to get hotels, now we have many. We have fine restaurants and generations that are used to coming downtown for entertainment.” He pointed to both the restored Playhouse Square theaters and the sports venues for changing perceptions of suburbanites about downtown. Udris argues that young people now known for liking urban areas and empty-nesters who are starting to move downtown both share a search for things to do. Doug Price, K&D CEO, points out another similarity to the current generation of developers. Except for Gilbert, all the players are Clevelanders, he said. “That’s why we all do it,” Price said in an interview. “We know the city and know the risks. There also has not been a big-bang project everyone is competing to get. It may change when that happens.” Now both K&D and Frank Sinito, owner of Millennia Cos., are undertaking office building to apartment conversions. Their customers are the hundreds of prospective renters, a different undertaking than vying for a handful of office or retail tenants who

might locate downtown. Pace said this generation of developers is more collaborative than its predecessors. “We compete,” Pace said, “and compete hard for things. But in the end, there’s a feeling that we win if tenants stay in the area we’re in.” He pointed to the multiple partnerships Fred Geis is in from MidTown and the Flats to Ohio City as a different approach from the past. Through his architecture days, Pace also got a first-hand look at the development boom towns who attract national developers who then exit after the boom ends. “There is a very different feeling in Austin or Denver or Portland today where national developers are active,” Pace said. “There is a sense that people working on the projects are there for a short time and after it’s over, they move on. That is very different from locally bred developers.” The current round of apartment-led downtown development, though a national phenomenon, builds on decades of efforts here to foster a downtown residential population. Those seeds are coming to fruition with this crop of apartment projects, said Tom Yablonsky, executive director of the Historic Gateway Neighborhood and Historic Warehouse District as well as executive vice president of Downtown Cleveland Alliance. “There’s clearly been a changing of the guard,” Yablonsky said. “With K&D and Millennia you have apartment owners and developers who know their own town. It’s not like rolling projects off an assembly line. There are complexities and stick-toit-iveness required.” However, Udris finds himself worrying about the same thing he did in the 1980s. “I worried about balance then,” Udris said. “We needed residential development as well as office buildings. Now I worry about getting the next office building so there are places for more people to work.”

CRAIN’S CLEVELAND BUSINESS

TEAM NEO CONTINUED FROM PAGE 1

The new report, which updates a similar, more limited report produced last year, found that while 65% of the jobs in demand in 2020 will require education or training beyond high school, only 54% of Northeastern Ohioans currently can qualify for those jobs. The Cleveland Foundation, which began analyzing the labor pool in 2014, is a partner in the current edition. Its original focus was to find ways to better connect Cleveland residents to future careers in occupations that pay what it calls “family sustaining wages.” This report builds on that work, expanding its focus to the 18 Northeast Ohio counties Team NEO serves and by offering great detail on what the demand will be. It will be updated annually. The current study is funded in part by Sherwin-Williams Co.

“We still see significant misalignment in particular as it relates to three really important sectors — information technology, manufacturing and high-level health care,” Duritsky said. “We will use this (report), as we have in the past, to meet with businesses and higher education because for us, trying to bring companies here, talent is No. 1 or 2” on their criteria for expansion. Among the top occupational groups expected to be in demand over the next several years are several categories of health practitioners, such as registered nurses and home health aids, and a variety of information technology occupations. The report compared 2016 job postings with the number of credentials awarded for each job category in 2015 to identify the occupations with shortages. “I do think the reports are helping by keeping a constant drumbeat up and focusing on what are our driver

industries that have good quality jobs and keeping the focus on where the business demand is,” said Shilpa Kedar, the foundation’s program director for economic and workforce development. “So we’re not just producing talent for the joy of producing talent.” Duritsky said he hopes the report’s findings will be used by school counselors to guide students into programs that will lead to jobs that employers are working to fill. He said it’s designed to help answer the question, “If you’re a two-year or fouryear graduate, what does the landscape of opportunity look like for you, with your degree or certificate?” The report evaluates 350 jobs in 19 occupational categories and maps them against 700 educational programs. In information technology, which is expected to grow rapidly, Team NEO found a mismatch between the demand for entry-level IT workers based

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on 2016 jobs postings and the number of IT credentials awarded in 2015. The shortage was 1,269 IT workers, though Duritsky noted that that counts only entry-level candidates from the region and doesn’t include candidates who might have completed degree or training programs outside the area. But he believes that the research measurement is meaningful for Northeast Ohio, a region that is not seeing a large influx of people. Similarly, the researchers’ analysis found that while the postings indicated a demand for 4,164 entry-level nursing and psychiatric and home health aides, regional programs awarded only 1,637 credentials — certificates or college degrees — to graduates in those fields. Team NEO suggests in its findings that the low level of programs graduating candidates for in-demand jobs offers an opportunity for the region to reshape the programs that provide technical education in the region. It

M AY 7 - 13 , 2 018

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would like to see schools adopt innovative models of delivery, such as work-based learning, which would require greater employer engagement. Duritsky said Cuyahoga Community College is one institution that is working hard to improve its programs to meet the demand. William Gary, Tri-C’s executive vice president of workforce, community and economic development, said the college has reshaped all of its workforce training and education programs and is working to sell them to students. The school is focusing on key industries and offering students the opportunity to earn multiple certificates that can lead to a more than one career option. “In manufacturing, our manufacturing folks can get certificates (that require as little as three months training) in 3D printing, advanced manufacturing, precision machining and also get a commercial driver’s license,” Gary said.

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CRAIN’S CLEVELAND BUSINESS

THE LIST

Largest 2017 Residential Sales Ranked by price THIS ADDRESS YEAR COUNTY

SALE PRICE

BUYER

SELLER

SQUARE FEET YEAR BUILT

SALE DATE

2779 SOM Center Road, Hunting Valley, 44022 Cuyahoga

$4,800,000

Todd M. Leebow (trustee)

Cathy B. Horton (trustee)

10,788 2006

Sept. 29, 2017

7464 Saddleback Lane, Gates Mills, 44040 Cuyahoga

$3,455,000

John A. (Jr.) and Gabriella M. Ciaramella

Patrice D. Clapacs (trustee)

9,108 2007

Aug. 31, 2017

21440 Avalon Drive, Rocky River, 44116 Cuyahoga

$3,300,000

Harry D. and Kelly E. Harp

Michael R. and Sofia Henry (trustees)

5,729 2010

Dec. 1, 2017

19486 Frazier Drive, Rocky River, 44116 Cuyahoga

$3,300,000

Nolan and Catherine Gallagher

Roger S. and Sharon K. Vail

7,300 2007

Nov. 8, 2017

35275 South Woodland Road, Hunting Valley, 44022 Cuyahoga

$3,200,000

35275 South Woodland LLC

Lynn Arko Kelley

10,820 2000

March 6, 2017

18800 North Park Blvd., Shaker Heights, 44122 Cuyahoga

$2,800,000

18800 North Park LLC

Catherine Paris (trustee)

7,870 1968

July 31, 2017

920 West Hill Drive, Gates Mills, 44040 Cuyahoga

$2,375,000

Brandon J. and Juliana P. Carrus

William N. and L.M. Neiheiser

9,229 1994

Jan. 27, 2017

19650 Frazier Drive, Rocky River, 44116 Cuyahoga

$2,369,000

Mark Richard Pfaff and Megan McCallister (trustees)

Mary J. and Donald J. Mayer

5,704 1995

June 20, 2017

18100 South Park Blvd., Shaker Heights, 44120 Cuyahoga

$2,300,000

Robert R. Campbell Jr. (trustee)

Julia LoMedico Pollock

8,820 1937

Sept. 8, 2017

19201 South Park Blvd., Shaker Heights, 44122 Cuyahoga

$2,049,000

Nicholas Fink (trustee)

Alec J. and Nadya Scheiner

8,908 1928

June 29, 2017

7151 Old Mill Road, Gates Mills, 44040 Cuyahoga

$1,862,500

Jeffrey A. Gorski (trustee)

Vita Di Casa LLC

7,851 1904

Nov. 1, 2017

38665 Hunting Hill Farm Drive, Suite C, Hunting Valley, 44022 Cuyahoga

$1,800,000

William C. and Herriet B. Mulligan

Scott Mueller

4,487 1998

Nov. 30, 2017

50 Rydalwood Lane, Moreland Hills, 44022 Cuyahoga

$1,795,000

50Rydalwood LLC

Douglas W. and Linda E. Preiser

8,250 2002

Nov. 30, 2017

30131 Saint Ives Drive, Westlake, 44145 Cuyahoga

$1,775,000

Stella Realty Management LLC

Dean T. and Carol J. Mueller

9,415 1995

July 14, 2017

2980 Waterfall Way, Westlake, 44145 Cuyahoga

$1,771,290

William L. and Kathryn S. Osborne

John E. Lawrence (trustee)

7,589 2001

Nov. 30, 2017

29961 Chairmans Rowe, Westlake, 44145 Cuyahoga

$1,725,000

Nishant Joshi and Laura A. Piroutek

Joel L. Mandel (trustee)

6,745 1995

Sept. 29, 2017

29997 Chairmans Rowe, Westlake, 44145 Cuyahoga

$1,700,000

John H. (II) and Jennifer Adamski

Michael and Carolyn Brown

8,615 1998

July 31, 2017

1745 Epping Road, Gates Mills, 44040 Cuyahoga

$1,605,000

Nathaniel T. and Mary A. Smith

Don W. and Linda R. Cochran

4,892 1954

Oct. 18, 2017

28717 Weybridge Drive, Westlake, 44145 Cuyahoga

$1,600,000

Nazem M. Nouraldin

Ruth A. Fortney (trustee)

11,747 1999

Oct. 2, 2017

26966 Lake Road, Bay Village, 44140 Cuyahoga

$1,600,000

John W. and Alison L. Nottingham

Anne R. Love

6,261 1993

Oct. 2, 2017

32904 Lake Road, Avon Lake, 44012 Lorain

$1,585,000

Fatena Kawkji and Firas Seffo

Sandra Haas

4,606 2008

Jan. 6, 2017

64 W. Washington St., Chagrin Falls, 44022 Cuyahoga

$1,575,000

513 Holdings LLC

Eileen Fellner (trustee)

4,757 1870

March 1, 2017

15355 Suffolk Lane, Chagrin Falls, 44022 Geauga

$1,500,000

Robert and Kathleen Skopec

Mary S. Graves

6,438 1996

Oct. 31, 2017

2062 Old Forge Road, Kent, 44240 Portage

$1,500,000

Daniel L. and Kimberly S. Ebie

Cynthia F. Grable

4,576 1974

April 18, 2017

113 Quail Lane, Chagrin Falls, 44022 Geauga

$1,478,800

Jerimy and Kristin Brockway

Tom W. Johnson (trustee)

6,394 1989

July 7, 2017

701 Lakeside Ave., Suite PH, Cleveland, 44113 Cuyahoga

$1,475,000

Reach Point LLC

Paul N. Isherwood

3,740 2005

Oct. 19, 2017

34650 Cedar Road, Hunting Valley, 44040 Cuyahoga

$1,435,000

Douglas W. and Linda E. Preiser

Kurt L. and Mary Anne Liljedahl

4,745 1953

Nov. 27, 2017

34055 Old Kinsman Road, Hunting Valley, 44022 Cuyahoga

$1,415,000

Jonathan A. Leebow (trustee)

James R. Herrick (trustee)

4,152 1960

Sept. 29, 2017

5289 SOM Center Road, Solon, 44139 Cuyahoga

$1,400,000

5297 SOM Center LLC

Carlette L. Gemma

1,260 1920

Aug. 8, 2017

2650 Heritage Lane, Pepper Pike, 44124 Cuyahoga

$1,400,000

Ansir Junaid

Heritage Lane Holdings LLC

8,916 2013

Jan. 27, 2017

6558 Chestwick Lane, Hudson, 44236 Summit

$1,395,000

Eric M. and Elizabeth A. Fudo

Prestige & Premier Cos.

5,320 2014

March 29, 2017

65 Winding River Trail, Bentleyville, 44022 Cuyahoga

$1,375,000

John R. Topits (trustee)

John and Beth A. Fung

5,440 1998

April 17, 2017

32749 Fairmount Blvd., Pepper Pike, 44124 Cuyahoga

$1,375,000

Juliet S. Korver (trustee)

Iris S. Wolstein (trustee)

4,728 2015

Sept. 12, 2017

30760 Stillwater Lane, Solon, 44139 Cuyahoga

$1,350,000

Michael J. and Lisa Louwers

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The Maxwell Foundation LLC

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PA G E 2 4

M AY 7 - 13 , 2 018 |

CRAIN’S CLEVELAND BUSINESS

AKRON

Neighborhood Watch

Kenmore and its Boulevard are ready for an encore

With a growing music scene and a main street perfect for an urban lifestyle, the area is working toward a revival By DAN SHINGLER

About this series

dshingler@crain.com @DanShingler

We thought we knew a fair amount about Akron, which is the hometown of some of us at Crain’s. That is, until we started driving around with Akron planning director Jason Segedy, who agreed to take part in an ongoing series to show us his knowledge and passion for the city — one neighborhood at a time. This month, we look at Kenmore, an area that’s working to repopulate its classic buildings with businesses and foster its music scene.

Kenmore used to be a bit of a black sheep among Akron’s neighborhoods. Now it’s a beacon of hope and a potential crucible for urban redevelopment. “I love Kenmore. It’s one of my favorite neighborhoods in Akron,” said Jason Segedy, Akron’s director of planning and urban development, as he began a tour of the southside neighborhood, just west of Firestone Park. To be fair, Segedy has said the same about a lot of Akron’s neighborhoods: The man loves a good street, whether it’s lined with trees, businesses or even solid, old buildings in need of investment. Kenmore Boulevard, for the most part, would be the latter. But Kenmore is special, Segedy said, because unlike other Akron neighborhoods that are trying to redesign themselves to become pedestrian- and bike-friendly to appeal to urban lifestyles, Kenmore was designed that way from the start. “Do you see how all the buildings are pushed right up to the sidewalk? That’s exactly what you want to see,” Segedy said as he drove down the main drag of Kenmore Boulevard past a mix of storefronts that range from vibrant to shuttered. Kenmore Boulevard is becoming a hot spot for Akron’s music industry and starting to attract interest from real estate investors. Segedy sees a lot of potential for Kenmore to turn around, and he was a big reason the city announced April 30 it will repave and reconfigure the main stretch of Kenmore Boulevard. That’s something businesses and advocates applaud. Most are willing to narrow the stretch if it will slow car traffic and allow more foot traffic. Segedy isn’t the only person who sees potential. Investors and business owners have started to recognize it, too. The focus is nearly all on what people simply call “the Boulevard” — the strip of Kenmore Boulevard that runs roughly from 17th Street SW to about 12th Street SW. This is the heart of the neighborhood and the section that makes Segedy smile. Here, Kenmore Boulevard is lined with old two-story commercial structures, many built 75 or more years ago. They don’t look much like the developments that followed them in other parts of the city. They were built in an era of street cars and pedestrians, Segedy explained, so buildings come right up to the sidewalk. There’s only a single lane of parking in front, though most of the buildings have parking in the rear. On the street level, you’ll find Lay’s Guitar Shop and the Guitar Department, both of which cater to Kenmore’s growing music scene. Other spots include Kenmore Komics and Games, E&S Hobbies and Trains, and the Rialto Theatre. The area also boasts as many as eight recording studios. Plus, there are drum makers and at least one other guitar maker. Todd Ederer purchased four of the buildings along this stretch in the past three years. He’s no stranger to Akron

helped shape some of the plans the city just unveiled for the Boulevard, Segedy said. Residents say Kenmore is “sticky,” too. Its community often draws people in once they’ve spent some time there — people like Noelle Beck, executive director of the First Glance Student Center, which provides Kenmore teens with support and activities, including an indoor skate park on Kenmore Boulevard. “I was looking to do an outreach program somewhere with youth that needed it … and here I am almost 18 Last September, Kenmore hosted a Better Block event, where temporary changes, such as bike lanes and outdoor years later and I live here. In 2008, I seating, showed residents what’s possible. Here, people gather outside the Rialto Theater. (Shane Wynn for Crain’s) moved into the community,” Beck help the community and add the said. “A lot of our volunteers move into the community.” most value to his properties. Kenmore business owners credit For now, though, his main tenant is the Kenmore Neighborhood Alli- Boyes with re-energizing and bringance, which is headed up by execu- ing more people into the Neighbortive director Tina Boyes. Her name hood Alliance, helping to get new comes up a lot when you talk to Ken- music venues open and to promote more businesses. Many say she’s the their shows, coordinating the Better “dynamo” behind the neighbor- Block, working with city officials on hood’s redevelopment and Ken- street and traffic issues, and generalmore’s recent success at building up ly raising the profile of Kenmore — and especially that of its music industry. music district. Ederer has allowed “Do you see how itsThat includes Guithe alliance, free of tar Shop, which has charge, to open Live all the buildings done repair work for Music Now at one of his buildings, 952 are pushed right all sorts of musicians and instrument colKenmore Blvd. It’s the up to the lectors for more than neighborhood’s newest music venue, with sidewalk? That’s 40 years. The shop even fixed a small stage for inti- exactly what The Kenmore Neighborhood Alliance has opened Live Music Now, the two of Pete Townmate shows with acts area’s newest music venue that hosts intimate shows. shend’s guitars that too small to use the you want to were smashed in peror the challenges of old industrial real happen to these business districts,” larger Rialto down the see.” formances and are street. estate. He’s done work downtown, Ederer said. now owned by a colSoon, Boyes plans — Jason Segedy, Akron’s some of which with developer Tony He’s working to rehabilitate the lector. Troppe, and owns Fairlawn-based buildings and to get them into use in to open a coffee shop director of planning and “We’ve taken in 80 Ederer Real Estate and Construction. ways that benefit the neighborhood, there during the day, urban development guitars in the last “I love these little two-story build- he said, adding that he’s not looking so the spot will have three weeks. I can’t ings, and I love how they’re right up at them as short-term investments live music in the evenings and provide the neighborhood remember that happening since the to the street. Some of them need but multiyear projects. Ederer wants to help rebuild the with a much-needed café and social old days, back in the ’70s or ’80s,” said varying degrees of work, but I’ve seen Dan Shinn, owner of Lay’s. through other explorations what can Boulevard because that’s what will spot, she said. Next door, Ed Michalec, owner of “Our goal is to change the image people have of this neighborhood,” the Guitar Department, said he’s said Boyes, who added she’s aware of similarly enthused. “I’m excited. I think (the BouleKenmore’s image of having a rural atvard) is doing great. For a while, we titude. “We’re Appalachian, but that’s didn’t know what was going or what why you get the great music here, direction things were headed, but everything’s been really good and positoo,” Boyes said. Boyes said she’ll probably never be tive lately,” he said, crediting Boyes satisfied with the state of Kenmore, for “turning theory into action” in the but that she’s optimistic about its neighborhood. Like Boyes and others, Ederer says current direction. Residents are engaged, she said, as evidenced by the there is still much to be done, includparticipation in Kenmore’s Better ing his current effort of securing a historical designation for the BouleBlock event in September. Usually held over a weekend, Bet- vard that would provide some tax ter Block events temporarily alter a credits and incentivize development. neighborhood to give people a sense Then, he hopes to house a restaurant, coffee shop and more retailers in his of what might be. In Kenmore, the Boulevard was buildings, because it will be easier to spruced up and reconfigured for pe- finance projects there. Guitars line the walls of Lay’s Guitar Shop in Akron’s Kenmore destrians and cyclists. That work neighborhood, which is home to a growing music scene. SEE KENMORE, PAGE 25

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CRAIN’S CLEVELAND BUSINESS

M AY 7 - 13 , 2 018

PA G E 2 5

AKRON

Law Building plans to convert to residential By DAN SHINGLER

tenants. That will be kept as office space,” Rybak said. Above, he said, will be seven floors of apartments, with remodeled common areas and a demonstration kitchen on the ninth floor, he said, with 14 one-bedroom units and two two-bedroom apartments on floors five through 11. It’s a huge project, both in terms of its size and potential impact downtown, observers say. The building has just more than 200,000 square feet of space, Rybak said. It’s also on South Main Street directly across the street from the Akron Civic Theatre and the proposed Bowery Project, which aims to redevelop six buildings, including the 12-story Landmark Building (the former Akron Savings and Loan Building). The Bowery Project is expected to cost about $40 million and to produce about 100

new apartments and 50,000 square feet of retail space. The Law Building has something else in common with the Bowery and others: the challenge of finding financing. Rybak said he’s a bit caught in the middle as an out-of-town developer in that he does not have the connections with local investors to which others might turn. And national lenders are often leery about lending tens of millions of dollars for a project like his in downtown Akron. “The issue in this project has been the reputation of Akron, I’m sorry to say,” Rybak said, when asked why he thought financing the project was difficult. But he thinks he’s now close to getting his deal together after a couple of false starts. “We’re still finalizing our financial

stack, but we’re almost there. We were almost there in November and had a (setback),” Rybak said. A lot of people are hoping he succeeds, including city officials and downtown advocates. “We are absolutely in support of the Law Building conversion and really excited to see the project come to fruition,” said Suzie Graham, president of the Downtown Akron Partnership. The city has been working to support residential developments downtown, including with a tax abatement program put in place last year that exempts an increase in a building’s value from property taxes for 15 years for new or renovated properties. “The City is supportive of the proposal to redevelop this building, and we believe it would be a benefit for downtown and the City if it comes to fruition,” said city spokeswoman Ellen Lander Nischt in email correspondence. “Any portion of the building used for residential housing would be eligible for the tax abatement (if they make qualifying improvements of course — meaning ones that would result in new residential property tax assessment).” Lander Nischt said the project already has been approved by the city’s fire prevention, zoning and sewer divisions, but has yet to receive approval from the water distribution division, pending some updates to the development plans. But if Rybak can get the project completed, he may have a winner — especially if he can beat some other developers to market and grab new tenants first, said Jerry Fiume, founder and managing director of Akron’s

empty parking spots only make it look even more desolate. The city has changed how it looks at that site, Segedy said. It’s no longer viewed as a spot likely to attract retail development. But with large nearby roadways and easy access to expressways, it’s an ideal site for light industry or a warehousing and distribution operation. Segedy said the city is talking to parties who have expressed

such an interest, but it is not yet ready to announce a deal. Kenmore also has the same challenges of almost any urban neighborhood in a Midwest city. Its housing stock is older, and some of it needs repair and rehabilitation. But some of it is also in great shape, Segedy said. Kenmore is the only neighborhood in Akron that sits on two lakes: Nesmith and Summit. Some homes

perched on the hill above Summit Lake have views that would rival anything found in Portage Lakes to the south. But, like most of the roads in Kenmore, everything about the neighborhood’s prospects seems to come back to the Boulevard. That’s where the neighborhood alliance, city officials and investors have most of their hopes pinned. If the central business district can be brought back, the revi-

dshingler@crain.com @DanShingler

Downtown Akron’s Law Building could become the city’s next luxury apartment building if its owner can put together the financing needed to complete a $26 million redevelopment. Its owner, New Jersey developer and real estate investor Tom Rybak, said he hopes to turn the 11-story office building into a high-end, mixeduse tower, with most of its space converted to apartments. Rybak said his previous projects include Newark, N.J.’s Pavilion and Colonnade apartments, a 1,200-unit project for which he provided architectural and construction services in 2010. Now he hopes to bring some of his big-city acumen to Akron. “We will be a pet-friendly building, and we will have certain apartments with high-end appliances, granite kitchen tops and lots of glass. It will be like a New York- or Chicago-style loft,” Rybak said in discussing his Law Building plans. He’s even considering having a doorman, he said, which would make his the first downtown Akron apartment building to have such an amenity. Rybak also plans to have other high-end amenities — such as a movie theater, spa and exercise facilities, plus meeting rooms on the lower floors — mixed in with a restaurant and retailers. On the roof, he’s planning to build a private sun deck and garden. “We’ll use the second, third and fourth floors to relocate our (office)

KENMORE CONTINUED FROM PAGE 24

But it’s not as if Kenmore doesn’t have its challenges as well. The former Rolling Acres Mall, once a premier shopping destination in the region, with nearly 1.5 million feet of thriving stores, is a mess. Today, it’s mostly a demolition site and its 8,000

PAGE 26

MAY 7, 2018

Law Building owner Tom Rybak wants to convert the downtown Akron office building into a mix of apartments, retail and office space. (Dan Shingler)

CRAIN'S CLEVELAND BUSINESS

REAL ESTATE

Phone: (216) 771-5276 Contact: Lynn E-mail: CLBClassified@crain.com KateCalcaterra Rozek OFFICE SPACE

AUCTIONS

SVN Summit Commercial Real Estate Group. “I think whoever converts or brings to market first, their conversion product is going to win,” Fiume said. But he thinks the Law Building is an ideal candidate for conversion to downtown apartments and that it would be much more difficult right now to find office tenants than apartment renters. “I think that building will be dynamite for conversion. It looks great on the inside,” Fiume said. Todd Ederer, a Fairlawn-based real estate developer who has done some work with Akron developer Tony Troppe, said he thinks the project is not only smart but fits perfectly with the city’s plans to rebuild its population. It also could be a catalyst for yet more development in the city center, he added. Akron is just following the same successful path that cities like Columbus, Cleveland and Cincinnati have already taken, he said. “I’ve been able to spend time and study these cities, and the things that’s consistent is once the residential stuff gets going, it snowballs,” Ederer said. Rybak said he did a local market study before committing to the project. “We are very positive about Akron,” he said. But he also knows time is an important factor and said he’s working as fast as possible to get the project started. As for a deadline on construction, Rybak’s wry sense of humor showed in his answer. “That already passed,” he said with a chuckle. talization will spread from there — or at least that’s the hope. And along those lines, things seem to be progressing more quickly after years of effort. Existing business owners are already changing their views of Kenmore, and Boyes and others hope potential businesses will follow their example. “At one point, I was thinking about going somewhere else, but I’m here to stay now,” Michalec said.

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M AY 7 - 13 , 2 018 |

CRAIN’S CLEVELAND BUSINESS

STEFANSKI CONTINUED FROM PAGE 1

Historically speaking, a tier 1 ratio between 4% and 6% has been more typical in the banking world, even though many banks have been voluntarily raising capital levels in recent years. Third Federal has long sided with holding on to capital instead of spending it on growth, making it a key feature of its conservative approach. It’s a value that traces back to how Stefanski’s father — Ben, who founded the bank with his wife, Gerome, in the midst of the Great Depression — had structured the bank after opening it in 1938. “My father’s career especially, everyone thought he was old-fashioned,” Stefanski said. “They also thought he was too aggressive in the marketplace — we’ve always tried to compete in terms of savings and CDs and mortgage products. The local companies and regulators always gave us a hard time because we were so aggressive and just followed the letter of the law in every respect. Competitors didn’t like it. And we were outliers because we had more capital than everyone else.” Competition would often scoff at the bank’s approach. “Anyone who is an outlier makes people uncomfortable because they aren’t following what everyone else is doing,” he said. “But we’ve been different in a way from a competitive perspective: If it was good for customers, and good for the community we serve and good for Third Federal in that we didn’t take excessive risk and we can fortify out war chest with a strong capital base, we’d do it.” Stefanski, 64, has no imminent plans to retire (it’s worth noting he has a son and two nephews working at the company, though no one in particular is in line for the job). As he looks back on the bank’s eight decades of business, 31 of which have been with him at the helm, there are plans for more of the same slow-but-steady growth the bank has achieved in past years with a similar game plan focused on savings and mortgage products. But there have been plenty of ups and downs along the way.

Capital is key to survival Stefanski first started working at the bank in 1982 after previously run-

Chairman and CEO Marc Stefanski and his family celebrated Third Federal Savings and Loan’s 80th anniversary in April at NASDAQ. (Contributed photo)

ning Ameritrust’s Cleveland Clinic branch. He’d always had an interest in banking, but he never particularly aspired to be a CEO. Nonetheless, he took over running the bank in 1987 after his father suffered a stroke. The late Ben Stefanski opened the bank in Slavic Village in May 1938 to predominantly serve struggling immigrant families. There were probably 20 or 30 savings and loan associations in the Cleveland region at that time. Ben Stefanski previously worked at an institution that failed in 1929. That, combined with the effects of the Great Depression, is what led to the Stefanski’s principle of having a large capital base. Think of it as an especially large rainy day fund. “He was going to follow the right things to do in terms of accounting and in terms of some moral or ethical compass, unlike other companies who may not have had that kind of experience and didn’t display that kind of leadership,” Stefanski said. The nationwide S&L crisis was settling in as Marc Stefanski took over as CEO in 1987. Thousands of thrifts failed during that period, which ran from 1986 to 1995. Strong capital levels helped Third Federal weather that storm. In 1997, the bank formed a mutual

holding company. Doing that could permit the mutual bank — which is owned by depositors similar to credit unions — to issue stock to raise capital. But that wouldn’t actually happen until 10 years later. In 2007, just before the last economic downturn, TFS Financial Corp. raised $1 billion in an IPO. The bank retains more than the lion’s share of control, though, as it only has 20% of its stock outstanding today. With the financial crisis in full swing, observers wondered if Stefanski was a soothsayer who saw what was coming. But it was just a bit of good fortune. “We made money every year (through the recession) and survived beautifully,” Stefanski said. “It’s why we’re still here today.” While that’s true, regulators dinged the bank in mid-2010 for its heavy exposure to risky loans, particularly second mortgages. The Florida market — where Third Federal began doing business around the late 1990s as it followed Cleveland families growing older and moving there — was a particular issue as home values tanked across the country. For the bank, those types of loans were simply part of a mission to support its members/customers, not predatory lending. Nonetheless, an enforcement ac-

ADVERTISING SECTION

tion followed limiting lending and preventing the bank from issuing dividends or buying back stock for more than two years as the portfolio was restructured. The enforcement was lifted in late 2012. “They had a lot of work to do to rightsize their risk, so they were put in the penalty box for a while,” said Damon DelMonte, a research analyst with Keefe Bruyette & Woods who covers TFS. “But they worked though all that, took some lumps and losses and charge-offs and came back on good graces of regulators. They’re doing much better today because of that.”

Committed to housing While Third Federal’s approach with a tight focus on mortgage products hangs a lower ceiling on overall performance, investors seem satisfied. TFSL stock has settled around $15 a share after hitting a peak of about $19 in late 2016. But that price today is still much better than the $8.13 per-share price its stock fell to in September 2011. “They’ve never really been at the top of the charts in profitability metrics in terms of ROA and ROE, but it’s always been a solidly run bank that has stuck to what they do very well,” said Charlie Crowley, a managing director at Boenning & Scattergood

Inc. “They’ve been profitable and poured profits right into net worth to finance future growth. They’ve gotten there in a different manner than some other banks. They historically have not been very acquisitive, preferring to build versus buy, which is unusual for a bank of their size. But they have been very successful with their model.” What’s more, Stefanski is incredibly optimistic about the housing market going forward. “We will continue to focus in even more and better on the current model we have,” Stefanski said. “Changes in the tax code are helping. People have more money to spend. Consumer optimism is ahead of pessimism. And the housing market is very, very good right now.” With no worries about an activist shareholder stepping in and forcing the bank’s hand in terms of seeking a sale or restructuring its approach to the market, strong capital levels and a heavy emphasis on charitable work that resonates in the market, Third Federal is sticking to its guns and remaining committed to the same model it’s had in place for the last 80 years. As S&Ls dwindle due to regulatory pressures driving consolidation and conversions to stock-owned commercial banks, Stefanski said he’s more committed to the mortgage-centric mutual model more than ever, even as some may be critical of that approach in terms of running a bank. There are no typical commercial bank products there, like credit cards. And although the bank has a physical presence only in Cleveland and parts of Florida, it lends in more than 20 states thanks to the internet and direct mailers. But the Third Federal model is clearly working. And as far as Stefanski is concerned, if something’s not broke, there’s no reason to fix it. “There is no doubt about it that this is an old, traditional model that didn’t work in the minds of a lot of people. That’s why they convert,” Stefanksi said. “For them, that was good. But for us, we found we can deliver a home mortgage product better than anyone else. We consider ourselves the best in the business. When you’re the best in the business, there’s a good chance you’ll still survive regardless of what the peanut gallery says about what you should or should not be doing.”

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CRAIN’S CLEVELAND BUSINESS

Source Lunch

M AY 7 - 13 , 2 018

PA G E 2 7

Ron King

General manager of the Huntington Convention Center of Cleveland and the Global Center for Health Innovation It’s been less than a year since Ron King came to Cleveland to run the Huntington Convention Center of Cleveland and the Global Center for Health Innovation. King arrived in Cleveland from Dallas, where he was director of convention and event services for that city. He was the city administrator who oversaw the 1 million-square-foot Kay Bailey Hutchison Convention Center; the American Airlines Center, a sports arena; and Union Station, the city’s transportation hub. Before that, King worked at convention centers in San Diego, Puerto Rico and Salt Lake City. An Oklahoma native, King’s first love was a recording studio where he could create sound effects. That led to work as a sound engineer and then production manager for the Tulsa Philharmonic Orchestra, where he said he “drove the truck and set up the orchestra.” Sound work was his introduction to the convention business. — Jay Miller

Five things Book you’re reading “Believe Me: A Memoir of Love, Death and Jazz Chickens,” by Eddie Izzard

Hobby Working on his century home in Cleveland Heights

First job “Blowing insulation into attics in Wichita Falls, Texas, during the summer. That inspired me to get a college degree.”

First hero “Batman. I use my Batman coffee mug every day.”

What musical instrument do you play? The trumpet

Lunch spot Au Bon Pain at the Global Center for Health Innovation The Global Center for Health Innovation 1 St. Clair Ave., Cleveland 216-920-1467 www.aubonpain.com

The meal One had a turkey club and a Diet Coke; the other a turkey sandwich with avocado and cheddar cheese, with an iced tea.

The vibe This bakery/cafe is bright and clean and filled with convention-goers when the center is busy.

The bill $ 21.66

What’s the tone you’re trying to set at the convention center? When I first got here, I lived at the Hilton (the Hilton Cleveland Downtown hotel adjacent to the convention center). When you walk from the hotel where they have art, music and energy in the lobby and then you walk into our convention center, it’s beautiful, it’s modern and new, but the energy level, because there’s no music or art, it feels heavier. So I said to my staff, let’s Clevelandize it. So we’re starting to roll out music in our lobby spaces. We’re going to have art coming into the building around the first of June. We’re talking with the Rock & Roll Hall of Fame and the sports teams to give it a sense of Cleveland, so when you’re here, you know where you are. What’s a convention center about? Convention centers are all about economic development. Yes, we love doing local events. But where the real impact is is in trade shows where you get someone flying in from out of town, using the airport, renting a car or getting a cab or an Uber. They get to the hotel, they go out to restaurants, spend the night. How many jobs have they touched? How much money and taxes are generated? It’s a great thing to be involved in. Hasn’t the convention center business been through a period of change? Prior to 9/11, you’d go to conventions and you’d spend your time in the convention center or the hotel and fly out. After 9/11 and the travel scare, a lot of meeting planners consolidated and tried to shed some expense. It made more sense for them to take conventions to cities with a vibrant entertainment district. So now they don’t have to provide so many dinners and other meals (in the price of convention registration). Then we had the economic crash and they doubled down on that. Also, the days of rubber chicken are over. So our chefs have been challenged to be more creative. Hasn’t that also made the convention business a very competitive business? We’re all really having to pick up our game. The revenue for convention centers dropped. You had cities that were governmental agencies they didn’t want to sit empty. So they

started giving rent away just to get people in just to get the hotel bed tax. Cleveland isn’t in that model. (The convention center complex here needs the rent revenue to pay off its debt.) So we have to think creatively as managers. Was it hard to leave Dallas? I had become very well acquainted with Sen. Kay Bailey Hutchinson, who the convention center was named after. I’d met her through the naming process (in 2013). Every few months, I would go to her office, have breakfast or lunch. She was one of the driving forces for the Dallas bid for the Republican National Convention, and she didn’t like to lose. So after I announced I was leaving to my boss (the mayor of Dallas), I called her up. She had just been named (by President Donald Trump) to be ambassador to NATO. So I called her up and told her, I’m going to have a career change just like you. “Oh, where you going?” I’m going to another convention center. “Oh, where?” It’s Cleveland. Long pause. “Oh, that hurt.” A part of your job is selling Cleveland — and the convention center — to meeting planners. How’s that going? It’s a new product, so there’s a bit of a learning curve. Emerald Expositions (a professional meeting planning firm) managed the National Pavement Exposition here in February. It’s the largest gathering of the paving industry. They’d never done a show here before. When Emerald’s two planners, women I’d known, came here in the winter — the firm is in San Juan Capistrano, Calif. — it was a snowy day. They said, “What are you doing here?” I said, “Trust me, you’ll get it.” Once they saw the center and experienced us, it changed their minds. They had a fantastic experience. When they left, they said, “OK, you’re right. We get it.” So now we’re on the radar of Emerald Expo. So, you’d say it’s gotten easier to sell Cleveland after the RNC? The more we can bring people in to see what we have, it’s an easier sell. I was at a Professional Convention Management Association meeting and saw some ex-clients of mine from Dallas and several would ask, “Are you still in Dallas?” I would say, “No, I’m in Cleveland.” And without exception, they would say, “I’ve been hearing a lot of good stuff about Cleveland.”

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Volume 39, Number 19 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 441131230. Copyright © 2018 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373.

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