Cleveland Citywide Development Corporation
Board of Trustees
Executive Summary
May 15, 2019

Project Name:
Borrower:
Councilperson/Ward:
City Assistance:
Presented by:
Project Site:

nuCLEus
Gateway Huron LLC and/or Designee (Stark Enterprises)
Councilman McCormack/Ward 3
$12,000,000 Forgivable Loan
Non-School TIF
David Ebersole/Richard Barga
Gateway Lots (E. 4th & Prospect)

Project Description

The Gateway lots, located at the corner of E. 4th and Prospect, have long been an
underutilized area for downtown Cleveland. As surface lots, these parcels created a
gap in the urban fabric and broke up the vitality of the connection between the
strong and growing assets at E. 4th Street & Euclid Avenue and the huge draws of
Progressive Field & Quicken Loans Arena.
Gateway Huron, LLC, an affiliate of Stark Enterprises, has acquired these lots to
launch Project NuCLEus, a truly transformative development that will change the

 NuCLEus
Board of Trustees │Executive Summary
May 15, 2019

face of the Gateway District and leverage this key location. Their proposed mixeduse development will be an attraction for shoppers, workers, and residents in itself
and a strong compliment to the existing assets in downtown. In addition to the
large surface lots at E. 4th and Prospect, the development site also encompasses
neighboring outdated parking garages to the east and a small building on Prospect
Avenue adjacent to the site. The project includes a large amount of Class A office
space which is critically needed in downtown Cleveland.
The initial development proposes to construct 277 residential rental units,
approximately 400,000 sf of gross commercial office, 77,820 square feet of national
credit tenant retail, approximately and 1,350 parking spaces, and pedestrian
oriented infrastructure improvements. The project proposes to construct two towers
on top of retail and parking, topping out at 24 stories, on the surface parking lot on
the corner of E. 4th Street and Prospect that will straddle the East 6th walkway,
creating two structures at ground level, that are connected above via the garage.
Additionally, the development proposes substantial improvements to the E. 6 th
Street walkway, creating a “Laneway” modeled on successful retail developments in
Melbourne, Australia. It is anticipated that as many as 1,000 individuals could be
employed at the project site.
Estimated Sources and Uses

SOURCES
Private Debt (Inc. TIF*)
Equity
City of Cleveland
City of Cleveland VPI
Cuyahoga County
State of Ohio
Subordinate Loans
TOTAL

$
$
$
$
$
$
$
$

213,125,000
100,400,000
12,000,000
360,000
6,000,000
6,000,000
16,000,000
353,885,000

USES
Construction
Soft Costs
Land Costs

$ 234,730,000
$ 92,425,000
$ 26,730,000

TOTAL

$ 353,885,000

Proposed City Assistance
Forgivable Loan Terms
Amount: $12M
Interest Rate: 0%
Term: All Principal & Interest terms will be deferred until the completion of the
project.
o Construction Period Term: The construction period will run for 36 months
following closing.
o Initial Lease-up Term: The initial lease-up term will run from the end of the
Construction Period Term until December 31 of that year.
o Occupancy Term: 246 months (20.5 years) – The Occupancy Term will begin
on January 1 following the expiration of the Initial Lease-up Term and will .
Collateral:

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 NuCLEus
Board of Trustees │Executive Summary
May 15, 2019

o Loan & Revenue Guaranty (per terms below)
Guaranties:
o Personal: Bob Stark
o Guaranty will be structured as follows:
The revenue guaranty will begin on January 1 of the year following 36
months from closing (i.e. if closed in August 2019, the guaranty will
begin for the calendar year 2023) and will run for a period of 20 years.
The City shall generate a combined income and parking taxes
equivalent to 110% of its costs of funds for the project (i.e. $13,200,000
to cover a $12,000,000 outlay), inclusive of income tax related to
construction.
The City shall generate a minimum of $700,000 in annual revenues
above the current revenues generated by the proposed project lead
tenants (Benesch & Stark Enterprises) & parking revenues $1,797,500 for the guaranty period.
The Guarantor shall make up any revenue shortfalls on an annual
basis.
Forgiveness terms:
o $2,000,000 of the loan will be forgiven upon completion of the project.
o $500,000 of the loan will be forgiven in each year following the completion of
the project, provided that the project meets the annual tax revenue
requirement and/or the Guarantor meets the annual guaranty requirement.
Forgiveness shall occur by June 30 of each year, for the year ending
the previous December 31.
Project Financing Status
Construction Loan:
o Currently in final underwriting with Key & Huntington as joint lenders
o Intent is to syndicate the loan: interested syndicators include 5/3, First
National, PNC, US Bank, CIBC, and Chemical.
Equity
o Primary equity contributions from Stark & J-DEK Investments ( including
$15,000,000 already invested)
o Three private investment groups who have committed up to $20,000,000 each
for the project
o Additional equity will be raised from private capital and institutional
markets
Cuyahoga County Grant: Legislation being introduced by Cuyahoga County
Council.
State/JobsOhio Financing: Final offer pending
Subordinate Loans: Currently in underwriting with CDA ($6,000,000) and OWDA
($10,000,000)
NOTE: A Non-School TIF (estimated $19,000,000 value) and two VPI Forgivable Loans
($180,000 each) were authorized in 2014.
Financial Analysis

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 NuCLEus
Board of Trustees │Executive Summary
May 15, 2019

The project yields a thin margin for substantial real estate development. Projects of this
scale are truly national in scope, making returns and marketability more challenging than
in most scenarios. However, Bob Stark is viewing this as a legacy project and is drawing on
his network of substantial equity and development partners to secure the necessary
participation.
Director Ebersole has reviewed the project with the lead manager for both Huntington and
Key Banks. They both indicated that the banks are comfortable with the debt and equity
positions, as well as the development team’s ability to execute on the project. Both banks
indicated that they are prepared to complete their syndication and take the loans to market
upon approval of the public financing.
Economic Impact

The statistics show that this building is necessary at this point in time. Class A
office is in critical demand and office space throughout the CBD is below 16%
vacancy, the lowest in 17 years (Newmark Knight Frank). Almost 6 million square
feet of Class B and lower office space has been converted to residential and mixeduse space since 2013. In order to reach the goal of 30,000+ downtown Cleveland
residents by 2030, new residential units will be required. The residential market
remains tight with vacancy rates steady and lease-ups in new capacity still strong.
Project will retain/create 1,000+ jobs in the City, in addition to new residential, retail,
and much-needed parking
Estimated $3,300,000 annual income tax revenue from retained and new jobs.
Estimated annual parking tax revenue of $480,000.
Development of a longstanding vacant parking lot in a critical location in the City
Promotion of access to fresh, healthy and affordable food in a transit-oriented
development
Fees
- Forgivable Loan Fee: $120,000
- Non-School TIF Fee: $95,000
- VPI Loan Fees: $7,200
City Requirements
Project is subject to Chapter 187: MBE/FBE/CSB requirements
Project is subject to Chapter 188: Fannie Lewis Cleveland Resident Employment Law
Project is subject to a Workforce Development Agreement
Project is subject to Davis-Bacon prevailing wage requirements
CCDC Board of Trustees
Request approval of the City assistance outlined above, as presented.

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