Playhouse Square tower March 2018

A rendering shows the Euclid Avenue frontage of Playhouse Square's planned apartment tower, at left, and adjacent 550-space parking garage.

(SCB)

CLEVELAND, Ohio - Playhouse Square Foundation is ready to raise the curtain on a 34-story apartment tower in downtown Cleveland's theater district, where site preparations will start next week and a formal groundbreaking could take place in early April.

The nonprofit organization's board recently blessed the project and gave construction contractor Gilbane Building Co. permission to proceed. The 319-unit apartment building and a 550-space parking garage will replace a parking lot at the southwest corner of East 17th Street and Euclid Avenue, across from the Connor Palace theater.

That parking lot, which Playhouse Square owns, is scheduled to close March 26.

A rendering shows a Euclid Avenue view of the apartment tower and garage, which will replace a surface lot at the eastern edge of the theater district.

Financing for the tower, a $135 million project, still is coalescing. But Art Falco, the arts district's frequently cautious chief executive, is surefooted enough to proceed with realizing a dream long held by Playhouse Square's real estate staff, board members and benefactors.

"We have commitments," Falco said. "And so long as we have commitments, there's the confidence that we can start work. Which is no different from any other real estate project."

Playhouse Square, already owner and manager for a formidable portfolio of buildings, will own the apartment project. Hines, a global real estate firm that has tackled other high-rise towers, has signed on as development manager. The building will open in summer 2020.

The project comes amid a surge of rental construction in Cleveland. The first residents are scheduled to move into the One University Circle apartment tower near the Cleveland Clinic and University Hospitals early next month. At East Sixth Street and Euclid Avenue downtown, a crane perforates the skyline where the Beacon apartments will rise above an existing garage.

And developers still are talking about other high-rise endeavors, including the much-ballyhooed nuCLEus mixed-use project in the Gateway District, near Quicken Loans Arena. But paying for such projects isn't easy, between escalating costs, a tight labor market, construction complexities and lenders' anxiety about how long the apartment boom will continue.

Falco expects Playhouse Square to close on all of the tower financing by June. But the nonprofit already has plenty of cash on hand, thanks in large part to a gift from the Richard J. Fasenmyer Foundation. The district also received $1 million from the last state capital budget.

An evening view shows the apartment building's lobby and the illuminated garage, dressed up for a Broadway show in the district.

That money is earmarked for the garage and apartment tower - apart from Playhouse Square's fundraising for its ongoing $100 million capital campaign, which is focused on theater restoration and maintenance, programming, education and district beautification.

Between the Fasenmyer gift and other sources, Playhouse Square has about $25 million in equity to put into the apartment deal, Falco said. That doesn't include what the organization could borrow against its other real estate, if necessary.

For much of the remaining funding, Playhouse Square is working with a group of banks - Falco won't identify them yet - and analyzing the best way to float bonds that would be paid off using rents from the apartments and garage. A bond issue could raise between $40 million and $75 million, depending on whether Playhouse Square opts to repay existing bond debt as part of the transaction.

A rendering shows the facade of the apartment tower from the northeast.

The apartments would qualify for a property-tax break under Cleveland's broad policy of offering 15 years of tax abatement on new residential construction that meets certain green-building standards. The underlying land, like Playhouse Square's other non-theater real estate, will generate property taxes.

The city also is considering tax-increment financing for the garage. Under that structure, a portion of the property-tax revenues created by the project would be ploughed back into the project, rather than ending up in public coffers. The Cleveland school district's share of new tax revenues from the project wouldn't be impacted.

That arrangement, with a 30-year term, would be worth just over $4 million.

Cleveland also is considering an interest-free loan of up to $1 million, which would be partially forgiven after a decade if Playhouse Square meets certain milestones, including filling street-level retail space lining the garage.

Legislation is likely to be introduced at Cleveland City Council this month.

Councilman Kerry McCormack, who represents the area, said the apartment tower will be an important step toward achieving the city's goal of building up downtown's population to 20,000 residents by 2020. The Downtown Cleveland Alliance, a nonprofit group, estimates that more than 15,000 people call the central business district home.

"I think this is a really unique location," McCormack said of the theater-district site. "I think we'll see high demand from people who want to live close to downtown and to Playhouse Square. I know that they're, for sure, looking at the millennial demographic but also looking at the Baby Boomers. ... It's a good sign of the continued progress of downtown Cleveland and of the city itself that we are seeing these buildings go up."

Playhouse Square won't discuss rental rates for the apartments, but they're likely to be among the highest downtown. The units, 11 to a floor, will range from one to three bedrooms. Greystar Real Estate Partners, a major apartment operator based in South Carolina, will manage the building, said Allen Wiant of Playhouse Square Real Estate Services.

"We have somewhere around 20 units already" on a waiting list, Wiant said. "That's not huge, but ... the thing hasn't started yet."

The tower construction will require lane and sidewalk closures on Euclid and East 17th through spring 2020, according to a neighborhood flyer prepared by Gilbane.