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Transcript of Recenter Life at Trinity
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RECENTER YOUR LIFE AT TRINITY
Urban Living For Those 55 And Over
PDD610 Urban Development Process
For Robert Simons, Ph.D.
Gregory SJ Soltis
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OUTLINE
EXECUTIVE SUMMARY…………………………………………………………….……3
CONCEPT………………………………………………………………………………….…4-7
SITE……………………………………………………………………………………………8-11
PRIMARY MARKET AREA…………………………………………………………12-13
DEMOGRAPHICS………………………………………………………………………14-15
CURRENT SUPPLY……………………………………………………………………16-18
NICHE ANALYSIS……………………………………………………………………………19
NICHE ANALYSIS CONCLUSIONS…………………………………..……………….20
CAVEATS………………………………………………………………………………………20
FINANCIAL ANALYSIS……………………………………………………………….21-23
RECOMMENDATIONS FOR PROCEEDING………………………………………24
LIST OF TABLES
HIGHEST AND BEST USE……………………………………………………………..…11
HIGHEST AND BEST USE……………………………………………………….…….…11
DEMOGRAPHIC SUMMARY….………………………………………..………….…14
HOSEHOLDS BY INCOME AND AGE OF HOUSEHOLDER 55+………….. 14
DOWNTOWN CLEVELAND HOUSING MARKET NUMBERS..…..…….…16
DOWNTOWN CLEVELAND CONDO TRANSFERS FROM ’08-’11…….…17
50+ DOWNTOWN CLEVELAND RESIDENTIAL NICHE ANALYSIS…….…18
RESIDENTIAL FRONT DOOR BACK DOOR ANALYSIS…….…………………22
FRONT DOOR…………………………………………………………….…………………22
BACK DOOR……………………………………………………………….…………………22
PARCEL INDEX FOR REFERENCE……………..………………….……….……23-24
LIST OF FIGURES
TRINITY IN DOWNTOWN CLEVELAND………………..………COVER SHEET
MATURE COUPLE WALKING ERIEVIEW CEMETARY…………...…..…..…3
TRINITY IN DOWNTOWN CLEVELAND MAP…………...……….…………..…4
TRINITY TOWERS RENDERING…………...……….……………………………….…5
TRINITY’S NEIGHBORHOOD MAP……………..…………...……….…………..…7
THE SITE MAP……………..…………...……….………………………………………..…9
SANBORN MAP……………..…………...……….………………………………………10
TRAFFIC COUNT MAP……………..…………….………………………………………10
THE HEART OF THE METRO REGION……………..…………….………………12 MID 20
TH CENTURY COMMUTERS…..……………..…………….………………12
PERCAPITA INCOME FOR ALL POPULATION………………………………….15
WHERE THOSE 55+ LIVE…………………………………………………………….….15
PERCENT CHANGE IN HOUSING UNITS 2000-2010……………………..….18
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EXECUTIVE SUMMARY
55+ Demographic Characteristics
• The 50+ demographic is expected to be the only demographic to
grow in Greater Cleveland by 2015 according to Census Bureau
projections.
•There will be an additional 48,481 people 55 and older in GreaterCleveland in the year 2015, even considering that the overall
population is projected to shrink by over 30,000 in that same time
period.
• Cleveland-Akron MSA Median Age: 37.1 (2000) 39.7 (2010)
40.1 (2015)
• There are 86,728 households, 55 plus with incomes over $75,000
per year, putting them in the income bracket of Trinity.
Downtown Cleveland’s Housing Market
• Vacancy rates are at all-time lows downtown. The total residential
vacancy rate downtown was reported to be 5.4% in a recent report in
the Plain Dealer.
• There are waiting lists at most buildings. Over 250 people are on a
list for East 4th Street apartments according to Tammy Oliver at MRN
Ltd.
• Downtown Cleveland Alliance CEO, Joe Marinucci stated in the Plain
Dealer he wouldn’t even blink at putting 500 new units of housing
online in a year downtown.
• The primary target demographic for downtown living are young
urban professionals with some empty nesters. This suggests older
adults may be an underserved market.
The Trinity Concept
• The location is where three unique downtown districts meet. Each
district has something to offer the 55 plus set.
• The largest demographic for live theater are those 55 and older.
They make up 27% of an average audience.
• Trinity would be the urban equivalent of a 55 plus community found
in the suburbs or in the Sunbelt with the added advantage of all the
amenities of the city. This would be a vertical country club.
• Trinity would not be advertised as a 55+ community, just advertised
to the 55+ community.
• There is no urban equivalent currently so this would be a new
product.
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CONCEPT
An urban lifestyle community for those 55 and older in the heart of
downtown Cleveland
The proposed site of the project is at the confluence of three
downtown districts; the Gateway District, the Theater District, and
the Campus District, thus christening the complex with the name
Trinity. Trinity is a mixed-use, vertical community for the Urban Go-
Go in the center of downtown Cleveland’s tight residential market.
Residential rental rates are at all-time highs, making the timing right
for new development. The specific locations of Trinity’s three,
residential towers at the intersections of Euclid Ave. & East 17th, and
Prospect Ave. & East 14th allow the buildings to act as physical
gateways into the Theater District; something the Playhouse Square
Foundation has been seeking to develop.1 It also gels with the local
development corporation’s desire to build 58 stories of residential
living.2
In addition, the target demographic fits with the TheaterDistrict’s most common patron; those aged 55 and older make up
nearly 27% of a typical live theater audience, a larger share than any
other age group.3
The product will provide the mature set all the services of suburban,
and Sunbelt, 55 plus communities, with the added convenience of
easy access to all the city has to offer. Theater, professional sports,
galleries; Cleveland State University, which through the state, offers
free classes to those 65 and older; various cathedrals, the city’s finest
dining establishments, chic lounges, jazz clubs, the West Side Market
& numerous farmer’s markets, urban boutique shopping and ethnic
1Steve Citerin, Marketing and Public Relations Manager, interview, Cleveland,
Ohio, April 2011.2
Joel Henning, In Cleveland, A Model of Economic Viability in the Arts,
http://online.wsj.com/article/SB10001424052748703712504576236683591903882
.html (May 2011).3
Tom Bradshaw and Bonnie Nichols, " 2002 Survey of Public Participation in the
Arts, V. Series. VI. Research Division report (National Endowment for the Arts.
Research Division); 45.NX220.A164 2004 " Library of Congress Cataloging-in-Publication Data, Washington, D.C
neighborhoods are all within a minutes drive or rapid ride. Many of
these amenities will be within a short walk of the front door of one of
Trinity’s three towers and many horizontal townhouses. Due to its
central location downtown and proximity to I-90, I-77, and I-71;
resident’s friends, children and grandchildren in the suburbs will be
but a short drive whether they live eastside, westside or to the south.
In addition, for those who are still enjoying a vibrant career, Trinity
puts residents in the middle of the state’s two largest employment
centers; downtown Cleveland and University Circle.
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Services and amenities at Trinity will include: unlimited access to the
main tower’s Health and Wellness Center, including classes, personal
training and dietician services geared to older adults; programmed
events, a private restaurant and dining room for residents daily use
and available for events, 24 hour security in the form of a street level
doorman and manned, gated parking; two indoor, climate controlled
parking spaces per unit; valet and driving services, grounds keeping;
and personalized concierge service, similar to any found in the finest
hotels and designed to assist residents in taking advantage of the
city’s many amenities. The ground floor of each tower will feature a
mix of street focused restaurant and retail, tailored for residents, the
daytime office worker and evening theater patrons.
Trinity’s target audience is a subset of the 55 and over set known as
“Go-gos”. They are empty nesters, retirees and snow birds who value
an active engagement in life. All units at Trinity will have two to three
bedrooms and two bathrooms, so as to accommodate visitingchildren and grandchildren, friends staying in the city for the night
after a show, or the occasional boomerang child. Apartments, condos
and horizontal townhouses will be designed with older adults in mind.
An average of 1400 square feet will all be located on one level of
living space. Horizontal row houses will be designed to have a vertical
presence on the street with elements of the typical row house that
was once common on Prospect Avenue nearby. Street entry to the
building will be in a common, vertical section of the building which
then will lead to private residences that flank it horizontally.
Elevators will serve units on upper floors. Garage space, directly
under each townhouse unit will be accessible after entering the gated
neighborhood from Prospect Avenue, and traversing the revived alley
streets of Caton Court and East 16th Place. For snow birds who spend
their winters in the Sunbelt, services will be available to assist them in
renting their spaces to visiting foreign graduate student families
studying at Cleveland State University and other area higher
education institutions.
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The current, typical downtown resident fits one of two descriptions,
“predominantly 25-45 y/o single professionals with some empty
nesters” according to Mark Pugacz, a consultant with the Downtown
Cleveland Alliance. Marketing efforts for downtown residential units
are geared heavily towards the younger demographic. The presence
of older adults downtown despite the marketing trends suggest that
more empty nesters would live downtown if the right product was
made available and marketed with them in mind. Adding to this
assumption, the Cleveland metro region is home to one of the highest
percentages of those 55 and over in the country. Greater Cleveland is
the 5th oldest of the 54 metro areas with populations of 1 million or
more people. That segment is expected to grow by nearly 50,000
from 2010 to 2015 according to the Census Bureau, while the region’s
overall population is projected to shrink by close to 31,000. 4
Trinity is a completely new product to the Cleveland market.
Currently there exists no residential complex that caters specificallyto the healthy, independent, Urban Go-Go. The choices available to
people 55 and over, looking for a residential complex designed to
complement their lifestyle are all suburban country club style
developments, subsidized low income apartments, or exist as
retirement communities with various levels of assisted living services.
The closest equivalent to Trinity is Judson Manor5 in University Circle;
a retirement community that offers independent living, various levels
of assisted living, and nursing care, packaged with services and
amenities for older adults.
4Rich Exner, Census shows Cleveland-Akron has near the highest median age in the
U.S.: Statistical Snapshot,
http://www.cleveland.com/datacentral/index.ssf/2011/06/census_2010_shows_cle
veland-ak.html (June 2011).
5 http://www.judsonsmartliving.org/our-communities/university-circle/judson-manor/care-levels.aspx
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THE SITE
At the confluence of three downtown districts
Trinity’s three sites lie on the edges of the Theater District in
downtown Cleveland. All three act as gateways into the theater
district and are currently underutilized; all three serving as surface
parking for commuters, theater patrons, and fans going to events in
the Gateway District. Due to the dense location of all three blocks in
the urban core, all are actually comprised of many smaller parcels of
land, each with its own set of governmental records. Most parcels
that are located near each other in block one and two are 2.08 and
1.08 acres, in that order. They seem to be owned by one person who
has them under different names and run by a law firm on Public
Square. They are operated as parking lots by Mr. Frangos. The owner
owes the city a substantial amount of back taxes for the properties he
owns. Block three’s parcels along Euclid Avenue are .73 acres,
making the total for all three 3.89 acres. Block three is ownedprimarily by Playhouse Square Foundation, with one parcel (#103 01
026) between the rest that has Ohio Realty -Euclid LLC & Barbara T.
Candler listed as its owners. In interviews with Mr. Einhouse; Vice
president of Facilities and Capital with the Real Estate division of
Playhouse Square Foundation, he indicated that Playhouse Square
has purchased all the properties from East 17 th to the Hannah
Building.
The site’s parcel numbers are as follows:
Block 1 (Phase 1)
103 01 024
103 01 025
103 01 026
103 01 027
103 01 028
Block 2 (Phase 2)
10311 001
103 11 002
103 11 003
103 11 004
103 11 005103 11 006
103 11 056
103 11 057
103 11 058
103 11 059
103 11 060
103 11 061
103 11 062
Block 3 (Phase 3)
10138 020
101 38 021
101 38 022
101 38 023
101 38 024
101 38 025
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SANBORN MAPS
In reviewing the Sanborn maps, an issue was found with block 2.
While it is currently a parking lot, it was at one time a gas station. It is
most likely that remediation will have to occur here.
TRAFFIC COUNTS
Traffic counts for the area are restricted primarily to Federal
Highways and Federal Routes. Of concern to the chosen sites are the
Innerbelt, which near the East 14 th Street exit has a count of 103,340
vehicles below the I-77 merge and 131,230 above it. The traffic
counts vary greatly within short distances along the Innerbelt due to
heavy traffic both exiting and entering the freeway. Euclid Avenue,
designated as Federal Route 20 has a count of 11,090 vehicles near
site three. Many vehicles along this route are public transport BRT
vehicles as the Siler Line runs this route. In addition, a small portion
of Prospect Avenue between Ontario and East 4th Street has been
included and recorded an average of over 6,100 vehicles per day.
This number is a good guess at what counts would be higher up the
avenue near sites one and two.
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PropertySupermarke
t
Convenienc
e Store
Entertainment/B
ar/Rest. Retail
Rental
HousingCondo
Warehouse/Light
industrial
Public
SpaceOffice
Parking (Open
Lot)Hotel Trinity
Block 1, Part A 8 9 18 13 10 -8 7 6 8 14 23
Block 1, Part B 2 6 14 11 11 -7 1 3 6 11 15
Block 2 0 4 13 11 8 -10 -1 0 8 7 20
Block 3 3 9 18 14 13 -12 1 6 8 9 19
AVERAGE 3 7 16 12 11 -9 2 4 8 10 19
HIGHEST AND BEST USE STUDY
A highest and best use study, found at the end of this section
determined that Trinity was a top choice with entertainment,
restaurant and retail close behind. The Theater District and Gateway
District already act as centers of entertainment so this conclusion
makes sense. Playhouse Square itself attracts more than one million
visitors a year, and that is set to only increase with the addition of theCleveland Playhouse Square to the complex.6 Combined with the
demand for housing downtown, the large daytime working
population of close to 110,000 and these conclusions make perfect
sense
6
Thomas Einhouse, Vice President of Facilities and Capital for the PlayhouseSquare Foundation, personal email, 06 December 2011
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THE PRIMARY MARKET AREA
Metropolitan Cleveland
The Cleveland-Akron MSA is Trinity’s primary market area for a
number of reasons. First and foremost, the populations of Cuyahoga,
Lake, Geauga, Ashtabula, Portage, Summit, Medina and Lorain
counties all have ties to the central city of Cleveland. The people in
this region get their news from Cleveland outlets, they root for thecity’s professional sports teams, attend shows, concerts and other
events in the city, and often also commute to the city for work. In
addition, a high percentage of people in all eight counties can trace
their roots back to a specific neighborhood in Cleveland. Either they
once lived there, or their parents and grandparents did. Even as early
as 1970, nearly one third of our metropolitan area’s population lived
in the central city, today, only one sixth does and takes up six times
the land.
..
The target demographic most likely still retains fond memories of life
in the city, especially those older than 60 years of age. Along with
those memories come negative emotions about the city and the
events that followed Cleveland’s heyday in the 1950’s. Urban
Renewal, court ordered busing and racial riots sped up the shift to thesuburbs, that seems to be continuing to this day. The most recent
population data from the 2010 Census show that the newest group to
leave the city are the black lower and middle classes. Most white
residents began their exodus decades ago.7
7Robert L. Smith, Census data reveals new migration pattern as black families leave
Cleveland ,
http://blog.cleveland.com/metro/2011/03/census_data_reveals_new_migrat.html(May 2011).
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Downtown is different. Downtown is one of the only “neighborhoods
to grow in size over the past decade. In fact, downtown grew by 21%
from 1990 to 20008, and continued to grow by more than 20 % from
2000 to 20109. Also, until the past few decades, not many people
lived downtown. Downtown was for working, shopping, government
services, or for entertainment. Therefore, no one group of people
ever laid claim to downtown, it was always everyone’s place. It still is.
Even if some older adults have negative connotations lingering, a
good marketing strategy can reignite the fond memories that are sure
to remain.
■Cleveland's unemployment rate fell from 9.1% in September 2010 to 7.6%
in September 2011.
■In the third quarter of 2011, the median single-family home sale price in
Cleveland was $113,600, down 0.8% from the $114,500 recorded one year
prior. Statewide, home sales volume increased by 14.4% from a year prior.
■Year-to-date apartment absorption totaled 946 units as of September
2011, down from 1068 net move-ins during the same period in 2010. This is
on pace to be the second consecutive year of positive apartment demand
following two years of negative demand in 2008 and 2009.
■Through the first nine months of 2011, no new apartment units were
completed, whereas during the same time last year, 236 apartment units
were completed. This marks the sixth consecutive quarter in which no new
units have come on-line.
■Multifamily permits for apartments and condos of 5+ units were issued
for 77 units in the first nine months of 2011, surpassing last year's year end
total of 75 permits issued.■Cleveland's overall average vacancy rate tightened to 4.8% in the third
quarter of 2011 from 6.2% a year earlier. This is the lowest vacancy rate
recorded since 2000.
■Average apartment rent rose 1.7% over the 12-month period ended
September 2011, with the average market rent increasing from $730 to
8Alan Achkar, More people are making downtown home, April 2001
9Robert L. Smith, Despite Cleveland's population plunge, civic leaders see
encouraging,
signshttp://blog.cleveland.com/metro/2011/03/despite_clevelands_population.html, March 2011
$742. This marks the fourth consecutive quarter of positive rent growth and
the highest recorded market rent over the past decade.
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DEMOGRAPHICS
Metropolitan Cleveland
The Cleveland region has experienced an overall population loss of
29,454 people from the 2000 census to the 2010 census. The decline
in population is expected to continue according to Census Bureauprojections. 30,955 more people are expected to exit the
metropolitan area by the year 2015. In contrast to this population
loss, is a population gain in persons 50 and over. There was a gain of
146,804 people in this age demographic from 2000 to 2010 and the
rise in those 50 and older is expected to continue to climb. 48,481
more people will join this age bracket by 2015. The 50 plus set
currently number just over one million in the Cleveland Akron MSA,
and will be approaching 1.1 million in 2015.10
Looking to downsize from the single family homes where they raisedtheir children, empty nester and retiree households typically consist
of 1 to 2 persons and half have incomes of $45,000 or more.11
Incomes are often augmented by equity, allowing households to
purchase homes for $250,000 and up or rent for $1250 to $2250 a
month, especially if amenities and services came as a part of their
monthly rent. Those in higher income brackets that currently reside in
the wealthier suburbs that follow 1-271 and the western shore
suburbs can afford significantly more for monthly rent, but prefer to
own. Survey results indicate that persons age 65 and up interested in
living in downtown Cleveland largely favor owning two-bedroom,two-bath condominiums or townhouses.12 However, a significant
number of snow birds are open to renting. Like other age groups,
the desired parking and windows/natural light but also listed storage
space, security and views as important housing features. While
10US Census Bureau
11
Us Census Bureau12Survey conducted by author
affordability was still cited as important, it did not top the list of
desired housing features as it did for younger age groups. 13
13
Interviews conducted by the author, Cleveland, Ohio November 11 to December11, 2011
Total Households: 1,158,090
Households 55+: 318,853
55+ Households with Incomes $75K and up: 86,728
According to Census Bureau estimates, the Cleveland-Akron CSA
is expected to lose over 30,000 people by 2015. In that same
timeframe, the region will gain 48,481 people in the 50 and over
demographic.
Source: US Census Bureau American Community Survey 2009
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CURRENT SUPPLY
The market is tight
Housing in downtown Cleveland is in short supply. Currently, the
average vacancy rate is 5.4%, with some buildings at 98% or higher.
The region's occupancy rate hit a recent low of 93 percent during the
first quarter of 2010. Now it's 95.2 percent - better than the nationalrate of 94.4 percent in the third quarter. Back downtown, there are
waiting lists to get into many buildings. Tammy Oliver, an associate at
MRN limited has over 250 people on a waiting list for residential units
in the East 4th Street District.14 An historic rehab that used tax
credits from the state of Ohio; 668, on Euclid Avenue and East 8 th
Street, and run by K&D Group Inc., filled up prior to opening and still
maintains a waiting list greater than 200. A combination of tight
lending from banks due to the economic meltdown of 2007 and 2008,
plus an increase in the popularity of urban living has caused there to
be a limited supply combined with high demand.
Ralph McGreevy, executive vice president of the Northeast Ohio
Apartment Association stated in a recent Plain Dealer article that
“Downtown needs more apartments, It’s just that simple”. Joe
Marinucci, the Downtown Cleveland Alliance’s Chief Executive, has
publicly stated that he “wouldn’t blink at bringing 500 new
apartments onto the market in a year”. The alliance's quarterlyapartment surveys, which don't include student housing, show 4,171
apartments downtown.15
14Tammy Oliver, Associate at MRN Ltd., Interview, Cleveland October 2011
15
Michelle Jarboe McFee, With apartments full, developers look for new rental opportunities in downtown Cleveland, December 2011
16
Downtown for sale units, which number at 936 total, are also in
demand. Even after the foreclosure crisis, those with the means
often choose to buy downtown. The Avenue District‘s condominium
tower was sent into foreclosure last year, but their townhome sales
have remained strong. The townhomes in the Avenue District are the
only new product on the market of its type downtown.17
16Mark Pugacz, Consultant to the DCA, personal email, 08 December 2011
17
Julie Iselin, Commercial Real Estate Broker, Allegro Reality Advisors, Interviewwith author, Cleveland December 2011
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DOWNTOWN CLEVELAND CONDO TRANSFERS FROM 2008 TO 2011
Source: Julie Iselin, Commercial Real Estate Broker, Allegro Realty Advisors,
Ltd.
Building Name Building Address 2008 2009 2010 2011 YTD Total Avg Sale Price Avg SF Avg Per SF
Park Building 140 Public Square 0 7 4 0 11 342,617.45$ 1,299 262.05$
Fries & Schuele 1951 W 26th Street 13 4 3 2 22 200,876.84$ 1,199 178.41$
Sincere Building 2077 E 4th Street 2 1 2 1 6 293,846.67$ 1,700 173.18$
Grand Arcade 408 W St. Clair Avenue 5 6 8 1 20 112,515.67$ 903 137.54$
Cloak Factory 635 W Lakeside Avenue 2 4 0 0 6 266,166.67$ 1,607 167.35$
Pinnacle Condominiums 701 W Lakeside Avenue 8 5 11 1 25 474,761.41$ 2,055 251.66$
Perry Payne 740 W Superior Avenue 0 1 1 0 2 160,250.00$ 888 182.24$
Pointe At Gateway 750 Prospect Avenue 5 2 2 1 10 161,515.00$ 986 158.96$
Water Street 1133 W 9th Street 7 5 3 0 15 149,710.08$ 861 180.24$
Avenue District St. Clair Avenue 0 5 0 0 5 397,527.80$ N/A N/A
Joshua Hall 1148 Prospect Avenue 2 1 1 0 4 320,248.50$ 1,811 177.31$
Stonebridge Plaza 1237 Washington Avenue 11 10 3 2 26 250,502.19$ 1,052 233.24$
Stonebridge Condos 2222 Detroit Avenue 5 5 8 1 19 168,368.33$ 1,251 135.89$Erie Building 1260 W 4th Street 5 0 0 0 5 330,785.00$ 1,520 218.39$
River Bend Condos 1444 W 10th Street 5 2 6 0 13 176,845.00$ 979 178.63$
Franklin Lofts 3200 Franklin Boulevard 2 1 3 0 6 195,670.83$ 1,410 139.08$
Grove Court 1900 Grove Court 4 2 6 0 12 82,152.43$ 1,319 78.49$
Lemko Hall 2337 W 11th Street 2 0 1 1 4 187,166.67$ 2,148 109.28$
TOTAL 78 61 62 10 211 244,350.53$ 1,889 188.11$
1st Quarter Average 2008 - Present 11.75
Avg 1st Quarter % of Total Sold 18%
2011 Projection 48.92
2nd Quarter Average 2008 - Present 23.00
Avg 1st Quarter % of Total Sold 34%
3rd Quarter Average 2008 - Present 20.67
Avg 1st Quarter % of Total Sold 31%
4th Quarter Average 2008 - Present 10.33
Avg 1st Quarter % of Total Sold 16%
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NICHE ANALYSIS
Profile of the residential market
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NICHE ANALYSIS CONCLUSIONS
An underserved and growing segment of the market
Those aged 55 plus are one of the only segments af Greater
Cleveland’s population that is growing, and they are growing by
almost 10,000 per year. This market of consumers are not given
many choices in the downtown rental market. In fact they are
mentioned more as a sidenote to the young urban professionals thatchoose to live downtown.
In the niche analysis completed for this study, it is estimated that
there are over 13,000 renters 55 and over in the Greater Cleveland
Area. Even if Trinity were to get just 5% of that market, that would be
659 new households a year. Adjustments were made in the niche
analysis to make sura a reliable number of older adults would be a
true market for downtown that could afford downtown living without
subsidies.
Absorption rates mentioned earlier and lack of supply mean that new
housing is appropriate to build at this time. In addition, the only two
markets mentioned as downtown dwellers consistently are young
urban professionals and empty nesters. The focus has been on the
young urban professionals, but the older crowd will become a larger
and larger segment of our population as the years pass and stand to
prove a substantial market for downtown living. The fact that they
are the only other demographic living downtown, even though the
city has pushed to cater to the younger crowd means that there isgreat potential in marketing to this subset.
CAVEATS
An urban lifestyle community
The main obstacles to getting Trinity constructed as planned are
financing and current thinking. Money is not readily available from
the banks, but financing can be had. One thing that would make it
difficult to prove a financially feasible project is that downtown rental
rates have had only modest increases in the past decade which makes
justifying the high rents needed to make new construction feasible
difficult. And, For the first quarter of 2011, it remains less expensive
to own a home rather than to rent in the Cleveland area, by a
difference of roughly 43% based on monthly payments. The city does
provide assistance and according to the city’s economic development
department, the project would receive tax abatement for 15 years. In
addition, Playhouse Square has been unable to get a project out of
the ground to date and may be looking for a partner.
The current Cleveland mindset is also another drawback. While many
have fond memories of the city decades ago, they also remember all
the failings, jokes, and disasters;financial or otherwise, of the late 20th
century. Crime is seen as a real problem to suburbanites who don’t
travel downtown often. An innovative marketing plan would need to
be put in place to counteract these perceptions and accentuate what
city living offers for those in their later years that the suburbs cannot
provide.
Finally, block two most certainly is contaminated from previous use as
a gas station. Mr. Frangos owns this site and many others. He owes a
large sum of money in back taxes to the city, and probably has not
remediated the site, as it currently is used for parking.
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FINANCIAL ANALYSIS
An underserved and growing segment of the market
New construction is difficult at this time, for many reasons.
Therefore, I got creativewith the concept in order to draw more
revenue from Trinity. Seeing as the towers will act as a gateway into
the Theater District, be near 25 stories tall and have incredible
visibility from all points south and east, especially those on theinnerbelt; giant digital displays will be focused outward instead of
inward like in Times Square, so as to announce to location of the
Theater District, and also provide an additional source of revenue for
Trinity. Mike Matonis, Vice President of Sales at Clear Channel
communications estimates that revenue for each digital billboard
could be upwards of $240,000 per year. That would be in addition to
over 8.5 million dollars of residential and commercial rent for Tower 1
at Trinity, an apartment tower with ground floor commercial space.
The digital displays would be at least twice as large as typicalbillboards and be oriented vertically. It will cost twice as much to
install them, but provide much greater revenue as they will become
iconic symbols with incredible visibility.
I spoke with Josh Smith at Panzica Construction and after I explained
the project to him, he quoted me $140 a square foot for construction
of the residential, $100 a square foot for unfinished commercial
space, and $1750 a parking space seeing as they would be indoors. I
assumed $160 a square foot for new residential construction after
checking some additional online sources just to be safe, andunderstanding this would be better quality than the average tower. I
also used $160 a square foot for construction of the commercial
space to really push it.
Rental rates downtown average at $1.05, although Tammy Oliver
over at MRN Ltd. told me that I could get $1.25 per square foot for
new construction, so I assumed the top of what the market can
charge. In addition, I assumed a $15 a square foot rental rate for my
commercial space. Julie Iselin from Allegro suggested that I couldeven get $20 a square foot for new. However, in speaking with
restaurant and business owners around the Theater District, $13 a
square foot was mentioned often. So, I assumed $15 a square foot
would be reasonable for new construction in this part of downtown.
My land values were calculated by conducting copious research into
city and county records. I also received assistance from Ms. Iselin
who has access to professional real estate software and databases.
I assumed I would receive a tax abatement from the city of Cleveland,
as new construction is eligible for such abatements.
With all the assumptions I mentioned and an assumed 6.0% annual
interest rate in these times of near zero federal interest rates, and
potential interest free loans from the city of Cleveland for a project
this size, my calculations put me $ 3,136,211 in the black every year.
My net operating income should be enough to ensure a decent rate
of return to investors, especially with incentives and loans from thecity. I did inquire as to whether the Playhouse Square Foundation
would be a partner in the venture and was told from Mr. Einhouse
that “In most cases we would prefer to attract a good developer and
stay out of the deal unless there is a compelling reason such as
control of the use or a creative funding opportunity. We would be
mostly interested in ensuring that the outcome was in line with our
mission/vision and we are perfectly fine with that occurring without
our financial participation.”
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RESIDENTIAL FRONT DOOR BACK DOOR ANALYSIS
ASSUMPTIONS monthly yearly Site Size (31,277 sf) 235 unit (329,000 sf)
Total Residential Units 220
Total Residential (sqft) 329,000
Residentia l Rent (per sqft) 1.35
Amenities (sqft) 46,500
Parking Deck (# of spaces) 330
Price Per Parking Space 15,000Total Parking (sqft) 124,000
Commercial Space (total sqft) 15,000
Commercial Rent (per sqft) 18
Service & Circulation (sqft) 85,542
REVENUES
Digital Bi llboard 40,000$ 480,000$
Residential Rent 444,150$ 5,329,800$ 5,329,800$
Commercial Rent (triple net) 270,000$ 3,240,000$ 3,240,000$
Total Revenues 9,049,800$
EXPENSES
Property Tax 2.9% -$ 45,326$
Operating Expenses (per foot) 6$ 3,321,252$
Vacancy 5% 266,490$
Disc ount Rate (ROR) = annual
cas h flow to developer14%
Land Value 1,590,400$
Initial Electronic Bil lboard Cost 400,000$
Hard Cost Com. & BOH (per foot) 100$ 10,054,200$
Hard Cost Res. & FOH (per foot) 160$ 60,080,000$
Hard Cost Parking 4,950,000$
Soft Cost 20% 12,016,000$
Total Cost 89,090,600$
LOAN INFORMATION
Capitalization Rate 0.1
Loan to Value Ratio 75%
Mortgage Constant 9.64%
Length of Mortgage (years) 30
Debt to Coverage Ratio 1.25Interest Rate (annual) 6.00%
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BACKDOORcost-driven approach
Site Cost 1,590,400$
Hard Cost 60,080,000$
Soft Cost 12,016,000$
Total Capital Budget 73,686,400$ sum of cost
Required Equity (0.25) 18,421,600$ total capital budget *equity
Required Annual Cash Flow 2,579,024$ ROR*Equity
Mortgage Amount 55,264,800$ total budget *LTV
Annual Debt Service 5,328,752$mortgage amount *constant
NOI 7,907,776$annual cash f low+debt service
Operating Expenses 3,321,252$
Property Tax 45,326$
Effective Gross Income 11,274,354$
Vacancy 266,490$
Gross Annual Potenti al I ncome 11,540,844$
convert to monthly rent /120/12Required Revenues to Justify Costs 8,014$ income/unit(month)
Actual Monthly Rent 444,150$ actual monthly rent
Rent Gap (436,136)$
Justified Project Investment 52,679,982$ <==from rents
Total Capital Budget 73,686,400$ <==from costs
GAP (21,006,418)$ NO GO
FRONT DOORmarket driven approach
Gross Annual Potenti al Income 9,049,800$ sum of rents
Vacancy 266,490$
Effective Gross Income 8,783,310$ net revenues
Property Tax 45,326$
Operating Expenses 3,321,252$ less expenses =
NOI 5,416,732$ net operating income
Annual Debt Service 4,333,385$ NOI/1.25 DSC
Before Tax Annual Cash Flow 1,083,346$ BTCF=NOI-Debt service
Equity Investment 7,738,188$ annual cash flow/ROR
Annual Debt Service 4,333,385$ NOI/1.25 DSC
Debt Service Constant 9.64%
Mortage Amount 44,941,794$ debt se rvice/constant
Justified Project Investment 52,679,982$ equity + mortgage
Actual Project Cost 73,686,400$
Gap (21,006,418)$ NO GO
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Design ReviewDistrict Current Zoning 2020 Land-Use Plan Last Transfer Date Last TransferSale Price L ast Ow ne r M ar ke t V al ue Size of Parcel(Sq. Ft) Size ofParcel (acres) $ per sq ft ofland Taxes Paid2010 Condition ofParcel Frontage(linear feet) Brownfield Daily TrafficCounts* Tax protest $ DeliquintTax
Yes - Downtown GR-E5 Mixed-Use: Downtown 28-Dec-83237,200$ 5,785 0.13 41.00$ 6,736.24$ Standard 86 N ≈65,000 N -$
Yes - Downtown GR-E5 Mixed-Use: Downtown 1-J an-75129,400$ 3,168 0.07 40.85$ 3,675.64$ Standard 320 N ≈20,000 N -$
Yes - Downtown GR-E5 Mixed-Use: Downtown 1-J an-75122,600$ 3,000 0.07 40.87$ 3,481.72$ Standard N ≈20,000 N -$
Yes - Downtown GR-E5 Mixed-Use: Downtown 1-J an-75372,000$ 9,103 0.21 40.87$ 10,565.20$ Standard N ≈20,000 N -$
Yes - Downtown GR-E5 Mixed-Use: Downtown 1-J an-87688,500$ 16,848 0.39 40.87$ 19,553.06$ Standard 573 N ≈20,000 N -$
Yes - Downtown GR-E5 Mixed-Use: Downtown 1-J an-87Standard N ≈45,000 N -$
Yes - Downtown GR-E5 Mixed-Use: Downtown 30-Aug-07350,000$ Vasilike Pasalis 350,000$ 9,900 0.23 35.35$ 9,800.00$ Standard 55 N ≈20,000 Y 24,549.37$
Yes - Downtown GR-E5 Mixed-Use: Downtown 28-Dec-83116,400$ 2,840 0.07 40.99$ 3,305.64$ Standard 42 N ≈45,000 N -$
2,016,100$ 50,644 1.16 40.11$ 57,117.50$ 1,076 ≈65,000 24,549.37$
Yes - D ow nto wn SI -E5 Mi xed -U se: D own to wn 1 -J an -7 5367,300$ 11,900 0.27 30.87$ 10,431.34$ Standard 75 N ≈45,000 N -$
Yes - Downtown SI-E5 Mixed-Use: Downtown 7-Mar-89268,700$ 8,704 0.20 30.87$ 7,631.20$ Standard 50 N ≈45,000 N -$
Yes - Downtown SI-E5 Mixed-Use: Downtown 18-Ju l-0095,000$
VoncyleBletscher,
Lois B Mill er (Trustee) 711,000$ 19,554 0.45 36.36$ 20,192.40$ Standard 99 N ≈45,000 Y 47,947.12$
1,347,000$ 40,158 0.92 32.70$ 38,254.94$ 224 ≈45,000 47,947.12$
Yes - Downtown SI-E5 Mixed-Use: Res ident ial 28-Feb-06592,700$ 14,580 0.33 40.65$ 16,832.92$ Standard 150 N ≈20,000 Y 71,400.38$
Yes - Downtown SI-E5 Mixed-Use: Res ident ial 04-Oct-941,023,000$ 20,460 0.47 50.00$ 29,053.61$ Standard 160 N ≈20,000 N 88,877.57$
Yes - Downtown GR-E5 Mixed-Use: Res ident ial 04-Oct-94609,200$ 12,184 0.28 50.00$ 17,301.52$ Standard 370 N ≈45,000 N 53,376.54$
2,224,900$ 47,224 1.08 46.88$ 63,188.05$ 680 ≈65,000 213,654.49$
Yes - Downtown GR-E5 Mixed-Use: Downtown 6-Nov -06817,766$ Hanna Buil ding LLC 231,000$ 4,560 0.10 50.66$ 6,560.16$ Standard 24 N ≈17,000 N
Yes - Downtown GR-E5 Mixed-Use: Downtown 6-Nov -06817,766$ Hanna Buil ding LLC 231,000$ 4,560 0.10 50.66$ 6,560.16$ Standard 24 N ≈17,000 N
Yes - Downtown GR-E5 Mixed-Use: Downtown 23-Sep-09
632,800$ 12,474 0.29 50.73$ 17,971.64$ Standard 66 N ≈17,000 N
Yes - Downtown GR-E5 Mixed-Use: Downtown 6-Nov -06817,766$ Hanna Buil ding LLC 316,400$ 6,237 0.14 50.73$ 8,986.22$ Standard 33 N ≈17,000 N
Yes - Downtown GR-E5 Mixed-Use: Downtown 6-Nov -06817,766$ Hanna Buil ding LLC 179,200$ 3,446 0.08 52.00$ 5,089.90$ Standard 45 N ≈19,000 N
1,590,400$ 31,277 0.72 50.96$ 45,168.08$ 192 ≈19,000 -$
2,086,000$ 40,960 3.89 51.23$ -$
PARCEL DATA
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RECOMMENDATIONS FOR PROCEEDING
The time is right but financing may be difficult
If the right group of financial incentives can be put together,
the right partnerships formed with the city and perhaps the
Playhouse Square Foundation, and when rental rates increase
substantially downtown, than the time will be right to go aheadwith a project of this sort. In order for this project to work
financially, residential rental rates would need to be about
$1.95 a square foot. That price takes into consideration profits
derived from digital billboards. Without those, rates would
need to be well over $2.00 a square foot.
NO GO