Investors buy 6-acre block at downtown Cleveland’s eastern edge for development, possible corporate HQ
CLEVELAND, Ohio – The recent sale of a city block at the eastern edge of downtown Cleveland points to large-scale development plans in the Superior Arts District, where longtime manufacturing buildings could become a corporate headquarters supporting hundreds of jobs.
On Dec. 28, a company tied to Ron Leonhardt, Jr., president and chief executive officer of Brecksville-based CrossCountry Mortgage, Inc., and an investor group led by high-profile Cleveland attorney Jon Pinney bought all of the buildings and parking lots between Superior and Payne avenues and East 21st and 22nd streets.
Property records don’t reveal the aggregate price, but the parcels – spanning roughly 6 acres – are valued at more than $3 million by the Cuyahoga County Fiscal Office.
The sellers were affiliates of Tap Packaging Solutions, a 113-year-old producer of folding cartons and boxes that was called the Chilcote Company for most of its history, and GBX Group, a major real estate owner and investor in the neighborhood.
During an interview, Leonhardt said the cluster of historic buildings could become a new corporate headquarters for CrossCountry Mortgage, a nationwide residential lender with about 450 employees in Brecksville and hopes of doubling that headcount within five years.
Founded in 2003, CrossCountry employs 2,600 people across the country.
The relocation plan is far from a done deal. CrossCountry also is exploring whether it makes sense to build a new headquarters in Brecksville, as part of a much larger, mixed-use makeover of the former U.S. Department of Veterans Affairs campus at Brecksville and Miller roads. The former VA site is located just north of CrossCountry’s current Miller Road offices.
Though Leonhardt has looked at other sites, “these two are the leading candidates,” he said of the Brecksville and Cleveland properties.
Brecksville Mayor Jerry Hruby was not available for comment Friday.
Regardless of the ultimate use, Leonhardt said the Cleveland properties are an attractive investment. If the buildings don’t become offices, they could be converted into housing.
In Northeast Ohio and across the country, Census tracts earmarked as “economically distressed” opportunity zones offer investors the ability to put off or avoid paying capital gains taxes. An investor with profits from a sale of stock or real estate, for example, can delay paying taxes on those gains by quickly putting the money into a fund that invests in a business or real estate project in an opportunity zone.
The potential tax savings are higher for investors who maintain their stake longer, with a break not only on reinvested capital gains but also on profits from the opportunity-zone deals. Large swaths of Cleveland, including the central business district, the Superior Arts District and other close-lying areas, made the U.S. Treasury’s list of approved opportunity zones last year.
Leonhardt said he and fellow investors in the Superior Avenue block, who formed a 50-50 partnership, had taxable gains they needed to reinvest.
He wouldn’t put a firm timeline on a potential project or a decision about CrossCountry’s headquarters, though the group already is working on designs and space planning with Vocon, an architecture firm based in Cleveland.
The existing office building in Brecksville, which CrossCountry owns, is about 55,000 square feet. The company might need 80,000 to 90,000 square feet to accommodate growth.
The cluster of buildings in Cleveland is much larger – an estimated 270,000 to 280,000 square feet between the smaller former GBX buildings, at 2104 and 2110 Superior Ave., and the four-story main Chilcote building along with annex and warehouse space at 2160 Superior Ave.
“We’re exploring all options with the site and really like the property in general,” said Pinney, managing partner of the Kohrman Jackson & Krantz law firm, which is representing CrossCountry in negotiations about public incentives for the headquarters project.
David Chilcote, chairman of Tap Packaging, didn’t respond to a request for comment about the growing company’s plans and the decision to sell the manufacturing complex built by his grandfather, founder August Chilcote, along with surrounding properties.
“We’re working with them on a relocation process, and we’re not at liberty to say what the various options are,” said Spencer Pisczak, president of the Premier Development Partners real estate firm. He described the sale of the Tap Packaging buildings as a “win-win.”
Real estate records show that the deal also involved swaps of parking lots flanking East 22nd Street. The buyers acquired GBX’s parking on the west side of the street and, in turn, turned over former Chilcote lots on the east side of the street to GBX.
“It was important to them to have the whole block,” Antonin Robert, GBX’s president of community development, said of Pinney and Leonhardt’s group.
Leonhardt said that any development will involve restoration of the existing structures. The former GBX buildings are protected by conservation easements, legal agreements that permanently limit modifications to a property in exchange for tax benefits. And all of the buildings sit in the national Superior Avenue Historic District, making them eligible for federal and state tax credits for preservation projects.
“It would be a giant hole in the wall of that historic district if they weren’t reused. That south side of the street there … it’s very intact as one of Cleveland’s original garment districts,” said Tom Yablonsky, who helped establish the Superior Avenue historic district in 2007 and who serves as executive vice president of the Downtown Cleveland Alliance and executive director of the Historic Gateway Neighborhood Corp., which has a conservation easement program.
“There’s plenty of surface parking to support new development,” he added. “I think it’s an opportunity for a mix of new and old, to figure it out together.”