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  • The Alto Partners

John Hartness Brown makeover in downtown Cleveland will be housing, not a hotel

Photos by: Michelle Jarboe, The Plain Dealer

CLEVELAND, Ohio - What's old is new again at the long-suffering John Hartness Brown complex in downtown Cleveland, where the property's new owner has returned to the original vision for redevelopment: Housing, not a hotel.

Alto Partners no longer plans to include a 140-room, limited-service hotel in a revival of the buildings, a series of empty facades at 1001-1101 Euclid Ave. That blighted expanse of real estate now is earmarked for 228 apartments, with 20,000 square feet of retail along the street and 230 parking spaces tucked inside. Alto recently amended its plans in a filing with the state.

In an email, Alto executive Michael Sabracos confirmed the change in scope. Lenders, he wrote, weren't nearly as enthusiastic about a hotel as they were about apartments.

"Given the history of this project, we wanted to take a path that provided us with the upmost success," wrote Sabracos, chief executive officer for Alto's U.S. operations. "Since our decision, we have secured the financing to move forward with the project ... and look forward to bringing the building back to life."

Most of the apartments will have one bedroom or one bedroom with a den, though the property will include some high-end penthouses. Sabracos said prices haven't been set, but the rents will be similar to what comparable projects are charging downtown.

The apartments will feature quartz countertops, stainless steel appliances and large walk-in closets, and the building will include a rooftop patio, a courtyard, areas for walking and washing dogs, fitness facilities, bike storage and a wine-storage room with private lockers.

Alto hasn't lined up ground-floor tenants yet, but Sabracos said the company hopes to lure a mix of service retailers, stores and restaurants, with an emphasis on locally owned businesses.

He wouldn't discuss how the change in the nature of the project will alter the overall cost - or the amount of a valuable state historic tax-credit award tied to the building.

Alto paid $9.1 million for the John Hartness Brown property in August. At the time, the complex was snarled in lawsuits and in the hands of a court-appointed receiver, who put it on the market to pay off troubled debt. Alto's purchase cleared the way for a redevelopment of the buildings, though the litigation still hasn't been fully resolved.

Lienholders in a foreclosure case, which was filed in August 2015, are squabbling over how to split up the proceeds from the sale. An earlier lawsuit, filed by local investors looking for their money back, finally ended this month with a confidential settlement, court records show.

The litigation isn't an issue for Alto.

But the company, the third developer in a decade to take on that stretch of Euclid Avenue, faces the burden of proving that - this time - there's cash and concrete action behind all the talk. "We have term sheets in place for the financing and are moving forward to finalize drawings," Sabracos wrote.

A spokeswoman for the Ohio Development Services Agency, which oversees the historic tax-credit program, said the state has given conditional approval to Alto's plans. To keep the tax credits, Alto must close on its financing and start construction by July 31. The state expects that the project will be complete by June 30, 2020.

The state awarded $11 million in preservation tax credits to the property in 2007. That's more than twice what the building would be eligible for today, due to changes to the state tax-credit program. Property owners don't actually receive credits until their projects are complete, but the promise of money helps them secure up-front investors and bridge financial gaps.

The amount of the award is based on the size and scope of the project. Alto's pivot to housing could impact what the state ultimately pays out. But the original award reflected a plan for apartments. The hotel concept - which started as an effort to bring the Le Meridien brand to Cleveland - didn't come along until 2010.

Alto also expects to draw on a federal preservation tax-credit program, which Congress preserved, with minor alterations, in the tax-reform package approved this week. Sabracos said the project is far enough along to fall under transition rules outlined in the tax plan. Tweaks to the program won't have an impact.

Like other new housing construction and renovations in the city, the apartments will be eligible for property-tax abatement if they meet certain green-construction standards.

The city also has considered tax-increment financing for the project, which would redirect new property taxes generated by the non-residential investments - and the apartments, after the abatement burns off - to paying down project debt for 30 years. That arrangement would not diminish the share of property-tax revenues pledged to the school system.

Tom Yablonsky, executive director of the nonprofit Historic Gateway Neighborhood Corp., thinks there's still room for creative lodging concepts downtown. But he said Alto's changeover to apartments makes sense.

"There's still a belief system in the continuing depth and growth of the downtown housing market," he said, "so it seems like a logical choice."

After a decade of watching the John Hartness Brown complex languish, along with the shuttered Cleveland Athletic Club Building across the street, Yablonsky has high hopes.

A local development team expects to close on financing for the Cleveland Athletic Club Building deal in late January, making way for 165 apartments and 10,000 square feet of offices and retail. That project, which will preserve features including an indoor swimming pool, could be finished by the end of next year. Last week, the Cleveland-Cuyahoga County Port Authority's board approved agreements to issue bonds for the project.

There still are trouble spots along Euclid, including the stalled makeover of the former Huntington Building on East Ninth Street. But reinvigorating the Cleveland Athletic Club and John Hartness Brown buildings, after years of neglect, will go a long way toward making the street feel cohesive from Public Square to Playhouse Square, Yablonsky said.

"That's the biggest swath undetermined on Euclid," he said. 'Everybody's been waiting for it. When all those things are figured out, Ninth to 12th could be the most amazing stretch of the original historic street, because it's still intact. There are no gaps. There are no holes."

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