An out-of-state investor group is trying to buy the John Hartness Brown Building and the neighboring building, at 1101 Euclid Ave. Their redevelopment could involve a 200-plus-room hotel, indoor parking, meeting space and 12,000 to 13,000 square feet of ground-floor retail. The buildings have been sitting vacant and are in the early stages of foreclosure.
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The John Hartness Brown Building, which runs from 1001 Euclid Ave. to 1021 Euclid Ave., and the building at 1101 Euclid Ave., with a black facade, could be the site of a mixed-use hotel project under a $55 million redevelopment plan. Out-of-state buyers hope to capitalize on the medical mart, convention center and casino -- all scheduled to open in 2013.CLEVELAND, Ohio -- An out-of-state investor group plans to open a hotel on Euclid Avenue, in a $55 million project that could eliminate a dead zone in downtown Cleveland.
JHB Hotel LLC, an entity tied to investors in New York, California and Colorado, expects to buy the John Hartness Brown Building at 1001-1021 Euclid Ave. and the neighboring building at 1101 Euclid Ave. before the end of the year. The vacant properties could be plucked from the early stages of foreclosure, thanks to a surge of interest in hotels to complement Cleveland's planned medical mart, new convention center and casino.
Those large projects, more than $1 billion worth of development, have sparked a hospitality race. Real estate experts say only a few hotels -- ones that secure financing first -- will be built.
On the east bank of the Flats, developers hope to start construction soon on an Aloft hotel. A Kimpton Hotel could occupy part of the former Schofield Building, at East Ninth Street and Euclid. An investor is trying to buy the former Cleveland Athletic Club Building, at 1118-1148 Euclid Ave., for a hotel project. And properties including the Huntington Building, also at East Ninth and Euclid, have been mentioned as potential hotel sites.
The investors behind JHB Hotel have a signed letter of intent with an upscale brand, said Pete Whiskeman, a partner in the project. He declined to identify the brand but said the project would involve a 200-plus-room hotel, indoor parking and 12,000 to 13,000 square feet of ground-floor retail. The hotel would open in 2013, timed to the debut of the casino, the convention center and the medical mart, a planned showplace for medical devices.
"If those things were not happening, this would not be happening," said Whiskeman, a principal with Hospitality Development Capital Group in Colorado.
Western National Capital Partners, a California company, likely will hold the majority stake in JHB Hotel LLC. The investors are working with hospitality consultant Lonnie Burghardt, who is based in Sandusky. Collectively, they have decades of experience in hotel development and financing.
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This week, the group was trying to wrap up a deal with Eli Mann, an elusive Cleveland Heights investor who bought the Euclid Avenue properties in 2007 and talked about filling them with apartments and stores.
Mann's plans never materialized. Public records show he owes more than $346,000 in property taxes on the buildings. Cuyahoga County filed to foreclose on the properties this year. The tax delinquencies must be resolved before JHB Hotel can take possession of the buildings and begin construction, Whiskeman said.
When reached by phone this week, Mann said he was in a meeting and might call back. He never did. His real estate broker, Richard Sheehan of Grubb & Ellis, confirmed the basic outlines of the deal with JHB Hotel and said he believes it will happen. He declined to comment further.
A similar story has been playing out at the empty Cleveland Athletic Club Building. Mann bought that property in 2007 and has a contract to sell it to Ned Weingart, a local investor who is also working on a hotel deal.
David Sangree, a hotel consultant who has done studies for Weingart and the Aloft developers, said he was not aware of the JHB Hotel plan. "That would raise our new hotel count downtown from about 500 new rooms to about 700 or 800 new rooms," said Sangree, president of Hotel & Leisure Advisors in Lakewood.
According to Smith Travel Research, hotel occupancy in downtown Cleveland was 60 percent through October -- up 4.5 percent over the first 10 months of 2009. The medical mart and other projects will create demand for hotel rooms, Sangree said, but "there hasn't been much information provided in terms of exactly how much demand."
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The John Hartness Brown Building, built in 1901, was later divided and covered with different facades. From left, the properties at 1001, 1015 and 1021 Euclid Ave. are part of the original building and would be restored for the hotel project. The building at 1101 Euclid Ave., built in 1915, no longer has its historic facade. It would be connected to the project to provide an entry to indoor parking, with hotel uses on its upper floors.The JHB Hotel project would involve reuniting the John Hartness Brown Building, which was built in 1901 and later divided into separate office buildings. The restored building would house hotel rooms, with lobby access and retail on the first floor. The building at 1101 Euclid, which is not considered historic, could provide ground-floor access to indoor parking. The hotel would use the upper levels.
Whiskeman provided few details on JHB Hotel's financing plans. In 2007, the state awarded $5.8 million in historic preservation tax credits to help Mann redevelop the John Hartness Brown Building. Such credits, which can attract investors to historic buildings, are driving development along Euclid Avenue from Cleveland State University to Public Square.
The credits for the John Hartness Brown Building are valid until September 2012 and will be lost if they are not used. The state cannot award them to a different building but can work with Mann to transfer the credits to a new owner, said Mark Lundine, urban revitalization coordinator with the Ohio Department of Development.
Cuyahoga County development officials said they have not offered any subsidies. Public documents show that the city of Cleveland is considering tax-increment financing, a structure that taps anticipated increases in property-tax revenues from a project to pay for construction. Tracey Nichols, the city's economic development director, declined to comment on the financing.
"We're very interested in seeing the project in more detail," she said.