First look: One University Circle high-rise apartments to start rising in January
Posted August 28, 2015 in Articles
Author: Michelle Jarboe McFee
Hoping to benefit from sky-high occupancy rates and rising rents, local developers expect to start construction early next year on a 20-story luxury apartment building in the city's University Circle neighborhood.
The first apartments at One University Circle might open in October 2017, with the remainder trickling onto the market through the following spring. The $112 million project is slated for a 1.3-acre site south of Euclid Avenue, at Stearns Road, where the Children's Museum of Cleveland plans to close in early January to make way for new development.
First Interstate Properties and Petros Development Corp. filed plans with the city Thursday for the project, which will have its first public vettings next week.
Developers in Cleveland have converted existing high-rise office buildings into apartments, but the 234-foot-tall One University Circle tower could be the city's first new high-rise apartment construction since the 1970s.
Across the country, builders are banking on strong demand from young professionals and Baby Boomers, who are downsizing from suburban homes or seeking a more urban lifestyle within walking distance of restaurants, nightlife and recreation. And in tight urban environments, those developers are going vertical, contributing to the nation's biggest high-rise residential building boom in decades.
"This is a national trend," said Sam Petros, a homebuilder and developer based in Broadview Heights. "This is happening all over the country in a big way – and way overdue."
Building, refined, is shorter, broader
Petros and Mitchell Schneider, First Interstate's president, signed an early development deal last year with University Circle, Inc., a nonprofit group that owns the Children's Museum site. At first, they considered building a 28-story tower.
After design work and number-crunching, the building morphed into a somewhat shorter, broader structure. But the number of apartments – most with one or two bedrooms – hasn't changed. The developers also expect to build roughly two-dozen studios, a handful of three-bedroom units and 12 penthouses on the building's top two floors. Living spaces will start around 550 square feet and top out close to 2,350.
With two years to go before the first apartment opens, Schneider and Petros said it's too early to specify rents. In today's market, they believe the apartments would command roughly $2.20 per square foot. So the average-sized apartment, at 1,100 square feet, might cost a tenant $2,400 to $2,500 a month.
Penthouse dwellers in the two largest units could plunk down more than $5,000 a month. The market in late 2017 ultimately will dictate what people pay.
"This is intended to be a high-end building," said Schneider, the Lyndhurst-based developer behind Legacy Village and Cleveland's Steelyard Commons shopping center. "A luxury lifestyle experience."
The building will offer full-time concierge services; a fifth-floor deck with an outdoor pool, cabanas and a meditation garden; a first-floor bistro and market serving light meals, prepared foods and wine; a fitness center; and a 20th-floor lounge.
This is a national trend. This is happening all over the country in a big way -- and way overdue.
Eighty-two percent of the apartments will have balconies or patios, and the developers believe that residents will be able to see the lake from the eighth floor and higher. Plans show 318 parking spaces, the vast majority tucked in the garage.
Schneider and Petros have room to do more. One University Circle will occupy only 1.3 acres of a 1.9-acre site. The remaining property, also owned by University Circle, Inc., is earmarked for a second phase – though the developers won't say what they hope to build on the land.
For now, the property will serve as a construction-staging area and surface parking to the west of the tower.
Tight apartment market props up tower
The tight apartment market is driving developers to pursue new projects across the region, with high-end buildings popping up in University Circle, downtown Cleveland, Westlake and Beachwood. According toReis, Inc., a real estate research firm, rental vacancy in the Cleveland area was a striking 2.9 percent during the second quarter – lower than the national rate of 4.2 percent.
"Since we've started building, there's no vacancy in the Circle," Chris Ronayne, president of University Circle, Inc., said of the recent flurry of apartment construction. "Rents have only gone up."
Higher rents make new construction more possible, and more palatable to lenders. Costs rise with the height of a building and the complexity of a project, though.
As a pure apartment building, One University Circle is less tricky than some other proposals, such as theambitious mash-up of apartments, retail, offices, hotel rooms and parking that Stark Enterprises hopes to build in downtown's Gateway District. But any high-rise is no small feat for Cleveland, where developers often turn to public subsidies to make projects feasible.
Schneider wouldn't discuss his financing in detail, saying the pieces still are falling into place. Most of the money will come from traditional loans and equity.
He and Petros do expect to take advantage of property-tax abatement, which Cleveland routinely grants for new residential investments in the city. And the developers haven't ruled out using other public-financing tools. One potential option is Cleveland-Cuyahoga County Port Authority bond financing that would reduce sales-tax costs on construction materials.
Schneider wouldn't elaborate on the other possibilities.
"The tax abatement is what allows it to work," Schneider said of the project. "It's not a rich deal, but it's rich enough to attract capital."
The developers have asked Cleveland to consider fixing up Deering Avenue, which will run along their tower's southern edge, and to explore opening up the one-way street to two-way traffic.
University Circle, Inc., expects to finalize a long-term land-lease deal for One University Circle within the next month. Debbie Berry, the nonprofit's vice president of planning and real estate development, wouldn't discuss terms of that deal.
The project site, at 10730 Euclid Ave., does not include a neighboring PNC bank branch. That branch, which PNC owns, also sits on land owned by University Circle, Inc., but is subject to a long-term ground lease.
On Thursday, a city design-review committee will evaluate exterior plans for the tower, designed by Dimit Architects of Lakewood. The Cleveland City Planning Commission will see the project Friday, Sept. 4. Those presentations won't include interior views of the units, which still are being fine-tuned.
Petros, who lives in Hinckley, plans to occupy a top-floor penthouse at One University Circle. He believes the building will attract other suburbanites who want a more urban lifestyle without the bustle of the center city.
Residents will be a short drive or bus ride, on the rapid-transit HealthLine along Euclid, from downtown. But they'll have a quieter landing pad, on a site surrounded by – but set slightly apart from – major hospitals, museums and universities.
"Who wouldn't want to be here?" Petros said. "When people realize they're driving an hour and 20 minutes ... to go to their suburban homes, when they have a great choice in the Circle, you're going to see them coming back."