Cold-storage deal highlights hunger for freezer space

The partners behind an unusual cold-storage complex on Cleveland’s Opportunity Corridor believe they’ll fill the building before it even opens.

The roughly $30 million project, the brainchild of Orlando Baking Co., will sit south of the company’s longtime headquarters in the Kinsman neighborhood. But Orlando expects to use only 20% to 25% of the space for its own products — and to rent out the rest to other businesses.

Known in industry circles as a public refrigerated warehouse, the 156,775-square-foot facility is on the drawing board at a moment of surging hunger for cold storage. The pandemic, supply-chain upheaval and the growth of e-commerce are shining a spotlight on a sector where the typical building is sorely outdated, at 42 years old, according to the JLL real estate brokerage.

“The U.S. has over 330 million people needing food, and as the population continues to rise, the demand for cold storage will follow trend,” researchers at JLL wrote in an autumn 2020 report on post-pandemic prospects for the industry. “With limited cold storage facilities, it is next to impossible to accommodate the population right now.”

Weston Inc., based in Warrensville Heights, is the developer of the Cleveland project, to be designed and built by ARCO National Construction. An Orlando affiliate called Cleveland Cold Storage LLC will master-lease and operate the facility, renting space by the pallet to other companies.

John Anthony Orlando, the bakery’s president and CEO, said he has reached out to local food producers including Miceli Dairy Products Co., on East 90th Street, and Pierre’s Ice Cream Co., in Midtown. But he doesn’t have any letters of intent from tenants — yet.

“We’ve been talking about adding a freezer onto our facility for probably 10 years,” said Orlando, who started renting storage in Columbus four years ago after realizing there were no buildings in Northeast Ohio that could meet his company’s needs.

What began as a plan for Orlando’s expansion turned into a much larger project, one that could grow to 261,775 square feet on roughly 12 acres, based on tenant demand.

Weston has a deal to buy that land from the city of Cleveland, which worked with nonprofits to assemble the property as part of a broader economic-development plan.

“If we can get phase one up and running, we would like to believe phase two would be shortly thereafter,” said T.J. Asher, president of Weston’s acquisitions and development group.

A 2014 study by Bush Consulting Group identified opportunities to add jobs and boost the local economy by investing in regional food producers and the infrastructure to support them. At that time, food manufacturing was a $4.3 billion industry in Northeast Ohio, employing 34,000 people.

The Cleveland Cold Storage warehouse will enable tenants to more efficiently store products and take advantage of pooled deliveries that cut down on shipping costs, said Nick Pacitti, a Hudson-based consultant working with Orlando. A supply-chain expert who has worked for Kraft Heinz Co. and Nestlé, Pacitti is pitching the project to manufacturers, distributors and other potential occupants.

Pacitti heard about Orlando’s plight a few years ago, in a moment of serendipity, from an Uber driver who was taking him to Cleveland Hopkins International Airport. Since then, he and Howard Lichtig, a vice president with the CBRE Group Inc. brokerage, have helped the family-run business search for development sites.

The JLL brokerage predicts a wave of speculative construction of cold-storage space and a shift toward more urban locations — if developers can find industrial land that’s close to highways. That’s a huge hurdle in many major cities.

“What’s really unique about Cleveland Cold Storage is it’s going to support and accommodate urban logistics,” Pacitti said.

The city’s asking price for the site, spanning more than 15 acres including a strip of retail frontage along East 79th Street, is $805,500, according to public records. But the deal also involves public incentives to offset some of the developer’s costs.

David Ebersole, the city’s economic development director, expects that $3 million will flow to the project from a $10 million Opportunity Corridor fund earmarked by JobsOhio, the state’s private, nonprofit economic development corporation. That money will assist with site preparations, cleanup and demolition, he said.

The city also is offering tax-increment financing, an arrangement that will plow a portion of new property-tax revenues from the complex back into the project.

Ebersole said the building will be a springboard for additional development along Opportunity Corridor and will help reverse a competitive challenge for the city.

“Now, all of a sudden, not only are businesses more comfortable expanding in the market because they can access that space locally, but … people in Columbus or Detroit or Toledo, they’re going to be shipping their stuff to Cleveland, versus us shipping our stuff down there,” he said.

CJ Follini, an entrepreneur and alternative asset investor, said the Cleveland project seems “phenomenally prescient.” Based in New York, Follini is obsessed with the need to build smaller, colder facilities closer to population centers, through deals such as partial cold-storage conversions of underutilized parking garages.

“This is the first instance I’ve seen of a government … recognizing this hidden need,” he said. “I actually believe Cleveland is being a thought leader.”