The Centennial, in downtown Cleveland, wins $40 million in tax credits for

The investment group behind a six-building revitalization plan in Cleveland’s Superior Arts District, east of downtown, won just over $8.5 million in credits. That portfolio includes the future home of CrossCountry Mortgage, a fast-growing mortgage lender that plans to move its headquarters and hundreds of employees to the city from Brecksville. Properties on either side of the future corporate complex will become additional offices, apartments and restaurants.

In Elyria, businessman Kevin Flanigan picked up $3.4 million in tax credits for his plan to reimagine a significant stretch of downtown. His project, a blend of historic preservation and new construction, will bring apartments, offices and an esports hub to the Lorain County seat.

In Canton, a planned restoration of the historic Renkert Building landed $4.2 million in credits. Westlake-based developer Ceres Enterprises aims to turn the 11-story structure into an extended-stay hotel, with a restaurant on the lower floors. A garage, with street-level retail and a rooftop event space, will rise on a neighboring parking lot.

Uptown Mentor, a Lake County development that will mix restaurants, retail space and offices, won $1.16 million in credits. And a modest project in Wooster, comprised of a restaurant and eight apartments, won a $527,479 award.

Other high-profile projects in the region, including a lofty plan to remake the Tower at Erieview in downtown Cleveland as Ohio’s first W hotel, made unsuccessful bids for credits. The remaining $42.1 million in awards went to three deals in Columbus and developments in a handful of smaller communities scattered across the state.

Millennia has been wrestling with the Centennial since May 2018, when the Cleveland-based real estate developer acquired the onetime office building from an out-of-state owner. The property spans 2.16 acres and includes a soaring, L-shaped banking lobby.

“Having this award ensures that this project will move forward, but now we are structuring it to make sure that we have viability in today’s market of March of 2022,” Tom Mignogna, vice president of Millennia Housing Development Ltd., said during an interview on Wednesday afternoon.

In 2015, under a previous owner, the building won $25 million in state preservation tax credits, during a short period when Ohio offered super-sized incentives for “catalytic” projects. The state does not pay out such credits until a project is done.

Millennia has been fighting to hang onto that award and faces a March 31 deadline to close on financing and start construction. The company expects to work with the Ohio Department of Development to get a bit of additional wiggle room, said Mignogna, who hopes to close on financing in the late second quarter of this year.

“The urgency to close is greater than ever,” he said.

Wednesday’s $40 million tax-credit award will round out a complicated capital stack that includes federal Low Income Housing Tax Credits, the state historic tax credits, federal tax credits for preservation, city and county loans, bank debt, private equity and bonds that will be issued by the Cleveland-Cuyahoga County Port Authority.

Millennia plans to sell the rights to the new tax credits to raise money for the deal.

The credits are designed for insurance companies, who can offset their state insurance premium taxes by investing in real estate developments. The identity of the potential buyer for Millennia’s credits is redacted in a copy of the project application released by the state, in response to a public records request from Crain’s.

The idea of a tax credit for significant, mixed-use projects first popped up in early 2018, in legislation tailor-made for an aspirational ground-up development in Cleveland. That project, a Gateway District deal called NuCLEus, is on hold. It was sidelined by financing challenges and the pandemic before the new tax-credit program even got off the ground.

The enabling legislation took three years to make it through the General Assembly and to Gov. Mike DeWine’s desk. Then it took state development officials much of 2021 to flesh out the program’s rules and come up with the application and scoring criteria.

The General Assembly allocated $100 million a year to the program, spread evenly over four fiscal years. That means the next installment of money will be available July 1, though it’s not clear when the state development department will start accepting applications.

“We can move forward into round two fairly seamlessly,” John Werkman, chief of the department’s business services division, said during a discussion about the program last week, at the Vorys law firm’s annual economic-development incentives conference in Columbus.

The next application window, he added, should not drag into September or October.

Each fiscal year, the state can award up to $80 million in credits to projects in or near major cities. The remaining $20 million is reserved for smaller communities — like Canton and Elyria. Deals must include at least two uses (parking does not count).

Applicants can seek a credit equal to 10% of a development’s costs, with a cap of $40 million. In the first round, the Centennial was the only project to pursue the maximum amount.

The credits must be make-or-break incentives for the deals. And applicants must show that the state will see a return on its investment through increased tax collections.

The Centennial will house more than 860 apartments, which Millennia is describing as “workforce housing.” Aimed at tenants including hospitality workers and public employees, the units will be limited to renters earning between 50% and 80% of area median income.

The second and third floors of the 24-story building will become an independent hotel, part of Millennia’s growing Savour Hospitality Group. During an interview last month, Millennia CEO Frank Sinito described the hotel as a five-star, five-diamond property.

“We think there’s an untapped market for that just best-of-best. And we’re doing that with our restaurants already. There are economies of scale with our business model now, too,” he said, adding that Millennia, a nationally known owner and developer of affordable housing, does not plan to expand its hospitality portfolio beyond Northeast Ohio.

On the Centennial’s ground floor, the Cleveland Exposition space will house collections from the Western Reserve Historical Society. The historical society, based in University Circle, sees opportunities to reach more visitors and city residents — and to show off cars, airplanes and other artifacts that are sitting in storage today.

“The Centennial project is a critical cornerstone in the broader revitalization of downtown Cleveland,” Millennia’s tax-credit application reads. “With its massive scale, high level of historic and architectural significance, and prominent location, the fate of this building carries greater weight than any other project in the overall trajectory of downtown Cleveland’s redevelopment.”

Mignogna expressed gratitude for public officials including Sen. Kirk Schuring, the Canton Republican who sponsored the legislation that created the Transformational Mixed-Use Development Program.

The other Cleveland winner, in the Superior Arts District, is a planned $100 million-plus investment along the south side of Superior Avenue, between East 21st and East 23rd streets.

A company tied to CrossCountry Mortgage founder and CEO Ron Leonhardt Jr. started buying up real estate in the neighborhood in late 2017. Renovations are well underway at the company’s future headquarters, at 2152-2160 Superior Ave, where a revitalized manufacturing complex could house more than 600 office workers.

Public records show that Leonhardt, working with local attorney Jon Pinney, has continued to add to his portfolio. Last year, companies associated with Leonhardt acquired the Heller Building, at 2202 Superior Ave., and the Keller Building, at 2230 Superior Ave., from affiliates of Cleveland-based real estate company GBX Group.

“The project will reactivate nearly 400,000 square feet of dilapidated and vacant space along the Superior Avenue corridor in Cleveland,” the group’s tax-credit application states. “The historic buildings in question are generally in very poor condition, requiring significant work both to the exterior and to the interior to make them attractive to modern tenants.”

A city design-review committee is scheduled to review plans for two of the buildings, at Superior and East 21st, on Thursday, March 3. The design package shows a restaurant anchoring the corner, with a small co-working space along Superior and 44 apartments upstairs.

The other buildings, between East 22nd and East 23rd streets, will become offices, retail space, storage and more apartments, according to the tax-credit application.

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