Crain's Cleveland Business by Crain's Cleveland Business

SPORTS BUSINESS: Big Ten praises Spire Institute after track championships. PAGE 5

CRAIN’S LIST Largest commercial real estate brokerages. PAGE 14

CRAINSCLEVELAND.COM I MARCH 7, 2022

Homeowners

FLOODED

with investor inquiries Northeast Ohio’s housing market has become a mecca for investors, spurring a flood of solicitations to homeowners, landlords and tenants. Some of those messages come from real estate agents, fixand-flip investors or iBuyers. But many allcash overtures are the work of wholesalers, who put properties under contract and then market those contracts for sale, with the goal of earning a fee. Page 10

Rita Knight-Gray stands outside her home in Cleveland’s Glenville neighborhood, not far from University Circle. She’s started responding to unwanted real estate solicitations by saying that her asking price is $3.5 million. | GUS CHAN FOR CRAIN’S CLEVELAND BUSINESS

Here’s how you can help Ukraine from Cleveland

Investors eagerly buying Cuyahoga County homes

BY JUDY STRINGER

BY MICHELLE JARBOE

Igor Djurin was a “just a little baby” when his parents fled war-torn Yugoslavia in 1990 but said growing up as a refugee in a family stripped of its homeland makes him hypersensitive to the plight of Ukrainians. Djurin also operates Schnitz Ale Brewery in Parma, home to Ohio’s largest population of Ukrainians. So, when Parma’s Pokrova Ukrainian Catholic Church said late last month it would be collecting emergency items for refugees fleeing Russia’s invasion of Ukraine, he didn’t hesitate to help. He hopped on Facebook and of-

fered up Schnitz Ale Brewery as a collection site. Community members responded by bringing in boxes and bags of warm clothes, food and medical supplies, which Djurin passed on to Pokrova volunteers for shipment to Poland refugee centers. “We will be looking for ways [we can] do more,” he said, “but this was our little part for now.” People and business all over Northeast Ohio are asking how they can do their “little part” as well, according to Andy Fedynsky, director of the Ukrainian Museum-Archives in Tremont. See UKRAINE on Page 17

NEWSPAPER

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Displaced Ukrainians disembark a train at a railway station in Lviv, Ukraine. | BLOOMBERG

THE

LAND SCAPE

Investors are snapping up a growing share of homes in Cuyahoga County, where various business entities accounted for one in five residential property purchases in 2020. A new research paper shows fundamental shifts in the real estate market, particularly in Cleveland and its close-lying suburbs. The housing collapse of 2007 to 2010 left Northeast Ohio awash in vacant and distressed properties. Now many of the places hit hardest during the Great Recession are ex-

periencing a surge in investor activity, fueled by cheap prices and strong rental demand. The Vacant and Abandoned Property Action Council, a civic group formed in the crucible of the foreclosure crisis, is sounding the alarm. Though members say they welcome responsible investors, they’re fed up with a rash of bad behavior — neglect that falls heavily on low-income, minority neighborhoods. “This is not an anti-investor paper. Period. What this is, I think, is a See INVESTORS on Page 16

A CRAIN’S CLEVELAND PODCAST

3/4/2022 2:12:28 PM

GOVERNMENT

New state laws bring new twists to building a business BY JAY MILLER

Ohio Secretary of State Frank LaRose used a recent visit to Cleveland to promote two new pieces of legislation that he said will make it easier for Ohio businesses to be successful. Senate Bill 105, signed by Gov. Mike DeWine last Thursday, March 3, requires political subdivisions to recognize state certifications of minority business enterprises, women-owned business enterprises, and veteran-friendly business enterprises. Senate Bill 276, which DeWine signed into law in January, gives businesses that want to file with the state as limited liability companies (LLCs) more flexibility to organize themselves. It will be especially useful for businesses that have several operations or locations under their umbrella. The new law creates something called a “Series LLC” that would insulate assets of each operation of a business so that the creditors of one operation couldn’t reach the assets of the other. LaRose spent Tuesday, Feb. 15, in Northeast Ohio, as part of his monthly tour of businesses and business organizations around the state. Speaking to a group of young entrepreneurs at Cleveland State University’s Small Business Development Center, he said SB 105 will make it easier for them to compete for work on government projects that include set-asides designed to encourage the creation and growth of

minority- and women-owned businesses (MBEs and WBEs). More broadly, an MBE or WBE certification lets potential customers know something about a business, and the designation can give a business access to both private grants and contracts, as well as public ones. “So what that means now is you will be able to get certified as a minority business enterprise (by the state) and it’ll work everywhere,” LaRose said. “You’ll be able to use it, compete for business, and you can go out there and grow your business.” Before SB 105, a qualifying business might have to be certified, and pay a fee, to qualify for public work in each community where it LaRose sought such work. Ariane Kirkpatrick, president and CEO of The AKA Team, a construction management firm, said she believes reciprocity will help her MBE/WBE firm. AKA is an umbrella for three businesses: a construction management firm, a commercial cleaning business and a waterproofing business. “It had to happen,” she said. “I have three different businesses, so that means I have to do a certification for each one.” The firm’s website lists certifications for the city of Cleveland, Cuyahoga County, the Cleveland Metropolitan

Housing Authority and the Northeast Ohio Regional Sewer District. Christopher Nance, vice president of construction and inclusive talent initiatives at the Greater Cleveland Partnership, said the need for businesses to go through the time and expense of certification in each locality has been a factor in the low participation of MBE and WBE businesses in public contracts, even though many communities set a goal of attracting these businesses to win as much as 5% of their contracts for work. Nance pointed to a GCP study that found Cuyahoga County awarded 4% of public contracts to minority- or female-owned businesses, well below its 15% goal. “I never thought you would hear this argument, or statement, coming out of me, but it’s that affirmative action doesn’t work because it hasn’t been well managed,” he said. He thinks not having to be certified in multiple communities will help. “I think the short answer, based on my experience with contractors, is yes,” he said. “Because it’s just a pain in the butt.” Before his visit to CSU, LaRose presented an award to Johnny Hutton, operator of three Zanzibar Soul Fusion restaurants. While the visit was designed to honor Hutton with an Ohio

Business Spotlight award, when LaRose mentioned the new legislation, Hutton wanted to hear more. LaRose explained that under SB 276, businesses will no longer need to create new LLCs for each of their operations. Instead, the law allows an LLC to operate as a holding company with subsidiaries, called series LLCs. “So the series LLCs is up and ready to go?” Hutton asked LaRose. “I mean, we just had this conversation two months ago that we need to have each one of these entities separate, you know, for tax purposes.” The LLC has been an increasingly attractive way to start a business. According to an Ohio State Bar Association report, based on filings with LaRose’s office, there have been 10 limited liability companies formed in Ohio for each new corporation — 130,000 in the first 10 months of 2021. The new law will allow Hutton, like any other business that prefers the LLC organization to a corporate one, to operate the three Zanzibar locations under one federal employer identification number, to file a single tax return and even have a single board of directors like a corporation. It does not require existing LLCs to make any changes. Ohio now is one of only 16 states that allows series LLCs. LaRose and some lawyers who have been reviewing the new legislation also expect it to make Ohio a more attractive place to do business because it

strips away some statutory requirements for LLCs, giving business owners greater freedom in how they structure their businesses. It does not, however, require existing LLCs to change their structure. ”I think it is intended to provide opportunities, to really make Ohio a little more attractive for companies to, you know, base their operations, in Ohio versus going elsewhere,” said Ludgy LaRochelle, an attorney at Tucker Ellis LLC in Cleveland. “It basically gives a lot of deference to the (business) agreement and for the parties to contractually decide how they’re gonna run the business, which is enticing to many entrepreneurs.” As with any new legislation, investors — or their attorney — should carefully review the operating agreement of any new LLC in which they invest. “It’s a cultural shift because, let’s say 20 years ago when LLCs were more like partnerships, there was an understanding that the members of an LLC had a very close duty to each other,” said Cleveland Heights solo practitioner Todd Masuda. “Someone who is signing an operating agreement, especially as a weaker member or a minority member in an Ohio LLC, (should) read that very carefully, because it may say somewhere that you’re going to get screwed.” Jay Miller: jmiller@crain.com, (216) 771-5362, @millerjh

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GOVERNMENT

New program aims to help small, minority-owned contractors BY KIM PALMER

about $52 million, or less than 5% of the $1.1 billion awarded to primary A new program aimed at growing contractors by the county from 2014 the number of skilled construction to 2018. Richard Patton, vice president of and building trade union members, specifically assisting small, minority- construction at NFP, said the goal of and women-owned companies, is the new program was to look at the being rolled out in the Cleveland bonding requirements differently by creating a concierge service for small area. The Small Contractors Surety businesses, which larger bond comBond Assistance Program, created by panies often are not interested in the union-labor owned Ullico Casu- working with because it means more alty Group and national insurance work. “Contractors are not coming to us broker NFP, is working to remove significant structural and financial bar- to be turned down,” Patton said, notriers small and emerging contractors ing that happens with most traditionface when bidding for construction al bonding programs. “It is a different mindset. It’s the reason for the projobs. gram. We can’t always do “This program is not only exactly what the contractor going to give a lot more wants, but most of the time, contractors the ability to get we can figure out how we a bond where they othercan get something done.” wise couldn’t, I think this With the new program, will move the needle for NFP does the underwriting womenand minoriin-house and advocates ty-owned companies, as when needed with major well,” said David Woncarriers to provide flexible dolowski, executive secrepricing and programs for tary of the Cleveland Build- Wondolowski owners with limited or dising and Construction tressed credit histories, PatUnion. ton said. Surety, or contractor, The application process bonds often are required has been streamlined and for larger commercial jobs, the form reduced to just a and they’re always required handful of pages. Contracfor civil or public work, tors will be able to pre-qualWondolowski said. The ify for bonds up to $350,000 surety bond acts as a form for the one program or up of credit that guarantees all to $500,000 in another prowork is completed and in- Jones gram that requires more volves a three-party agreement between the surety company, a due diligence. The pre-qualification allows contractors to be more efficontractor and the project owner. Both national and local data sug- cient in the jobs they pursue. In many gest that small, women- and minori- cases, that pre-qualification will ty-owned businesses struggle to come within days of submission. “Some companies will have an anqualify for the bonding required for large or public construction jobs due swer within 24 hours,” said Mike Lato limited capital and credit. Those pre, NFP’s surety senior vice presistruggles have resulted in a much dent. “With this program, those smaller share of public contracts be- owners get to spend less of their time, ing awarded to those companies money and manpower bidding for compared with awards to majori- jobs.” For some of the trickier cases, the ty-owned firms. According to a 2020 study by bonding funds and process will be Cuyahoga County, minority and handled by a third-party funds conwoman-owned businesses received trol company that acts as a controller

Cleveland Building and Construction members work on the Halle Building downtown. | CLEVELAND BUILDING AND CONSTRUCTION

for a 1% project fee and will help control risk and manage the line of credit, invoices and payments, Lapre said. And for more established contractors that have topped their credit limit and need help moving to the next level, the program provides bonding of more than $500,000. “In some cases, we can increase a more established contractor’s job capacity by 40% to 50% with an increase in the credit line,” Lapre said. As a benefit of the partnership with Ullico, the union-based company when needed will provide collateral to help secure a bond for a contractor that needs financial assistance. Only union contractors or contractors willing to promise to agree to pay union dues, wages and benefits for the duration of that job are eligible for the program, Wondolowski said,

but otherwise the program “is open to anyone working on general contracting work and any size company that might lack collateral or have credit that is not in the greatest shape.” The bonding program comes at a time when the construction industry is facing both a diversity disparity and a tightening workforce as the market is set to take off post-pandemic. “We need to make sure we have workers. We have a workforce crunch,” said Lisa Booth, executive director of the Northern Ohio chapter of the National Association of Minority Contractors. Construction workers in Cleveland skew older than the nation as a whole. The median age of construction workers here is 44, while it’s 41 nationwide. More than 32% of the

Cleveland workers are older than 50, and just 17.8% are under 30, according to 2019 data from the U.S. Census Bureau. “There is all of this work coming and not enough skilled people,” Booth said. Booth and fellow board member Kyle Jones, who owns KBJ Construction and is a member of ACE (architecture, construction, engineering), a high school recruitment and mentor program, are cautiously optimistic about the union’s new plan. “The program looks good. It’s definitely a start,” Jones said. However, the program’s third-party fund oversight make him nervous as a small business owner who needs a high level of flexibility. “As a small business you are always juggling. What if they (the fund control manager) make a bad decision for your business?” he said. But with project prices getting higher, a result of increased demand and continued supply chain delays, it is harder than ever for small contractors to bid on jobs, when larger firms can negotiate better lending rates and raw material bulk discounts, he said. Most minority firms opt to partner with established “majority firms” in order to work on large and public works jobs, but the end goal is to grow without relying on another company, Jones said. “Partnerships are good, but the goal is to do it on your own,” he said. Kim Palmer: kpalmer@crain.com, (216) 771-5384, @kimfouroffive

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New Cleveland investment fund targets women- and minority-owned businesses BY JEREMY NOBILE

Many financial experts will note that a core reason minority- and women-owned businesses are fewer and often lag the financial success of companies managed by their white-male counterparts is simple: They don’t draw the same degree of growth capital. Filling this void in the market is where Cleveland’s The Mezzanine Fund comes into play. “What I want to focus on is a more intentional deployment of capital so the outcome is more beneficial for women and people of color,” said Mezzanine Fund founder and managing director Anne Richie. “There is plenty of data now on women and people of color outperforming, yet there is not enough capital funding that outperformance.” The Mezzanine Fund is a flexible debt fund that is looking to pool together $100 million for investments in entrepreneurs with growth aspirations who are running businesses with around $10 million in revenue. They’re the sorts of companies that are too established for startup money and usually too small to interest private equity shops, but that might se- Richie cure their place in a supply chain with just a little more scale or sophistication. The builder capital that will be made available from the Mezzanine Fund is designed to help support enterprises run by diverse individuals who don’t want to give up equity but are ready to grow to their next level. The kind of business that might find its place in a supply chain with just a bit more scale or sophistication that a capital infusion could support is the sort of target Richie has in mind. Bridging a business’ gap to that next level is where the fund’s name comes from. Its minimum investment would be $2 million. Keeping those businesses around and owned by their diverse founders, Richie said, is one of her goals because that’s part of the recipe for helping women- and minority-owned businesses claim more share of the business world. “We’re trying to build companies that are going to stick around,” she said. Richie estimates there are some

10,000 businesses in the Midwest that could fit the fund’s criteria, which makes Cleveland a perfect and central market in which to launch Mezzanine. There isn’t great, comprehensive data on how much investment capital flows to diverse companies compared to the non-diverse, but the information that is available is quite telling. An analysis of Crunchbase data, for example, found that Black female startup founders were receiving just 0.34% of venture capital spent in the U.S. at midyear 2021—a trend that came to light despite the level of venture funding for startups led by Black women pacing at a fiveyear high. Now, Richie is not looking for startups with her fund. But as a Black woman with a long and successful career in banking and finance, she has a unique perspective on where capital flows. Stats may be helpful when it comes to painting a picture of what’s going on in the investment world, but Richie doesn’t necessarily need them to validate what she already knows all too well. She has witnessed the dearth of support for women- and minority-owned businesses firsthand over decades of work in financial services. It’s what inspired her in the first place to launch The Mezzanine Fund, whose tagline is “elevating diverse businesses.” Richie’s resume includes tenures with Citicorp, Wells Fargo, JumpStart and KeyBank, where she managed distressed assets, restructurings and workouts. She’s also a faculty member with the Goldman Sachs 10,000 Small Businesses program. While she may not have operated a fund before — something that might pose some challenges on the fundraising circuit — she has worked with entrepreneurs from a variety of backgrounds across a spectrum of companies large, small and in between. Young to old. Successful to struggling. It’s a skill set her supporters say makes her uniquely qualified for this endeavor. “The key here is that Anne is highly experienced. She has been making these similar types of investments not in a fund structure but in her capacity for working with banks

over her career,” said Fred Cummings, president at Pepper Pike hedge fund Elizabeth Park Capital Management and one of The Mezzanine Fund’s advisers. “Raising capital is a challenge for anyone whether you are Black or white or yellow or orange or brown,” Cummings said. “But there are not a lot of people like Anne — African American women — who are in asset management. And I think someone with her background and level of experience deserves an opportunity to show what she can do.” If successful, The Mezzanine Fund could play a significant role in supporting the development of women- and minority-owned businesses while providing potentially outsized market returns for investors. There is plenty of information showing that diverse companies tend to perform better than those that are not diverse. Yet, the capital is not following this sector like it seemingly should. “I see the problem. And I think Anne has a solution with her builder capital philosophy to make a difference with The Mezzanine Fund,” said Jeffrey Kadlic, managing partner for Evolution Capital Partners and another of the fund’s advisers. “That is why I wanted to be involved.” With the driving purpose of supporting diverse entrepreneurship, Richie notes her fund could even help a woman or minority businessperson acquire a non-diverse business—thereby making it diverse at the ownership level. After all, the quickest way to build a $50 million diverse company is to buy a non-diverse one. With the high level of M&A in the market today, driven in large part by retiring baby boomers, there could be many opportunities to do just that. And with the recent news of Intel building a massive chip plant in Columbus, Richie is all the more excited about the potential to scale up diverse companies that could work with the company. “We could grow and build companies to sell into Intel forever, and I don’t mean the typical janitorial or staffing services, but providers of mission critical supplies,” she said. “There is just so much opportunity in our state and our region.” Jeremy Nobile: jnobile@crain.com, (216) 771-5362, @JeremyNobile

4 | CRAIN’S CLEVELAND BUSINESS | MARCH 7, 2022

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SPORTS BUSINESS

‘A WORLD-CLASS EXPERIENCE’

Spire draws praise from Big Ten BY JOE SCALZO

The Spire Institute and Academy is about 180 miles from Ohio Stadium. It’s about 210 miles from Michigan Stadium and about 230 miles from Penn State’s Beaver Stadium. In short, it’s not the most convenient location to hold the Big Ten’s indoor track and field championships — even for the league’s closest schools. It’s just the best place. “Because of Spire’s expertise in conducting high level track and field events year over year, it’s become the ideal location for Big Ten institutions,” said Diana Sabau, the Big Ten’s deputy commissioner and chief sports officer. “Everything they provide for our athletes, coaches and fan base, it’s exactly what the Big Ten wants — a world-class experience. “We’re very happy with what they’ve afforded us.” This year’s meet, which was held Feb. 25-26 at Spire, marked the ninth time since 2013 that the Big Ten opted to hold the meet in Geneva instead of on the campus of one of its member schools. The 2020 indoor meet — the last meet before the pandemic — drew approximately 12,400 unique visitors to Spire, including about 7,500 outof-town guests, according to the Ashtabula County Convention & Visitors Bureau. Ohio estimates the average day visitor spends $116, whereas overnight guests spend $369, meaning those overnight guests brought more than $2.7 million to Ashtabula County and Northeast Ohio. Add in the local visitors, as well as the costs, fees and payroll associated with the event, and the weekend generates an estimated $4 million and $5 million each year.

huge by indoor track standards. For instance, Michigan’s indoor facility has permanent seating for 2,000 fans, although it can expand its seating to 3,500. Most indoor facilities are even smaller, since the added seating capacity adds to the price tag. Ohio State’s French Field House, for instance, was first built in 1956 and can only seat 800 fans, even after a $1.3 million renovation in 2009. “There’s a lot of support for these student-athletes from all over — parents, family, friends — and the facility allows for maximum fan engagement throughout the day,” Sabau said.

Fast track Spire features an eight-lane, 300-meter track made by Beynon, one of the top track manufacturers in the world. The BSS 2000 Hobart track is the same used on many of the world’s best indoor facilities and features a wide turn radius, which results in gentler — and fewer — turns than a 200-meter track. “The track is very fast,” Sabau said. “Our student-athletes love the high performance afforded with that track.”

Extra space Spire has a separate field event area with two high jump pits, two long jump pits, two pole vault pits, two shot put circles and portable weight throw cages for discus, shot and weight throws. That means the league can contest a lot of events simultaneously. “Very few indoor facilities allow for that,” Sabau said. “If we went back to a college campus, we might have to split the weekend and have men and

“IT’S PROBABLY ONE OF THE BUSIEST, IF NOT THE BUSIEST, WEEKEND OF THE YEAR. AND IT’S NOT ONLY GOOD FOR US, IT’S GOOD FOR THE CITY OF CLEVELAND. AT THESE LARGE EVENTS, WE’VE HAD PEOPLE STAYING ALL THE WAY OUT TO CHAGRIN BOULEVARD.

The Big Ten indoor track and field championships draw more than 12,000 unique visitors to Spire Institute, generating an economic impact between $4 million and $5 million each year. | BIG TEN

time. A number of teams took advantage of that (at the meet), which makes things easier for them.”

Neutral site While competing on a college campus has its benefits, it also means one team has a home field advantage, allowing their athletes to sleep in their own beds and compete on a familiar track. Spire neutralizes that. “I think a neutral site means an equal playing field for all participants,” Sabau said. Of course, the Big Ten meet is just one of many big events on Spire’s cal-

Fan capacity Spire’s indoor facility has a spectator capacity of 5,000 fans, which is

women compete on alternate weekends. The coaches like being there at the same time. “Spire affords us the opportunity to be really timely with our events and stay on schedule, which can be hard to do with sports like swimming and track. You can get waylaid. But because it’s so big, it affords us the opportunity to have races going on while throws and high jumps and happening simultaneously.” Spire also has a 30,000-squarefoot banquet, hospitality and meeting space overlooking the track, as well as two separate mezzanine viewing areas. “We have games and snacks and things for them to do (in the banquet space), so they can go up and take a breath and get away from the craziness,” Orloff said. “We can also do team meals for 20-30 athletes at a

provides a big boost to its business, said Stephanie Siegel, the executive director of the Ashtabula County Visitors Bureau. The Big Ten meet is one of its 10 biggest events of the year, she said. “With the help of Spire, we’re really excited about our first quarter, which isn’t typical to say when you’re in the travel and tourism industry unless you live in Vail (Colorado),” Siegel said, chuckling. “They’re definitely helping us make mountains out of molehills.” Joe Scalzo: joe.scalzo@crain.com, (216) 771-5256, @JoeScalzo01

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“It’s probably one of the busiest, if not the busiest, weekend of the year,” Jeff Orloff, Spire’s chief operating officer, said. “And it’s not only good for us, it’s good for the city of Cleveland. At these large events, we’ve had people staying all the way out to Chagrin Boulevard. “We’re putting heads in beds.” The Big Ten used to rotate the location of its indoor meet — nine different campuses hosted the meet between 2004-2012 — but Spire has become its permanent location, hosting the meet every year but one: 2019, when it was in Ann Arbor, Michigan. Here are four reasons for that:

endar. The facility hosted Ohio’s state indoor track and field meet on March 4-5 and will hold the USA Artistic Swimming Junior and Senior Championships and National Team Trials on April 6-10. Then, in May, it will hold the Division III outdoor track and field championships. Those events — along with its regular programming — helped Spire rank No. 11 on Ohio’s list of top leisure locations in 2019 with more than 1.1 million visitors each year, according to Placer AI. While Ashtabula County is best known for its wine, covered bridges and its proximity to Lake Erie, Spire

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PERSONAL VIEW

Return to ‘normal’ public schools is not enough BY JAMES M. TRUTKO

The 2020-21 school year was dismal for public education in Cuyahoga County as schools were buffeted by the COVID pandemic and social and political currents. Most parents and the public hoped that schools would return to “normal” for the county’s 130,000 public school students this year, but even if COVID disruptions fade in spring, the public schools’ “normal” performance fails to prepare many students for the future and handicaps Cuyahoga County’s economic growth. The Ohio Department of Education’s proficiency tests Trutko is an compare what students have learned in Ohio’s 608 public economist and school districts. Although critics harp about their limita- market research tions, proficiency tests generally assess the acquisition of professional. The useful knowledge that is correlated with future educational lifelong performance and job success. Cuyahoga Every year, each district gives about 21 comparable state- County resident wide proficiency tests for various subjects covered in grades lives in Rocky three through 12. Over the past five years, students in the 31 River and can be Cuyahoga County school districts have taken over 2,700 pro- reached at ficiency tests, more than sufficient to draw some conclu- jmtrutko@ sions. The tests reveal disturbing findings about the recent gmail.com. performance of Cuyahoga County’s districts — one-third (10) of Cuyahoga County districts rank in the bottom 10% of all 608 Ohio districts. The five-year average proficiency score for all 31 local districts is 65%, about the statewide average, but district performance varies widely. In the best district, 93% of students pass proficiency; in the worst district, only 24% do so. Unfortunately, 10 Cuyahoga County public school districts with 60,600 students (47%) had average scores below the 50% proficiency threshold: South Euclid-Lyndhurst, Cleveland Heights-University Heights, Bedford, Richmond Heights, Warrensville Heights, Euclid, Maple Heights, Garfield Heights, Cleveland and East Cleveland. So even in a “normal” school year, a sizable number of the county’s public school students are trapped in districts where the overall proficiency results are terrible. Overall, an estimated 57,000 (44%) of the county’s 130,000 public school students do not achieve test proficiency. The proficiency tests reveal three trends across all 31 districts. First, the tests confirm that school shutdowns and online learning have negatively affected children: The average proficiency test scores for Cuyahoga County’s 31 public school districts dropped by over 10% from 69% in 2018-19 to 57% in 2020-21. It’s hard to see how a 10% deficit will be made up and continued closures are likely to widen the gap. Second, the proficiency test results in intermediate schools are only 60%, eight points lower than elementary schools and six points lower than high schools. The poorer intermediate school results clearly warrant more study. Third, scores for the critical foundation skills, math (59%) and English (65%), are much lower than those for social studies (78%) and science (68%). Many observers regard critical foundation skills to be more difficult to remediate. The results of 2,700 proficiency tests from local schools indicates significant changes must be made if Cuyahoga County residents and community organizations want more students to pass proficiency tests and be ready for adulthood. A “new normal” for public schools must start with increasing parental pressure on school boards and on state legislators to change educational policies and laws. The goal should be creating a simpler, controlled environment for skills acquisition that uses informal customs and traditions, discipline, technology and explicitly recognizes personal responsibility. By speaking out forcefully at school board meetings, especially when school boards are considering school levies, parents will alert a complacent public to school issues. Engaged parents can gradually force school boards to recognize that individual children and their parents are the primary clients of the educational system, and the school mission must be focused on student mastery of skills and core knowledge, not their social or political opinions or group identity. The other part of the educational solution involves state legislators changing state laws to give school boards and parents more power against the powerful educational interest groups. First, state law should be modified to restrict collective bargaining agreements to eliminate automatic cost drivers like step increases and seniority increases, to restrict excessive vacation leave provisions, and to create performance incentives and penalties. These restrictions need to be enacted at a state level because busy superintendents dealing daily with teachers and part-time school boards cannot bargain effectively against powerful, professional union negotiators. Second, state legislators should create “proficiency scholarships” to be used during the summer by parents whose children failed the state proficiency tests. A state grant of $5,000 would allow parents to obtain remedial education focused specifically on core foundational skills. The grant should be usable at any public or existing charter school that has set up a grade and subject-specific remedial classes of at least three hours per day for a month or more during the summer. “Proficiency scholarships” would give parents of students in failing districts and parents of disadvantaged children a real ability to remedy their child’s educational problems by accessing other schools and teachers. If assertive parents show up at school board meetings and contact state legislators, the region may be able to look forward to a “new normal” for public schools where failing schools perform better and more students master the core skills they will need to get better jobs and have a better life. But without more parent involvement and state action that leads to a major change in educational philosophy and substantial educational reform, Cuyahoga County residents cannot expect improved educational results that will lead to more economic growth, stronger property values and more economic opportunity for the disadvantaged.

Porter Wright is proud to celebrate partner Tracey Turnbull for her recognition as a 2022 Notable in Law. Through unwavering leadership, inspiring mentorship and tireless advocacy, Tracey continues to make an indelible mark in the greater Cleveland community.

Tracey Turnbull, Partner-in-Charge, Cleveland

Chicago Cincinnati Cleveland Columbus Dayton Naples Pittsburgh Washington, D.C.

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PERSONAL VIEW

It’s time to add hydrogen to Ohio’s energy mix

RICH WILLIAMS FOR CRAIN’S CLEVELAND BUSINESS

BY GRANT GOODRICH

EDITORIAL

Quick service W

ell, that was fast. One of the high-profile challenges the Bibb administration inherited in January was coming up with a plan to bolster the flailing West Side Market, one of Cleveland’s favorite spots for residents and visitors alike. We were encouraged at the end of December, when then-Mayorelect Justin Bibb named Jessica Trivisonno, formerly the economic development director for the Detroit Shoreway Community Development Organization, as senior strategist on the market’s future. And we’re pleasantly surprised that by the end of February — this is light-speed in the government world — the administration produced a thoughtful, realistic plan aimed at getting the market back in growth mode. Legislation introduced in Cleveland City Council last Monday, Feb. 28, has three key elements: capping rental rate increases; expanding lease options; and permitting alcohol sales. Those and other measures are an excellent start to bringing stability, and hope for a better future, to the market, where the vacancy rate stands at an unsustainable 32%. Specifically, the administration proposes keeping rental rates at 2020 levels for this year, and then holding annual increases at no more than 3% in future years. That would provide some much-needed predictability for vendors, and a pretty good deal in the current inflationary environment. The administration also seeks the flexibility of offering vendors leases of up to three years, with the option for a threeyear renewal. Leases at present can be no longer than a year at a time, which the administration correctly noted “prevents some businesses from securing financing and is a disincentive for those who may want to invest in their space.” On the other side of the lease-length equation, the plan would allow short-term leases to put the market in the business of hosting pop-up events and food trucks. The plan’s repeal of the city’s ordinance that prohibits alcohol sales at the market is straightforward — and past-due. One other positive of the plan is that it would authorize the city and Ohio City Inc. “to continue collecting donations” for the market and allow the funds to be spent on programs including marketing, “establishing new revenue-generating ac-

tivities at and near” the building, and supporting long-term planning. These are all elements the market needs to be more competitive in the modern retail landscape. Bibb in a statement said the legislation “opens the door to new opportunities for growth” at the market. We agree, and we hope council is able to act quickly to enable the changes at a key city asset that’s critical to maintaining development momentum on the near West Side.

Time for a change At 2 a.m. Sunday, March 13, standard time will give way to daylight saving time in Ohio and just about every state in the country. This is the bad one, where your already-sleep-deprived self loses an hour and you wake up in a near-zombie state. (OK, maybe that’s just us. But it’s not great.) With any luck, and some legislative action, perhaps this can be the last time we go through the drudgery of a time change. The Washington Post reported last week that 19 states to date have passed bills to switch to year-round daylight saving time, should Congress allow it, according to the National Conference of State Legislatures. Another 22, including Ohio, are considering it this year. Research “has linked the timeshift to an uptick in everything from heart attacks and miscarriages to fatal traffic accidents and workplace injuries,” the Post says. On a more basic level, the time change is disruptive to people’s schedules — and after the last couple of years, the prospect of at least one less disruption is awfully appealing. It’s not easy to get big changes through Congress, but this one has a shot. The Post noted that an October poll by the Associated Press-NORC Center for Public Affairs Research found 75% of respondents would prefer to end time changes. There’s division (of course!) on whether daylight saving time or standard time should be the standard, but we’d live with either, if we can transcend political differences to get rid of the practice of changing our clocks. In the meantime, try to get some rest this week. And good luck waking up next Sunday.

Executive Editor: Elizabeth McIntyre (emcintyre@crain.com) Managing Editor: Scott Suttell (ssuttell@crain.com) Contact Crain’s: 216-522-1383 Read Crain’s online: crainscleveland.com 8 | CRAIN’S CLEVELAND BUSINESS | MARCH 7, 2022

Across the globe, countries and regions are beginning to use hydrogen as a way to store zero-emissions energy and maintain vibrant industrial economies while also reducing greenhouse gas emissions. This transition is being accelerated by the decrease in cost for renewable energy, falling costs for making hydrogen, the desire to reduce carbon emissions, and the improved perfor- Goodrich is a mance of the latest clean energy tech- Cleveland nologies. resident. We have an exciting opportunity in Northern Ohio to be a part of this global hydrogen pivot. That’s why we’re trying to do our part to bring a low-carbon emissions “hydrogen hub” to our region. Case Western Reserve University and the University of Toledo, together with leading companies from around the state and other local, regional and national partners, are assembling a proposal to attract federal funding for a low-carbon emissions hydrogen hub to meet industrial and transportation demands. A Midwest Hydrogen Hub, centered in Northern Ohio, would be one of the hubs identified specifically in the federal bipartisan infrastructure bill that was approved in the fall 2021. Think of each of these hubs as an ecosystem of users and suppliers of hydrogen — principally manufacturers, transportation companies and their supply chains. The overarching goal: Spark regional investment and drive down the cost of clean hydrogen. So what can other stakeholders do to take part? For starters: ` Manufacturers, transportation companies and energy companies here in Northern Ohio should evaluate if hydrogen is part of their fuel or energy mix in the near future, and prepare for this transition. ` Industrial leaders should meet with their customers to find out if they are planning to transition to hydrogen, and evaluate these new needs. ` Policymakers in the state can help the process by incentivizing adoption of clean hydrogen as a fuel for heavy transportation and shipping, while de-risking large-scale commercial hydrogen projects through financial and tax policy.

What has been holding us back? One issue that has concerned Ohio’s investors in renewable energy is energy storage. When the sun isn’t shining or the wind is calm, typical forms of renewable energy struggle to deliver the electricity our economy requires. And while batteries are improving, they are heavy. They are better suited to storing energy for buildings, homes and cars, but aren’t a good match for manufacturing, heavy-duty equipment, long-distance transportation or maintaining charge under frigid conditions. Factories, trains, airplanes and ships have higher power requirements over longer durations, and need that power source to take up as little weight and space as possible. That’s where hydrogen comes in. Hydrogen, when run through a fuel cell, makes electricity to power an electric motor, with no pollution or emissions. When combusted, hydrogen can create power and heat with significantly reduced emissions when compared to burning fossil fuels.

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

See HYDROGEN, on Page 9

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PERSONAL VIEW

A rescue plan for creative communities BY ROBIN ROBINSON

What makes a neighborhood vibrant? A vibrant community is filled with jobs, creativity, art, music, theater, dance and voices that represent our diversity and experiences. In the coming months, Cleveland will have an opportunity to reinject vibrancy into communities harmed by the COVID-19 pandemic. As a working artist in Cleveland, I’m joining hundreds of local artists to ask the Cleveland City Council and Mayor Justin Bibb to invest a portion of federal American Rescue Plan Act (ARPA) funds into arts and culture. Cleveland’s rebound from COVID requires an investment not only in public safety, health and human services, but also in the creative sector. Artists, creative businesses and cultural nonprofits form the backbone of Cleveland’s economic vibrancy. Of the $511 million federal ARPA funds awarded to the City of Cleveland, the creative sector requests $10 million — just 2% (2 cents on the dollar). These rescue funds will restore creative jobs impacted by COVID’s financial damage exceeding $146 million. The sector suffered a 50% decrease in employment, with 5,000 lost jobs and $30 million lost in paychecks. The economic losses were made worse as our city lost more than a year of performances, concerts, exhibits, plays, festivals, in-person arts education activities and more. Those who work in these sectors faced unprecedented strains. After a challenging year, the arts and culture sector began to regain hope as some venues slowly reopened in 2021 with many precautions. However, the recent surge in new Omicron cases and the strain on our health systems caused the cancellation of events again, reliving the challenges of the early pandemic, and kicking the floor out of a fragile ecosystem already suffering from devastating losses. A relatively modest ARPA investment will produce big re-

sults, according to Assembly for the Arts, an advocacy group for the creative sector. ARPA support will stabilize a sector that generates $9.1 billion for the regional economy, supports 62,500 jobs and touches residents in all 17 of Cleveland’s wards. It will generate investments in hard-hit Black and brown neighborhoods, and reignite activity, tourism and programs in our amazing Robinson is a Cleveland-based arts districts. ARPA funds will put creative workers, nonprofits and cultural artist, art businesses back to work so they can educator, art help heal our depressed communities. therapist and The ARPA funding request is on par community with what similar communities are inactivist. vesting in their creative sectors. Cities like Austin, Texas; Milwaukee; Toledo; and Cincinnati have all invested ARPA funds in arts and culture. Cleveland needs to do the same. Our theaters, live music venues, galleries, science and nature centers, exhibits, public art spaces, after-school programs and studios have been hit again. Tourists are ready to visit, spending dollars not just in the creative sector, but at hotels, restaurants and entertainment venues. COVID has hit the creative sector hard. An ARPA investment of $10 million will help protect and bring jobs to every neighborhood. We are creative businesses. We are cultural nonprofits. We are individual artists and so much more. We remain anchors for neighborhoods all over the city. ARPA funds will protect one of our greatest assets that is central to Cleveland’s economy and identity. We ask the mayor and City Council to employ ARPA funding to rescue artists, creative workers, nonprofits and organizations who bring economic vibrancy to Cleveland’s neighborhoods and the region at large.

LETTER TO THE EDITOR

Too many loopholes in drug pricing program In Ohio, large hospital corporations are taking advantage of patients through the poorly run 340B Drug Pricing Program — a federal program that provides drug discounts to qualifying hospitals, the savings from which are supposed to be used by the hospitals to provide charity care. Hospital corporations are using loopholes within the program, pocketing the discount savings, and providing minimal charity care. The scale of the problem is massive — originally there were 90 participating 340B hospitals, now there are over 2,500. The 340B program incentivizes hospitals to prescribe more drugs because they get an approximately 50% discount and sell them for a full marked-up price. To pre-

HYDROGEN

From Page 8

New technologies, new hopes Companies, researchers and the U.S. Department of Energy (DOE) are tackling the obstacles to a transition to a hydrogen economy through aggressive research and development. Significantly, DOE has established the “Hydrogen Shot” program, setting a price target of $1, per 1 kilogram of hydrogen by 2031. Such a dramatic price decrease would accelerate the adoption of hydrogen for energy storage. Until now, hydrogen has primarily been made through a process known as steam methane reforming (SMR) derived from natural gas. Due to the cost and emissions generated from making hydrogen this way, it has primarily been used by industry. (A separate project led by Cleveland State University, Stark-Area Regional Transit Authority and others addresses this cost and emissions issue. It is targeting a natural gas-derived hydrogen hub, which would invest heavily in carbon capture, utilization and sequestration technologies, and also accelerate the region’s transition to a hydrogen economy.)

scribe more drugs, hospitals have done two things. First, they are creating huge networks of “contract pharmacies” to expand their prescription capacity. Second, they are purchasing independent oncology practices and making them 340B-eligible outpatient departments. When cancer care shifts from community oncology practices to hospital affiliated settings, 340B hospitals take advantage of expensive cancer drugs that can be bought at significant discounts and then sold through contract pharmacies at marked-up prices. Patients are suffering. Congress must act immediately to close these loopholes. Jeff Johnson Cleveland Recent advances in electrolyzers, a device that takes water and electricity and makes hydrogen, means that in the very near future, hydrogen will be made nearly anywhere with access to water and electricity. This stored energy could be used weeks after it’s been made, and can be moved around the region to where it’s needed.

Northern Ohio’s abundance — and opportunity While Northern Ohio doesn’t have abundant sources of renewable energy yet, it does have an abundance of water and emissions-free electricity in the form of our two nuclear power plants: Davis-Besse and Perry, operated by Energy Harbor. Energy Harbor has already announced plans to make moderate amounts of hydrogen using a low temperature electrolyzer at its Davis-Besse nuclear power plant, through a pilot project with the DOE. Producing hydrogen could improve the economics of our nuclear power stations, while also jump-starting our region’s transition to an emissions-free hydrogen economy. So, the urgent takeaway for Northern Ohio businesses and manufacturers is this: The hydrogen transition is already underway across the globe — and we’ve got to move quickly to have a share in the growth. MARCH 7, 2022 | CRAIN’S CLEVELAND BUSINESS | 9

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OPTIMISTIC OUTLOOK Signs of improved fiscal strength are setting a modestly upbeat tone in the hotel industry. PAGE 12

REAL ESTATE

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BUYING BLITZ

Cleveland-area homeowners grapple with flood of inquiries from investors

BY MICHELLE JARBOE

For the last year, Joe “JK” Kalinowski has been sparring with unseen antagonists. They text him with offers to buy a house in Cleveland Heights — a property he doesn’t even own. At first, the 48-year-old Lakewood resident answered with a simple request: “Stop.” As the onslaught of messages continued, though, he decided to have some fun.

The house, he now texts back, is a magnet for paranormal activity. He couldn’t possibly sell off a gateway to hell, where he’s “fighting the demonic betrayers of mankind who wish to unleash eternal darkness and damnation upon us all.” The would-be buyers don’t respond. The messages keep on coming. “It’s just so crazy to me how persistent they are,” said Kalinowski, who recently started receiving similar phone calls about his actual

Top: Joe Kalinowski stands outside his Lakewood home. He recently started receiving phone calls about the house from investors. He’s locked in a long-running text battle with purported investors over another house in Cleveland Heights that he doesn’t even own. Above: Rita Knight-Gray stands in the living room of her home in Cleveland’s Glenville neighborhood. She’s received inquiries about her house, and her rental property next door, from investors in Ohio, Arizona, California and other states. | GUS CHAN FOR CRAIN’S CLEVELAND BUSINESS

10 | CRAIN’S CLEVELAND BUSINESS | MARCH 7, 2022

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OK home, which he’s owned since 2016. Northeast Ohio’s housing market has become a mecca for investors, spurring a flood of solicitations to homeowners, landlords and tenants. House prices here are relatively low. It’s still possible, particularly in Cleveland and some inner-ring suburbs, to find properties for much less than $100,000. Meanwhile, a three-bedroom house rents for $750 to more than $3,000 a month, an appealing figure for institutional and individual investors in search of yield. “The price versus rent ratio is so strong here versus places like Florida and California,” said Erin Thomas, a Westlake-based real estate agent who focuses on investment sales. On Facebook, which teems with off-market real estate offerings, it’s not uncommon to see houses priced at $45,000, with a purported after-repair value of twice that figure. That math is what keeps Kalinowski’s phone buzzing, even as house prices rise.

Bombarded with offers “Investors are insatiable in their demand for more and more houses,” said Sally Martin, the city of Cleveland’s new director of building and housing, during a Feb. 10 hearing of the U.S. Senate Committee on Banking, Housing and Urban Affairs. “Residents are bombarded with postcards, text mes-

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“the bane of our existence.” Thomas, who joined Keller Williams in 2020, once worked in the wholesaling world. She still interacts with wholesalers, who rely on widely available public records and paid national databases to assemble target lists of homes by ZIP code or community. Some practitioners strive to contact hundreds of homeowners a day. Selling to a wholesaler or investor can be a great option for a property owner looking to unload a house quickly, Thomas said. But sellers should ask a lot of questions, carefully vet the purchase contract and ask for details about a buyer’s track record and proof of funds. They also ought to get an independent opinion of what their property might be worth. “If you’re getting calls, it’s because your home has value. … And someone wants to pay for that value,” she said. “But you need to protect yourself.”

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100 calls, three answers At 72, Rita Knight-Gray has no intention of leaving her longtime home in Glenville, on Cleveland’s East Side. Last year, investors accounted for 29.1% of home sales in that part of the city, according to data compiled by the Redfin real estate brokerage. Knight-Gray inherited her home in 1987 and bought the house next door, which she maintains as a rental, the following year. The Cuyahoga County Fiscal Office puts the combined market value of the

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sages and other marketing materials offering to buy their homes for cash.” Some of those messages come from real estate agents, fix-and-flip investors or iBuyers, a growing crop of businesses that use algorithms to buy houses and resell them fast. But many all-cash overtures are the work of wholesalers, who put properties under contract and then market those contracts for sale, with the goal of earning a fee. In Ohio, wholesaling is legal — though real estate agents and a top state regulator say that the industry is rife with questionable practices. It’s fine for a wholesaler to put a house under contract and to advertise that contract for sale. But if the contract-holder doesn't have an Ohio real estate license, it’s not OK for that advertisement to include pictures of the house, the address and other details that make it look like a property listing. “We are constantly receiving communications with clips or screenshots or whatever, or links to wholesaling advertisements,” said Anne Petit, superintendent of the division of real estate and professional licensing at the Ohio Department of Commerce. “Quite frankly,” she added, “we get so many, we can’t even take time to track them.” She expressed particular disdain for the freewheeling real estate marketplaces on Facebook and Instagram, which Petit called

properties at just over $79,000. One day in late February, she received a text message from someone with a Florida area code and a postcard from a Columbus-based company that promises to close deals in as little as a week. “Every now and then, I answer a call, and I ask them what makes them think I wanted to sell,” she said. “Sometimes, I just get really pissed, and I say, ‘If you’re willing to give me $3.5 million, we can talk.’” It probably takes 100 calls to get even three people to answer the phone, said Andrew Dunn, a co-founder of Capital Growth Group, a Cleveland-based company that offers cash for houses. Since launching their business as a side-hustle two years ago, Dunn and business partner Tyler Powell have acquired more than 60 houses by partnering with behind-thescenes investors. The 28-year-olds are focused on fix-and-flips, properties that they renovate and hold for fewer than 90 days. Those homes often are priced at $30,000 to $100,000 and require at least $10,000 worth of work. Some become rentals. Others sell to owner-occupants. Powell and Dunn said that half of their sellers are individuals. The rest are landlords. Many of the owners lack the cash to make repairs, are facing foreclosure or have fallen behind on their property-tax bills. See INVESTORS on Page 13

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Better times are starting to check in at area hotels BY STAN BULLARD

Nic DiLillo, general manager of the Crowne Plaza Cleveland at Playhouse Square, is overjoyed to see the buzz back around the hotel at 1260 Euclid Ave. after shows returned to operation at Playhouse Square following pandemic closures. DiLillo also is glad to see leisure travel returning to the Northeast Ohio lodging market as the pandemic has worn on, but his eyes are fixed on the still-missing part of the equation: the rebound of the business travel market. "We're seeing a new norm in hybrid work from home and travel," DiLillo said. "We're trying to make adjustments to what the future will be. We are still seeing the impact of the hybrid workforce, but I don't want to put any dates in writing for when business travel will return." DiLillo Normalcy for the region's hotel market is unlikely until business travel retains its former volume after COVID-19 slowed down corporate travel for business and meetings. The industry benefited from the rise of leisure travel in 2021 during the spring and summer, which helped hotels make it through the pandemic. Some hotel properties are once more selling — providing a measure of confidence in the industry — and realty developers are returning to new hotel projects as hotel fundamentals climbed out of the cellar of the first year of the pandemic in 2020. In Northeast Ohio, business travel

accounts for about a third of the hotel business. So a full return to profitability won't emerge until business travel rebounds — but that's a big question mark. Radhika Reddy, who added the title of hotel general manager of the Ariel Broadway Hotel she developed in Lorain during COVID-19 to her other tasks as the founding partner of Ariel Ventures LLC, a Cleveland economic development and financial consultant, puts it simply. "Our hotel benefits from a location near the lake in the summer for leisure travel," Reddy said. "We may get booked full for some weekends, but even in the summer we need business travel for the weekdays, especially Monday, Tuesday and Wednesday." Even so, Reddy said 2021 was better for the hotel in a historic Lorain building than 2020 and hopes that 2022 is still better. Individual operators are not alone in their musings on when corporate travel gets back to normal. David Sangree, president of the Hotel & Leisure Advisors consultancy in Lakewood, doubts business travel will rebound this year. "People have gotten used to doing business using Zoom calls and not having to travel," Sangree said. "Many Cleveland-area urban hotels will find occupancies will not be as strong as in 2019 until business travel comes back. Companies often do a lot of training for employees. It's a factor. They've done that through Zoom the last few years. Training works better in person, but it remains to be seen

when the need for training begins to help hotels." Laurel Keller, senior vice president for Hospitality, Gaming & Leisure in Newmark's Cleveland office, said there is concern that business travel may not return to the level of market share pre-pandemic. "The recent leisure demand increase has positively impacted several hotels in Northeast Ohio, but group and commercial demand also needs to return to complete the recovery," Keller said, and that question mark tempers the optimism starting to surface in the region's hotel business. Given that the nation and its hotels moved into unknown territory as the pandemic struck in 2020, the two years of experience since have brought some insight into what the future may look like. On the plus side, financial woes for hotels did not prove as desperate as they immediately appeared in 2020. "However," she added, "lenders’ flexibility with loan payment deferrals/ modifications/forbearance helped prevent a significant wave of foreclosures." The best insight on the behindthe-scenes impact on the lodging industry, albeit at a national level, is from Trepp, a New York-based loan analytics and related data services firm. CMBS, or commercial mortgage-backed securities, loans hit a 30-day delinquency rate of 23.5% in June 2020. However, as lenders worked with owners for loan deferrals and other measures to keep the industry stable, the markets also started recovering. By May 2021, the delinquency rate

fell to 14%, and by December 2021, to 8.8%. Trepp concluded that by the end of last year, $7 billion in hotel loans were late, compared with $33 billion in June 2020. Improved fundamentals, although they varied by hotel, location, segment and the owner's fiscal strength,

indicated by 2021 revenues, while sellers generally still want to receive prices based on the results they had in 2019. Keller said she views recent sales as simply an indication that the market may be thawing and lenders are starting to look at deals again where the values are “MANY HOTELS STILL ARE UNDERSTAFFED, supported by revenues or the THOUGH THE SITUATION IS IMPROVING.” strength of the — Laurel Keller, senior vice president for Hospitality, borrower. Gaming & Leisure in Newmark’s Cleveland office New challenges have also accounted for the improve- also emerged as the lodging busiments. STR, a global hospitality data ness, like most types of service busiand analytics company that's part of nesses and some others, are having CoStar Group, reported that in 2021, problems filling open positions. hotel occupancy in Cleveland hit "You're getting interviewed as 51%, compared with 37% in 2020. In much as you are interviewing," DiLilAkron, occupancy was 54% in 2021, lo said of interviewing prospects. compared with 41% in 2020. Keller said, "Many hotels still are Both areas are still below 2019 oc- understaffed, though the situation is cupancy levels, although STR data improving. Be patient with desk shows hotels in both areas have been agents, valets, servers, cooks and able to hike average daily room rates housekeepers, as well as their superabove 2020 levels, though they still visors and managers." trail 2019 pre-pandemic rates. The other element that rings true Sangree argues that hotel opera- in the hotel business is that managers tors tried to maintain room rates are focusing on the basics of their during the pandemic, because cut- business. ting room rates during the Great ReFor example, DiLillo said delays in cession did not bring justifiable re- weddings during the pandemic are sults. reaping benefits for hotels today, as The other factor that bodes for a they may sell blocks of rooms associbrighter outlook is that hotels are ated with a wedding at their hotel or transacting again, although at bot- elsewhere in town. tom-fishing pricing. "We all are having more weddings Sangree said many hotel operators than we ever have had," he said, nothave felt such sales give some sense ing wistfully,"We only have 52 weekof hotel values that were missing in ends in the year." the grip of the pandemic. However, the marketplace is still constipated Stan Bullard: sbullard@crain.com, because buyers want to buy at prices (216) 771-5228, @CrainRltywriter

‘CarMax for houses’ Digital transactions for big-ticket items are not unusual, as companies like CarMax and Carvana have become tremendously lucrative in navigating consumers searching for new and used cars online. A Cleveland-based company has applied that concept to the housing market, simplifying a lengthy selling process via an easy-to-use electronic platform. FlashHouse, unveiled in 2018 by Ryan Young and Stephen London, allows sellers to get a quote on their home within 24 hours. This process is not magic, but instead is based on the iBuyer model that generates an automated valua- Young tion by drawing on property data and mathematical algorithms. Speed is ideal for FlashHouse customers, often convenience-seekers who already bought or are currently building another home. Folks inheriting properties comprise a portion of Young’s portfolio, as do individuals undergoing divorce or other life events requiring discretion. “It’s been a surprise, because going in we thought there would be a lot

more distressed sellers coming to us,” said Young. “People just really like the convenience. When you’re thinking about selling a house, you’ve got to get it market-ready, plus there’s showings and open houses. People value not having to go through that process. It’s amazing how that consumer experience opens up your eyes to something completely different.” Young sees younger sellers as well as individuals eager to move after decades in the same home. All told, a diverse client base that has helped grow FlashHouse by 250% year-over-year. Since launch, the startup has acquired 200 homes in Cleveland, Akron and Canton. Headquartered at 29225 Chagrin Blvd. in Pepper Pike, FlashHouse has 35 employees in its busiest operational areas as well as its new Columbus office. To utilize the FlashHouse platform, customers must first fill out a short online form covering their home’s location, age, size and condition, alongside details like any recent kitchen remodel. Competitive cash offers on qualifying properties are made within 24 hours, followed by a

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FlashHouse, which reports 250% growth year-over-year, recently purchased this house in Strongsville. | CONTRIBUTED

virtual home assessment to verify seller details. Ultimately, homeowners sell and move on their own timeline without needing to list on the market or show the property. Taylor Shamis sold his three-bedroom Tremont house in January via the FlashHouse platform, needing a speedy transaction to acquire his current Ohio City digs. After receiving a “phenomenal” cash offer — albeit a bit below what he would have

gotten on the market — Shamis decided to make the move. “I asked how fast we could get this done so I could secure that new house,” Shamis said. “I knew the price would be below market, but it wasn’t a crazy amount below. At the end of the day, I never would have secured my new home without FlashHouse. It would have taken months to sell our home and get through everything.”

Selling in a ‘Flash’ Young, also the CEO of the Young Team of Keller Williams real estate agents, said an average FlashHouse seller typically gets 2% to 3% less with his platform, depending on market and the home’s condition. Consumers will gladly take a small loss that’s lacking the uncertainty of the traditional selling rigmarole. “If you put your house on the mar-

12 | CRAIN’S CLEVELAND BUSINESS | MARCH 7, 2022

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INVESTORS

From Page 11

In late 2020, Ann Richardson and her siblings sold a three-bedroom colonial in Maple Heights in a deal with Capital Growth Group. Richardson’s 91-year-old mother had died earlier that year, leaving behind a longtime home in need of extensive upgrades. “Honestly, we just didn’t have the energy to do what we needed to do with the house to get it to a place where it could be put up for sale,” Richardson said. The family talked to a representative from We Buy Ugly Houses, a nationwide network of franchises that offer all-cash deals and quick closing timelines. But Richardson and her sisters felt more comfortable with Dunn’s approach. They sold the house for $23,000. One month later, it changed hands again, for $59,000, according to public records. Since then, the property has flitted on and off the market, where it has been advertised as a rental generating income of $1,000 a month. In Maple Heights, the share of investor purchases hit 36.2% last year, Redfin found.

'The ground level of real estate' Ruth Hillman shrugged off a slew of phone calls and postcards before responding to a message from Capital Growth Group early this year. The text was the first one she’d seen that included a company name — one she could Google to research online. In early March, Hillman was wrapping up a transaction with Capital Growth Group to sell her vacant house on Cleveland’s West Side, in the Clark-Fulton neighborhood. The ket, it sits there for 30 days and takes another 60 to close, versus selling to us and doing a 30-day close,” Young said. “We’ve closed some homes in seven days. Regardless, you’re going to be in more control of the process.” A Pepper Pike native, Young worked as a chef for various big-city restaurants before returning to Cleveland in 2009 to join his parents in real estate. Helping build out the Young Team provided valuable insight into the industry’s irrevocable transition into the high-tech sector.

Joe Kalinowski stands outside the front door of his Lakewood home. | GUS CHAN FOR CRAIN’S CLEVELAND BUSINESS

63-year-old secretary moved into an apartment two years ago, after it became too difficult to maintain her century-old home, to mow the grass and shovel the snow. Since then, the house has been vandalized and stripped, Hillman said. She suggested, and agreed to, a sale price of $400. The investor buyer also will take care of more than $1,700 in taxes, including delinquencies that piled up during the pandemic, she said. “It’s just a complete teardown,” said Hillman, who described the property as a burden she is happy to shed after 25 years. “It was not in the best of shape er service that industry pros can offer to clients, he noted. “We don’t want Realtors to feel that we’re taking away from them,” Young said. “Their clients can list traditionally or buy directly from us.” Perhaps the company’s most daunting challenge is convincing potential customers that its model is legitimate. Young recalled a conversation with a woman who, although intrigued by the concept, insisted that it was too good to be

“WHEN YOU’RE THINKING ABOUT SELLING A HOUSE, YOU’VE GOT TO GET IT MARKET-READY, PLUS THERE’S SHOWINGS AND OPEN HOUSES. PEOPLE VALUE NOT HAVING TO GO THROUGH THAT PROCESS. IT’S AMAZING HOW THAT CONSUMER EXPERIENCE OPENS UP YOUR EYES TO SOMETHING COMPLETELY DIFFERENT.”

when I bought it. Sometimes, you put money in, and it’s still not working.” Jamison Williams, an Akron-based flipper and wholesaler, frequently encounters vacant and dilapidated homes like Hillman’s. “I know we’ve all been on a nice street, and we see that one ugly house,” he said. “It lowers the value of property. If I saw that house, I would probably reach out to the owner and buy that property.” Williams dove into the real estate business during the pandemic, after graduating from college and watching the world grind to a halt. At 25, he’s now a franchisee for KeyGlee, a wholesaling operation based in Arizona.

“It’s like the bottom. It’s like the ground level of real estate,” he said of the business of cold-calling sellers and churning through contracts. “But it’s a level that’s needed.” Still, Williams shies away from text messages. He finds most of his deals through referrals, rather than sending out mail, mining real estate software or sifting through death and divorce records — a common source of leads for some companies. Petit, the state real estate superintendent, noted that homeowners can take steps to block robocalls and to report questionable phone calls or text messages to the Federal Com-

munications Commission. But in a hot real estate market, where hedge funds and mom-andpop investors alike have Greater Cleveland in their crosshairs, the inquiries aren’t likely to stop anytime soon. That means Kalinowski will get to keep weaving his elaborate narrative, about the unremarkable suburban home he’s taken to calling “the Elbon Road Hell Hole.” As he wrote in response to yet another unwanted text message last week, “the battle wages on.” Michelle Jarboe: michelle.jarboe@ crain.com, (216) 771-5437, @mjarboe

Welcome Taft welcomes John R. Mitchell to our Compliance, Investigations, and White Collar Defense team.

— Ryan Young, co-founder and chief strategy officer at FlashHouse

Young said, “I was intrigued in the technology and the algorithms being put together. I thought if this was being done in other markets, why don’t we do this in the Midwest?” A marketplace mostly seeing focus in coastal “smile states” has quickly found digital footing in Young’s home region. FlashHouse also acquires homes most iBuyers will not — a varied portfolio that reflects Northeast Ohio’s architectural diversity, said Young. Additionally, FlashHouse is proagent and Realtor, providing anoth-

true. Education and guidance are vital to promotion, insofar as FlashHouse is purchasing $500,000 homes in popular markets such as Moreland Hills and Hudson. The startup does not deal in dilapidated properties, said Young. “It all comes down to options, as far as customer reach,” he said. “After selling your house in a new way, you’re going to tell your friends and family about it.”

John R. Mitchell Partner

Taftlaw.com

Contact Douglas J. Guth: clbfreelancer@crain.com MARCH 7, 2022 | CRAIN’S CLEVELAND BUSINESS | 13

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CRAIN'S LIST | COMMERCIAL REAL ESTATE BROKERAGES Ranked by number of local brokers

RANK

COMPANY

LICENSED LOCAL BROKERS (INCLUDING CONTRACTORS) 1-1-2022

LOCAL FTE STAFF 1-1-2022

COMMERCIAL TRANSACTIONS IN NORTHEAST OHIO, 2021 # LEASES SQ. FT.

# SALES SQ. FT.

PROPERTY TYPE FOCUS AREAS AND SPECIALTIES

OFFER PROPERTY MANAGEMENT SERVICES?

TOP LOCAL EXECUTIVE(S)

R.M. "Mac" Biggar, president

HANNA COMMERCIAL LLC 1350 Euclid Ave., Suite 700, Cleveland 44115 216-861-7200/hannacre.com

— —

Brokerage, corporate services, property management, accelerated auctions

CBRE 950 Main Ave., Suite 200, Cleveland 44113 216-687-1800/cbre.us

345

— —

Office, industrial, retail, medical, land, flex Y space, multifamily, specialty, hospitality, data center

Christopher Zubel, director, executive managing Keith Brandt, managing director

CUSHMAN & WAKEFIELD | CRESCO 3 Summit Park Drive, Independence 44131 216-520-1200/crescorealestate.com

— —

Industrial, office, retail; serving owners and investors

Nathan Kelly, president, managing director

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES 5005 Rockside Road, Suite 800, Independence 44131 216-264-2000/marcusmillichap.com

— —

121 —

Multifamily, retail, office, industrial, health care, hospitality, manufactured housing

Michael Glass, division manager Grant L. Fitzgerald, regional manager

COLLIERS INTERNATIONAL 200 Public Square, Suite 1200, Cleveland 44114 216-239-5060/colliers.com/cleveland

138 1,380,352

87 Retail, industrial, self-storage, multifamily, 15,926,270 office

Brian A. Hurtuk, managing director

NAI PLEASANT VALLEY 1093 Medina Road, Suite 100, Medina 44245 216-831-3310/naipvc.com

— —

Office, industrial, retail, health care, investment, self storage

Alec J. Pacella, president

PASSOV GROUP 3401 Richmond Road, Suite 200, Beachwood 44122 216-831-8100/passovgroup.com

— —

Tenant/landlord representation, investment Y sales, land sales/assemblages, development, disposition, marketing

Steven Passov, owner Austin Loconti, managing partner

GOODMAN REAL ESTATE SERVICES GROUP LLC 25333 Cedar Road, Suite 305, Lyndhurst 44124 216-381-8200/goodmanrealestate.com

79 883,109

27 2,695,816

Retail, restaurant, office, investment sales in all property types

Richard H. Edelman, principal, senior vice president Randall J. Goodman, principal, president

PLATZ REALTY GROUP 3768 Boardman Canfield Road, Canfield 44406 330-757-4889/platzrealtygroup.com

77 292,000

89 1,487,000

Office, retail, industrial, apartments, investment properties

Don Thomas, managing partner

ALLEGRO REALTY ADVISORS LTD. 1938 Euclid Ave., Suite 200, Cleveland 44115 216-965-0630/allegrorealty.com

— —

Office, industrial, retail

Michael L. Cantor, managing director, principal

JLL 127 Public Square, Suite 1430, Cleveland 44114 216-861-7171/jll.com/cleveland

150

— —

Office, industrial, retail, health care, hospitality

Robert J. Roe, managing director

MATTHEWS REAL ESTATE INVESTMENT SERVICES 950 Main Ave., Suite 510, Cleveland 44113 216-220-8860/matthews.com

32 100,000

Matthew Wallace, market leader

SVN | SUMMIT COMMERCIAL REAL ESTATE 3009 Smith Road, Suite 25, Akron 44333 234-231-0200/svnsummitcommercial.com

— —

Corporate, hospitality, industrial, land development, medical office, multifamily, office, restaurant, retail, self-storage

Jerry Fiume, managing director

GERSPACHER REAL ESTATE GROUP INC. 5164 Normandy Park Drive, Suite 285, Medina 44256 330-722-5002/gerspachergroup.com

78 —

41 —

Office, retail, industrial, multifamily, special purpose, investment, land

Troy L. Gerspacher, president, broker

DALAD REALTY CO. 6055 Rockside Wood Blvd., Suite 100, Independence 44131 216-447-0070/daladgroup.com

— —

Office, industrial, flex, land, retail, residential

Neil Viny, president

FASS MANAGEMENT REAL ESTATE SERVICES 3705 Lee Road, Suite 100, Shaker Heights 44120 866-861-4761/fass-res.com

— —

Office, retail, mixed, multifamily

Akil S. Hameed, CEO, owner

LEE & ASSOCIATES CLEVELAND 6100 Oak Tree Blvd., Suite 120, Independence 44131 216-282-0100/leecleveland.com

— —

Office, medical, flex, industrial

Joseph Greenberg, partner

KOWIT & CO. REAL ESTATE GROUP 6009-B Landerhaven Drive, Mayfield Heights 44124 216-514-1400/kowitrealestate.com

87 522,000

4 95,000

Retail and office leasing, land sales, property Y management

Brad Kowit, partner

ANCHOR CLEVELAND LLC 24500 Chagrin Blvd., Suite 100, Beachwood 44122 216-342-2523/anchorcle.com

128 999,685

5 98,557

Retail leasing, investments, health carerelated retail, restaurants, land

Tori R. Nook, principal

PICKARD COMMERCIAL GROUP 2950 W. Market St., Suite G, Akron 44333 330-794-7986/pickardcommercial.com

15 91,500

16 175,000

Office, industrial, investments, development

Jim Pickard, president

CRESCENDO COMMERCIAL REALTY LLC 2 Summit Park Drive, Suite 540 , Independence 44131 440-484-2200/cc-realty.com

90 150,000

3 33,300

Health care, office, retail

Joe Greulich, principal

RJ WOHL CO. 1991 Crocker Road, Suite 600, Westlake 44145 440-835-0300/rjwohl.com

— —

Office, retail, warehouse, investment sales, land acquisition

Jack M. Sanfilippo, executive vice president

WEBER WOOD MEDINGER (WWM REAL ESTATE) 25800 Science Park Drive, Suite 150, Beachwood 44122 216-464-7100/wwmrealestate.com

— —

Corporate real estate services, industrial, office, health care, sale leaseback, retail, investment sales

Blair Wood Kevin G. Joseph, partners

COLDWELL BANKER COMMERCIAL EMMCO REALTY GROUP 3681 S. Green Road, Suite 201, Beachwood 44122 216-292-3700/emmcorealtygroup.com

— —

Office, retail, property management, investment sales, leasing

Jeffrey E. Soclof, president

NEWMARK 1300 E. 9th St., Suite 105, Cleveland 44114 216-861-3040/nmrk.com/offices/cleveland

96 2,639,976

James Clark, executive managing director

Shopping centers, industrial, health care, 68 1 3,000,000 1 multifamily, leasing, STNL, office, self storage

24 Office, industrial, investment properties, 10,040,210 land, retail, multifamily, medical, parking garages and lots, specialty

Research by Chuck Soder (csoder@crain.com) | Information is supplied by the companies. Firms with the same number of brokers are then ranked by local employment. Some brokers may also do residential deals. NOTES: 1. Statewide. 2.

Excludes 23 brokers who focus on residential property.

Get all 39 brokerages and hundreds of executives in Excel format. Become a Data Member: CrainsCleveland.com/data 14 | CRAIN’S CLEVELAND BUSINESS | MARCH 7, 2022

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DATA SCOOP

Demand for local office space might actually rise in 2022 Back to the office?

BY CHUCK SODER

How do you expect demand for office space to change in 2022?

Demand for local office space just might actually increase in 2022, judging by survey responses from companies on the Crain’s Commercial Real Estate Brokerages list. Granted, they don’t all agree, but on average their outlook for the local office market was somewhat positive — with a few caveats. This year, we asked the 39 brokerages on the full digital list this question:

Increase somewhat: 7 Increase slightly: 4 Remain about the same: 8 Decrease slightly: 5 Decrease somewhat: 1 Decrease significantly: 1 SOURCE: CRAIN’S SURVEY OF COMPANIES ON COMMERCIAL REAL ESTATE BROKERAGES LIST CRAIN’S CLEVELAND BUSINESS GRAPHIC

BLOOMBERG

How do you expect demand for Northeast Ohio office space to change in 2022? Of the 29 brokerages that answered the question, 14, nearly half, said they expect demand to increase to some degree. By comparison, just seven, or 24%, project a decrease. Eight said demand would “Remain about the same” (making it the most popular single response out of all seven options on the scale). Nathan Kelly clicked the “increase somewhat” box. The number of office lease deals should “go up dramatically” in 2022, said Kelly, president and managing director at Cushman & Wakefield | CRESCO. The firm is No. 3 on the list, which is ranked by licensed local brokers, including contractors. Companies are finally ready to sign longer-term leases after two

Increase significantly: 3

years of asking landlords for short extensions, Kelly said. Though some companies need less space due to the rise of remote work, COVID-19 also put the kibosh on the trend toward denser offices. Thus, he still projects a “comparatively modest”

rise in local square footage leased in 2022. Granted, many of those deals will be subleases, which won’t take space off the market. “You will not see a huge bump in occupancy,” Kelly said.

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Rents likely won’t rise either, said Matthew Wallace, market leader for Matthews Real Estate Investment Services of Cleveland, No. 12 on the list. He expects demand to increase, but mainly for Class A and B+ office space. Below those levels, many offices will be converted to apartments, removing supply from the market, Wallace said “It’s really kind of a tale of two markets,” he said, cautioning that one or two large deals can easily

sway annual stats. There also could end up being a split between downtown and suburban offices, said Mac Biggar, president of Hanna Commercial LLC in Cleveland, No. 1 on the list. “More people are willing to do office work in the suburbs where they’re not paying for parking,” he said. Plus, restaurants and some downtown attractions are “not doing as well,” which also hurts downtown’s appeal, though Biggar hopes that will change. “The more people we have (downtown), the better it does,” Biggar said. On the survey he said demand for local office space would “decrease slightly.” Demand for industrial space and other commercial facilities has been stronger, which could explain the response to this question: How does your firm expect its commercial leasing/sales volume to change in 2022 by square footage? This one was a landslide. All 28 companies answering the question said they expect volume to rise. The most popular answer was “increase somewhat,” with 18 responses. Four picked “increase significantly,” and six went with “increase slightly.” Chuck Soder: csoder@crain.com, (216) 771-5374, @ChuckSoder

Promote your MBA or continuing education program to future students and employers Get the word out about your…  MBA  Certifications  Advanced degrees  Training  Workforce development programs

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3/4/2022 2:20:00 PM

INVESTORS

people that just suck every last breath out of a property. And then you have others who take care of it.” Many of the recommendations in the Vacant and Abandoned Property Action Council’s paper take aim at bad actors. “We don’t want extractors. We do want investors,” said Jayme Lucas-Bauer, neighborhood development project manager at the nonprofit Old Brooklyn Community Development Corp., which serves a stretch of Cleveland’s West Side. Lucas-Bauer, Germaniuk and Kobie are part of the core group behind the report. The authors also include housing-policy researcher Frank Ford and Sally Martin, the longtime South Euclid housing director who recently became Cleveland’s direc-

Investor share of home purchases, 2021

From Page 1

recognition that with the right to own and operate rental property, there comes a responsibility to maintain,” said Zach Germaniuk, an attorney who leads neighborhood-stabilization efforts for Slavic Village Development, a nonprofit organization on Cleveland’s southeast side. The white paper, which includes a profusion of policy recommendations, sprang from research by Timothy Kobie, a business process analyst in Cleveland’s building department. During the early days of the pandemic, Kobie found himself at home, with time to spare as an oldschool Cleveland City Hall tried to adapt to the new reality of remote work. To keep busy, he started mining a powerful database housed at Case Western Reserve University. That exercise became an analysis of 17 years’ worth of residential property sales. In 2004, Kobie determined, investors were behind 7.17% of purchases in Cuyahoga County. By 2020, their market share had grown to 21.1% — even as overall sales of one- to three-family homes soared. On Cleveland’s East Side, where home prices in some neighborhoods still have not returned to prebust levels, investors edged out individual homebuyers in 2020. Landlords, flippers and other business buyers snapped up 45.76% of all homes sold, while individuals accounted for 44.79% of purchases. The remaining transfers involved government entities, banks, land banks and trusts. “We need investor activity,” said Kobie, noting that there still are roughly 4,000 vacant properties, most of them residential, in the city. “It’s something that we need especially given the foreclosure crisis and what that did to Cleveland’s housing stock. ... We really don’t want to demolish all those structures.” His findings are similar to data compiled by Redfin, a tech-driven national real estate brokerage that has been monitoring investors for years. In 2021, Redfin found, investors were the dominant buyers in five Cleveland ZIP codes — blanketing the Broadway-Slavic Village area, most of Glenville, Kinsman and much of Collinwood — and in the city of East Cleveland. Though investors are gravitating to Cleveland and its modestly priced

Last year, investors accounted for more than 50% of home sales in a handful of neighborhoods on Cleveland’s East Side, as well as in the city of East Cleveland, based on data from the Redfin real estate brokerage. The company tracks transactions at the ZIP code level and identifies investors using keywords including LLC, Inc., Trust, Corp and Homes.

71%

“YOU JUST HAVE DIFFERENT TYPES OF PEOPLE. YOU’VE GOT PEOPLE THAT JUST SUCK EVERY LAST BREATH OUT OF A PROPERTY. AND THEN YOU HAVE OTHERS WHO TAKE CARE OF IT.” — David Sharkey, president of Progressive Urban Real Estate

SOURCE: REDFIN

“In the last 22 years, I have never had as many out-of-state investors contact me about purchasing homes in the Akron and Cleveland area,” said Eberhardt, the broker and owner of Eberhardt Realty & Management in Akron. The investors she sees aren’t pouncing on homes that oth“IN THE LAST 22 YEARS, I HAVE NEVER erwise might be HAD AS MANY OUT-OF-STATE INVESTORS attractive to CONTACT ME ABOUT PURCHASING HOMES o w n e r - o c c u pants. Flippers IN THE AKRON AND CLEVELAND AREA.” are focused on dilapidated — Candice Eberhardt, president of the Akron Cleveland Association of Realtors properties and low-priced in Cuyahoga County’s outer suburbs homes that haven’t been updated in in 2004. By 2020, they were respon- decades. Local real estate agents sible for 7.11% of purchases in a also are watching longtime landlords cash out by selling their existmuch busier market. Candice Eberhardt, president of ing rentals. “It makes it difficult for renters, the Akron Cleveland Association of Realtors, has been besieged by calls and it prices them out of the marfrom investors since the start of the ket,” said Eberhardt, who also is pandemic. She recently spoke to a hearing from tenants who, as their California buyer who hopes to ac- rents climb, are looking to buy. First-time buyers, in particular, quire four or five Northeast Ohio rental properties this year, at prices are struggling to find affordable properties. The supply of homes listof $80,000 to $100,000. inner-ring suburbs, including Maple Heights, Euclid and Garfield Heights, they’re buying a larger share of homes across the region — illustrating the growth of single-family housing as a commodity. Kobie’s research shows that investors bought 3.45% of all homes sold

ed for sale is at a record low. Across the nation, researchers and regulators are talking about whether everyday consumers are losing out to investors, who are offering cash with no contingencies. In Cleveland, David Sharkey doesn’t see single-family buyers and investors going head-to-head. For two-family homes, though, the competition is fierce, said Sharkey, president of Progressive Urban Real Estate. “Many of these investors seem desperate to buy,” he said. “And I don’t really understand that.” Sharkey has seen investors who purchase in bulk, then backpedal after realizing they’ve taken on too much. He’s encountered “slum landlords” who live just down the street from their poorly maintained properties. But he’s also working with West Coast buyers who are approaching Northeast Ohio real estate as a long-term investment, buying rental properties to fix up and hold as part of their retirement strategy. “You just have different types of people,” Sharkey said. “You’ve got

Investor activity grows in Cuyahoga County

Investors scoop up lower-priced properties

Business buyers as a share of total home purchases - one- to three-family properties

Median purchase price for one- to three-family homes in Cuyahoga County

West Side neighborhoods

Outer suburbs

East Side neighborhoods $29,525 $80,000

20%

10%

2004

2006

2008

2010

2012

2014

2016

2018

2020

2020 2004

30%

$30,000 $40,000 East inner suburbs $65,000 $113,000 $55,000 $107,000 Cuyahoga County $42,000 $121,053 $48,300 $135,000

SOURCE: “THE IMPACT OF REAL ESTATE INVESTOR ACTIVITY ON THE CUYAHOGA COUNTY, OHIO, HOUSING MARKET, 2004-2020”; TIMOTHY KOBIE; NEOCANDO

2020 2004

40%

Individual 2020 2004

Investor

West inner suburbs

2020 2004

Cuyahoga County

East inner suburbs

2020 2004

East Side neighborhoods

tor of building and housing. Frustrated by layers of limited liability companies and the challenges of tracking down elusive and farflung owners, their group is asking for more robust enforcement of building and housing codes. They want local governments to require out-of-town landlords to designate a local agent, for example. And they hope cities will take action against those agents, and property managers, when necessary. Existing municipal laws and systems simply cannot keep up with the market, Germaniuk said. “I can sit on an island with an Internet connection and a couple hundred dollars in my pocket, and I can form a web of LLC entities that can wreak havoc on a community 8,000 miles away from me,” he said. “And that particular scenario was not contemplated at the time that many of these regulations went into effect.” While pushing for more tools to identify irresponsible property owners and hold them accountable, the report’s authors also are advocating for better tenant protections. That includes a right to legal counsel in evic-

West Side neighborhoods $40,000 $88,000 $50,000 $95,000 West inner suburbs $109,250 $133,500 $122,500 $155,000 Outer suburbs $147,500 $177,000 $120,302 $185,000

NOTE: PRICE ANALYSIS EXCLUDES $0 TRANSACTIONS, SUCH AS TRANSFERS BETWEEN FAMILY MEMBERS OR RELATED BUSINESS ENTITIES.

16 | CRAIN’S CLEVELAND BUSINESS | MARCH 7, 2022

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tion proceedings; pay-to-stay legislation, to let tenants avert evictions by paying delinquent rent; and source-of income protection, to prohibit discrimination against tenants who rely on federal housing choice vouchers and other rental subsidies. The group is lobbying for the Cleveland Tenants Organization, a nonprofit that shut its doors in early 2018, to be resurrected. And they’re pushing for more funding for Cleveland’s oft-maligned building department, which brings in more money than it spends, according to city budget records. Martin said that some of the recommendations, including tearing down walls between city departments, are easier lifts. Others, like creating a county-wide housing court similar to Franklin County’s Environmental Court, will be much harder to pull off. Some involve changing laws, while others are about shifting practices. Nonetheless, she said, “I hope we adopt all of them. And I hope the federal and state lawmakers help us. We obviously don’t have enough tools in the toolbox.” Ford, who has studied local housing trends for years, was not surprised to see the share of investor purchases is climbing. But he is alarmed by the pace of that growth. He’s particularly worried about real estate speculation on Cleveland’s East Side, where few investors are pulling construction permits within six months of a purchase, despite the poor condition of many properties. It’s unclear whether those buyers are performing unsanctioned work or avoiding repairs altogether. With a new administration in Cleveland and strong national interest in the dynamics shaping the housing market, Ford hopes that the white paper will attract lots of attention. The Akron-Cleveland Association of Realtors is likely to weigh in on the findings, Eberhardt said. “We may have an opportunity here, right at this time, to get either some federal legislation or some state legislation, just because of the confluence of things coming together right now,” Ford said. Taylor Marr, the deputy chief economist at Redfin, expects to see more regulations aimed at investors, such as increased taxes on investment activity to fund affordable housing projects. In a tight housing market, investors can be part of the solution, taking on risks that aren’t palatable to a typical buyer, refurbishing properties for sale and boosting the supply of much-needed rental housing. But, he said, there are some neighborhoods where investors are impeding ownership, driving up costs for everyone and taking out more value than they’re adding. “I think everyone’s asking themselves, or should be asking themselves, what level of investor activity is reasonable,” Marr said. “If it’s 25%, I think a lot of people would agree that’s too high. But is 5% too low? “The question is, where do we draw that line? And what do we do about it?” Michelle Jarboe: michelle.jarboe@crain.com, (216) 771-5437, @mjarboe

Residents take shelter in the lower level of a Kyiv metro station during Russian artillery strikes. | BLOOMBERG

UKRAINE

From Page 1

“We’ve gotten a flood of inquiries over the last few days,” Fedynsky said. “It’s been really gratifying to see the outpouring of support for Ukraine.” Fedynsky cited Catholic Relief Services, Fund to Aid Ukraine and Cleveland Maidan Association among a handful of nonprofits leading Ukraine assistance efforts. Catholic Relief Services (CRS), based in Baltimore, is sending staff and resources to support church partners in Ukraine, Romania, Moldova and Poland that are addressing growing refugee needs, according to a March 1 press release from the organization. The United Nations reported that in the week since Russian forces invaded Ukraine on Feb. 24, more than1 million people have fled Ukraine. CRS’s initial support of displaced families includes food distributions, reception and transportation services and evacuation of vulnerable children from conflict areas. Monetary donations can be made at support.crs.org/donate/donate-ukraine. Northeast Ohioans will have a unique opportunity to support CRS’s work in Ukraine on Saturday, March 30, when the Chagrin Documentary Film Festival (CDFF) partners with the Chagrin Valley Little Theatre to re-screen “Holodomor: Voices of Survivors” by Canadian-Ukrainian filmmaker Ariadna Ochrymovych. The 2015 short documentary about the 1932-33 Holodomor famine in Soviet Ukraine was part of CDFF’s 2018 festival, said festival director Mary Ann Quinn Ponce. The March 30 event is free, but reservations at chagrinfilmfest.org are required. Goodwill donation proceeds will go to CRS. “We have a really strong connection with the Ukrainian community, and CRS was their suggestion as to the best tool to get that support where it’s needed most,” Quinn Ponce said. The United Ukrainian Organizations of Ohio, located in Parma, established its Fund to Aid Ukraine in

Cleveland Maidan Association is shipping luggage, boxes and pallets to Poland with transportation to the Poland/Ukraine border for distribution. They brought 50 volunteers and packed 1,737.5 pounds of supplies. | COURTESY

1990, just before the breakup of the Soviet Union, according to president Marta Liscynesky-Kelleher. In the early years, it supplied humanitarian aid to the fledgling democracy with relief efforts aimed at orphanages, hospitals and the lingering impact of Chernobyl and natural disasters. More recently, it also has been providing medical supplies and assistance to Ukrainian soldiers injured during Russian-based separatists conflicts in eastern Ukraine. “Right now, we are working on two tracks: First is humanitarian aid, whatever is needed immediately including medical supplies; and the second is the refugee track, where we want to resettle Ukrainian refugees right here in Cleveland much like what we’ve done with Afghan refugees,” Liscynesky-Kelleher said. “We are partnering with Global Cleveland on resettlement.” Liscynesky-Kelleher said Cuyahoga County has already made a commitment to ask county employees to support Ukraine through the Fund to Aid Ukraine. “And we have cities and organizations that are looking at the model as well but have not publicly committed just yet,” she said. The Cleveland Maidan Association

(CMA) is another local organization on the front lines of Ukraine aid. CMA is a grassroots, all-volunteer organization launched in 2014 as a response to the Euromaidan revolution, in which a Ukrainian uprising resulted in the ouster of the country’s pro-Russia president. Spokeswoman Nadiya Petriv said the group is focused today on getting medical supplies to those in need, whether they are refugees in bordering countries or wounded soldiers and civilians still inside Ukraine. It had a “packing day” at Cleveland-based MedWish International on March 1, culling together three pallets worth of medical equipment from wish lists of its partners on the ground. That collection, Petriv said, “will be heading to our volunteers at the Polish border as soon as we combine it with supplies we collected directly.” She said CMA’s Facebook page is the best place to stay informed about its fundraising activities and volunteer opportunities. Supporting MedWish International itself is another way to lend a hand to Ukrainians. The Cleveland-based nonprofit, which repurposes discarded medical supplies, does not exclusively focus on Ukraine assis-

tance, but director of development Allison Busser said, “That has been our priority in the last couple of days, for sure.” The day of CMA’s packing event, for example, MedWish hosted two other organizations gathering materials for Ukraine, including local members of Arizona-based Safari Club International, which packed 86 pounds of wound care, suture, surgery, respiratory and IV supplies for Kharkiv Hospital. Busser calculated that nearly 6,000 pounds of medical supplies bound for Ukraine relief has come from its East 31st Street warehouse, with several future “packing” events already scheduled. Those looking to contribute can donate supplies, register to volunteer, or make a financial contribution in support of MedWish’s operations at medwish.org/ukraine. In addition to these groups, Charity Navigator has curated a list of its highly rated nonprofits responding in Ukraine. The list, which includes Catholic Relief Services, can be found at charitynavigator.org/ ukrainerussiaconflict. Chief Relationship Officer Kevin Scally said donation through its Giving Basket also can be designated for specific use in Ukraine. How ever you choose to give, Scally recommended the following tips for donors: ` Give with your heart, but also give with your head. Make sure you’re supporting a registered 501(c)3 nonprofit organization. These are the only organizations where your gift is tax-deductible. ` You’ll also want to make sure these are efficient, effective nonprofits with a strong commitment to financial health and accountability and transparency. You can use Charity Navigator’s ratings to give with confidence. ` Avoid high pressure situations. It’s OK to take some time to determine how and where you want to give. ` Look for a clear, articulated strategy for how the nonprofit is responding to the crisis and determine whether they have a dedicated fund. Contact Judy Stringer: clbfreelancer@crain.com

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AKRON

Chapel Hill lands another big manufacturing tenant BY DAN SHINGLER

Akron’s Chapel Hill Mall hasn’t been this busy since Archie the Snowman and the once-popular shopping destination’s famous carousel brought in thousands of families each holiday season decades ago. Except now the place — renamed Chapel Hill Business Park by its owner, Solon’s Industrial Commercial Properties group — is busy with shipping rather than shopping. And it’s shipping goods produced right there by a growing number of manufacturing tenants. Activity at the park is soon to pick up even further, as ICP said it has landed another big light-industrial tenant for Chapel Hill. That new tenant is Akron’s Driverge Vehicle Innovations, which manufactures wheelchair-accessible vans for its parent company in Richfield, MobilityWorks — a national dealer of vehicles made by Driverge and other manufacturers. Driverge has signed up to take just less than 153,000 square feet in the 642,000-square-foot business park on Akron’s Brittain Road, said both ICP and Driverge. Driverge president Mark Minatel said his company hopes to begin operations at the former mall around June 1 and will move all of its 120 Akron employees into the new space, which also will house its headquarters. “It will be our entire Driverge team,” Minatel said. “We are going to take the entire 150,000 square feet all at once.” Minatel said his company wanted to stay in town and was attracted to the business park’s Akron location; its clean and open space that’s well-suited to manufacturing; and its easy access to interstate shipping routes via State Route 8. Driverge also especially likes the location’s parking. Driverge sometimes has as many as 800 vehicles that come to it as stock vehicles, made by Ford, Dodge and Mer-

Akron’s former Chapel Hill Mall has landed another large manufacturing tenant, making it more than half full less than a year after it was purchased by Solon’s Industrial Commercial Properties group. | DAN SHINGLER/CRAIN’S CLEVELAND BUSINESS

cedes-Benz, before the company completes their conversions, Minatel said — and Chapel Hill’s 60 acres of parking can hold that many and more. He’s also doing it for his current employees, who he said deserve a newer and consolidated space, as well as for the future employees he hopes to attract, Minatel said. The company’s Akron employees are currently spread out over four buildings on the southeast side of town around the intersection of Kenmore Boulevard and West Wilbeth Road, where Driverge grew up and into the area’s available space, Minatel said. Driverge is still growing and will have more space at Chapel Hill than it does in its current buildings combined. “It’s going to be an addition of about 60,000 square feet for us. We’re at about 93,000 square feet right now,” said Minatel. The company is already planning to

add more people to fill up that space and increase its capacity, as well. “We are hiring,” Minatel said. “We’re going to be looking immediately to add between 20 and 25 positions. Seventeen of those are manufacturing positions and three will be professional, engineers.” This isn’t the first time the former mall has created jobs for the city — and landed tenants for ICP. Chris Salata, ICP’s chief operating officer, said that with the addition of Driverge, the business park will be nearly 60% filled with light manufacturing operations. Craft 33, a cabinet-making brand of Akron’s Famous Supply company, already uses more than 217,000 square feet of Chapel Hill for its manufacturing operations, Salata said. That leaves 272,000 square feet of the former mall left to lease and build out for future tenants, and Salata said he already has deals in the works for a

good chunk of that space. Driverge has already told ICP it may need another 18,000 square feet of space, Salata said, with at least one more major tenant already close to taking more space. “We’re in conversations with another tenant for another 85,000 square feet,” Salata said. “I can’t tell you who it is just yet, but we’re pretty far along in those discussions as well.” ICP had high hopes for the mall when it purchased it from the city of Akron for $7 million last year, especially when the city changed the zoning for the structure to allow light manufacturing operations to move in. But even those hopes have been surpassed by the amount of space ICP has been able to build out and fill in less than a year, Salata said, noting that his company already is doing demolition in the rest of Chapel Hill in anticipation of more tenants. Rents are good, for the market, he

said, with spaces leased so far at prices between $3.50 and $5 per square foot. Chapel Hill is the fifth mall that ICP has purchased — it’s currently working to redevelop the 750,000 squarefoot Midway Mall in Elyria — and its success has bolstered its confidence and made it want to buy more, and even to possibly expand Chapel Hill with new construction, Salata said. “Given the acreage there, if the lease-up continues at this pace, we could expand it,” he said. “In Northeast Ohio, there’s not many 100,000 square-foot-plus spaces in the market right now. Your options are either to build from the ground up, which is happening, or retrofit something like Chapel Hill in short order.” Jerry Fiume, managing director at SVN | Summit Commercial Real Estate Advisors in Fairlawn, said he routinely sees tenants hungry for good manufacturing space in and around Akron. “We’re working with three clients right now, and anywhere between 50,000 and 100,000 square feet is what they’re looking for,” Fiume said. He thinks Chapel Hill, as well as other malls that are converted by ICP, will continue to do well as manufacturing centers. “They’ve got high ceilings, open spaces and minimal columns — which lends itself perfectly for a conversion to light industrial use,” Fiume said. If ICP can land the tenant it’s currently working with at Chapel Hill, Salata said the mall will be 75% leased, with its remaining space suitable for yet another large tenant. “We’ve been very smart in our layout, and it’s worked out well for the tenants and what they actually need,” he said. “We should have about 150,000 square feet left, and it’s all going to be consolidated and contiguous space.” Dan Shingler: dshingler@crain.com, (216) 771-5290, @DanShingler

MANUFACTURING

Rocky River-based World Group adds capacity to its trucking business BY RACHEL ABBEY MCCAFFERTY

World Group in Rocky River isn’t concerned about a new trucking business opening up in its markets. That’s because Bristol Transportation, launched last fall, is part of its portfolio. World Group is a transportation and logistics company operating a family of brands, including ContainerPort and, now, Bristol Transportation. The companies work in areas such as trucking, warehousing and freight forwarding. Bristol basically “mirrors” ContainerPort, said Jonathan Urban, executive vice president of trucking operations at ContainerPort. And the company is marketing Bristol in areas where ContainerPort already is established. Urban said Bristol stands to serve as an additional option under the World Group umbrella for both customers and drivers. He said World Group views this approach as a way

to “bring more capacity in an already strained capacity market.” The trucking industry has seen “significant growth” in recent years, said Tom Balzer, president and CEO of the Ohio Trucking Association in Westerville, of which ContainerPort is part. When the economy is growing, the trucking industry does well. Demand is strong, and the supply is often there overseas, he said. “It’s the conduit in the middle that is really being stretched to its thinnest right now,” Balzer said. The trucking industry had been facing a driver shortage for at least a decade prior to the pandemic, he said. And it takes time for shipments to bounce back after disruptions like weather events or the protests at the Canadian border. The various supply chain and workforce challenges may be necessitating “creative business structures” in the industry, Balzer said. Urban said the driver shortage in

the trucking industry is a big factor in the company launching Bristol. “We needed to come up with another option to increase our capacity,” he said. Bristol operates two terminals in Savannah, Georgia, and Charleston, South Carolina. Urban said there are plans to open three more locations in 2022, including one in Chicago later this month. Decisions around where to open sites are based on customer demand. The company doesn’t yet have a trucking operation in the Cleveland market, Urban said, but its back-end systems and services are here, just like ContainerPort’s. The real difference comes through in the external marketing and in the local autonomy given to each location. “We like to position ourselves as a national company run by local people,” Urban said. Though the ContainerPort and Bristol terminals are part of the same larger company, each location will be differ-

Bristol Transportation, which aims to offer customers and drivers more options, launched last fall. | CONTAINERPORT GROUP

ent. They may offer different driver pay models, Urban said, or focus on a different niche, such as long-haul versus regional freight. Managers of each terminal are able to run their location as if it were their own, he said, barring issues of safety. They’re able to make hiring decisions and choose freight. Having multiple terminals with varying pay scales, perks and approaches in the same market could help Bristol and ContainerPort draw in more drivers overall, as those different approaches could be attractive to different drivers.

The market really only allows a trucking company to get so large, Urban said. The drivers working for ContainerPort or Bristol are independent contractors — small business owners who own their own trucks and pay for their own fuel. They don’t want to get lost in a large corporation. Keeping the terminals smaller allows drivers to be a “medium fish in a medium pond,” Urban said. Rachel Abbey McCafferty: (216) 771-5379, rmccafferty@crain.com

18 | CRAIN’S CLEVELAND BUSINESS | MARCH 7, 2022

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