Flats Project Inches Closer to Becoming a Reality

Cleveland's Flats East Bank project gets $32 million loan guarantee from HUD

Wednesday, December 1st, 2010

Michelle Jarboe, The Plain Dealer

CLEVELAND, Ohio -- The U.S. Department of Housing and Urban Development will provide $32 million in long-anticipated loan guarantees to support development on the east bank of the Flats.

The federal agency has agreed to provide a $30 million loan to the city of Cleveland and a $2 million loan to Cuyahoga County, as part of a complex financing package for the Flats East Bank project.

The low-interest loans, known as HUD 108 loans, will help the Wolstein Group and Fairmount Properties build the $275 million first phase of their long-delayed development.

HUD's role in the project is not new. In fact, the developers have factored these loans into their elaborate funding scheme for more than a year. But the deal was not certain until Wednesday, when U.S. Sen. Sherrod Brown's office announced the formal approval - a necessary step to move the Flats financing toward closing.

"We are getting there, and this is a very important piece to have in place so that we can close,"said Steve Strnisha, a financial consultant working on the Flats East Bank project.

The HUD 108 loans will pass from the federal government to the city and county, and through to the developer. The loans will be repaid using parking revenues from the project, which includes a parking garage, and a tax-increment financing agreement, which taps increased property-tax revenues from development.

"We appreciate HUD's approval and the assistance of our Congressional delegation," Mayor Frank Jackson said in an e-mailed statement. "This will be an unprecedented project that will help revitalize our river and lakefront and will keep two major employers in the city of Cleveland."

The initial phase of the Flats project includes an office building, an Aloft hotel, parking, retail and restaurant space. Accounting firm Ernst & Young, law firm Tucker Ellis & West and the CB Richard Ellis brokerage - all tenants in downtown Cleveland buildings - plan to move to the office tower.

The Flats project stalled when the economy collapsed, but it appears close to re-emerging, thanks to a web of public and private support. The developers hope to close on their financing this year and start construction soon, with an anticipated opening date in spring 2013.

"This news will keep over a thousand good-paying jobs in Cleveland and create hundreds more construction jobs," Brown said in a written announcement about the HUD guarantees. "The Flats East Bank development is just the latest sign that our state is ripe for business development, and this project signals a major turning point for the revitalization of downtown Cleveland."