Local economy faces uncertain future during COVID-19 pandemic

by Bruce Checefsky

Sean Watterson is doing everything possible to keep his business from going under. As co-owner of the Happy Dog on Detroit Avenue in the Gordon Square arts district, he’s responsible for 30-40 full and part-time employees all of which have been laid off since the COVID-19 pandemic.

   The neighborhood corner bar, a favorite hangout for hip Clevelanders, and named Best Neighborhood Bar by Cleveland Scene Magazine, produces hundreds of live music events every year, from rock and country to punk and polka. Last year alone, his payroll supported more than 500 bands and 2000 musicians. Public programs include Keep Talking: A Storytelling Show, Poetry Slams, and community building events with the City Club, Global Cleveland, International Partners in Mission, and the Northeast Ohio Consortium for Middle Eastern Studies (NOCMES). The Happy Dog serves over 50,000 hot dogs a year to more than 70,000 customers. The menu also includes hamburgers, tots and fries, and, of course, plenty of beer.

“We suspended operations when the Governor’s order went into effect. We have a limited menu. We weren’t doing much takeout before this and we worried that we would be losing money even faster if we tried doing takeout,” he said. “We also worried about the safety of our employees.”

With their operations payroll down to zero, including no compensation to the co-owners, Watterson conserved as much cash as possible. He suspended the Happy Dog liquor liability license, cable television, waste pickup, and linen cleaning services. Outstanding bills were categorized by priority. He applied for a Small Business Administration Disaster Assistance Loan.

“The past couple of weeks have been hyper focused on programs we qualify for,” he added. “There’s a scarcity mentality with experts telling us that most of the assistance programs are on a first-come-first-serve basis.”

Watterson doesn’t have a crystal ball when it comes to talking about the future of the Happy Dog. There’s no moment when everything opens and goes back to the way they were before the crisis. While the Governor will decide when bars and restaurants can reopen, will customers feel comfortable going back? He’s not so sure.

“Dive bars do great in a recession. They’re affordable places to get together. We did well after the 2008 recession,” he said. “But we’re not focused on that right now.”

In the rush to get a financial assistance package operational by the Federal government, all small businesses were lumped together in the same program, according to Watterson. Bringing payroll back to 75% makes more sense for some businesses that can continue to operate during the crisis. Hotels and businesses in the hospitably sector of the economy require the government to understand that small businesses run on very thin margins and without much cash flow. Even a low interest loan might not help.

“Our margins are typically so thin that the amount of extra revenue you need to pay back the loans are enough to knock you out. If you come through this crisis with debt for the rest of your life people are going to wonder if it’s really worth it,” Watterson added.

Cultural institutions across the city like the Cleveland Museum of Art and Museum of Contemporary Art are closed, as are theaters and performance venues including Cleveland Public Theater, Near West Theatre, Capitol Theater, convergence-continuum, LGBT Community Center, and other west side community centers. Michael Gill, Executive Director, Publisher and Editor of CAN Journal (Collective Arts Network), a nonprofit organization of more than 95 art galleries, schools, and related institutions, plus individual artists, sees the evolution of isolation and social distancing easing in the coming months. Gill believes most organizations will survive.

CAN Journal regularly reports on cultural events around Ohio City, Tremont, Gordon Square, and other near west side neighborhoods as well as events throughout the city and Northeast Ohio.

“Mission driven community and cultural centers like Art House provide arts activities for students in schools and also serve families in their neighborhood. Several similar community organizations including Metro West, as part of their Creative Fusion Program, and Julia de Burgos Cultural Center have events planned for August,” Gill said. “Providing service to the community is their primary mission. They may have more liberty to steer their programs within budget constraints.”

Local artists, on the other hand, can apply for funding to help with the economic fallout through resources such as the Emergency Relief Grant offered by SPACES gallery. The Warhol Foundation has authorized its sixteen re-granting partners, including SPACES, to re-allocate $100,000 grants to create and administer COVID-19 emergency relief funds.

Additionally, a coalition of seven arts organizations that includes Artadia, Creative Capital, the Foundation for Contemporary Arts, the MAP Fund, the National YoungArts Foundation, Academy of American Poets and United States Artists have launched Artist Relief, a new initiative that has been funded to provide $5,000 relief grants to artists facing financial emergencies due to the fallout from COVID-19. (https://www.artistrelief.org).

The Greater Cleveland COVID-19 Rapid Response Fund is designed to complement the work of public health officials and expand local capacity to address all aspects of the outbreak as efficiently as possible. The Rapid Response Fund will provide grant awards on a rolling basis to nonprofit organizations in Cuyahoga, Lake and Geauga counties, according to the Cleveland Foundation. (clevelandfoundation.org)

“I couldn’t guess on the length of recovery to the economy,” Gill said. “So many artists supplement their income with service industries jobs. That has to come back first.”

Independence-based Dalad Group, a multifaceted real estate developer with office and industrial properties in downtown Cleveland and the southern suburbs, was in the middle of developing Tinnerman Lofts when the full impact of the COVID-19 pandemic struck. Tinnerman Lofts will have 49 market-rate apartments and several workplace commercial spaces.

The Tinnerman Stove and Range Company building at 2038 Fulton Road was first constructed in 1914 for the Tinnerman Steel Range Co., which remained on the site until 1957, when it moved to Brook Park. Tinnerman is best known for inventing a speed nut, a type of locknut with two sheet metal prongs that act as one thread. The speed nut was eventually used in the manufacture of automobiles and stoves, and during World War II the United States government also began using Tinnerman’s speed nuts in its aircraft.

The Dalad Group was awarded $1.7 million in Ohio Historic Preservation Tax Credits for the Tinnerman Lofts project.

Construction and housing are considered essential services. In terms of a construction schedule, COVID-19 might slow down the work but not drastically. Whether anyone will lease the lofts is another question.

“I suspect there will be some people ready to lease,” said Neil Viny, president of the Dalad Group. “But we don’t how this will change leasing structure.”

In 2018, The Dalad Group successfully converted the Worthington Building on Johnson Court to loft apartments in a $30 million project in the Warehouse District.

“We have a few other projects in pre-development, and we continue to do architecture work and planning on those projects,” he said, adding, “this is entirely new territory. No one knows precisely how the economy will come back.”

Several blocks west at the corner of Lorain Ave and West 44th Street, the former Ohio City Furniture Store building has been demolished to make way for construction of Harbor 44, a multi-story commercial and office building. Harbor 44 was being billed as a 29,000 SF proposed Class-A, mixed-use retail and office development in Cleveland’s burgeoning Ohio City neighborhood. The new development had plans to offer a rooftop deck with exquisite downtown skyline views, underground parking and excellent connectivity to walk, bike or drive to work or entertainment destinations, according to Cushman & Wakefield CRESCO Real Estate. But that changed. The current plan is to reduce the building from three to two stories and eliminate underground parking, according to Shawn Darling, sales agent for Cushman & Wakefield CRESCO Real Estate.

Cushman & Wakefield CRESCO Real Estate major shareholders include Honk Kong-based private equity house PAG and San Francisco-based TPG Funds, private equity firms affiliated with leverage buyouts and venture capital.

“We did get a lease signed with Sherwin Williams for 4300 square feet on the ground floor. There’s another 5000 square feet for retail and 10,000 square feet for offices,” she said. “The building was scaled back from three to two floors to meet the requirements of the Sherwin Williams deal.”

Darling wants to find businesses that add value to the community as an amenity to improve the area like a microbrewery, juice bar, or cafe. Rents start at $22-$24 SF per year.

When asked whether changes to the building design were approved by the local block club, Thomas McNair, Executive Director, Ohio City Incorporated, replied by email, “I am aware that the project is evolving and has been scaled back from 3 stories to 2, but it is essentially the same project with a mixed use building fronting Lorain Avenue, parking in the rear, and housing along West 44^th Street. Those changes will be reviewed at a to-be-determined time in a new virtual format that the City is working on. Changes have not been given to the block club as there is no changes yet that have been approved, and we are working through how to best shift community engagement in the midst of a global pandemic.”

James Asimes, Director of Acquisitions at Realife Management Group, the developers of Harbor 44, confirmed that the project is privately financed. Realife is led by Yaron Kandelker, an Israeli native now living in Cleveland with a rapidly accumulating commercial properties portfolio in Northeast Ohio, according to Crain’s Cleveland Business.

Harbor 44 is scheduled to open early in 2021.