Tower City’s future still in play as blockchain guru expands focus

CLEVELAND, Ohio — A long-rumored plan to convert Tower City’s struggling shopping mall into a blockchain-focused technology hub has evolved into a vision for an entrepreneurship center with complementary retail components.

The plans for "City Block” were officially announced Monday by area businessman Bernie Moreno, one of the leaders of Blockland Cleveland, an initiative originally aimed at making Cleveland a leader in blockchain, the technology behind digital currency.

But during Monday’s announcement and in an interview, Moreno made clear that blockchain is no longer the sole focus of the venture. What was originally conceived of as a blockchain hub at Tower City will, under current plans, be much more broadly focused.

"I started with a mindset that this could be a blockchain hub, and as we got more and more people engaged in the community and heard feedback, we adapted the mission to be much more focused on, what does the community really want?” he said. “It was loud and clear that what they really wanted was a center for entrepreneurship that’s much broader than just tech and a lot broader than just blockchain tech.”

Asked what the role of blockchain will be in the initiative going forward, Moreno said it will be the focus of an annual conference. “It’s not what we’re going to be leading with, it’s going to be just something we use to attract people to Cleveland for conferences and things like that," he said.

The unveiling of the plans for City Block is just the start. A deal with Bedrock, the Detroit-based real-estate firm tied to Quicken Loans founder and Cleveland Cavaliers majority owner Dan Gilbert, is not finalized. Blockland Cleveland instead will spend the next four months courting investors and tenants for the project; if they meet certain benchmarks, they’ll move forward with a deal with Bedrock.

In a statement, Bedrock Chairman Jim Ketai confirmed that Bedrock “has entered into discussions with the Blockland community to reimagine this historic landmark into a project we have dubbed ‘City Block.’”

“We continue to work together toward a shared goal of bringing City Block to life as a hub for entrepreneurship in the heart of Cleveland with access to neighborhoods throughout the city,” he said. “The vision is for City Block to soon occupy a substantial portion of The Avenue Shops at Tower City Center, bringing together corporations, technology startups, venture capitalists and the broader community in a world-class entrepreneurial center for the purpose of moving Cleveland and Northeast Ohio to the forefront as a top five relevant technology city.”

If a deal is reached, Moreno said Bedrock will consider a model under which it remains the landlord, but brings on community partners as equity owners in the project. He estimated a renovation of the site to fit City Block’s needs would cost about $110 million.

Early renderings of the project, which are subject to change, show a park on Prospect Street and a renovated atrium inside Tower City.

Moreno said Monday that Tower City Cinemas would stay, as would the Cleveland International Film Festival.

The announcement comes more than three years after Bedrock purchased The Avenue from longtime owner Forest City Enterprises. Bedrock purchased the 366,000-square-foot shopping center and underlying parking for $56.5 million, The Plain Dealer reported at the time of the sale in March 2016.

The deal added to Gilbert’s real-estate holdings in downtown Cleveland, which already included large chunks of the sprawling Tower City complex. Companies tied to him also own the Higbee Building, home to Gilbert’s JACK Cleveland Casino and Quicken Loans’ downtown office; the Ritz-Carlton hotel; and the nearby May Co. building.

Although they have been mum on the details up until this point, Bedrock officials have long said they planned to redevelop the vacancy-plagued shopping mall. When the shopping center opened in 1990, it was a destination for high-end shopping. But shifting economic winds and changes in retail trends led many stores to depart over the years. When Bedrock took over The Avenue, it opted not to enter into any long-term leases with retail tenants as it plotted a redevelopment plan.

Asked about the redevelopment of the property into a venture tied to Blockland, some local commercial real estate experts expressed optimism about the plan.

“Reimagining the Tower City development will take bold and brilliant entrepreneurs with vision that anticipates 21st century emerging needs. Yes, I think we have those entrepreneurs in Cleveland,” said Robert Weeks, past president of the Northern Ohio chapter of commercial real-estate group NAIOP. “This property should be the centerpiece of Cleveland and it clearly is not today. A bold move is the only way to restore this property to its former status as a centerpiece of Cleveland.”

“I certainly think that Blockland, as it’s been discussed and written about, would probably be good for Tower City, in terms of an economic generator,” said David Browning, managing director of CBRE’s Cleveland office, in an interview prior to Monday’s announcement.

He noted other redevelopment projects completed or in the works at Tower City, such as K&D Group’s ongoing conversion of parts of Terminal Tower into apartments. Developments that have a mix of office space, residential, and retail components — the “live, work, play” concept — are what’s successful right now, Browning said. The Blockland deal would put the Tower City complex more in line with that model.

"Tower City, as it was originally redeveloped by Forest City, was a huge retail component,” he said. “As we know, regional malls overall, they’re just not successful. … A massive retail redevelopment of Tower City, I just don’t see that working.”

“I think you want to try something there that’s going to be good for the community and at the central location," Browning added. "I think trying something is better than trying nothing.”

Moreno and Bedrock have both said that retail will remain a component of The Avenue’s future.

“I certainly believe, and I think my team members in Detroit agree, that there will continue to be a significant retail component to any of the redevelopment scenarios we’re currently considering and evaluating,” Ken Till, Bedrock vice president of development, told The Plain Dealer in April.

“We want the retail to be complementary of the larger redevelopment,” he said. “We want the larger development to integrate with our neighbors, whether it is Bedrock, Jack, or assets owned by others” such as K&D. “It’s a matter of tying all these assets and opportunities together to provide something that is greater than the sum of the parts.”

Moreno said he expects to deliver another update on the project in October.