Le Meridien Project in Downtown Cleveland Gets Another Grace Period

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By Michelle Jarboe McFee, The Plain Dealer

CLEVELAND, Ohio – Façade-survey work and interior demolition might pick up soon at the long-empty John Hartness Brown Building on Euclid Avenue, the potential site of a 206-room Le Meridien hotel.

A legal settlement and a tax-credit extension gave the slow-moving project a reprieve this month. Now a California developer says he's reconfiguring his financing – yet again – and hoping to open the downtown Cleveland hotel by early 2017.

The next date to watch in this saga? Sept. 1.

The Ohio Development Services Agency agreed in early June to give the Le Meridien project another 90 day extension on valuable preservation tax credits allocated to the project years ago. The state's decision came as the development group settled a lawsuit filed by Northeast Ohio investors who raised questions about the viability of the project and asked where their money ended up.

Court records show that the investors and the project team, led by California developer Steve Goodman, reached a provisional settlement agreement May 28. The details of the settlement aren't available, and records related to a late-May hearing have been sealed. The court shelved the case until late August.

None of the parties would say much about the lawsuit or the resolution.

"It's behind us," Goodman said during a recent phone conversation. "It has been settled, but I can't give the terms of it."

The investors, seven East Side residents, amassed $900,000 for the project in 2011. In April, they sued Goodman, various companies tied to him and a handful of other parties, based on allegations of misrepresentation and mismanagement. The investors wanted their money back. And they wanted clarity on the project.

Jon Pinney, their attorney, wouldn't say what his clients have been promised or given. "The parties have reached an interim settlement and hope to fully resolve this matter within the time frame established with the court," Pinney wrote in an email. "We have no further comment at this time."

The state had been prepared to rescind $11 million in tax credits that the building won in 2007, under a different owner. Those credits, which have only been allocated and not distributed, were set to expire by June 1.

A spokeswoman for the state development agency, which oversees the popular credit program, confirmed that the developer now has until Sept. 1 to close on financing for the entire project and start construction.

"It is our hope that with this extension, the project will be able to move forward," the spokeswoman, Penny Martin, wrote in an email.

She didn't elaborate on the state's rationale for granting the project another grace period. If the state rescinds the credits, the developers will have to reapply through a competitive process that limits credits to $5 million per building, in most cases. Goodman appears confident that he'll meet his new deadline.

"I have all the money I need to finish this thing," he said, before noting that the last pieces of the project financing are still falling into place.

Since April, the developers have backed away from their ambitious plan to raise $42.5 million from wealthy foreign investors seeking U.S. residency through an immigrant investor visa program. Now, Goodman says, the Le Meridien team plans to use only $10 million in funding from that program, which requires each investor to put up $500,000 in the Cleveland area and to create 10 jobs.

Goodman originally planned to use that overseas money as a first mortgage for the hotel. Now, he's talking to more traditional lenders about a $36 million loan. He wouldn't publicly identify the banks that are evaluating the project, an overhaul of the space behind an eclectic set of facades running from 1001-1101 Euclid Ave.

"I think we've retrenched, and we've gotten all the pieces put back together," Goodman said. "And it was all made possible by taking off the pressure with the state historic tax credits, time-wise."

Starwood Hotels & Resorts, parent of the Le Meridien brand, still lists the hotel opening date as January 2017 on its website.

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