CH City Council authorizes three-party lease proposal for Millikin School

In a unanimous vote at its Aug. 20 meeting, Cleveland Heights City Council voted to authorize the city manager to execute a non-binding proposal for the lease of the Severance Millikin School from the Cleveland Heights-University Heights City School District, and the sublease of the property to Mosdos Ohr Hatorah, an Orthodox Jewish school.

The three-party lease agreement was signed by Mosdos on July 31, and members of the CH-UH Board of Education voted 5–0 to authorize the lease proposal at their meeting on Aug. 7.

Now that all three parties have authorized the lease proposal, Steve Shergalis, director of administrative services for the district, said, “Once we get formal written confirmation of the council’s legislative action, we’ll sit down and start drafting the actual lease language. That’s going to take a little time.”

Shergalis said he expected that attorneys for the board and Mosdos, with the involvement of John Gibbon, the city’s law director, would work out the lease language. The lease would then need to be formally approved.

“This [three-party] arrangement allows us to avoid the requirement for a district ‘right of termination’ clause, which is required according to Ohio case law but was unacceptable to Mosdos since they would be asked to make permanent improvement investments to the building,” said Shergalis. A termination clause would allow the district to take back the property without notice, if it needed the property.

The lease proposal was drafted by Alan Rapoport, attorney for Mosdos, and by the district’s legal team, from the firm Squire Sanders. Both Shergalis and Rapoport stressed that what has been approved is not the lease.

Shergalis said, “This sets forth the terms under which we would move forward to craft the lease. Rapoport explained, “It’s what we’d call a letter of intent. It justifies us spending more time in fleshing out a lease.”

Dennis Wilcox, vice mayor of Cleveland Heights, characterized the legislation as a "very important first step," and noted that it was subject to a final lease.

The proposed lease terms are for an initial 30-year lease at $1 per year, and then two consecutive 10-year lease options, at “fair market rent.” The proposal stipulates that Mosdos will make at least $1.5 million in permanent improvements to the school within the first 18 months ($500,000 in the first 6 months, $500,000 in the next 6 months, and another $500,000 within 18 months following the start of the lease). Mosdos would be responsible for all taxes, maintenance, insurance and utilities. The leased area would not include the Severance stables.

“The 30-year term coincides with the useful-life improvements we expect Mosdos to put into the building,” explained Shergalis. “Mosdos will commit to a minimum of $1.5 million in improvements. They would take over the building entirely, including taxes, assessment, repairs and insurance, so [that would be] a significant cost savings to us.”