Lakewood agrees to settlement to fully sever ties with former developer of Lakewood Hospital site

CLEVELAND, Ohio – The city of Lakewood has reached an agreement to entirely sever ties with a developer it previously partnered with to put apartments, townhomes, and store and office space on the city-owned site of the former Lakewood Hospital.

© David Petkiewicz, cleveland.com/cleveland.com/TNS
The facade of the former Lakewood Hospital, as contractors prepared the site for redevelopment.

In an email released Friday to cleveland.com and The Plain Dealer, mayor Meghan George’s administration said that the city achieved a “clean walkaway” from agreements it entered into to develop the former hospital’s site Detroit and Belle Avenues. The email notes that the City Council must still sign off on the deal.

The email does not give the name of the developer. However, the city previously entered into an agreement with Carnegie Management and Development Corporation of Westlake to transform the vacant site. The relationship fell apart after a dispute over cleaning up environmental contamination and finances.

The email did not disclose the terms of the settlement. George said in a text message Thursday that she would be happy to discuss the settlement following the City Council’s approval, but it was not immediately clear when it would vote.

The email, sent by George’s Chief of Staff John Storey to Lakewood resident and NEOtrans blog founder Ken Prendergast, only says that the city worked to “most efficiently and expeditiously proceed with development without any concern or worry of further difficulties related to any agreements.

“We were able to achieve this,” Storey wrote.

Carnegie President and CEO Rustom Khouri did not return a message.

The council discussed the sale of the site and “imminent court action” during an executive session on Monday with its attorneys at the Thompson Hine law firm, records show.

Storey also wrote that the city obtained “due diligence materials and market studies” as part of the agreement, saving time for any future developer and will help as the city negotiates with a new one.

“This outcome is wonderful news, and we believe it is in the best interest of the City moving forward,” he wrote.

Under Carnegie, the 5.7-acre site was set to become “One Lakewood Place.” The planned $72 million development included 200 apartments and 12 townhomes and retail and office spaces.

Demolition contractors working on the site in September 2019 found tetrachloroethylene under stone slabs and in the soil in an area that used to be under a laundry room. The chemical was used in dry cleaning before becoming more strictly regulated in the 1970s

The unexpected environmental remediation cost more than $1.7 million from the Lakewood Hospital Fund, resulting from the master agreement with the Cleveland Clinic that includes money from from the sale of facilities or from the hospital system’s payments.

In April, Khouri said that the near-west suburb did not meet its requirements under their agreement to obtain a letter from the Ohio Environmental Protection Agency that would protect Carnegie from legal responsibility for further investigation and cleanup following the efforts to get rid of the tetrachloroethylene. George wrote in a note posted on Lakewood’s website in April that the city was willing to support the letter but that Carnegie did not agree to move forward.

She accused Carnegie of breaching the agreement and also described a “financial gap” between the two sides.

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