Dallas-based Gatehouse Capital has pulled the plug on the high-profile proposed Milwaukee Hotel Palomar and Residences development planned for the Park East corridor in downtown Milwaukee.

The $150 million, 22-story development planned for the northwest corner of West Juneau Avenue and Old World Third Street was to include 63 luxury condominiums, a 175-room boutique hotel, a restaurant owned by Food Network star Michael Symon, a nighclub, a spa and fitness center, retail space and a parking structure.

In a prepared statement, Gatehouse chief executive officer Marty Collins said that one problem for the project was that, "as the residential and credit markets worsened to historical levels, Gatehouse Capital attempted to obtain a higher level of assistance from the City of Milwaukee, which unfortunately failed to materialize … the project is simply impractical in this new business climate without a much larger assistance package."

Collins said Gatehouse made a significant investment in the project.

"We were invited to this opportunity in early 2006 by local co-developers who were the majority financial partners," Collins said. "In 2007 to keep the project moving, Gatehouse Capital restructured that relationship and provided significant funding, advanced the drawings and construction plans, completed and opened the sales center, and identified several other nationally recognized operating partners for the restaurant and spa while continuing to sell the residences. As the residential and credit markets worsened to historical levels, Gatehouse Capital attempted to obtain a higher level of assistance from the City of Milwaukee, which unfortunately failed to materialize. This was a landmark project in an emerging section of the city with great promise to which we were very much attached. I would like to thank the Milwaukee community for the support it has shown during the planning and pre-development of this project over these last several years. We had a world-class team of professionals that were committed to building the finest project in Milwaukee. But even with the highest level of support and community backing, the deteriorating macro conditions of today's market could not be overcome. In the final analysis, the project is simply impractical in this new business climate without a much larger assistance package. We wish the community every success in the re-development of this emerging section of downtown."

Signs of trouble for the project first appeared last fall when Collins announced that the start of construction for the project had been pushed back as a result of the recession and the credit crunch.

The demise of the Palomar project is a major blow to efforts to attract development to the Park East corridor. A freeway spur through the corridor was removed in hopes of opening up a large swath of land for development on the northern edge of downtown. Most of the land that was underneath the freeway spur is owned by Milwaukee County. So far the county has been unsuccessful in its attempts to attract any development to its Park East property.

The County Board adopted the Park East Redevelopment Compact (PERC) for reviewing developments on the county-owned land in the Park East corridor. The PERC requires developers to pay union-scale wages for construction projects on the county land. In addition, the PERC indicates that developers that hire local employees, provide job training or create green space would by more likely to be selected. However, developers criticized the PERC, saying it would discourage development. The Milwaukee Common Council rejected a proposal similar to the PERC.

Some other development has occurred in recent years on land around the Park East corridor that is privately owned or was owned by the city including the new Manpower Inc. corporate headquarters, the Pabst brewery redevelopment, Mandel Group Inc.'s North End development, a Staybridge Suites hotel and an Aloft hotel.