April 02. 2012 9:00AM

Documents illustrate city's generous offer to Kohl's

Real Estate

By Andrew Weiland

  
More details about the corporate headquarters campus that Menomonee Falls-based Kohl's Corp. seriously considered building in the Park East corridor in downtown Milwaukee are revealed in documents released by the city to the media in response to Freedom of Information Act requests.

In February, Kohl's told city officials that it was no longer considering the city as a possible location for a new corporate headquarters, despite an incentive package offered by the city of tax incremental financing of more than $100 million and a new markets tax credit package of about $170 million (the benefit of that to the company would have been worth about $25 million).

Kohl's officials have declined to publicly disclose their reasons for rejecting the city's offer.

Based on the documents released by city officials, Kohl's considered a two-phase project for a 1.65 million-square-foot corporate headquarters campus between McKinley Avenue, Old World Third Street, West Juneau Avenue and West Winnebago St. The project would have included a 15-story building along the east side of Old World Third Street and a 10-story building on the east side of North Sixth Street.

The first phase of the development would have created 1 million square feet of office space. The second phase would have created 652,000 square feet of office space.

The project also included plans to build two parking structures north of McKinley Avenue. Both eight levels, one parking structure along the east side of North 6th Street would have had 2,300 spaces and the other, along the east side of Old World Third Street, would have had 1,300 parking spaces.

The two structures would have had a total of 3,600 spaces. Kohl's planned to have 4,500 to 5,000 employees at the downtown headquarters. Additional parking spaces would have been included within the main headquarters campus, said Department of City Development spokesman Jeff Fleming. In addition, the city could have provided spaces in a city-owned parking structure southeast of Juneau Avenue and Old World Third Street, near the Bradley Center. Also, Milwaukee County planned to provide free bus passes for Kohl's employees and some of the company's employees may have moved to the downtown area and walked to work, Fleming said.

City officials also disclosed a timeline of the negotiations with Kohl's. Mayor Tom Barrett first called Kohl's chief executive officer Kevin Mansell about the project on Nov. 24, 2010. Mansell had publicly announced in May of 2010 that the company needed additional office space, but had not announced that it was considering plans to build a new corporate headquarters.

Barrett called Mansell after city officials heard that Kohl's was considering plans to build an office complex at sites outside of Menomonee Falls, Fleming said.

The city and other municipalities in the Milwaukee 7 region have a no-poaching agreement, which prevents municipalities from trying to convince companies to move to their community unless the company indicates publicly or privately that it is considering plans to relocate, Fleming said. That meant city officials had to wait until it was clear that Kohl's was in the market for sites outside of Menomonee Falls before contacting the company, he said.

Kohl's had considered plans to build a corporate headquarters campus in the Woodland Prime business park in Menomonee Falls. The project would have been built at a site that included the North Hills Country Club property. However, after negotiations with the country club broke down, Mansell in May of 2011 said that Kohl's would consider all options for a location for a new corporate headquarters.

Shortly after that statement, Barrett requested a meeting with Kohl's. City and company officials had their first meeting on June 1, 2011. City officials met with Kohl's executives five more times during 2011 to discuss the project.

City officials presented several sites to Kohl's as potential headquarters locations including: the Park East corridor, the former Pabst brewery complex, the Reed Street Yards, the lakefront area near the U.S. Bank Center, the former Northridge Mall site, the former 440th Air Reserve Base near Mitchell International Airport and a site at South First Street and Greenfield Avenue that includes part of the Rockwell Automation Inc. headquarters complex. Kohl's executives then indicated they were interested in the Park East corridor and negotiations shifted to focus on that site.

One Milwaukee developer said that city officials made a mistake when they initially presented so many different site options to Kohl's. Some Kohl's executives were perplexed by some of the sites suggested by city officials, that developer said. Instead the city should have asked the company what it wanted, and then made a strong sales pitch based on the benefits of a downtown location.

Two commercial real estate sources said the city's pitch to Kohl's was perceived by some of the company's executives as unimpressive at first but then they became extremely impressed by the deal later in the months-long negotiating process.

Some developers say they were frustrated that they were not involved in the Kohl's negotiations. However, the process was controlled tightly by Kohl's which preferred to deal with city officials and insisted that the negotiations remain private, some sources say.

Some may wonder if public disclosure about the Kohl's negotiations will make it difficult for the city to negotiate with developers on future projects. However, Barrett and other city officials said they were proud of the incentive package that the city and county put together for the Kohl's project and they have indicated a willingness to offer aggressive incentive packages for future developments that will create a large number of jobs.

"We are capable and willing to do it if it's the right deal," Department of City Development commissioner Richard "Rocky" Marcoux said in February.

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