April 16. 2012 9:00AM

Efforts move forward to attract development near lakefront

Real Estate

By Andrew Weiland

  

Initiatives to attract major commercial real estate development to two adjacent sites near Milwaukee's lakefront are moving forward.

The properties are located just southeast of the tallest office building in the state, the U.S. Bank Center at 777 E. Wisconsin Ave., and just west of Lake Michigan, Discovery World, the Milwaukee Art Museum and the North Gate to the Summerfest grounds.

At such a key location the two properties are extremely underutilized. One is the U.S. Bank annex parking garage. The other, just east of the annex parking garage, is the Milwaukee County Downtown Transit Center at 909 E. Michigan St.

Milwaukee County recently issued a request for interest (RFI) seeking developers interested in purchasing and redeveloping the Downtown Transit Center site. Responses to the RFI are due on April 30.

Many see the Downtown Transit Center, built in 1992, as a waste of valuable downtown property near the lakefront. Bus route modification and restructuring has resulted in fewer busses using the facility than was originally designed. Instead of using the high-value lakefront site for a government facility, a dense private development of the site could generate significant property tax revenue.

Any developer that buys the property will likely demolish the two-story, 111,460-square-foot structure. Construction of the Downtown Transit Center was partially funded by a federal grant, which means the county will need to obtain federal government approval to relocate the operations and sell the property to a developer.

Relocation of the Downtown Transit Center and redevelopment of the site into a dense commercial use was one of six recommendations made last year by the Long Range Lakefront Committee, comprised of representatives from the city, county and key lakefront stakeholders. Other recommendations from the Long Range Lakefront Committee include: reconfiguration of the Lake Interchange to free up land for commercial development near the lakefront, consideration of eventual redevelopment of O'Donnell Park, reconfiguration of the Michigan Street and Lincoln Memorial Drive intersection to make it more pedestrian-friendly, and addition of a bicycle/pedestrian lane to the Hoan Bridge (that idea was rejected by the state Department of Transportation last year).

The Downtown Milwaukee Master Plan, completed in 2010, also recommends redevelopment of the 2.2-acre Downtown Transit Center site. The downtown master plan says the transit center operations should be relocated to a site near the Intermodal Station, which is located at 433 W. Saint Paul Ave.

The redevelopment recommendations for the Downtown Transit Center site have gotten the attention of some developers.
"There has been interest from a number of parties (in developing the transit center site)," said Brendan Conway, spokesman for Milwaukee County Executive Chris Abele.

Last fall the County Board approved the recommendations of the Long Range Lakefront Committee, setting the stage for the RFI for the Downtown Transit Center site.

In recent months, county officials had been focused on negotiations with Kohl's Corp., which was considering plans to build a new corporate headquarters on county-owned land in the downtown Milwaukee Park East corridor. After Kohl's decided not to build downtown, county officials decided to shift more attention to redeveloping the Downtown Transit Center site, while still working to attract development to the Park East, Conway said.

So far none of the developers expressing interest in the Downtown Transit Center site have presented any specifics. That is expected to come in response to the RFI, Conway said.

A major advantage of the Downtown Transit Center site is that, because of the state's public trust doctrine, none of the property east of it along the lakefront could be developed.

"No one will ever block your view," Conway said.

Meanwhile, developers are also eyeing the U.S. Bank annex garage site immediately west of the Downtown Transit Center.
Wauwatosa-based Irgens Development Partners LLC is in discussions with U.S. Bank about developing an office building at the site of the annex parking garage.

"We've had discussions with Mark (Irgens, president of Irgens Development Partners)," said Joe Ullrich, vice president of U.S. Bank. "There's no plan. We're not ready to announce anything."

Irgens declined to comment.

However, Ullrich said the development would likely be an office building and there is a "good likelihood" that Godfrey & Kahn S.C. would be the anchor tenant, if the project came together.

"It's a lot of preliminary stuff," Ullrich said.

U.S. Bank has been talking to other developers about the annex parking structure site, but Ullrich said talks with Irgens are the "furthest along."

"We're not exclusively talking with Irgens," Ullrich said. "We've had other conversations with other developers."

Last year Irgens was working on a joint venture project with Van Buren Management owner Joel Lee to build an office building east of Pfister Hotel downtown. That project, called Washington Square, would have been anchored by Godfrey & Kahn.

However, that project did not come together and while Lee owns the site and is still pursuing it, Irgens is now seeking another site to build an office building with Godfrey & Kahn as the anchor tenant.

In 2005, Godfrey & Kahn considered plans to move to the proposed Lake Pointe Tower, a 42-story mixed-use development at the U.S. Bank annex parking garage site, which was planned by JBK Properties.

"It's a site we've always liked," said Godfrey & Kahn managing partner Nic Wahl.

But in 2005 Godfrey & Kahn decided to stay put in the M&I Bank headquarters building on Water Street and the Lake Pointe Tower project never came to fruition. Yet, if the Irgens project comes together, the firm could end up moving to a new building at the site after all.

Irgens, or another developer, could try to assemble both the U.S. Bank annex parking structure and the Downtown Transit Center sites, especially since a development at the Downtown Transit Center site would block the view of a development at the U.S. Bank annex parking garage site.

Also, Ullrich said U.S. Bank has talked to a hotel developer about building a hotel on vacant parcel between the U.S. Bank Center and the complex's new parking structure, just south of the office tower. He declined to provide any additional details.

Despite the tremendous assets of the sites near the lakefront, any developments planned for the Downtown Transit Center or the U.S. Bank annex parking structure properties will face significant challenges in finding tenants and obtaining financing. Banks have been reluctant to provide loans for large commercial developments since the Great Recession. Meanwhile, demand for office space is weak in downtown Milwaukee. The east side of downtown Milwaukee has a 14 percent office space vacancy rate and no new multi-tenant office buildings have been built downtown since 2003. The downtown hotel market is strong but three new hotels are already under construction downtown and a 380-room hotel is planned near Potawatomi Bingo Casino, while nothing is being done to increase the demand for hotel rooms in the city.

The downtown condo market has been essentially dead since the Great Recession, but demand for apartments is strong with building developers reporting high occupancy levels. Numerous apartment projects are getting built in the downtown area, but most large projects that are getting built have received some level of government assistance.

Any developers that propose a major project for the sites near the lakefront will likely be seeking government assistance as well.
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