April 16. 2012 9:00AM

Italian dressing

Third Ward project could be game-changer

By Andrew Weiland

The transformation of the Historic Third Ward from a burned out warehouse district into a thriving mixed-use urban neighborhood of residences, office space, stores and restaurants is one of Milwaukee's greatest redevelopment stories.

But now the Italian Community Center is contemplating plans to do a mixed-use redevelopment of its 15.7-acre Third Ward property, which could take the neighborhood to the next level.

The site, located southeast of East Chicago Street and North Jackson Street and just west of the Summerfest grounds, includes the 60,000-square-foot ICC building and approximately 12 acres of surface parking lot and vacant land. It is a large underutilized site at a key location. The development project for the site has the potential to enhance one of Milwaukee's greatest neighborhoods and one of its top visitor destinations.

"This could be a signature development for the city of Milwaukee," said Dave Spano, president of the ICC and president of Brookfield-based Annex Wealth Management.

The ICC site, still known by some as the Coachyards, was once a rail yard for trains bringing produce to the Third Ward markets. The rail yard was abandoned in the 1960s, at the same time that urban renewal plans destroyed the Third Ward's Italian neighborhood.

"It was a sad time," said Bill Jennaro, an attorney who grew up in the Third Ward and is a former president of the ICC. "I'm still sad about it to this day."

The ICC bought the property from Milwaukee County in the 1980s and built the ICC building, located at 631 E. Chicago St., where numerous conferences and events are held.

The ICC has unsuccessfully tried a few times in the past to redevelop the rest of the site, but the plans have never moved forward.

"The timing hasn't been right before," Spano said. "If we moved ahead with our plans in the '80s we would have been the only thing down there. We decided we should wait for the future development of the Third Ward."

The Third Ward has attracted a surge of development since 2000, transforming it into one of the city's trendiest neighborhoods. Now that the Great Recession is over, ICC members believe the Third Ward is ready for a major development of their property, Spano said. Last year, the ICC issued a request for information (RFI) to dozens of possible development partners to gauge their interest.

"We got some phone calls (from eager developers asking), 'Are you serious this time?'" Spano said.

The ICC recently selected Coachyards Development LLC, a division of Marcus Investments LLC, to do a feasibility study for the project. Marcus Investments is an investment arm of the Marcus family in Milwaukee.

Coachyards Development is working with Rainier Properties II LLC, led by developer Bruce Westling, to conduct the study. Westling, also president of brokerage and a principal for NAI MLG Commercial, is also leading the leasing efforts for Marcus Corp.'s The Corners development in the Town of Brookfield.

"Westling will see if the potential tenants he is talking to for The Corners might be interested in our project," Spano said.

The study team for the ICC project also includes the Engberg Anderson architectural firm, Greenfire Management Services, AECOM and Gilbane Construction Company. However, their expertise cannot be used until after the initial feasibility period.

The feasibility study is expected to take six months and will examine development possibilities for the ICC's property.

"At this point, we envision a mixed-use development that is an extension of the very unique and special Third Ward neighborhood," said Spano. "The project could potentially include parking, retail, restaurants, residential and hospitality. It would fill the gap between the neighborhood and Summerfest, add to the tax base and provide an exciting new addition to Milwaukee's downtown, Third Ward living and dining experience."

"It's such a big site," said Robert Joseph, a developer who has done numerous projects in the Third Ward. "Of course it will be a mixed-use development."

The size of the ICC property and its key location in the Third Ward near downtown Milwaukee, the Summerfest grounds and the lakefront have real estate professionals imagining the possibilities for its development potential.


Although there are some vacant spaces, the Third Ward has become a thriving retail district with numerous stores and restaurants. Suburban malls filled with national chain stores dominate the metro Milwaukee retail marketplace. The city of Milwaukee has few thriving retail areas, but the Third Ward is a notable exception, with an offering of mostly unique, independent retailers that attracts shoppers from outside of the city.

"It's a regional district," said Cory Sovine, vice president of Siegel-Gallagher's retail group. "People come from the suburbs to (shop and/or dine in) the Third Ward all the time."

With a few notable exceptions, including the Anthropologie store, national chains have avoided the Third Ward. But the ICC project could change that.

National retailers are starting to take note of the Third Ward, Westling said.

"They'll say, 'What's that kind of cool area near downtown (Milwaukee)?" Westling said. "It's on their radar."

A large scale new development on the ICC site could attract national retailers to the Third Ward, Sovine said.

"I think there is an opportunity that there could be a lot of retail down there," he said. "There's not a lot of ready-to-go vacant retail space in the Third Ward right now. The Third Ward to this point has a very limited national retail presence. But the ones that are down there are doing well. These are the kinds of things you sell when you are courting national retailers."

A new development could help attract national retailers because they prefer new buildings instead of the historic Third Ward buildings that are appreciated by independent retailers, Sovine said.

"A lot of national retailers aren't flexible (to fit into an old building)," he said. "They have their prototype."

Westling said the Marcus-led group hopes to attract one or more retail anchors to the project that will complement the Third Ward's existing retail offerings and will help attract more traffic for existing Third Ward retailers. That does not mean any anchor stores in the project will be large stores, Westling said. But they would be destination stores that help drive traffic to the development and the neighborhood, he said.

The Third Ward's warehouse district atmosphere provides a pedestrian-friendly and historic built environment that is unique in Milwaukee and seems to appeal to shoppers. By comparison, downtown Milwaukee has struggled to attract retailers. Office towers seem sterile and cold and are, "not conducive to shopping," Sovine said.

Separated from the rest of the city by the Milwaukee River and I-794, the Third Ward also has a feeling of isolation that sets itself apart and may be perceived by some shoppers as safer.

"From a neighborhood perspective (the Third Ward) is a completely different world than downtown Milwaukee," Sovine said.

Those attributes have led to the strength of the Third Ward's retail environment and could help attract retail development of the ICC site.

Nancy O'Keefe, executive director of the Historic Third Ward Association, cited the growing success of the Milwaukee Public Market.

"The Public Market is doing phenomenal. They have counters on the doors now. They have more than 1 million people (a year going to) the Public Market," O'Keefe said.


The ICC's request for information required developers to include plans for a hotel, which could complement the ICC's meeting facilities. However, there are already three hotels under construction downtown and a huge hotel planned at Potawatomi Bingo Casino.

"We're really starting to get overbuilt, to an extent," said Greg Hanis, president of New Berlin-based Hospitality Marketers International Inc. A new hotel in the Third Ward should not open for another four to five years to allow the market to absorb the additional supply that is under construction or soon to be under construction in the downtown area, he said.

However, Sovine said the Third Ward is its own unique market that attracts people to shop, dine and hang out. The neighborhood could support a small, trendy hotel, he predicts.

"I'm shocked it hasn't happened yet," Sovine said. "It stands to reason that if there are people who want to hang out there, then there should be a place for them to stay. It's very much a niche customer who would go to a Third Ward hotel."

A Third Ward hotel also could be appealing to people attending Summerfest or the ethnic festivals.

"It feels like a good site for a hotel," Joseph said.

Marcus Investments will provide great expertise in determining if a hotel will work in the Third Ward, Spano said.

"We're engaging with the premier hotel development company in the state," he said. "They're going to tell us what they think."


The Third Ward has attracted numerous office tenants, especially creative firms that find the historic buildings attractive. Pat LeSage, the owner of Pettibone Group, which owns Warehouse #1, the closest office building to the ICC site, said he is in negotiations with a pair of potential tenants that would essentially fill the building for the first time since 2001.

However, the Third Ward/Walker's Point submarket has a 21.2 percent office space vacancy rate, according to the Xceligent first quarter market report. The ICC project could include office space, but the development will be driven by market demand, Westling said.


Although the condo market collapsed in downtown Milwaukee and adjacent neighborhoods such as the Third Ward since the Great Recession, the apartment market in those areas is showing significant strength. Mandel Group, one of the largest housing developers in the downtown and Third Ward areas, says its apartment portfolio is currently 97 to 98 percent occupied. The 85-unit Jackson Square apartment building, located across the street from the ICC, only has one unit remaining, said Joseph. Jackson Square is the latest of several developments that Joseph has built in the Third Ward.

Urban neighborhoods need residential development to attract retail development, and the retailers help attract more residential development, Joseph said. The Third Ward is strong in both areas, he said, because it is an appealing, pedestrian-friendly urban neighborhood.

"That's what living in the city is all about," Joseph said. "It's about walking."


Any development of the ICC property will need to include enough parking spaces to support the uses that are developed there and will need to account for the parking demands from people attending Summerfest and other festivals. The ICC property currently has 1,800 parking spaces.

"Parking is very difficult for those 11 days (of Summerfest)," Joseph said.

Whatever occurs on the ICC site, real estate observers expect the evolution of the Third Ward to continue the progress made since the dreary urban renewal days. And the city's Italian community will once again play a major role in shaping the neighborhood's makeup.

"I appreciate what it's become," Jennaro said. "I admire what's been done to reestablish the neighborhood. It's now a neighborhood again."