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Milwaukee council approves loans for The Moderne
Published November 3, 2009 - BizTimes Daily
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The Milwaukee Common Council this morning approved a controversial $9.3 million in city loans for The Moderne development, a planned 30-story building that will be built on a vacant lot at the southwest corner of Juneau Avenue and Old World Third Street in the downtown Milwaukee Park East corridor.
The building will have 203 apartments, 14 condominiums and first floor retail space. The Moderne is being developed by a group of investors led by developer Rick Barrett. The general contractor for the project is J.H. Findorff & Son Inc.
The project should break ground in December and will take two years to build, Barrett said.
Critics of the project said the loan created a financial risk to the city's taxpayers that the private sector was unwilling to assume. Critics also said the project will create more competition in a downtown housing market that is already soft.
The $9.3 million in loans from the city provide the final piece to the financial puzzle for the project. The city loans are necessary because the financial industry meltdown during the recession has made it extremely difficult for developers to obtain financing from the private sector for a major development, Barrett said.
"We're excited for our city, excited for the Park East and excited for the people we are going to put back to work," Barrett said after the council vote. "I can't tell you how honored I am that the (Common) Council saw what I saw. We're very happy."
Aldermen expressed reservations about providing a loan for a market-rate housing development, which is a significant shift in city policy. However, most said that there is a need to support the project because of the bad financial markets hindering development and to create jobs and increase the city's tax base.
To obtain support from aldermen for the project, The Moderne developers agreed to increase their emerging business enterprise (EBE) goal from 18 percent to 25 percent and to increase their resident preference program (RPP) goal from 22 percent to 30 percent, meaning more contractors will be minority-owned Milwaukee firms and more workers will be "under-employed or unemployed" construction workers who live in the city.
"When one considers the benefit vs. the cost, the city taxes that will be generated from the project and the jobs that will be created on what right now is a vacant lot, I think it weighs heavily on the side of supporting it," Alderman Michael Murphy said.
The $55.24 million project has a $41.4 million loan from the AFL-CIO Investment Trust, which will be serviced by Capmark Financial Group and is guaranteed by the U.S. Department of Housing and Urban Development (HUD)'s 221(d)4 program.
The Moderne developers also addressed concerns raised last week by aldermen about personal guarantees of the city loans and default provisions for the loans. Personal guarantees for the loans will be secured by a first lien on assets with a combined fair market value of no less than $3.35 million.
