Dallas-based Gatehouse Capital's decision to drop its Milwaukee Hotel Palomar and Residences development proposal that was planned for the Park East corridor in downtown Milwaukee, is a major blow to efforts to attract development to the corridor.

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.

Work to demolish the Park East Freeway spur through the corridor was completed about five years ago. The freeway spur 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.

Chicago-based RSC & Associates planned to develop two county-owned blocks in the corridor, but dropped its plans for one block and its plans to build a pair of hotels and apartments on another block have been delayed indefinitely.

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 be 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, or is still under construction, 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, the Flatiron condominiums, a Staybridge Suites hotel and an Aloft hotel.

In response to questions about the Palomar project and the lack of development on county owned land in the Park East corridor, Milwaukee County Board Chairman Lee Holloway released the following statement, "This development would have been a great addition to the Park East area, and the developers gave this project their best shot. It’s unfortunate that the economy and the credit markets did not favor this type of project at this time. If anything, this proves that we are having difficulty in creating jobs for county residents. It underscores the need for a federal stimulus package to create jobs and opportunities in Milwaukee County."

However, Milwaukee Alderman Robert Bauman, who represents the downtown area, said the failure of the Palomar project demonstrates the problem of forcing developers to obtain county and city approval for development of the county-owned properties in the Park East corridor.

"There's an inherent problem with all of the county owned parcels," Bauman said. "Developers have two units of government they have to pass through. That creates delays and is an impediment for development in any economic climate."

In addition, the developer for the Palomar project indicated that city officials were reluctant to provide financial assistance for the project. 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."

In a statement to the media, Department of City Development Commissioner Richard "Rocky" Marcoux declined to address the issue of city financing for the project.

"We understand that current economic conditions have impacted the Palomar project, but we are hopeful that as conditions improve, Gatehouse will still view Milwaukee as the opportune place to invest and develop projects," Marcoux said. "Unfortunately, as the developer noted, market conditions are not ideal and lenders are cautious. The pace of the Park East corridor redevelopment will always be determined by the private marketplace, but we will continue to do our part to ensure that it’s an attractive development opportunity."

A spokeperson for Mayor Tom Barrett could not be reached for comment.

The city may need to re-consider its tax incremental financing (TIF) policy, in light of the recession, Bauman said.

"My guess is you will see a re-evaluation of the policy, given market conditions," Bauman said. TIF requirements could be loosened to, in effect, create a city stimulus package for economic development, he said.

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 number of home sales, and the prices that those homes sold for, fell throughout southeastern Wisconsin in 2008, according to MLS data released by the Greater Milwaukee Association of Realtors.

Home prices fell in every southeastern Wisconsin county, except for Ozaukee County, in 2008:

• Milwaukee, $169,737, down 12 percent compared to $192,844 in 2007.
• Kenosha, $189,965, down 5 percent compared to $200,836 in 2007.
• Ozaukee, $315,871, up 1.7 percent compared to $310,535 in 2007.
• Racine, $174,744, down 4.8 percent compared to $183,651 in 2007.
• Sheboygan, $162,021, down 1.5 percent compared to $164,432 in 2007.
• Walworth, $283,650, down 5.7 percent compared to $301,027 in 2007.
• Washington, $218,492, down 5.4 percent compared to $231,052 in 2007.
• Waukesha, $283,833, down 5.9 percent compared to $301,688 in 2007.

The number of homes sold in each county were down in 2008, according to the MLS data.

In Milwaukee County home sales were down 15 percent (from 9,580 in 2007 to 8,145 in 2008). In Kenosha County home sales were down 22 percent (from 2,110 to 1,641). In Ozaukee County sales were down 24.6 percent (from 1,127 to 849). In Racine County sales were down 18.7 percent (from 2,249 to 1,829). In Sheboygan County sales were down 19.8 percent (from 1,292 to 1,036). In Walworth County sales were down 32 percent (from 1,426 to 969). In Washington County sales were down 24.5 percent (from 1,730 to 1,307). In Waukesha County sales were down 20.4 percent (from 4,794 to 3,818).

Several major retail real estate developments in southeastern Wisconsin are having success attracting tenants to fill small retail spaces, according to Dan Rosenfeld, principal of Mid-America Real Estate, a retail real estate brokerage.

The Shoppes at Wyndham Village project, located at Highway 100 and Drexel Avenue in Franklin and anchored by Target and Sendik's Fine Foods stores, will soon be adding an Aveda salon, a Ferch's Malt Shoppe & Grille, Sport Clips and Cousins Subs, Rosenfeld said. Mid-America, which is handling the leasing for Wyndham Village developer Mark Carstensen Construction & Development Companies Inc., is also negotiating with a "local restaurant," which would occupy a stand-alone 7,000-square-foot building that would be built at the shopping center, Rosenfeld said. According to Rosenfeld, the Sendik's store at Wyndham Village is not struggling, contrary to some rumors in Franklin. "You have to farm that market and grow that market," he said.

The Shoppes at Fox River project, being developed by Opus North Corp. at 1200 W. Sunset Dr. in Waukesha, will be anchored by Target and Pick 'n Save stores and will also have Sonic, Buffalo Wild Wings, Sport Clips and Noodles & Company as tenants, Rosenfeld said.

The regional mall planned for Pabst Farms has been delayed because of the recession, but the Marketplace at Pabst Farms recently obtained leases for Carlson Wagonlit Travel, Cousins Subs and a chiropractor, Rosenfeld said. Mid-America is also negotiating with a restaurant for a 5,000-square-foot space, he said.

Lisbon Terrace LLC, a joint venture of Vangard Group LLC and Commonwealth Development Partners LLC, plans to build a three-story building on a vacant 32,555-square-foot site at the northwest corner of North 27th Street and West Lisbon Avenue with 14 two-bedroom apartments, 10 three-bedroom townhouses and a third floor common area with a media room, an exercise facility and meeting space.

The site is consists of several vacant lots and a city-owned parking lot that the developer plans to purchase for $32,500. The $5.6 million development will be financed in part through affordable housing tax credits allocated by the Wisconsin Housing and Economic Development Corp.
The apartments will have 1,000 square feet of space and the townhouses will have 1,500 square feet of space. Rends will range from $565 to $695 per month, depending on the income of the tenants.

Milwaukee Habitat for Humanity Inc. plans to build 25 more homes for low-income residents this year. The non-profit organization plans to build 15 homes in an area between North 1st Street, East Concordia Avenue, North Holton Street and East Chambers in the Harambee neighborhood. Habitat built 10 homes in 2008 and 10 in 2007 in another portion of Harambee, to the southwest.

Habitat also plans to build 10 homes along North 20th and North 21st streets in the Park West neighborhood.

The homes will be built by volunteers on vacant lots purchased from the city for $1 each.

The homes will have 1,100 to 1,400 square feet of space with 3 to 4 bedrooms and 2 bathrooms. Once completed the homes will be sold to low-income buyers for $60,000, plus 200 hours of sweat equity working on the homes.

Habitat for Humanity has built 228 new homes in the city and rehabilitated another 93 homes.

Best Choice Mechanical LLC, a heating, ventilation and air conditioning company plans to purchase a vacant two-story, 3719-square-foot building at 4703 N. Hopkins St. from the city of Milwaukee for $4,400. The company plans to spend $147,000 to rehabilitate the 109-year-old building into a business office.

Biodiesel company acquires terminal in Port of Milwaukee
Innovation Fuels, a rapidly emerging, New York-based renewable fuel company that manufactures, markets, and distributes biodiesel fuel to customers around the world, has closed on the purchase of a large terminal on 10 acres of land in the Port of Milwaukee.

The terminal will have the capacity to store 310,000 barrels (43,000 metric tons) of biodiesel and other renewable fuels into and out of the Midwest.

The project was financed by Securant Bank & Trust, a commercial bank based in Milwaukee.

"We feel very strongly about the renewable fuels sector and understand the strategic importance for Innovation Fuels to establish a solid base here in the Midwest and Milwaukee in particular," said Spencer Mather, vice president of Securant Bank & Trust. 

The terminal, originally built as Shell Oil's Milwaukee headquarters in the 1950s, includes a 20,000-square-foot warehouse, executive offices and a garage. The site features existing truck and rail loading infrastructure, with excellent highway access and is served by two Class I railways, the Union Pacific Railroad and the Canadian Pacific Railroad.

In addition, the Port of Milwaukee has international shipping access via the St. Lawrence Seaway and can receive river barge cargo via the Mississippi. The facility also has an idled connection to the Westshore petroleum pipeline, which could be used to bring in diesel and gasoline to the terminal for blending with renewable fuels, such as biodiesel and ethanol.

"This acquisition provides Innovation Fuels with direct, deep-water access to the lucrative Great Lakes and Northeast markets as well as to international ports, making the Port of Milwaukee property one of the keys to our global strategy," said John Fox, chief executive officer for Innovation Fuels. "We can now easily transport finished product from Midwestern biofuels producers to virtually anywhere on the East Coast of the United States as well as to our international customers."

"We are both simplifying and streamlining the ethanol and biodiesel logistical and distribution process," said Richard "Hardy" Sawall, senior vice president of midwest operations for Innovation Fuels. "Being able to store renewable fuels at the Port of Milwaukee site and having direct access to a refined petroleum pipeline represents a unique opportunity for us to seamlessly blend our sustainable biodiesel into the regional diesel fuel market."

Sawall said the company plans to create 30 to 40 jobs at the terminal and to invest $15 million to $20 million to upgrade the infrastructure at the site.

Innovation Fuels' Research and Development center is studying next generation technology and feedstocks, including jatropha, pennycress and algae - crops that don't divert resources away from feeding people.

Unified Solutions renews 277,000-square-foot lease
Unified Solutions Inc., a contract packaging firm, recently renewed its 277,000-square-foot lease at 9801 80th Ave. in the Lake View Corporate Park in Pleasant Prairie. The company is headquartered in the building and uses about 70,000 square feet for manufacturing, 203,000 square feet for warehouse operations and 4,000 square feet for office space. The building is owned by Malvern, Pa.-based Liberty Property Trust. "We consider it a vote of confidence in our properties and service when a tenant renews, and we are pleased that USI will remain a tenant for years to come," said Neal Driscoll, director of leasing and development for Liberty Property Trust. "Overall, our occupancy rate remains high, which we believe is due to a powerful combination of high tenant satisfaction with Liberty and a degree of economic uncertainty."

Liberty Property Trust has other spaces available for lease in southeastern Wisconsin. The firm has 30,500 square feet of space available at 2440 W. Corporate Preserve Dr. in Oak Creek. It is building a 240,000-square-foot industrial building at 8691 109th St. in Pleasant Prairie that will be available in April. The company also has 50 acres of vacant land in Sturtevant, where it plans to eventually develop 800,000 square feet of industrial space in multiple buildings.

Irgens purchases Brookfield office complex
Wauwatosa-based Irgens Development Partners LLC purchased the 49,062-square-foot two building office complex at 16620-50 Bluemound Road in Brookfield from Liberty Property Trust. The complex, formerly known as the Liberty Property Trust Center, has been re-named Bluemound Crossings.

The sale price was not disclosed. Kevin Armstrong and Kurt Smith of CB Richard Ellis represented Liberty Property Trust in brokering the sale.

“We were able to acquire this asset below reproduction cost," said Jason Luther, vice president of Irgens Development. "In turn, we’ve positioned the project to be able to extend this value to prospective tenants by offering competitive lease rates below market. Improvements and upgrades to the building and property will further enhance the appeal of this property.”

Current tenants in the complex include Ameriprise Financial, Access Endodontics, Sundance Vacations, and Wisconsin Laser Eye. Irgens is offering 1,325 to 12,804 square feet of office spaces for lease in the complex.

Irgens plans to make renovations throughout the property including updates to the common area corridors and restrooms, electrical/lighting and HVAC systems to be more energy efficient and to comply with EnergyStar practices. Exterior updates beginning in the spring will include significant landscape enhancements, repair to the brick facade, and parking lot repair. Irgens will also apply for Green Globe certification from the Green Building Initiative for the property once renovations are complete.

“Not only is energy management good for the environment but it can produce significant savings for our tenants through lower operating expenses further differentiating our project from competitive available space in the market,” said Luther.

Brookfield-based Briohn Building Corp. recently completed the design and construction of an office space renovation and 15,800-square-foot manufacturing addition for Marking Services Inc. at 8265 N. Faulkner Road, Milwaukee. Briohn also recently completed a 11,000-square-foot tenant improvement for M&I Treasury Management at the Milwaukee Center, 111 E. Kilbourn Ave., Milwaukee, and a 4,150-square-foot interior remodeling for McKey Perforating, 3066 S. 166th St., New Berlin. In addition, Briohn has been contracted to design and build a showroom expansion for Makino Production Machinery Group at W229 N2510 Duplainville Road, Pewaukee.

Brookfield-based NAI MLG Commercial recently added Adam Williquette to its Brookfield brokerage team as a sales associate. His responsibilities will include assisting industrial and investment clients in the acquisition of investment property, leasing and sale of commercial buildings, as well as land development. Williquette joined NAI MLG Commercial in 2004. In his most recent role as a licensed investment broker intern, Williquette assisted brokers in all aspects of the commercial real estate industry.

Milwaukee-based Triad Construction recently announced the addition of Alba Santana as receptionist to its office staff.

Waukesha Campbell Construction Inc., Waukesha, recently announced that Sal Bando Jr., has joined the company as its business development manager.

Appraisal by Schley LLC, a Milwaukee-based, full-service residential appraisal firm, announced that it is now available to provide appraisals for Federal Housing Administration (FHA) loans.

The city of Milwaukee Housing Authority recently issued a request for proposals (RFP) for architectural and engineering services to develop a master plan for the revitalization of the Westlawn housing development. The proposals are due on Feb. 20.

IREM Forecast Breakfast, Thursday, Jan. 15, 2009, 7-9:30 a.m., Italian Community Center, 631 E. Chicago St., Milwaukee. For more information, call (414) 476-4736.

REACH Winter Gala 2009, The Big Chill, Saturday, Feb. 28, 7:30-10:30 p.m., The Eisner Museum, 208 N. Water St., Milwaukee. For more information, call (414) 271-2021.