Developer Rick Barrett has spent the last 3 years of his life been working on The Moderne, a planned 30-story building that will be built at the southwest corner of Juneau Avenue and Old World Third Street in downtown Milwaukee.

Now the project is finally ready to break ground. The Milwaukee Common Council on Tuesday approved $9.3 million in city loans for the project. The project should break ground in December and will take 2 years to build, Barrett said.

The building will have 203 apartments, 14 condominiums and first floor retail space. The general contractor for the project is J.H. Findorff & Son Inc.
“It will truly be an iconic structure on the west side of the (Milwaukee) River and will undoubtedly lead to further development in the Park East corridor,” said Ald. Robert Bauman.

The $9.3 million in loans from the city are the final piece to the financial puzzle to the project, which Barrett. 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, he says.

“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.

That means 25 percent of the contractors on the project would be owned by minority-owned Milwaukee firms and 30 percent of the workers will be “under employed or unemployed” construction workers who live in the city.

The EBE and RPP commitments were a key consideration for several aldermen.

“It is extremely important for us to get a benefit from (a development subsidized by the city), other than erecting a beautiful building,” said Ald. Ashanti Hamilton.

Ald. Joe Davis and Common Council President Willie Hines were the only aldermen who objected to the loans for The Moderne. Davis said he opposed the project because there were no job training or business development component.

Other 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 Comptroller has opined that this is a very risky transaction. We all recognize that,” Bauman said.

But city support for The Moderne should essentially be seen as an economic stimulus project for the city, he said.

“We will put people back to work,” Bauman said. “We will create a building of substantial value in the city of Milwaukee and we will add substantially to the tax base. I think those are the principal objectives we need to keep in mind in reviewing any real estate financing that the city is asked to engage in.”

“When one considers the benefit versus 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,” said Ald. Michael Murphy.

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.

The site where The Moderne will be built was previously occupied by a 1-story muffler shop building, Bauman said. In 2005 a developer proposed a 5-story, 86-room Country Inn hotel for the property, but that project fell through.

The Milwaukee area has a 7.8 percent industrial space vacancy rate, according to the third quarter report by Boston-based Colliers International (whose local affiliate is Milwaukee-based Colliers Barry).

The region's 7.8 percent industrial space vacancy rate for the third quarter was unchanged from its 7.8 percent industrial space vacancy rate in the second quarter.

The Milwaukee area's vacancy rate is the 8th lowest of the 55 markets tracked by Colliers International and is much lower than the national industrial space vacancy rate of 10.53 percent, according to the report. The national industrial space vacancy rate spiked in the third quarter, up from 8.67 percent in the second quarter.

The lack of speculative development in the Milwaukee area is a big reason the region has a lower industrial space vacancy rate than the rest of the country, said Colliers Barry president and CEO James T. Barry III.

Five organizations in the Milwaukee area will receive a combined $320 million in allocation authority through the federal new markets tax credits program.

Waveland Community Development will received $100 million, First-Ring Industrial Redevelopment Enterprise will receive $70 million, M&I New Markets Fund will receive $40 million and the Milwaukee Economic Development Corp. (MEDC) will receive $25 million.

Waveland will use its $100 million allocation to invest in business and real estate projects that demonstrate “a capacity for catalytic change” in economically-distressed communities. WCD works with and invests in women and minority-controlled businesses, as well as companies located in minor urban and more removed rural areas.

The Wisconsin Community Development Legacy Fund (WCDLF) will use its $85 million allocation to bring equity equivalent financial capital and low-cost senior debt currently not available in the low-income communities of the state. In Milwaukee, WCDLF will target investments that provide employment and entrepreneurship opportunities with a focus on the minority population.

“This award will be used to assist Legacy Bank in providing the much needed catalyst for investment in small businesses in underserved community and commercial real estate projects located in low and moderate income areas in the City of Milwaukee,” said Legacy Bank chairwoman and CEO Deloris Sims.

M&I New Markets Fund in Milwaukee will use its $40 million allocation to make loans and purchase loans from other Community Development Entities (CDEs) in low-income communities, and to support the development of office, industrial, retail, residential, mixed-use and community facilities.

First-Ring Industrial Redevelopment Enterprise (FIRE) is a collaborative entity designed to revitalize Southeastern Wisconsin’s abandoned industrial properties. FIRE will use its $70 million in capital to invest in office, mixed-use, community facility, retail and industrial developments designed to rehabilitate abandoned, contaminated and blighted industrial sites and promote sustainable development.

The Milwaukee Economic Development Corporation (MEDC) will use its $25 million allocation to increase the amount of low-interest loans to business and real estate developers for asset purchases, real estate development, and mixed-use developments in Milwaukee’s low-income communities.

“As a member of Congress, I fought to establish the New Markets Tax Credit as a tool to encourage investment in low-income communities that lack access to capital,” said Mayor Tom Barrett. “The allocations to MEDC and other local community development financial institutions ensure that this tool is put to work to rebuild the economy of Milwaukee's central city, creating jobs and opportunity.”

The seventh annual BizTimes Milwaukee Commercial Real Estate & Development Conference will be held next week, on Nov. 12, at Potawatomi Bingo Casino in Milwaukee. The event will feature a panel discussion with some of the most renowned commercial real estate experts in the nation.

The theme for this year's conference will be, "What Now?" The conference will examine the latest trends in commercial real estate and development and explore the possibilities for the year ahead. Emphasis in the discussion will be given to successful development strategies and best practices in a recession, including adaptive reuse of properties, effective approaches to gaining access to capital, environmental sustainability and the emergence of aerotropolis development (near airports).

The panelists will share their insights about national statistics and trends and offer their perspectives about the possibilities and the limitations of the Milwaukee market.

The national experts on the panel will include:

The BizTimes Milwaukee Commercial Real Estate & Development Conference will take place Thursday, Nov. 12, at Potawatomi Bingo Casino, 1721 W. Canal St., Milwaukee.

The breakfast panel discussion will be moderated by professor Mark Eppli, Ph.D., who is the Marquette University Bell Real Estate Chair and a fellow at the Urban Land Institute. Opening remarks will be provided by Richard "Rocky" Marcoux, commissioner of the Milwaukee Department of City Development.

BizTimes Milwaukee presents the conference annually in conjunction with the Bell Real Estate Chair and the Commercial Association of Realtors Wisconsin (CARW).

More information about the conference is available at: http://www.biztimes.com/site/commercial-real-estate-development-conference

Towne buying building for Actuant HQ

Towne Investments announced that it has purchased the 175,000-square-foot building at 12545 W. Westbrook Crossing, Menomonee Falls, from Bemis Manufacturing. Towne will remodel and add a 137,000-square-foot expansion to the building, which will be occupied by Actuant Corp. The company will move its corporate headquarters from Butler to the facility, and a new office building that will be built across the street.

Towne Investments is the trade name under which Milwaukee-based Zilber Ltd. develops, owns and manages commercial real estate. Zilber executives said they closed on the purchase of the building on Friday and concurrently entered into a long-term lease agreement with Actuant.

The new facility will allow Actuant to consolidate its operations in the Milwaukee area, and add jobs.

“We are extremely pleased to be part of a transaction that involves the expansion of jobs in southeastern Wisconsin,” said Zilber president Jim Borris.

“We are very impressed with Actuant’s management team, including chief executive officer Bob Arzbaecher,” said Zilber executive vice president John Kersey. “They did an outstanding job in facilitating this transaction. We look forward to providing them with an exceptional building to conduct their business.”

Milwaukee-based C.G. Schmidt will be the general contractor for the expansion project, which was designed by Zimmerman Architectural Studios. The project will be completed by the summer of 2010.

Actuant was represented by Kurt Van Dyke and Pete Slezak of Colliers Barry in brokering the lease with Towne Investments.