Wait­ing game for apart­ments

Milwaukee Journal Sentinel - - Front Page - Tom Daykin Milwaukee Jour­nal Sen­tinel USA TO­DAY NET­WORK – WIS­CON­SIN

Some up­scale apart­ment tow­ers in the east side and down­town area re­main on hold.

By June, Milwaukee’s first new apart­ment high-rise in six years will open — with an­other un­der con­struc­tion.

But three other up­scale apart­ment tow­ers in the down­town and east side area re­main on hold, as the de­vel­op­ers con­tinue to as­sess the mar­ket and seek fi­nanc­ing.

“I can’t tell you with 100% con­fi­dence that we’re go­ing to get this done,” said de­vel­oper Barry Man­del about his firm’s pro­posed high-rise, known as Port­fo­lio. “This has tremen­dous chal­lenges.”

The apart­ment tow­ers are part of a his­toric surge in down­town area com­mer­cial de­vel­op­ment over the past few years.

Projects un­der con­struc­tion in­clude the Milwaukee Bucks arena, the BMO Tower of­fice build­ing, and a Hy­att Place Ho­tel, apart­ment build­ings and a new home for Milwaukee Brew­ing Co. at the for­mer Pabst brew­ery com­plex. Re­cently com­pleted projects that have re­shaped the sky­line in­clude North­west­ern Mu­tual Life In­surance Co.’s of­fice tower.

But there have been con­cerns about the num­ber of new high­erend apart­ments be­ing de­vel­oped through­out the greater down­town area out­strip­ping de­mand.

That’s led some apart­ment de­vel­op­ers to drop their plans, while other projects have been de­layed. An apart­ment build­ing planned for N. Wa­ter and E. Brady streets was re­cently switched to con­do­mini­ums — in part due to con­cerns about an over­sup­ply of rental units.

The Milwaukee area’s apart­ment va­cancy rate of 7% will likely rise to around 7.5% to 8% by the end of 2018, said Richard Aaron­son, chief ex­ec­u­tive of­fi­cer of Atlanta-based At­lantic Realty Part­ners, which last year opened two large mid-rise apart­ment de­vel­op­ments in Mil-

wau­kee and Wauwatosa.

“Ab­sorp­tion is go­ing to need to catch up,” said Aaron­son dur­ing a Thurs­day pre­sen­ta­tion at the an­nual real es­tate fore­cast spon­sored by In­sti­tute of Real Es­tate Man­age­ment’s Milwaukee chap­ter.

High-rises, be­cause of their greater num­ber of units and higher costs, are typ­i­cally the most dif­fi­cult apart­ment de­vel­op­ments to fi­nance.

Chicago de­vel­oper Robert King in 2016 dropped his plans to build a 35-story apart­ment tower at 700 E. Kil­bourn Ave. af­ter he couldn’t at­tract investors and lenders.

“They didn’t think the in­vest­ment yields would be there,” said King, pres­i­dent of Car­roll Prop­er­ties.

Milwaukee’s new­est high-rise, the 30-story Moderne, opened in 2012 with a $55.3 mil­lion fi­nanc­ing pack­age that in­cluded two city loans to­tal­ing $9.2 mil­lion — which have been largely paid off.

The Milwaukee apart­ment tow­ers now un­der con­struc­tion or pend­ing are mostly pri­vately fi­nanced. Some city funds are in­volved with one project, while an­other tower is be­ing funded mainly through tax-ex­empt bonds. Here’s a sum­mary of all five projects:

7Seventy7, a 34-story, $100 mil­lion build­ing at 777 N. Van Buren St. It’s been un­der con­struc­tion since April 2016 and will open in June.

North­west­ern Mu­tual, which is de­vel­op­ing 7Seventy7, ini­tially planned a large park­ing struc­ture to ac­com­mo­date growth at the com­pany’s nearby head­quar­ters.

Com­pany ex­ec­u­tives then con­cluded it made fi­nan­cial sense to also de­velop an apart­ment tower sim­i­lar to prop­er­ties North­west­ern Mu­tual owns in Chicago, Bos­ton and Wash­ing­ton, D.C.

“We do be­lieve there’s pent-up de­mand for this type of project in Milwaukee,”

“We do be­lieve there’s pent-up de­mand for this type of project in Milwaukee.” Chris Misiti-Eskritt Man­ag­ing direc­tor of as­set man­age­ment at North­west­ern Mu­tual

said Chris Misiti-Eskritt, man­ag­ing direc­tor of as­set man­age­ment.

7Seventy7 fea­tures 25 sto­ries of 315 high-end apart­ments, in­clud­ing 14 pent­house units, sit­ting above an eight­story, 1,400-stall park­ing garage.

The 34th story has a small gath­er­ing space for res­i­dents, while the street level in­cludes 10,000 square feet of re­tail space. Other ameni­ties in­clude fit­ness cen­ters, a con­fer­ence room and a ninth­floor out­door deck area that in­cludes a swim­ming pool and fire pit.

North­west­ern Mu­tual will be­gin mar­ket­ing the apart­ments by March. The rents haven’t yet been dis­closed.

Misiti-Eskritt ex­pects the units to at­tract a wide range of res­i­dents, in­clud­ing younger pro­fes­sion­als who al­ready live down­town and sub­ur­ban emp­tynesters who want to re­lo­cate.

Saint John’s on the Lake ex­pan­sion , a 22-story, $123 mil­lion build­ing at 1850 N. Prospect Ave. Con­struc­tion is to be­gin this spring.

Saint John’s Com­mu­ni­ties Inc., which op­er­ates the se­nior hous­ing com­plex, ex­pects to open the tower, with around 170 new units, in spring 2020.

The new tower will re­place a three­story build­ing at Saint John’s that pro­vides 50 beds for peo­ple who need nurs­ing care and 24 as­sisted liv­ing apart­ments.

Those nurs­ing care and as­sisted liv­ing units will be re­lo­cated to the tower’s lower floors and a con­nect­ing four-story build­ing.

The tower’s up­per floors will fea­ture 79 apart­ments for se­niors who can live in­de­pen­dently, along with 16 as­sisted liv­ing apart­ments.

Saint John’s has reser­va­tion de­posits on 68 of the in­de­pen­dent liv­ing apart­ments, said Re­nee An­der­son, pres­i­dent at Saint John’s Com­mu­ni­ties Inc. Com­bined monthly rents and ser­vice fees in those units start at $3,970, she said.

The project is be­ing fi­nanced mainly with $80 mil­lion in bonds is­sued by the Wis­con­sin Health and Ed­u­ca­tional Fa­cil­i­ties Au­thor­ity. That al­lows Saint John’s, a non­profit cor­po­ra­tion, to bor­row money at a lower in­ter­est rate be­cause the bond pur­chasers don’t pay taxes on those in­vest­ments.

Port­fo­lio, an $85 mil­lion to $90 mil­lion project with around 20 sto­ries at 1350 N. Prospect Ave. Con­struc­tion could be­gin by the end of 2018 if the project com­pletes its fi­nanc­ing pack­age by then.

Port­fo­lio, which would take around two years to con­struct, was ini­tially un­veiled in May 2016 as a 24-story tower with 235 apart­ments.

It’s be­ing re­designed to have around 180 units, said Man­del, pres­i­dent of Man­del Group Inc.

“We’ve de­cided that the depth of the mar­ket is un­clear,” he said.

Port­fo­lio con­tin­ues to tar­get older renters who can af­ford larger, lux­ury apart­ments with lots of ameni­ties. Man­del be­lieves that fo­cus will help set Port­fo­lio apart from other new Milwaukee high-rises.

“We don’t be­lieve mil­len­ni­als can af­ford the cost of new high-rise con­struc­tion,” Man­del said.

Port­fo­lio’s monthly rents would range from around $1,700 to $6,000, he said, with units roughly one-third to one-half larger than other lo­cal high­rise apart­ments.

Cou­ture, a $122 mil­lion, 44-story build­ing at 909 E. Michi­gan St. Con­struc­tion was to be­gin in De­cem­ber, but that start has been de­layed.

Cou­ture, which is be­ing de­vel­oped by Bar­rett Lo Vi­sion­ary De­vel­op­ment LLC, would take about 30 months to com­plete.

Rick Bar­rett, who op­er­ates the firm, had no ad­di­tional in­for­ma­tion on the project’s sta­tus, a spokesman said. Bar­rett’s other de­vel­op­ments in­clude the Moderne high-rise, 1141 N. Old World Third St.

Cou­ture’s re­vised plans, ap­proved last year, call for 312 apart­ments, 52,000 square feet of com­mer­cial space and a pub­lic tran­sit con­course that in­cludes the down­town street­car.

It would seek a wide va­ri­ety of res­i­dents, but would likely draw more empty-nesters than the Moderne, Bar­rett has said. Rents haven’t yet been dis­closed.

Bar­rett Lo plans to fi­nance the project with a loan to be guar­an­teed by a U.S. De­part­ment of Hous­ing and Ur­ban De­vel­op­ment fund. It pro­vides loan guar­an­tees in re­turn for fees from de­vel­op­ers.

The Com­mon Coun­cil and Mayor Tom Bar­rett in 2015 ap­proved plans to spend $17.5 mil­lion for the Cou­ture’s pub­lic im­prove­ments, in­clud­ing the tran­sit con­course and an out­door plaza.

Those city funds, in­clud­ing an ad­di­tional $2 mil­lion to re­lo­cate a sewer line, would be re­paid by 2033 from prop­erty tax rev­enue gen­er­ated by the Cou­ture and the neigh­bor­ing 833 East of­fice build­ing, which was com­pleted in 2016.

Goll House tower, a $55 mil­lion, 27story build­ing at 1550 N. Prospect Ave. A con­struc­tion start date hasn’t yet been an­nounced.

Madi­son de­vel­oper Chris Houden plans to de­velop the apart­ment tower af­ter mov­ing the 1898 Goll House, a for­mer man­sion later con­verted to of­fices, roughly 30 feet closer to Prospect Av­enue. The man­sion would then be re­de­vel­oped with a few apart­ments.

The high-rise would have 192 apart­ments aimed at younger pro­fes­sion­als and oth­ers, with rents start­ing at around $1,800 for one-bed­room units.

The project re­ceived Com­mon Coun­cil zon­ing ap­proval in Septem­ber over strong op­po­si­tion from neigh­bor­ing condo own­ers at 1522 N. Prospect Ave.

Houden op­er­ates Pal­isade Prop­erty Man­age­ment LLC, a Madi­son-based firm. He was trav­el­ing out­side the United States and couldn’t be reached for more in­for­ma­tion about the Goll House de­vel­op­ment’s sta­tus, a spokesman said.

TOM DAYKIN / MILWAUKEE JOUR­NAL SEN­TINEL

North­west­ern Mu­tual's 7Seventy7 apart­ment tower is un­der con­struc­tion and sched­uled to open in June. The tower is built on top of a park­ing struc­ture.

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