Costly delays
Couture’s delays may mean a $6.7 million bill for Milwaukee County and alternative plan for The Hop.
Milwaukee County taxpayers could be hit with a $6.7 million bill from the federal government because of continuing delays with the planned Couture apartment high-rise.
Also, city officials might need another way to complete The Hop’s lakefront loop, which depends on the Couture’s transit concourse, to avoid repaying a $14.2 million federal grant.
But, the good news is that a federal deadline for the transit concourse’s completion could be extended.
That would eliminate the immediate need for Mayor Tom Barrett’s Department of Public Works to create a Plan B for completing The Hop’s lakefront loop.
And it would give County Executive Chris Abele’s administration more time to avoid writing a $6.7 million check to the Federal Transit Administration.
FTA officials haven’t yet told the Journal Sentinel whether the agency would consider extending the Dec. 31, 2020, deadline.
The agency, in a statement issued Tuesday, said it is continuing to work with both county and city officials on the streetcar concourse.
A statement from Jeff Polenske, city public works commissioner, hinted that an extension was possible.
“We remain optimistic the line will run through a transit concourse in a
“We remain optimistic the line will run through a transit concourse in a completed Couture. In reaching that goal, we may have to adapt how we approach the work.”
Jeff Polenske city public works commissioner, in a statement
completed Couture. In reaching that goal, we may have to adapt how we approach the work,” it said.
“That involves partnering closely with others involved in this project to maximize the benefits and reduce the impacts to taxpayers,” Polenske’s statement said, without elaborating.
“Milwaukee County continues to support BVD (Barrett Lo Visionary Development LLC’s) vision for the property and their efforts to secure project funding,” said Aaron Hertzberg, the county’s director of economic development. “County staff is working with the FTA to consider if an extension of the timeline to deliver transit amenities is appropriate.”
The FTA in recent years has extended deadlines in connection with passenger rail projects in such areas as San Jose, California, and Honolulu, Hawaii.
Here’s why this matters to Milwaukee:
The Hop’s lakefront loop runs east from the the streetcar’s main line on North Milwaukee Street.
That loop is supposed to begin operating by the end of 2020 on tracks already built on East Michigan and East Clybourn streets. The Couture’s transit concourse would link those tracks.
The transit concourse would solve problems for both local officials and Barrett Lo Visionary Development, which plans to build the 44-story, 322unit Couture overlooking downtown’s lakefront.
Barrett Lo needed to buy the Couture site, a former county bus facility at 909 E. Michigan St., at a deep discount to help make the project feasible, according to the county’s consulting firm, Chicago-based S.B. Friedman & Co.
But, the county was on the hook to pay $6.7 million to the Federal Transit Administration if it didn’t sell the property at market value. That’s because the agency helped finance the bus facility with a 1988 grant.
So, city Development Commissioner Rocky Marcoux suggested Barrett Lo redesign the Couture to include a transit concourse for the streetcar and buses.
That met the FTA’s condition that the county would not have to pay back the federal grant as long as the Couture site’s sale proceeds were used for another transit project.
Barrett Lo later bought the 2.2-acre county site for $500,000, and in 2017 demolished the bus facility.
Since then, construction of the Couture has been on hold until Barrett Lo, led by Rick Barrett, can complete its financing package.
The project got a big boost in October. That’s when the U.S. Department of Housing and Urban Development invited Barrett Lo to submit the application for a firm commitment to guarantee a construction loan.
That preliminary decision indicated the Couture had largely cleared an extensive underwriting process that lasted several months.
But that guaranteed loan would cover only part of the development tab. The remaining costs would be covered by the project’s equity investors.
HUD granted Barrett Lo two extensions to meet its application deadline while the firm worked to attract investors.
The latest deadline was Friday — with Barrett Lo announcing it would not meet it.
Instead, the firm plans to resubmit an application once it’s assembled enough investors.
Barrett Lo didn’t indicate when that would be, or how much cash it still needed to secure before seeking the HUD loan guarantee.
Developers pay fees for the loan guarantees.
The agency provides an accelerated route to obtain a guarantee — an option Barrett Lo plans to use.
HUD, in its guidelines, says accelerated requests should be done only “in strong markets,” with both the developer and its lender acknowledging “the risk of a rejection.”
Rents are rising in the Milwaukee area as young adults establish their own place and baby boomers look for high-end empty nests.
Other HUD guidelines include the lender and developer having a “previous positive experience” with the program.
Barrett Lo used a HUD-guaranteed loan as its main financing for the 30story Moderne apartment and condo high-rise. It opened in 2012 at 1141 N. Old World 3rd St.
The Moderne financing included two city loans, which Barrett Lo finished paying off in 2018.
The Couture’s main financing would be an $80 million private loan guaranteed by HUD, according to a Department of City Development report.
Barrett Lo also expected to raise $25 million from investors.
The $122 million development tab includes $17.5 million in city funds for the Couture’s transit concourse and other public improvements. Those city funds would come from property taxes generated by the Couture and the neighboring 833 East office building.
City officials in June said there are possible alternatives to the Couture transit concourse for completing the lakefront loop by the end of 2020.
They could include a temporary stop for the line.
However, city officials remain confident the Couture will be built, according to Polenske, and Dan Casanova of the Department of City Development.
They spoke at a June meeting of the Common Council’s Public Works Committee.
Some committee members said they’re concerned that the lakefront loop won’t meet that December 2020 deadline.
That could force Milwaukee to repay a $14.2 million federal grant used to help finance the route — unless the Federal Transit Administration extends the deadline.
Meanwhile, Ald. Bob Donovan on Tuesday said local officials should find another developer for the Couture site.
“I think it is now past time for the City to seek other proposals to develop this very special site,” Donovan said in a statement.
Actually, it’s up to Milwaukee County to make that decision.
Under a 2016 development agreement, a Barrett Lo affiliate, Couture LLC, was given a deadline to begin construction — which has long since passed.
That contract allows the county to force Barrett Lo to return the development site in exchange for $425,000. That’s 85% of the purchase price.
Alison Dirr of the Journal Sentinel staff contributed to this report.
Tom Daykin can be emailed at tdaykin@jrn.com and followed on Instagram, Twitter and Facebook.