Waiting game for apartments
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.