Brownfield success story

Last updated on May 13th, 2019 at 02:40 pm

For decades, Allis-Chalmers Corp. was an industrial giant. The factory in West Allis employed more than 15,000 people in its heyday.

However, in the mid-1980s, the company collapsed into bankruptcy, putting thousands of people out of work and leaving West Allis with a massive, obsolete, vacant industrial property.

As the Milwaukee area’s manufacturing sector struggled, blue-collar West Allis became the quintessential down-on-its-luck Rust Belt town, symbolized by the vacant Allis-Chalmers plant.

The former Allis-Chalmers property was a huge brownfield that attracted little interest from developers. Although part of the property was converted into a shopping center, much of the massive facility remained vacant for years.

“(The buildings) were in rough shape,” said Kyle Harmon, who was formerly the vice president of Siegel-Gallagher Inc. Harmon was one of the few real estate brokers who thought part of the Allis-Chalmers plant had the potential to be redeveloped into an office complex. “There were a lot of pigeons, broken windows and roof leaks. There were definitely challenges with the buildings, but the buildings were structurally very stable.”

Richard Carlson had worked for Allis-Chalmers for 20 years as a research engineer.

After the company went bankrupt and he lost his job, Carlson bought much of the former Allis-Chalmers complex and for eight years used it to provide cold storage space.

“It sat there for several years because I wasn’t convinced I wanted to do (a major redevelopment),” he said.

The City of West Allis received a $300,000 brownfield grant from the Wisconsin Department of Natural Resources in 1996 to clean up and redevelop the Allis-Chalmers property. However, Carlson turned it down for a year, still unsure if he wanted to do the project.

“I kept looking at it and thought, ‘Well, with this grant, let’s see if anybody is interested in coming over here in terms of office space,’” Carlson said.

The grant paid for two new elevators.

“If the brownfield grant hadn’t been there, we wouldn’t have started (the redevelopment),” Carlson said.

Still, many were skeptical that office tenants would want to be located in an old factory in West Allis. Carlson said one commercial real estate broker told him he was crazy.

“They thought we were lunatics,” Carlson said.

Harmon was one of the few believers and represented Carlson’s company, Whitnall Summit Co., in finding tenants for the office development, which ultimately became known as Summit Place.

Later, Carlson hired Harmon and named him president and managing member of Whitnall Summit Co.

When the $50 million redevelopment is complete, Summit Place will have about 650,000 square feet of office space.

The office market was flat when the project started in the mid-1990s, but Harmon believed the property was ideally located – just 10 miles from downtown Milwaukee and near Interstate 94 and the Zoo Interchange. The building had large floor plates to accommodate large office space users more efficiently on a smaller number of floors than other, narrower office buildings.

The property had ample room for parking. Plus, the brick and steel structure provided the same type of architectural charm as many of the buildings in Milwaukee’s Historic Third Ward.

“You had some real charm to the place,” Harmon said. “People were attracted to the shell.”

By starting with the already built and structurally sound shell of the Allis-Chalmers buildings, Carlson was able to build a large office complex at a lower cost than it would cost to build the same-sized office building brand new. The price savings is about $40 per square foot, Carlson said. It costs about $125 to $140 per square foot to build a new office building, he said.

Carlson purchased the buildings for Summit Place and some other properties on the former Allis-Chalmers complex for about $7 million from the Allis-Chalmers Reorganization Trust.

The lower construction prices have enabled Carlson to charge lower lease rates than many other office buildings that he is competing with in the market. As a result, Summit Place has lured office tenants from throughout the metro area.

So far, about 90 percent, or about 560,000 square feet, of the office space at Summit Place has been leased. The complex has 60 different tenants, which occupy as little as 1,000 square feet and as much as 163,000 square feet. The largest tenant is Blue Cross & Blue Shield of Wisconsin, which moved to Summit Place earlier this year and abandoned its downtown Milwaukee building.

Carlson also took advantage of government assistance to make the massive redevelopment project work. In addition to the brownfield grant, the City of West Allis provided $7 million in tax incremental financing (TIF) for the building’s infrastructure and to build a parking structure. Carlson also received federal new market tax credits worth about $2.5 million for the project.

The property’s environmental issues were addressed by the previous owner, Carlson said. He said the Wisconsin Department of Natural Resources (DNR) has become easier to work with on brownfield projects, because the agency is taking a more pragmatic approach in the interest of encouraging redevelopment of abandoned industrial sites.

Carlson thinks more brownfield redevelopment projects will occur in the future as more people want to live and work in the middle of the metro area without having to drive lengthy distances each day, especially if fuel prices skyrocket again.

However, municipalities, especially built-out communities such as West Allis, are competing with outlying areas for new development. Cities should be willing to help developers with brownfield redevelopment projects, Carlson said. The investments will pay off for the cities by creating more jobs and increasing the tax base, he said.

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