Last updated on June 24th, 2019 at 02:09 pm
The Milwaukee Common Council has approved a $4 million loan related to the redevelopment of the former Sears and Milwaukee Mall building on Milwaukee’s north side into an 80-room boutique hotel and conference center.
The loan was approved despite concerns raised by some that in doing so, the city would be taking on “significant risk” while also not having complete information on the project’s feasibility.
Council members voted 12-3 to approve the loan that will help finance a proposed redevelopment project from Milwaukee developer Kalan Haywood to convert the former Sears building at the northwest corner of Fond du Lac and North avenues into the Ikon Hotel.
The roughly $30 million project will initially consist of the hotel with a rooftop restaurant and first-floor incubator and office space, as well as a new 24,600-square-foot conference center next door. Later development phases could include housing, offices, a fitness center and retail space.
In assisting with that project, the city would put $4 million toward it through the creation of a new tax incremental financing district. Half of that money will be used for costs related to property acquisition, allowing Haywood to pay back a loan he received early last year from the Milwaukee Economic Development Corp. to buy the property. The other $2 million will go toward redevelopment work, including interior demolition, asbestos abatement and other site work.
Alderman Mark Murphy said although he supported the project overall, he was wary of the city committing money to the project due to the apparent high level of risk involved in the project. He said his concerns come from a report penned by city comptroller Martin Matson.
The report, dated April 23, points out the comptroller’s office has not received from Haywood on the hotel’s projected income, and therefore could not determine whether he could repay the loan. What’s more, private financing has not yet been lined up for the project.
Matson’s report further states that if Haywood is unable to secure the necessary financing for the project and pay back the $4 million loan, the tax financing district would not break even and the city would take possession of the property.
“I simply think that in order to make an informed and thoughtful decision we should take the advice of the comptroller,” and hold off until the city receives more information, Murphy said.
Haywood, president of Haywood Group LLC, said that in the time since Matson’s report a consultant has completed a feasibility study on the project, and added he plans to provide the study’s findings with the city once his group has thoroughly reviewed it.
While Haywood declined to provide details on the report’s findings, he offered this: “Since I’ve received (the study), I’ve been smiling ever since.”
Alderman Russell Stamper, who represents the area where the hotel would be developed, said the loan from the city would make private lenders more comfortable in providing a loan of their own on the project.
Pushing back the approval of the loan even further would also mean Haywood would likely not be able to achieve his goal of opening the hotel portion of the project in time for the Democratic National Convention next summer.
“In order for us to improve the central city, our community, we have to build economic projects and provide jobs,” Stamper said.
Alderwoman Chantia Lewis said the project also represents a significant development of a property that lies outside of downtown Milwaukee, an area that has seen a significant building boom in several years.
“This moment is one that we can point (to) and look back to and say this is one of the developments that we as a city partnered with to help spur economic development in the neighborhoods,” she said.
Murphy was joined by fellow aldermen Bob Donovan and Terry Witkowski in voting to send the proposal back to the committee level, in order for the city to receive additional information from the developer. When that motion failed, the three voted against the proposal altogether.
The 200,000-plus-square-foot three-story building that is to become the Ikon Hotel was built in 1927, with further additions in 1940 and 1947, according to a city report.
It was first used as a Sears until the department store ceased operations there in 1981. Then in 1987, the building was remodeled and became the Milwaukee Mall, which was comprised of dozens of smaller vendors. Haywood purchased the building in 2018.