Early-stage work has begun at the 11-acre site of the future Iron District in downtown Milwaukee, but developers are still ironing out the specifics around how the $160 million project will be financed.
"At this point, we're really looking to finalize the capital stack," said S.R. Mills, chief executive officer at Kenosha-based Bear Development, in an interview with BizTimes Milwaukee. The real estate firm is partnering with Grafton-based Kacmarcik Enterprises to develop the mixed-use sports and entertainment district northeast of the Marquette Interchange. Announced in May, plans for the proposed project include a full-service hotel, an indoor concert venue, a residential development, and an 8,000-seat soccer stadium that will house a USL Championship league team and Marquette University's soccer and lacrosse teams.
Now, eight months since the project was unveiled, demolition work is underway at the former Ramada hotel property at North Sixth and West Michigan streets. Asbestos and environmental abatement projects recently wrapped up and the building is expected to be razed soon. Mills said construction will break ground "any day now" on the project's multi-family affordable housing development, which will be located on a 0.78-acre site on the west side of the district.
"We're actively working with our architects, engineers and contractors to further refine the plans so we can move those forward, and then securing the debt and the equity - that’s sometimes a little more art than science, but it's coming together well," he said.
As interest rates have continued to climb - including the Fed's most recent hike of half a percentage point Wednesday - the "art" of building the project's capital stack has become increasingly more complicated than the developers initially expected. As Bear and Kacmarcik mapped out their plans for the Iron District earlier this year, they understood there would be supply chain issues and that construction costs would be steep. But what they didn't anticipate was how expensive it would become to borrow money and finance debt. It's a challenge that has driven them to "look at things a little (differently)" when it comes to managing the project's various funding sources, Mills said. For example, taking on different short-term debt to advance through a certain period and then refinancing later, he said.
One funding source Mills is trying to avoid tapping - if he can help it - is the City of Milwaukee. In June, the city approved the creation of a developer-funded tax increment finance district for the proposed five story, 99-unit Michigan Commons apartment building. But that could be the only public funding the proposed Iron District project sees.
"We’re hopeful that we don’t need to reach out to the city to utilize TIF on (the other portions of the project)," said Mills. "Our goal is to not need any TIF, but we don't want to close the door on that either. We’re working hard to be able to secure all the necessary funding that we need."
That's despite earlier indications by Mills, as reported by Urban Milwaukee, that the proposed $40 million soccer stadium may require some public funding. That possibility has led some to raise questions about whether a community benefits agreement - one similar to that of the nearby Deer District - would come out of any public investment in the project.
A recent report by University of Wisconsin-Madison nonprofit think-tank COWS argues that the Iron District project would in fact need to provide community benefits, such as union contracts and living-wage jobs, in the case that it needed additional monetary support from the city.
"As the proposed Iron District comes into sharper focus and the city confronts a fiscal crisis with still uncertain impacts on municipal government, city policy makers will need to decide whether they want to direct public subsidies to a soccer stadium, hotel, and performing arts venue and on what terms. Guaranteed family-supporting employment for Milwaukee residents must be centered in discussion of these investments," according to the COWS report.