Commercial property values in Milwaukee increased more than 18 percent in 2006, and some properties in the city’s downtown area have already posted dramatically higher increases for 2007.
A report by the Public Policy Forum values all of Milwaukee’s commercial property at about $9.7 billion for 2006.
Development in and around downtown Milwaukee has driven up property values in that part of the city.
The higher property values are reflected by the rising assessments and sale prices of commercial properties in the downtown area.
Several downtown commercial buildings that have been sold within the last year have sold for prices well above the properties’ assessed value. Those sales have triggered assessment increases for the properties.
The 14-story, 153,000-square-foot First Financial Centre, a 15-story office building at 200 E. Wisconsin Ave., sold for about $10.6 million in February. The building was assessed at about $7.5 million in 2006 and is now assessed at $10.8 million.
The 22-story, 472,000-square-foot Chase building at 111 E. Wisconsin Ave. was sold in the fall of 2006 for about $45.8 million, including its parking garage across Michigan Avenue. The sale and assessment are still under review, said Mary Reavey, the city’s assessment commissioner. For now, the Chase building, which was assessed at $34 million in 2006, is assessed at $49.5 million, and the garage is assessed at $8.8 million.
A mostly vacant commercial property along the Milwaukee River at 1781 N. Water St. was reassessed from $226,000 in 2006 to $4,539,000 for this year. The reassessment was largely reflective of land sales of nearby properties and the fact that the parcel is one of a few along the river that has not been redeveloped, Reavey said.
“It’s the point that it’s eminent,” she said. “The land around it is being sold for $20 to $30 per square foot. We put it at the low end of that range.”
A vacant, four-story, 18,250-square-foot commercial building at 221 S. 2nd St. in the Fifth Ward neighborhood sold for $600,000 in April, almost double its 2007 assessed value of $315,000. In 2006, the property was assessed at $218,000.
In light of the sale price, Reavey said her office may take a closer look at that building and its neighborhood.
“It will require investigation as to the terms of the sale,” she said.
Milwaukee reassesses all properties every year, Reavey said, largely to keep up with changes in specific areas in the city. Those assessments are made partially by looking at the prices of the sales similar nearby properties.
“We’re always reactive,” Reavey said. “We don’t want to force the market, we read it.”
Because her department is able to read the real estate market every year, the city ensures that its assessments are as accurate as possible, Reavey said.
“The advantage to doing it real time, every year, is that they are equitable,” she said. “There is a lot of variation (from year to year) because the city is so diverse.”
The assessor’s office generally looks at data from several years when reassessing a specific property, said Peter Weissenfluh, chief assessor.
“It depends on what type of property it is,” he said. “The trend line is what we look at. We don’t trend into the future.”
Another property near downtown that received a significantly higher assessment this year is the Lake Bluff at East Pointe apartment building at 1300 N. Prospect Ave.
The large increase was made because of plans to convert the 110-unit from apartments to condos. The Lake Bluff building was developed by Mandel Group Inc. in 1998 for about $15 million. The building was sold in January to Chicago-based Shoreline/Lake Bluff LLC for about $27.5 million.
The building was assessed at $16.7 million for 2006 and was reassessed to $26.9 million for 2007.
Garry Benson, principal of Shoreline/Lake Bluff, said that conversion is underway now.
When the building was sold by Mandel Group, it was near 100-percent occupancy. The condo conversion has lured about 20 percent of Lake Bluff’s population to purchase units.
The building ultimately will be better suited as condos rather than apartments because of its level of detail, Benson said.
“This was originally constructed with the anticipation of conversion, in terms of the detail and architecture that was put into the community,” he said. “We wouldn’t be recapturing those monies on a rental basis.”
Prices for the converted condos range from $259,000 to $809,900, Benson said, with sizes ranging from one bedroom to two bedrooms with a den. Units are being remodeled as they are sold, and include new kitchens and flooring and new paint. One-bedroom units include one parking spot; two bedroom units include two.
The former leasing office and part of the former club room are being redeveloped into a formal dining room that can seat up to 16 people and a theater room capable of seating eight to 10. Both of those rooms will be available to Lake Bluff residents.
When other apartment buildings in and near downtown have been converted to condos, they have had similar adjustments to their assessments, Reavey said.
“That’s what happened with Landmark (On the Lake) and the Blatz,” she said. “They’re different properties now. We’ll cancel the old tax key and create individual tax keys for each condo.”
The reassessment is appropriate because a condo building is far more valuable than an apartment building, Weissenfluh said.
The values of many downtown properties have increased dramatically in the last year, Weissenfluh said, but not all properties have had the same appreciation.
“All of the development has put upward pressure on assessments and values,” he said. “In general, (assessments and property values) have gone up and it looks like they will continue.”
Although retail spaces have not increased greatly in the downtown area in recent years, recent mixed-use developments such as Cathedral Square give the assessor’s office hope that that will change.
“That synergy hopefully will continue to improve retail in downtown,” Weissenfluh said.
Another encouraging sign that may drive commercial real estate values in the future is the relatively recent trend of out-of-state buyers purchasing land and buildings in downtown Milwaukee, Weissenfluh said.
“We have a changing profile of buyers, more out of state investors,” he said. “They can buy properties (here) at more reasonable cap rates (than in their own states).”
Downtown Rising
The assessed values of many commercial properties in downtown Milwaukee are on the rise. Some examples include:
2006 2007
assessment assessment
U.S. Bank building, 777 E. Wisconsin Ave. $174.7 million $191.3 million
100 E. Wisconsin Ave. $54.5 million $66.9 million
200 E. Wisconsin Ave. $7.5 million $10.8 million
Milwaukee Center, 111 E. Kilbourn Ave $40 million $47 million
Cathedral Place, 555 E. Wells St. $23.9 million $32.6 million
