Last updated on April 21st, 2023 at 06:12 pm
A judge on Wednesday approved the sale of the 100 East office tower in downtown Milwaukee, ending one chapter for the building, and starting another.
Addressing about a half dozen parties, including attorneys for current building owner Hertz Milwaukee 100 East Wisconsin, LLC, its creditors, developer Michael Klein, and receiver Michael Polsky, Milwaukee County Circuit Court Judge Christopher Foley said he had reviewed the “receiver’s motion to sell” the 36-story building and agreed that all efforts had been made to secure the “highest and best offer” for the building, which has been in foreclosure since April 9, 2021.
Filed on March 16 by Polsky, that motion urged Foley to approve selling the building to 100 East Propco, LLC – a redevelopment group led by Klein of Klein Development and restauranteur John “Johnny V” Vassallo – for $28.75 million. The developers plan to transform the now half-empty office building into a luxury apartment tower.
Referencing the sale agreement on Wednesday, Foley said he was “satisfied that this is the highest and best offer for the building.”
“It would be highly illogical to not approve the sale,” he said, just before giving his formal approval of the sale. “It is the sad financial reality that the lenders, and other creditors, will be left holding the bag.”
Foley’s approval of the agreement comes as part of the foreclosure lawsuit that building owner Hertz Milwaukee 100 East – an affiliate of California-based Hertz Investment Group – has been working through with Wilmington Trust National Association – a trustee to the company’s lenders.
Hertz purchased the 435,000-square-foot office building at 100 E. Wisconsin Ave. in 2016 for $78 million, according to state records. The acquisition was part of a $416.9 million office portfolio deal for Hertz.
That same year, law firm Michael Best & Friedrich announced it would move its 235 employees out of 100 East and into the BMO Tower at 790 N. Water St. The move took place in April 2020. Also in 2016, PricewaterhouseCoopers announced it was moving more than 250 workers from 100 East to the 833 East office building. The move took place in December of 2020.
Morningstar Credit Ratings LLC, a national credit rating organization, in 2018 placed a $51.9 million loan for the 100 East building on its watchlist because of the expected drop in occupancy from 83% to 60.4%.
Since then, 100 East has lost other tenants to new downtown office buildings, including Fiduciary Management, which currently leases space on the 22nd floor of the building, but is in the process of moving into new digs at BMO Tower.
As of March 28, 2022, Hertz owed Wilmington Trust close to $50.8 million, according to a court document, plus continuing interest, costs, and fees, including attorneys’ fees.
The proposed sale agreement comes about a year after CBRE started marketing the building to potential buyers. Those efforts, according to court filings, included an initial call for offers that resulted in eight potential buyers. A second-round call later reduced the number of potential buyers to three. Those three parties then submitted their “highest and best” purchase proposals.
Wilmington Trust, National Association, will receive all proceeds from the sale, minus closing costs and any as-yet-unpaid administrative expenses, incurred by the receiver for the property itself, Friedman Real Estate Group, which has been managing the building since December 2021.