City officials have reached an agreement with Milwaukee-based Mandel Group Inc. on a city loan for the second phase of the North End development.
City officials, including Department of City Development (DCD) staff and Aldermen Michael Murphy and Nik Kovac have agreed to a $4,628,940 loan to Mandel Group for the project, according to Department of City Development spokesman Jeff Fleming.
The deal still must be approved by the Common Council and Mayor Tom Barrett. The deal is also subject to some modification pending review by the city comptroller’s officer, Fleming said.
“We are pleased that DCD has concluded its review of our proposed financing structure and is moving the request on to the City Comptroller’s office for its review,” said Richard W. Lincoln, senior vice president for Mandel Group. “In particular we would like to extend our sincere thanks and appreciation to Aldermen Nik Kovac and Michael Murphy for their substantial contributions and suggestions. It was in large part through their efforts that the parties were able to reach a mutually agreeable resolution.”
The second phase of the North End is a $36.7 million project that would consist of two buildings with 155 apartments. It will be built next to the 83-unit first phase of the North End project, which is located southwest of Water Street and Pleasant Street in downtown Milwaukee.
Other financing for the North End’s second phase will include $26.185 million in tax exempt bonds issued by the Wisconsin Housing and Economic Development Authority (WHEDA) through the federal Midwest Disaster Area program. Mandel Group will provide $5.7 million in equity for the deal. The city will also provide $2.2 million in tax incremental financing (TIF) for infrastructure improvements.
Mandel Group originally requested an $8 million loan for the project, because the capital markets for real estate development became extremely tight during the Great Recession. In January, DCD staff recommended a $3.4 million city loan, based on a recommendation from Chicago-based consulting firm S.B. Friedman & Company.
City officials said they wanted to provide a loan for the project to help create construction jobs during the economic downturn and help grow the downtown area and expand the city’s tax base. City officials took a similar approach in providing a $9.3 million loan for the 30-story Moderne apartment and condominium building development, now under construction southwest of Old World Third Street and Juneau Avenue downtown.
The city also considered providing a loan for New Land Enterprises LLP’s Bookends project at East Kilbourn Avenue and North Van Buren Street. However, that project fell through.
“This has been discussed along with two other projects (The Moderne and Bookends), that the city might get involved in at a time when the construction market had slowed quite a bit,” Fleming said. “It was in part because of the economy and in part because of what the projects were seen as bringing to the downtown area.”
The term sheet for the North End phase two loan deal indicates that the city is not planning to provide loans for any more residential developments downtown.
“The city does not plan to provide additional financial assistance to future phases of the North End project, or any other residential projects, in the downtown area,” the term sheet states. “If requested to provide such assistance for a residential project, such assistance will be limited to 10 percent of the estimated assessed value of the project as determined by the assessment commissioner, following the determination by the Department of City Development and Office of the Comptroller that the project cannot proceed but for the provision of such financial assistance.”
“It’s going to be two and out for the city,” Fleming said.
Mandel Group continues to work on the other financing components of the proposed development, as well as on resetting the timing of final design and construction details of the project.
“The City’s action to move forward with their analysis allows us to reinitiate our efforts on the balance of the project’s details,” Lincoln said.
Mandel Group plans to begin construction for the project by the end of the year.
