Milwaukee downtown condo market expands

Last updated on May 13th, 2019 at 02:22 pm

Milwaukee’s downtown housing stock is growing.
Data from the Milwaukee Department of City Development (DCD) indicate that 2,544 new downtown condo and apartment units are either recently constructed, under construction or planned for the months ahead. Using DCD’s standard multiplier of 4.7 people per unit, that translates to just under 12,000 new downtown residents.
A trend toward more people living downtown is already evident. According to DCD Urban Development Manager Dan McCarthy, comparisons of 1990 and 2000 census data show a 22% increase in downtown Milwaukee’s population. McCarthy stressed that, according to the data, those people are being attracted not only from outside the downtown but from outside the city – in many cases from outlying counties.
Milwaukee Mayor John Norquist said the increase in downtown housing has been contingent on policy changes at the city. Some changes to zoning policy are still pending.
"We have expedited the conversion of office space to residential," Norquist said. "You can get permits for that almost immediately. If you want to take an office building and change it to residential – put in plumbing and balconies, we expedite all that."
Changes in actual zoning code will make life a lot easier for those who would intermingle residential with office uses, according to Norquist.
"The first one to get redone was the Third Ward – and that has its own zoning code which is very urban and very flexible in terms of usages," Norquist said. "You don’t need to get a special permit. You could take down a structure and you can build something of the same existing mass on the lot; you don’t need a variance."
Zoning changes for other areas, including downtown, should follow suit.
"The zoning should come by the city council some time this spring," Norquist said. "It doesn’t seem controversial; it should go right through. We just need to legalize the urban form."
McCarthy indicated the city is pinning many hopes on the influx of well-heeled downtown residents.
"The hope is that the downtown children will drive the school system," McCarthy said, adding that an increased downtown population would also increase retail activity.
But in the case of higher-end condominium projects, some are slow to proceed to the construction stage.
In the tight economy, lenders are requiring a larger percentage of a condo project to be pre-sold than in years past. And that works against developers intent on erecting towers and other significant structures that make the most of their expensive downtown footprints. Selling a building that does not yet exist is also a challenge, according to developers and brokers.
River Tower
project 30% presold
The Rivertower, a European-style 25-story glass fa̤ade tower slated for North Edison Street along the Milwaukee River, would be the first building of its kind erected in North America Рan energy-efficient residential tower of double-paned glass and stainless steel designed by Gastrau Fuerer Vogel LLC, a Third Ward architectural firm which has most of its operations in Switzerland.
Landing the presales necessary to secure financing will be the trick, however, and unless contracts equaling 60% of the construction estimate are in the bag by April, the option to purchase the lot from the city will expire.
But developer Jeff Mawicke, a Milwaukee attorney, said he is optimistic that he will be able to keep his option on the property until June, when he feels presales will be complete.
Mawicke said the media has portrayed the project as being a longer shot than it is. Unit prices are reasonable, he said, given their size. A 2,026-square-foot unit will sell for $373,000, rather than the $400,000 reported in some print media.
Mawicke said a little more than 30% of the necessary presales have been captured so far.
Units sold range from entry-level 2,026-square-footers to larger half-floor units and a couple of full floors.
"I would say that the majority of people are comprised of empty nesters who are considering moving downtown into an urban environment, and a middle-tier of professional people who work downtown and want to live also in that environment," Mawicke said.
One part of the condo cost equation that is still in the air is the condo association fee.
"The condo fees are only estimated at this point; you are just guessing," Mawicke said. "We feel they will be competitive with any other units. This is really an issue that the occupiers of the units will determine once they decide what services they would like to pay for."
One plus with the River Tower is that its European design should make the building much less expensive to operate and maintain.
"When you look at condo association fees, they tend to start at a low level and then increase with maintenance issues," Mawicke said. "This building is designed to be virtually maintenance-free. There is also a City of Milwaukee ordinance or state law which allows for property tax relief to the extent that you utilize heating technologies that do not rely on fossil fuels. The glass façade of the building will comply with those rules and will allow a dollar-for-dollar reduction in the assessment. But we need to get the building up in order to estimate what that reduction will be."
Two projects,
two downtowns
Milwaukee-based developer Burke Properties is involved in two condo redevelopment efforts in downtown Milwaukee and downtown Cudahy.
In downtown Milwaukee, Burke is converting the 49,000-square-foot Grain Exchange Building, 741 N. Milwaukee St., from offices into 30 condominium units.
Unlike Burke’s Cudahy project and many other condo projects being contemplated or erected in and around downtown, the Grain Exchange was able to go forward without presales. No units needed to be sold before construction began. That flexibility was possible because the company was able to finance the rehab using its own equity. While the first few purchasers were able to make changes to their floor plans and develop custom apartment homes, most units will be completely built out and sold as-is.
Burke Properties President Paul Votto said the ability of the buyer to gain control by buying early is key.
"I personally think that, to have a successful project, you need to be as flexible as you can be," Votto said. "People want to have flexibility when they are paying a higher number. As you get to the upper end, you have to be somewhat flexible."
The ability to show at least some finished units early on – and the fact that the building itself was in place, helped prospects visualize what they were buying, according to Votto.
Burke purchased the building in 1999 and, according to Votto, planning on the project started about two years ago. Construction commenced about a year ago; the first residents will take occupancy in April of this year.
"I think any time you actually have a product for people to look at, it makes it a little easier," Votto said. "We are in the midst of doing a presale condo project in Cudahy, but the one on Milwaukee and Mason we started without any presales."
Cudahy project
in presales
In Cudahy, Burke’s condo homes will have some similarities to those in the Grain Exchange. Floor plans and amenities offered will be similar. But there are certainly differences between the two projects. For one, this is new construction, and sales equal to 50% of the cost to construct the 70 units will need to be in the lock box before construction begins.
Already under construction is the rest of the four-block redevelopment project, which apart from the condos includes a new library and a limited amount of commercial space.
"We started our presale process three to four weeks ago," Votto said. "Our goal is to have 50% of the project sold before we start construction. It really comes down to what a lender requires. In the case of the project in downtown Milwaukee, we financed the original renovation with our own equity. But for a lender, the requirements have varied, and have tightened up recently. These days, you will see banks with a minimum 40% to 50% presale."
Votto said that presale requirements may affect the type of condo units constructed – and may work against the construction of larger buildings.
"If you are building one big building, the presale will tend to be higher because it’s not like you can stop construction," Votto said. "But if you are building eight buildings with six units in a building, you can slow down your construction."
Apart from the fact that new construction means a presale requirement, the Cudahy project differs from the Grain Exchange in that the units in downtown Milwaukee will come much more dearly than their counterparts in the less resplendent downtown Cudahy.
In Cudahy, the condos will sell for $151,900 to $187,900, while those to the north start at $220,000 and range up to $750,000 for a two-story unit.

Weas develops lakefront condos
Construction is under way on another relatively high-dollar condo project. Weas Development has sold 62 of 93 units and has begun construction of 1522 On the Lake, a residential tower within a few stone throws of Lake Michigan at 1522 N. Prospect Ave. Sales are going strong now that the presale requirement has been met, according to Dave Conine, who partners with Doug Weas on the firm’s development projects.
"We started marketing in March," Conine said, adding that buyers ranged in age from their mid-40s on up. Some are single professionals, others were empty-nesters moving in from the suburbs. Others are businesspeople with homes in several states.
By late February, construction of the underground parking was completed, and contractors were beginning to pour the floors and walls for the first story. Shell construction should proceed at a rate of one floor a week, according to Conine, at least after a five-floor learning curve during which the crew will progress at a rate of one floor every week and a half.
The east-side location with lake views means the real estate alone is priced at a premium, which in part has determined the number of units in the building.
"We tried to do it with apartments and it financially didn’t work out," Conine said. "The value of the land requires more than 30 condos to make sure the cost of the land does not price the condos out of the market."
The number of condos may be increasing as Weas plans to secure necessary approvals from those who have already bought into the project to add a 19th floor to the building. The addition of the floor would bring the total number of units to 99. The additional story would contain standard units, and what was previously the top floor would house several large penthouses.
Average unit cost will be $430,000, which will buy a unit between 2,100 and 1,800 square feet. For $1 million, buyers get one of four empty penthouse shells they can have built out to suit at their own expense. Penthouses range from 3,600 to 5,500 square feet.
Parking an issue
In downtown, parking is at a premium. And even the higher-end condos tend to come with a single parking space. Condo buyers at the Grain Exchange will have the option of leasing additional parking in the nearby Pfister Hotel ramp at a discount arranged by Burke – $150 a month with an additional 5% discount for an annual contract. Parking is also available in the Interparking lot next to Grenadiers for $165 per month. At Burke’s project in Cudahy, additional parking will be available for rent at a nearby surface lot.
The Rivertower, however, will leverage European technology to ease some of the parking woes.
"The parking is underground in the plaza," Mawicke said. "The larger two-floor units will have two parking places. We are also offering as a flexibility situation a lift, which is used very regularly in Europe. A car sits on top of another car. That is available for people who have one space but want two."
The lift comes for a $10,000 upcharge, Mawicke said.
DCD’s McCarthy stressed, however, that even without parking, it is possible to sell downtown condos.
McCarthy pointed to the Cawker Building at Plankington and Wells where 19 condos were sold at prices ranging from $127,000 to $194,000 after the building was redeveloped in 1998. No parking is provided as part of the purchase agreement.

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