Will appeal the preliminary decision by HUD officials against providing a loan guarantee for New Land’s Bookends North development.
Executives with Milwaukee-based developer New Land Enterprises LLP and Department of City Development Commissioner Richard “Rocky” Marcoux will meet today with Department of Housing and Urban Development (HUD) officials to appeal the preliminary decision by HUD officials against providing a loan guarantee for New Land’s Bookends North development.
Bookends North is a $60 million, 19-story development that New Land wants to build at the northeast corner of Kilbourn Avenue and Van Buren Street in downtown Milwaukee. The proposed building would have 224 luxury apartments, 300 indoor parking spaces and 3,000 square feet of retail space.
New Land is seeking a loan guarantee through HUD’s 221(d)4 program for $51.7 million. The developer is also asking the city of Milwaukee to provide a guarantee for a $3.5 million loan. New Land would provide $5 million in equity for the project.
New Land is seeking loan guarantees through HUD and the city because the private financial markets are still in a credit crunch that is making it extremely difficult for developers to get financing for major projects from the private sector.
HUD recently provided preliminary approval, through its 221(d)4 program, to guarantee a $41.4 million loan from the AFL-CIO Investment Trust for The Moderne development at the southwest corner of North Old World Third Street and Juneau Avenue in downtown Milwaukee. The Moderne would be a 30-story building with 203 apartments and 14 condominiums.
The developer for The Moderne is in the process of obtaining final approval for the HUD loan guarantee, which will be in place at closing, HUD officials said.
But after reviewing the Bookends North project HUD officials declined to issue preliminary approval by telling New Land that the developer is not being invited to submit an application for the loan guarantee.
HUD officials said they would not provide preliminary support for Bookends North because they are concerned that there is not enough demand in the downtown Milwaukee market for the luxury apartments that New Land wants to build. The slumping economy, the competing Moderne project and the shadow apartment market created by the renting of unsold condominiums are all concerns cited by HUD officials.
New Land is appealing HUD’s decision, which will be the subject of today’s meeting with Marcoux and HUD officials.
“We are addressing (HUD officials’) concerns,” said New Land director of sales and marketing Tim Gokhman. “We are meeting with them. I don’t believe it’s a final answer.”
Despite the lack of support by HUD, the Common Council’s Zoning Neighborhoods and Development (ZND) Committee on Tuesday recommended approval of a $3.5 million loan guarantee for Bookends North, contingent on the HUD loan guarantee and establishment of a financing source for the $3.5 million loan.
Marcoux said the ZND committee’s support was critical to convincing HUD to support the project.
“We need to convince HUD that the market will support this development,” Marcoux said. “HUD has some issues. I think we can put these issues to rest with them. We are going to put some perspective on the table for them. This market segment can support this development.”
However, the city comptroller’s office said it is premature for the city to review financing support for a project until all other funding sources are in place.
“This is a pig in a poke right now,” said deputy comptroller Mike Daun. “This can work, but it is premature to be hearing it now.”
It is a change in city policy to provide financial support for market-rate housing developments, but supporters of the project say the city needs to support the development to stimulate the economy and create jobs.
“This is highly unusual, but these are highly unusual times,” said Ald. Tony Zielinski. “The bottom line is jobs. This is going to provide guaranteed jobs.”
New Land has pledged that all of the construction workers on the project will be union workers. The firm has also pledged that 25 percent of the contractors on the project would be owned by minority-owned Milwaukee firms and 30 percent of the workers will be under employed or unemployed construction workers who live in the city.
Ald. Robert Bauman supported the loan guarantee for Bookends North, but said he was disappointed that approval of The Moderne is hurting the chances of Bookends North receiving approval.
“I firmly believe that (Bookends North) is the stronger project and will add more value to the city and will be less risky to the city,” he said. “There is no doubt in my mind (the city) will end up with 14 condos (from The Moderne) in about 3 years not knowing what to do with them other than discount them at 50 cents on the dollar.”
