When Kohl’s Corp. decided earlier this year not to build a new corporate headquarters in downtown Milwaukee, the decision was widely seen as a huge missed opportunity for downtown Milwaukee. Kohl’s would have brought 5,000 employees to downtown every weekday and would have boosted the downtown office, retail, restaurant and hotel markets.
To many in metro Milwaukee, Kohl’s decision to build a new corporate headquarters in Menomonee Falls was just another sign that downtown Milwaukee is in decline and is unable to attract major businesses.
But now the recently announced decision by Northwestern Mutual Life Insurance Inc. to build a new $300 million, 840,000-square-foot, 30 to 35-story office tower at its downtown campus should provide a major boost to the downtown real estate market and could help change regional perceptions about the state of downtown Milwaukee.
“We are very hopeful this development sends a signal about the attractiveness of doing business in Milwaukee,” said Northwestern Mutual chairman and chief executive officer John Schlifske.
“(Northwestern Mutual) has made a loud and powerful statement about this city,” said Milwaukee Mayor Tom Barrett.
Last year, Northwestern Mutual announced that it plans to tear down the 451,964-square-foot, 34-year-old East Building on its downtown campus. The company said the building needs extensive and costly maintenance and cannot serve its long-term needs.
The company spent the next year evaluating whether it should replace the building with a new building downtown, or at its Franklin campus, or a combination of both.
Some assumed that Northwestern Mutual would choose Franklin to take advantage of lower costs to build a wider suburban office building than a tall, narrow downtown office tower.
Milwaukee city officials have agreed to provide $48 million in tax incremental financing for the project (TIF). Ald. Robert Bauman said the TIF funds are necessary to make the downtown site competitive with the lower cost suburban option for the project. Schlifske said the company needs the TIF funds to justify to its board of directors that the project be built downtown instead of in Franklin.
“We hoped all along to build downtown,” Schlifske said. “Our bias all along has been to keep it downtown because we like being here. We like being part of the business community here.”
It will be a developer-financed TIF, which means instead of having the city borrow the funds, Northwestern Mutual will pay for the entire construction project cost up front and the TIF funds will be rebated as a portion of its property tax payments. Under the deal Northwestern Mutual will receive 70 percent of the tax increment (the increased property tax revenue generated by the new building) and the city will receive 30 percent until a total of $48 million is paid to the company. After that the city gets all of the increased property tax revenue from the project.
The TIF funds are subject to Common Council approval, but Bauman predicted that won’t be a problem because the TIF is developer financed and “all of the other benefits both tangible and intangible,” from the project.
The tangible benefits include the retention of the 1,100 employees that work in the building that Northwestern Mutual plans to tear down. In addition, the company plans to add another 1,700 employees, over a span of about 10 years, in the new downtown building.
“These are family-supporting jobs,” Barrett said.
Adding another 1,700 employees downtown should provide a boost to downtown retailers and restaurants.
The project is also expected to create about 900 construction jobs. As part of its TIF deal with the city, Northwestern Mutual has pledged to use small, emerging and women’s business enterprises for 25 percent of the total construction cost and will use Milwaukee resident workers for 40 percent of the hours on the construction project.
“It’s important that when we have a financial role at stake that our people get a chance to work,” Barrett said.
Possible intangible benefits from the Northwestern Mutual project include a confidence boost for downtown that could help attract other businesses and could help convince financial institutions to support other downtown development projects.
Common Council President Ald. Willie Hines said the Northwestern Mutual project serves as a reminder that downtown Milwaukee remains the heart of the state’s business community.
“It is my hope that more companies take note of Northwestern Mutual’s decision and consider making Milwaukee their home,” Hines said.
The Northwestern Mutual project could provide a boost for other proposed downtown Milwaukee developments such as The Couture, the 44-story building proposed by developer Rick Barrett at the Milwaukee County Downtown Transit Center site, just a block south of Northwestern Mutual’s downtown campus. The Couture would have a 180-room hotel, 179 upscale apartments and about 40,000 square feet of retail space. Additional employees at Northwestern Mutual could help support apartments, a hotel and retail space at The Couture.
“(Northwestern Mutual) is a signature company with strong roots to the city saying they want to be in the heart of downtown Milwaukee for the next 100 years. That’s so tremendous,” Barrett said. “It’s monumental to me. It breathes a sense of confidence into the marketplace.”
A confidence boost in downtown from the Northwestern Mutual project could help other proposed office building developments attract tenants and financing. Wauwatosa-based Irgens is working on an 18-story, 350,000-square-foot office building at 833 E. Michigan St., one block south of the Northwestern Mutual downtown campus. The Godfrey & Kahn law firm is committed to be the anchor tenant for the building. Also, developer Joel Lee has partnered with Ryan Companies on Lee’s long planned Washington Square office tower, which would be built about a block west of the Northwestern Mutual downtown campus. Milwaukee law firm Quarles & Brady is thinking about moving from its current location at 411 E. Wisconsin Ave. to the Washington Square project, according to several sources.
In the meantime Northwestern Mutual still must develop the specific details for its office tower project, including its exact height. The building will not be as tall as the 42-story U.S. Bank Center, which is the tallest structure in the state, Schlifske said.
The company also is still examining options to address the increased parking needs for the new office tower.
The firm still has not selected an architect and plans to release renderings of the project in mid-2013. Numerous sources expect the company to select a major national architectural firm for the project. Schlifske said the company wants to build an “iconic” structure.
“We want the building to say something about Northwestern Mutual in terms of our growth and strength,” he said. “We believe the building will positively transform the skyline of Milwaukee and the Milwaukee community.” n
