No matter how you look at it, the new office building that Northwestern Mutual Life Insurance Company plans to build at its downtown Milwaukee headquarters campus will be big. Very big.
“This is one of the most significant real estate developments in the history of the city of Milwaukee,” said Richard “Rocky” Marcoux, commissioner for the Department of City Development.
Marcoux and other city officials hope the building will make such a big impact that it becomes a catalyst that sparks additional development in the downtown Milwaukee lakefront area.
It will certainly have a major impact on the city’s skyline. Based on the preliminary plans for the project, the building will have 1,114,000 square feet of total space and it will be 33 stories and 550 feet tall.
At that height the building will be about the same height as the 100 East Wisconsin office building in downtown Milwaukee, which is the second tallest building in the state. The tallest building in the state is the 42-story, 600-foot U.S. Bank Center at 777 E. Wisconsin Ave. in downtown Milwaukee. But the Northwestern Mutual building will be larger than the U.S. Bank Center, which has 1,077,607 square feet of total space, according to city records.
“(The new Northwestern Mutual building) will be the largest single building under roof in the state of Wisconsin,” Marcoux said.
Northwestern Mutual has hired New Haven, Conn.-based architectural firm Pickard Chilton, a high-profile national firm, as the design architect for the building. Northwestern Mutual chief executive officer John Schlifske has said he wants to build an iconic building for the city that symbolizes the strength of the company.
Renderings of the building will not be released until later this year, but the company showed city aldermen massing images that show a 400,000-square-foot, four-story base along Mason Street between Prospect Avenue and Van Buren Street and the office tower on top of that along Prospect. The base will be a common area with space for training, meetings, an employee cafeteria and space accessible to the public. The architecture of the building will “embrace Mason Street,” Marcoux said.
The Common Council recently approved $54 million in tax incremental financing (TIF) for the project, which Northwestern Mutual estimates will cost $350 to $400 million.
By comparison, the U.S. Bank Center, constructed in 1971, has an assessed value of $179 million, according to city records.
The project will create much-needed work for construction workers and businesses. Northwestern Mutual has hired Milwaukee-based Prism Technical Management & Marketing Services LLC to help the company comply with the city hiring and contracting requirements for TIF projects. At least 40 percent of the construction workers on the project must by city residents that are unemployed or “underemployed.” At least 25 percent of the construction work, professional services and supplies purchases for the project must be done by or from local certified small business firms.
The new Northwestern Mutual building will replace a 16-story, 452,000- square-foot building on its headquarters campus. That building, constructed in 1978, needs significant structural repairs, renovations and upgrades so the company plans to tear it down and replace it with the new building.
About 1,100 employees work in the building that will be torn down. Those employees will be moved to the new building and the company plans to add another 1,900 employees there by 2030. Most of the jobs are professional jobs with an average salary of $60,000.
By comparison, when ManpowerGroup built its new 280,000-square-foot corporate headquarters in 2007, the company brought about 900 employees to downtown Milwaukee. The city provided a $25 million TIF for that project.
City officials and Northwestern Mutual executives say the $54 million TIF assistance for the project is necessary to justify the additional costs of building downtown versus building at the company’s suburban campus in Franklin. High-rise buildings cost more to construct and groundwater at the downtown site also makes construction costs there higher. An analysis by construction consultants from The Concord Group determined that it will cost $50 million more to build the Northwestern Mutual building at the downtown site as opposed to a suburban site.
“Because Northwestern Mutual does have options for building outside of the city, it is necessary to make the cost of building downtown comparable to building on an alternative site,” City Comptroller Martin Matson said in his review of the TIF for the project. “Without the city’s financial participation to offset some of the additional costs of building this project in downtown Milwaukee, it is reasonable to assume Northwestern Mutual would choose an alternative site outside of the city of Milwaukee.”
The TIF funds for Northwestern Mutual will be “developer financed,” which means the company pays the construction cost up front and is reimbursed the TIF funds as it pays property taxes over time. TIF funds come from the increased property tax revenue created by the new development above what the tax revenue was from the property prior to the new development.
“Northwestern Mutual Life assumes the risk that the proposed (TIF) district will generate sufficient incremental revenue to recapture the $54 million of costs through its share of future incremental revenue,” Matson said in his report.
The TIF funds for Northwestern Mutual include $4 million for improvements to nearby public infrastructure, including streetscaping and improvements to Cass Street, Mason Street, Van Buren Street and Wisconsin Avenue.
In addition, the city will use another $18 million in TIF funds generated by the Northwestern Mutual project to pay for the road and pedestrian improvements it will make for the Lakefront Gateway Project. For that project, the state will spend $16 million to reconfigure Lake Interchange ramps to free up a three-acre site for future development near the lakefront and the city will spend $18 million to: repave and extend Lincoln Memorial Drive to Chicago Street in the Third Ward, rebuild Clybourn Street into a boulevard and extend it to Art Museum Drive, repave Cass Street from Wisconsin Avenue to Michigan Street, repave Michigan Street from Van Buren Street to Harbor Drive, repave Harbor Drive from Clybourn Street to Chicago Street and build new pedestrian bridges from the Milwaukee County Transit Center site to O’Donnell Park and to the lakefront Urban Park.
City officials believe the Lakefront Gateway Project will make the area more visually appealing, will improve pedestrian access to the lake, will improve traffic flow to the Third Ward and will help attract more development to the Third Ward and downtown lakefront area. The Northwestern Mutual TIF district is providing the funds for the city to do the Lakefront Gateway Project. The office tower project is making the Lakefront Gateway Project possible.
“Currently, there is no alternative city funding sources available to finance the Lakefront Gateway Project proposal,” said Matson. “Without the city’s share of the (TIF) revenue, this public infrastructure project would need to be delayed and negatively impact the (DOT’s) reconfiguration of the freeway ramps within the Gateway Project.”
Unlike the $54 million in TIF funds for the Northwestern Mutual office tower, the city is taking the risk for the $18 million in TIF funds for the Lakefront Gateway Project.
Aldermen rely on the comptroller’s office for advice on city financial matters, and Matson endorsed the Northwestern Mutual TIF plan.
“It is clear that the (TIF district) proposed (for the) Northwestern Mutual office building will be successful from the city of Milwaukee financial perspective and should be supported,” Matson said. “The Gateway infrastructure project does present some risk for the city due to uncertainty regarding the district’s future estimated assessed value. However, given the maximum term of payment to Northwestern Mutual for their $54 million advance to the office project will be 25 years, and the maximum life of the (TIF district) is 27 years, there will be two years where, if necessary, the entire increment would be available to repay the public transportation costs.”