Reinventing Racine

With Foxconn in view, some developers see opportunity

The first time California native Tim Ryan visited Racine was on Jan. 17. 

It was cold but sunny. Snow covered the ground.   

“There were abandoned stores downtown, and we couldn’t get a cup of coffee anywhere,” Ryan said. “My business partner hated it. I said, ‘No, this is the point. It’s perfect.’”

Ryan, president of Arcadia, California-based Tim Ryan Construction Inc., is part of a three-person development team from the Los Angeles area that recently purchased four commercial buildings in downtown Racine and plans to close on two more in October. 

Recently, some local and national developers like Ryan have begun to take notice of Racine after hearing about the Foxconn Technology Group development in nearby Mount Pleasant last year, when the Taiwanese manufacturer announced it was going to build a $10 billion complex and create 13,000 jobs.

After many false starts, city officials are hopeful this newfound attention will give Racine, which has struggled for years with poverty, high unemployment and crime, the jumpstart it needs to get back on track.

Diamond in the rough

“I decided to focus, for now, on the downtown area of Racine, knowing that Mount Pleasant is more developed and closer to the Foxconn site, and that Kenosha is ahead of Racine in development,” Ryan said. “Racine really caught my eye as the next up-and-coming location. The harbor is absolutely beautiful and downtown has all of the makings for a great center of town for eating, shopping and entertainment.”

Ryan and his partners, Brittany Seely of Pasadena, California-based New Arbor Development LLC and Todd Bowden of Monrovia, California-based Bowden Development Inc., have formed Mt. Royal Investment Group for their projects in Racine.

Mt. Royal’s first Racine purchase was in July, the former YMCA building at 401 Wisconsin Ave. The group has also purchased a three-story, mixed-use building at 222 Fifth St., giving it control of the entire block.

Mt. Royal originally planned to tear down the YMCA building and construct a new five-story, 150-unit apartment building at the site. It has since decided instead to renovate the property into 52 market-rate apartments.

Adding market rate multi-family housing in Racine will be a change for the city. The majority of rental housing there is low-income. 

Preserving the YMCA building also means preserving its history, which includes a historic four-lane bowling alley in the basement, Ryan said.

“Down the road, we want to do something big, like 160 units, but right now, we think this is what makes sense for this property and what is good for that corner,” Ryan said.

Mt. Royal has also purchased the Main Street General Store building at 302 Main St., which was operated as a general store for 40 years until it recently closed. Ryan said he and his partners plan to renovate the 3,000-square-foot historic building and re-lease the space.

The team will do the same at a vacant commercial building at 411 Main St. that currently has residential apartments on the upper floors.

Ryan will close on two more buildings near Monument Square, at Main and Sixth streets, in October.

“These are very nice buildings that need our expertise in leasing up and helping the downtown revive,” he said.

A family affair

Sam and Tim Ryan at Sam’s school, the University of Oregon. Sam did research for Tim, president of Tim Ryan Construction in Arcadia, California, in July 2017 and realized Racine was where his dad should be investing.

Mt. Royal has Ryan’s son Sam, 19, to thank for its investment in Racine.

Sam was home from the University of Oregon in the summer of 2017, when his dad told him to find a city for him to invest in. 

Because of the cost of doing business in Los Angeles, Tim Ryan began looking for investment opportunities elsewhere in 2008. At the time, he started with Chattanooga, Tennessee.

In July 2008, Volkswagen AG announced it would build a $1 billion plant, its first U.S. plant since 1971, in Chattanooga. Over the past decade, Tim Ryan’s investments in Chattanooga real estate, under the name HSS Investment Properties LLC, have paid off.

“The city absolutely exploded,” Tim Ryan said. “Now I’m looking at selling my properties there.”

After spending a few days doing research last year, Sam told his dad about Foxconn’s plan to build a plant in Racine County.

“He just nailed it,” Tim Ryan said. “My partners and I are excited about being part of the growth that is coming to Racine. I see the downtown being an attraction for younger millennial types. There has been a new migration back to the urban cities in the past 10 years that America hasn’t seen since the early 1900s.”

Reinventing for the 21st century

How much Foxconn’s plan to create 13,000 jobs will benefit the City of Racine has been debated.

Naysayers have endured decades of disappointment in a city with a high rate of poverty, one of the worst ranked urban public school districts in the state, a small percentage of high school students attending college and crime rates rivaling cities more than double its size, according to data from the state and the U.S. Census Bureau.

But at one time, Racine employed thousands at its manufacturing companies. At its peak, J.I. Case Co. employed more than 5,500 people, serving as the city’s largest employer for 120 years.

J.I. Case broke ground on a new headquarters complex along the Root River in downtown Racine in 1990, but by 1992, as the company was celebrating its 150th anniversary, it also was planning to cut 4,000 workers.

By the mid-1990s another 300 people were laid off. Case Corp. merged with New Holland N.V. to become CNH Group NV in 1999, and in July 2002, Racine’s tractor plant closed.

J.I. Case wasn’t the only manufacturer to abandon Racine.

Western Publishing, the company that published the Little Golden Books, was founded in 1907 in Racine and at one time employed thousands. The company closed in August 2001.

Other companies that have closed or moved out of the city in the 1990s and 2000s include Racine Steel Castings, Walker Manufacturing and Young Radiator.

Even S.C. Johnson & Son Inc., which at one time invested millions in Racine’s downtown, announced in 2015 it would move 175 employees to Chicago.

“We’ve lost more than 14,000 manufacturing jobs in the last generation and those jobs did not get replaced by other family-supporting wage jobs,” said Racine Mayor Cory Mason.

Mason, 45, was elected in October after spending more than a decade in the state Legislature.

Like most Gen Xers who grew up in Racine, his friends’ grandparents and parents worked at one of the large manufacturers that have since left the city or downsized. Mason’s father worked at SC Johnson.

Mason recalls going to J.I. Case High School, where he and his friends were told to hurry up and graduate so they could buy a house and go to work with their fathers.

“You weren’t going to be rich, but you would be fine,” he said. “Now, it’s a different economy.”

Over the past 20 years, Racine has struggled to find its new identity, Mason said. The city has a wealth of natural assets – close to Milwaukee and Chicago, situated on Lake Michigan, with a historic downtown – but a 20-minute drive from I-94 to the city has hampered growth. Poverty has long plagued Racine.

“We are in a really interesting transition right now,” Mason said. “Racine did the 20th century really, really well. But part of all of the Foxconn excitement means we can define what we are going to mean for this century.”

Part of the former Horlick Malt complex in Racine. Credit: Shelly Tabor

Kenosha, which has similar demographics, location and population to Racine,  took a major economic hit in 1988 when Chrysler Corp. shuttered the American Motors auto assembly plant, taking more than 5,000 jobs with it.

Today, the site is home to more than 300 condominiums and apartments known as Harbor Park. Mason credits Kenosha’s city and county leaders with the success.

One of Kenosha’s advantages over Racine is that it is simply closer to Chicago. Kenosha County has attracted several businesses from Illinois.

Milwaukee author and historian John Gurda said one of the reasons Kenosha has fared better than Racine is the Metra commuter rail line that runs from downtown Chicago to Kenosha. Metra, coupled with the fact that a number of Chicagoland residents have moved to Kenosha County, has aligned Kenosha with Chicago, Gurda said.

There have been discussions for more than a decade about extending Metra to Racine and Milwaukee with a KRM commuter rail line, but it has not gained traction.

“I think (Racine) has become a smaller-scale Milwaukee, struggling with deindustrialization and poverty, but it hasn’t yet turned a redevelopment corner, fueled in part by millennials,” Gurda said. “Perhaps Foxconn will change that dynamic.”

Gurda said what Racine has undergone is similar to Cleveland, Buffalo and other industrial cities in the north, all of which are going through “mid-life crises.”

Bruce Renquist, retired owner of Racine-based design firm Renquist Associates, started his company in 1969. He worked with Racine-based firms including J.I. Case and SC Johnson, but said he ended up doing more business in Texas than Racine, or even Wisconsin. 

“Even before many of the companies left, they were flaccid,” Renquist said. “It is heartbreaking, in many respects, to look at so many of the family businesses that were so successful and the different categories of businesses that do not exist anymore.”

Investing in the future

In the early 2000s, the City of Racine began working on a redevelopment project for 26.5 acres of industrial property along the Root River in downtown Racine. The $65 million project became known as Machinery Row.

Two former historic J.I. Case warehouses, built 100 years ago and totaling 720,000 square feet, would have remained on the site and been renovated; a 440,000-square-foot building would have been renovated into apartments; and another building would have been a mixed-use development.

The project was touted by former Racine Mayor John Dickert, who said it could be like the Historic Third Ward in Milwaukee.

But after spending years working with Davenport, Iowa-based Financial District Properties, which was unable to complete the project, the Redevelopment Authority of Racine took back the properties.

Oregon, Wisconsin-based Gorman & Co. stepped in to take over the $9 million in historic preservation tax credits that had been awarded in the hopes of saving the project, but ultimately, it became clear the buildings could not be saved and Gorman walked away last year, said Amy Connolly, director of Racine’s Department of City Development.

In July, the city hired Rogers, Minnesota-based Veit & Co. Inc. to demolish the buildings at the former Machinery Row site.

The property, now being called the Water Street Redevelopment Area, will be master planned by Milwaukee-based engineering firm Graef and Chicago-based architecture firm Perkins + Will.

Racine budgeted $6.1 million this year for the demolition of the buildings, site cleanup and the installation of a river walk.

“We are still committed to public access, to improving water quality and to creating a sense of place,” Mason said. “There will still be a river walk. Beyond that, we are literally wiping the slate clean for something new. For us, this opens up a lot more redevelopment opportunities instead of trying to figure out a use for buildings that have some nice history, but were literally collapsing in on themselves.”

While the failed Machinery Row project plans would have included hundreds of market rate apartments, developers have now begun to view Racine as a place where market rate housing could be successful.

West Allis-based Cardinal Capital Management Inc. has an option to purchase the former Ajax industrial property in Racine’s Uptown neighborhood, where the company is planning to construct a four-story building with 112 market-rate apartments.

The Ajax site in the 1500 block of Clark Street has been looked at by two other developers who considered veterans’ housing and low-income housing at the former industrial warehouse buildings. Cardinal plans to demolish the old buildings.

Creating a new market

Milwaukee developer Josh Jeffers says he realized Racine’s untapped potential in 2017, when he began working on a $19 million project at the former Gold Medal Co. Inc. furniture manufacturing buildings in Uptown.

Jeffers, president of J. Jeffers & Co., plans to redevelop the buildings into 77 units of affordable and market-rate apartments at 17th Street and Packard Avenue. He was recently awarded $620,000 in Low Income Housing Tax Credits through the Wisconsin Housing and Economic Development Authority for the project and plans to begin construction in spring.

A rendering of the Gold Medal project.

In June, Jeffers made another investment in Racine, purchasing three buildings at 2100 and 2200 Northwestern Ave. for a combined 246,000 square feet, plus an additional 8 acres of vacant land.

The buildings are a gateway to the 13-building Horlick Industrial Historic District site (the former Horlick Malted Milk Co. complex). They were constructed in 1882 and 1902, making them a perfect fit for Jeffers, who has made his career specializing in historic preservation projects.

Jeffers is planning to work on the project in multiple phases, with the first phase being 80 to 90 predominantly affordable housing units in one of the existing buildings.

Over the next decade, Jeffers envisions up to 400 units of affordable and market-rate apartments, including new construction on the vacant land and mixed-use development in what could become a $100 million catalytic project for the City of Racine.

“In Milwaukee, it has been apartment building mania; I think we recently celebrated our 10,000th unit and it has been predominately market rate,” Jeffers said. “It has gotten to the point where the market is already slowing down. Go to Racine, and it is not that they are behind; the (apartment development) cycle has not even started yet.”

Racine has a number of developable sites available for new construction and what Jeffers calls a phenomenal stock of existing historical buildings for sale at reasonable prices, making him feel like a “kid in a candy shop,” but abysmally low rents have kept developers away, Jeffers said.

There is a chicken-or-the-egg game of not having enough market rate apartments to produce real estate comparables to be able to charge higher rents, so no new buildings are constructed, Jeffers said. 

The average cost to operate an apartment building ranges from $600 to $800 per unit. In Racine, the average rent is $775 per month, according to the U.S. Census Bureau.

Developers will not build apartments knowing they will make such a thin profit margin, Jeffers said.

By building predominantly affordable housing with phased in market-rate apartments, Jeffers can obtain LIHTC through WHEDA and other sources of federal and state financing, greatly reducing his debt, he said.

“There is a myth that people won’t pay market rate if there is affordable housing mixed in, but that is not true,” Jeffers said. “We just opened the Griot Apartments in (Milwaukee’s Bronzeville neighborhood) that has a mix of market-rate units and they are flying off the shelf.”

The Griot and the redevelopment of the nearby former Garfield School, undertaken by Jeffers and Milwaukee developer Melissa Goins, includes 30 affordable apartments at the school building and 41 affordable and market-rate apartments at the Griot building, 411 W. North Ave.

Jeffers plans to take a page from Mandel Group Inc. for his Racine project at the Horlick site. A decade ago, the Milwaukee-based developer started building upscale apartments at a former tannery site on North Water Street in downtown Milwaukee now called The North End. Mandel is currently finishing the last phase of the project.

“I take a lot of inspiration from Mandel,” Jeffers said. “They were able to create a neighborhood and create a market.”

They were also able to create comps, which Jeffers said eliminates the chicken-or-the-egg game.

“After what we did with the Griot, we could hypothetically build a market-rate apartment building in Bronzeville next door, and have a comparable to get the rent we are looking for,” Jeffers said. “Right there, we have created a market.”

Jeffers knows creating a new market in Racine won’t be easy. The Griot project took 13 funding sources to make it work. Jeffers anticipates Racine will be similar, and will take at least 10 years. 

But he is bullish on the city.

“What really gets me excited about the Horlick site is there is such a critical mass,” Jeffers said. “And then you introduce Foxconn, it is so exciting. I know there has been debate about how many jobs and if Racine will benefit, but I don’t even know why this is a question. Will (Racine) get 13,000 jobs? No. But they are neighbors (of Mount Pleasant) and will reap the benefits with economic development.

Racine and Kenosha: A Tale of two cities

Racine population: 77,542

Kenosha population: 99,877

Racine unemployment rate: 4.9%

Kenosha unemployment rate: 4.1%

Racine median household income: $41,178

Kenosha median household income: $49,636

Racine persons living in poverty: 21.9%

Kenosha persons living in poverty: 19.3%

Racine median monthly mortgage: $1,169

Kenosha median monthly mortgage: $1,423

Racine median gross rent: $775

Kenosha median gross rent: $830

Racine high school graduation rate: 82%

Kenosha high school graduation rate: 88.5%

Racine bachelor’s degree or higher: 17.5%

Kenosha bachelor’s degree or higher: 22.9%

Racine unified school district report card: 59.3% meets few expectations

Kenosha unified school district report card: 70.8% meets expectations

Sources: U.S. Census Bureau; Wisconsin Department of Public Instruction

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