Sheboygan hopes South Pier development picks up

When the Blue Harbor Resort and Conference Center opened in 2004, Sheboygan officials hoped it would be the anchor for the redevelopment of a 42-acre lakefront site.

However, that area, called the South Pier District, has been slow to develop and much of it remains vacant. Some businesses that had set up shop in the district have gone out of business or moved elsewhere during the recession.

“We’ve had some bumps in the road based on the economy,” said Paulette Enders, director of planning and development for the City of Sheboygan. “That’s not just our city, it’s the entire state, the nation and the world. If (the South Pier District) was continuing to grow as it was before the economy tanked, I think we would be having a different conversation.”

The 182-room Blue Harbor Resort has struggled to attract guests year-round to a community that is not seen as a tourist destination by many, despite the South Pier District’s attractive lakefront and riverfront setting.

“(Blue Harbor is) an absolutely beautiful facility. We love the facility and the team there,” said Kim Schaefer, chief executive officer of Madison-based Great Wolf Resorts Inc., which owns Blue Harbor. “But the idea in Sheboygan was that it was going to become a little bit more of a tourism district and there were some other plans for what was going to happen down at the peninsula and the harbor there. That really hasn’t come to fruition. So that’s really the crux of the issue down in Sheboygan.”

But Enders says the South Pier District was never intended to just be an entertainment and tourism district.

“It was always intended to be an extension of the community, not a separate entertainment district,” she said. “That would be very difficult to make something like that successful on its own. There is nothing wrong with an entertainment district, but it is more difficult for it to be sustainable.”

But Sheboygan’s lack of tourist destinations makes it harder for Blue Harbor to attract guests and get them to return, Schaefer said.

“(Sheboygan is) just not known as a tourism destination,” she said.

“We’ve had some bumps in the road based on the economy.”
— Paulette Enders, City of Sheboygan

In its third quarter report, Great Wolf reported a non-cash impairment charge of $24 million related to Blue Harbor. It was the second time the company imposed a write-down for Blue Harbor since 2007.

Overall, the company reported a net loss of $42.1 million for the quarter.

Great Wolf executives said they will explore all of their options for Blue Harbor, including a sale. Blue Harbor is one of 12 resorts owned by the company.

“We are looking at a broad range of alternatives, possible disposition of the property, possible repositioning, possible partnering with other parties to do something different,” said Jim Calder, chief financial officer of Great Wolf. “We’re open to a wide range of things. We are looking at all alternatives to best realize value out of the property. In the meantime we continue to operate it. It continues to give a great guest experience, a great service to our guests. In the meantime, it’s sort of status quo while we in corporate evaluate what the possibilities are.”

One option, Schaefer said, would be to sell the resort to another owner but have Great Wolf continue to operate it.

The city of Sheboygan has invested heavily in the South Pier District and Blue Harbor. The district lies on a peninsula once used for coal and salt storage by the C. Reiss Coal Co. After the company ceased operations there and the property sat vacant for years, the city acquired the site for $1.8 million from Wichita, Kan.-based Koch Industries Inc. The city spent about $10 million to install infrastructure on the property and provided $8 million and a $4 million loan for the development of the $54 million Blue Harbor development.

Great Wolf executives have given no indication that they plan to close Blue Harbor.

“We’ve got groups on the books for a year out,” Schaefer said. “Clearly, it doesn’t help anybody (to close the resort). That is not an option at all.”

“I can’t imagine them shutting their doors and walking away,’ Enders said. “They are meeting their obligations to us.”

Blue Harbor is not the only business to struggle in the South Pier District. The second biggest development in the district, the 38,000-square-foot indoor sports and recreation complex called Triple Play Fun Zone, opened in 2006. Later re-named The Fieldhouse, it closed in December of 2008 and remains vacant. The building is owned by Sheboygan-based Community Bank & Trust, which took it back from the previous owner. The bank has hired Brookfield-based NAI MLG Commercial to market the property. NAI MLG Commercial’s web site has a list price for the property of $1.25 million.

Some other businesses such as the Islander Café, How Divine (a women’s clothing and accessories store) and a floral shop have closed or re-located from the South Pier District.

The South Pier District has been successful in attracting visitors, especially during warm weather months, but has struggled to attract customers year-round and during the week. It has especially struggled to attract local residents to patronize businesses there. A greater number and variety of stores is needed to attract more local residents to shop in the South Pier District, Enders said.

“In order for the district to be successful, we need to get locals to visit the shops and restaurants,” she said.

Despite those challenges, the South Pier District’s lakefront and riverfront setting remain attractive to some.

One developer, Robert Moeller, and his three sons are working on three projects in the district. Those projects include an Italian restaurant, which is under construction and is expected to open in the spring, a miniature golf course (expected to open by Memorial Day) and an ice cream parlor, which would be located in a vacant space in an existing building owned by Moeller.

“I think the Moeller developments will spark some renewed interest (in the South Pier District),” Enders said.

The recession has hampered business and development of the South Pier District, but the 42-acre site’s full development was always expected to take several years, Enders said. The successful redevelopment project that created the shanty village riverfront shops located on the other side of the Sheboygan River from the South Pier District started in the 1980s and took several years to take hold, she said.

“That didn’t happen overnight. It was a long process,” Enders said. “(The South Pier District) is still a relatively new development. It’s obviously a gorgeous piece of property.”

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