A Chicago developer has purchased what some consider the ugliest building in Milwaukee, believing he has found a hidden gem.
R2 Companies bought the downtown Milwaukee post office complex last month for $13.1 million from a group of private investors. Matt Garrison, managing principal, says the firm is planning to transform the 1.1 million-square-foot sprawling concrete structure at 341 W. St. Paul Ave. into a mixed-use development with retail along the street, a riverwalk and entertainment along the 1,500 feet of frontage on the Menomonee River.
[caption id="attachment_124985" align="alignleft" width="350"] KEY LOCATION The downtown Milwaukee post office complex sits across the Menomonee River from the Harley-Davidson Museum, near the Historic Third Ward and the central business district.[/caption]
The timeline for these plans is contingent on the U.S. Postal Service, which has a lease in place for another four-and-a-half years, plus an option to extend for up to 30 years.
But Garrison, whose firm is the latest in a long list of out-of-state firms to make a major commercial real estate investment in southeastern Wisconsin, is steadfast in his long-term commitment to the project.
“We’re motivated to make money but also motivated to work on really cool and interesting things,” Garrison said. “With urban planning, if you make a mistake, it can take a half century to fix. We want to do the right thing.”
From day one, Garrison has said he wants to keep the existing post office structure, built in 1967, intact. He is working with San Francisco-based architectural firm Gensler on redevelopment plans for the building.
“It’s complex, but it’s also incredibly unique,” Garrison said. “A lot of people in Milwaukee might say this building is ugly, but wait until you see our renderings; it’s not going to be ugly. We are going to have so much fun.”
One immediate design obstacle will be working around the train tracks that go through the building. Garrison said he would like to work with the city to install a pedestrian bridge that connects St. Paul Avenue to the Harley Davidson Museum to the south.
Along St. Paul, Garrison is envisioning various types of retail on the first and second floors – including at least one big-box store – to activate foot traffic along St. Paul and draw people from the Third Ward.
There will be parking but it will be hidden, likely on the third floor. The fourth floor will house a single corporate tenant that Garrison is hoping to lure from the suburbs or out-of-state.
Along the Menomonee River, the portion of the structure that now houses mail trucks could potentially be used as part of the river walk, Garrison said. Other food, beverage and entertainment outlets are planned for the river side of the building.
The existing post office structure is too large for residential, so Garrison is planning to build two towers on the property, on land next to the building, that could include residential, hospitality or office.
“I can build another 900,000 square feet of ground-up development,” Garrison said. “There is a blank canvas there, but it will depend on what the market can handle. We have a long-term outlook for this project.”
[caption id="attachment_124982" align="alignleft" width="350"] POST OFFICE INTERIOR About 1,000 people work at the downtown Milwaukee post office complex.[/caption]
Garrison’s plans are grandiose and will be costly. He plans on investing $100 million on redeveloping the existing building and $200 million on new building construction. He said it is too early to know if he will ask the city for subsidies but “financing is not an issue.”
By comparison, the 44-story Couture planned for 909 E. Michigan St. is expected to cost $122 million; the 17-floor 833 East office building currently under construction is a $101 million project; Northwestern Mutual Life Insurance Co. is building its downtown corporate campus, which will total 1.1 million square feet, for $450 million. The new residential tower Northwestern Mutual announced last month will cost $100 million.
Tod Desmarais, director at Gensler, compared the downtown Milwaukee post office project with the Merchandise Mart, which is located on the Chicago River in downtown Chicago, and 600 West Chicago, the converted former Montgomery Ward Catalog Warehouse in Chicago.
Gensler was the architectural firm that renovated 600 West Chicago. It also has designed dozens of national and international corporate headquarters and tourist attractions, including the QVC Headquarters in Japan, the Shanghai Tower in China, the Facebook headquarters in Menlo Park, Calif., the Westin Denver International Airport hotel and The Gate Building in Dubai.
Desmarais said he and Garrison are envisioning a mixed-use development that will activate the Menomonee River, but will also have the potential to transform the neighborhood.
“When you have a building of this scale and magnitude of the post office with great bones and structure, it lends itself to a lot of opportunities for a variety of different uses,” Desmarais said. “What I think is so interesting is its location within the city. It’s kind of the knuckle connecting all kinds of neighborhoods – you don’t usually find that opportunity. All fingers point to this site.”
The total footprint of the post office property is 9 acres.
[caption id="attachment_124988" align="alignleft" width="350"] POST OFFICE EXTERIOR The downtown Milwaukee post office complex was built in 1967.[/caption]
There is another 2.1 acres of land along the Milwaukee River at 324 N. Plankinton Ave., just south of the BP gas station at the corner of Plankinton and St. Paul, where the post office leases space for its trucks. According to the Milwaukee assessor’s office, that property is owned by Sidney and Harry Hack and the Julius Bernstein Trust. The property is assessed at $1.9 million.
Garrison said that parcel, which sits on the confluence of the Menomonee and Milwaukee rivers, would also be a desirable purchase. The Hacks could not be reached for comment.
“I haven’t approached them yet, but if anyone has any good ideas for me, let me know,” Garrison said.
Before the sale of the downtown Milwaukee post office, there were about 40 walk throughs of the building, so listing brokers Kurt Van Dyke and James Young, of The Barry Co., got to know post office operations pretty well.
“Their business is actually growing, especially the package delivery business, but the downtown building doesn’t fit that business,” Van Dyke said. “What they could use is a single-story distribution facility.”
[caption id="attachment_124990" align="alignleft" width="350"] The 1.1 million-square-foot complex lies along the Menomonee River.[/caption]
“What we learned in the walk through is it’s probably a few years of decision making before they can relocate, so arguably, you’re looking at them exercising one extension and maybe in that period between five to 10 years formulating a plan,” Young said, adding that the post office is using 100 percent of its 1.1 million square feet.
“You would be amazed at the operations,” Young said. “Considering how quirky it looks on the outside, I expected it to be a maze, but it lays out pretty well and they’ve got it streamlined.”
In 2008, the U.S. Postal Service purchased 64 acres at the southwest corner of East College and South Pennsylvania avenues in Oak Creek with the intent to develop a new 820,000-square-foot mail processing and distribution center. At the time, the Postal Service announced it would work with Milwaukee developer Cobalt Partners to build a more efficient building and vacate the downtown facility, which was said to be obsolete. However, the project never moved forward.
More than 1,000 people currently work at the downtown Milwaukee post office. If the post office is relocated to Oak Creek or another facility, it would mean redevelopment of the downtown site could take place sooner, but it would also mean the city of Milwaukee could lose at least 1,000 jobs to another community.
[caption id="attachment_124986" align="alignleft" width="350"] Redevelopment of the downtown post office complex could revitalize St. Paul Avenue.[/caption]
Garrison said he is in the process of setting up conversations with the appropriate people to talk about a possible new post office facility in Oak Creek.
“It would probably take several years to make that happen and ultimately, (the post office) has control of the property,” Garrison said. “We’re willing to do anything if it makes sense.”
USPS spokesman Sean Hargadon said there are no plans to develop the Oak Creek property at this time.
“The Postal Service will honor the terms of the lease for the building downtown and continue to process incoming and outgoing mail for our customers,” Hargadon said.
Despite the post office residing in the building, Garrison could begin putting together some of the pieces of his massive redevelopment puzzle immediately, said Rocky Marcoux, commissioner of Milwaukee’s Department of City Development.
For example, the riverwalk and pedestrian bridge pieces could start to fall into place immediately, as well as discussions with possible retail tenants, Marcoux said.
“The building is a perfect situation for downtown big box retail,” Marcoux said. “Parking comes with the property and it has its own ramp off the Sixth Street Bridge for semis. We’ve said in the past big box is not something we would spend taxpayer money on, but we’re not opposed to big box retail – we’d love to see it, just not on our dime.”
Where the city would be a possible partner with Garrison is on the riverwalk.
Marcoux and other city officials spent about four hours with the developer and walked away “very impressed” with his working knowledge of the city.
The group talked about the site’s assets, including its location between the Menomonee River and St. Paul Avenue, as well as its proximity to the Milwaukee Intermodal Station, the Third Ward and the streetcar line when it’s built.
“I just love the fact that he understands and gets the connectivity,” Marcoux said. “I’m very impressed with him, with his company, his knowledge of the site and his prep work. I’m so glad he didn’t just purchase the property as a lease hold. He bought it and wants to develop it.”
The post office property was listed for $12.8 million and had at least 10 offers – all but one being from buyers who live out of state, according to The Barry Co.
“There was a lot of out-of-state competition for this property,” said James T. Barry III, president of The Barry Co. “It’s a big indication that non-local developers and investors have rediscovered Milwaukee and are willing to invest and that’s a vote of confidence for Milwaukee.”
Once the post office vacates and Garrison begins his massive redevelopment project at one of the most visible sites downtown, Barry believes the work will be a catalyst for future redevelopment along St. Paul Avenue.
“The city has had a vision of trying to connect the Menomonee River, to build a river walk, to have pedestrian bridges from the train station to the Harley Museum; this is something that could spark that,” Barry said. “There is a movement to try to redevelop St. Paul and reenergize it. This type of redevelopment can really be a jump start.”