Developer Rick Barrett has spent the last 3 years of his life been working on The Moderne, a planned 30-story building that will be built at the southwest corner of Juneau Avenue and Old World Third Street in downtown Milwaukee.
Now the project is finally ready to break ground. The Milwaukee Common Council on Tuesday approved $9.3 million in city loans for the project. The project should break ground in December and will take 2 years to build, Barrett said.
The building will have 203 apartments, 14 condominiums and first floor retail space. The general contractor for the project is J.H. Findorff & Son Inc.
“It will truly be an iconic structure on the west side of the (Milwaukee) River and will undoubtedly lead to further development in the Park East corridor,” said Ald. Robert Bauman.
The $9.3 million in loans from the city are the final piece to the financial puzzle to the project, which Barrett. The city loans are necessary because the financial industry meltdown during the recession has made it extremely difficult for developers to obtain financing from the private sector for a major development, he says.
“We’re excited for our city, excited for the Park East and excited for the people we are going to put back to work,” Barrett said after the council vote. “I can’t tell you how honored I am that the (Common) Council saw what I saw. We’re very happy.”
Aldermen expressed reservations about providing a loan for a market-rate housing development, which is a significant shift in city policy. However, most said that there is a need to support the project because of the bad financial markets hindering development and to create jobs and increase the city’s tax base.
To obtain support from aldermen for the project, The Moderne developers agreed to increase their emerging business enterprise (EBE) goal from 18 percent to 25 percent and to increase their resident preference program (RPP) goal from 22 percent to 30 percent.
That means 25 percent of the contractors on the project would be owned by minority-owned Milwaukee firms and 30 percent of the workers will be “under employed or unemployed” construction workers who live in the city.
The EBE and RPP commitments were a key consideration for several aldermen.
“It is extremely important for us to get a benefit from (a development subsidized by the city), other than erecting a beautiful building,” said Ald. Ashanti Hamilton.
Ald. Joe Davis and Common Council President Willie Hines were the only aldermen who objected to the loans for The Moderne. Davis said he opposed the project because there were no job training or business development component.
Other critics of the project said the loan created a financial risk to the city’s taxpayers that the private sector was unwilling to assume. Critics also said the project will create more competition in a downtown housing market that is already soft.
“The Comptroller has opined that this is a very risky transaction. We all recognize that,” Bauman said.
But city support for The Moderne should essentially be seen as an economic stimulus project for the city, he said.
“We will put people back to work,” Bauman said. “We will create a building of substantial value in the city of Milwaukee and we will add substantially to the tax base. I think those are the principal objectives we need to keep in mind in reviewing any real estate financing that the city is asked to engage in.”
“When one considers the benefit versus the cost, the city taxes that will be generated from the project and the jobs that will be created on what right now is a vacant lot, I think it weighs heavily on the side of supporting it,” said Ald. Michael Murphy.
The $55.24 million project has a $41.4 million loan from the AFL-CIO Investment Trust, which will be serviced by Capmark Financial Group and is guaranteed by the U.S. Department of Housing and Urban Development (HUD)’s 221(d)4 program.
The Moderne developers also addressed concerns raised last week by aldermen about personal guarantees of the city loans and default provisions for the loans. Personal guarantees for the loans will be secured by a first lien on assets with a combined fair market value of no less than $3.35 million.
The site where The Moderne will be built was previously occupied by a 1-story muffler shop building, Bauman said. In 2005 a developer proposed a 5-story, 86-room Country Inn hotel for the property, but that project fell through.
