Last updated on May 13th, 2019 at 02:24 pm
WHEDA expands focus
State program can now be used to help finance urban business developments
While myriad loan guarantee programs are designed to help businesses construct their own facilities, until recently little assistance has been available to help small businesses move into leased space in new urban developments.
That may change, as a Milwaukee developer is planning the first raft of projects program from Wisconsin Housing and Economic Development Authority (WHEDA).
According to Randy Roth, principal with Endeavor Cos, a Milwaukee-based firm specializing in urban revitalization, the state’s flexible new finance tool will help locally owned businesses get space in multi-use facilities.
Benefit to small retailers
"What we are going to see is smaller, local retailers with one or two units in the community now being able to take advantage of the foot traffic of a multi-use setting," Roth said. "The program is going to be very useful for developers and also businesses that don’t own real estate in central city under-served communities."
To date, according to Roth, it has been hard for developers to include startup businesses and smaller companies in multi-use projects because a developer’s ability to obtain financing was dependent on the creditworthiness of tenants.
"We never had a program that allowed a developer to bring in smaller local business," Roth said. "It was hard to bring them in because of the underwriting requirements."
WHEDA, under new executive director Antonio Riley, will hang onto its core mission of financing homes for low- and moderate-income households. However, Riley and newly hired deputy director George Christenson also will focus WHEDA’s resources on stimulating nonresidential development in urban areas.
According to Riley, the program can be used for non-real estate transactions, including business startups, and can provide loan guarantees up to $750,000. Borrowers must be either existing businesses with annual revenues of under $5 million or developers with previous commercial development experience.
"This is part of an expanded loan initiative announced by the governor," Riley said. "We are starting out with $12 million in loan guarantees available to businesses in communities with populations of 35,000 or higher. Hopefully, we can increase that figure to $40 million. We purposely started with a broad description of how the money could be used so we could help people not covered by other programs.
"SBA (Small Business Administration) loans can be used to develop retail space, but the developer has to occupy it. This new WHEDA loan can be used to develop space for someone else to occupy. It can be used to buy out a business partner, for operating capital or to start up a business."
Roth said the pent-up demand for retail deals similar to three pilot projects he is working on could come to dominate the new WHEDA program.
The first is a 22,000-square-foot building on an acre and a half of land on near Capitol Drive and Richards Street in Milwaukee. The project features a blend of national retailers, including Subway and Best Price Electronics Boutique. Roth is negotiating with another prospective tenant.
"We want to get Victor Lady, a local company, in there. Without this program, we would try to make all the tenants national retailers because of underwriting. You go to the bank, and the better credit your tenants have, the better," Roth said.
Brewer’s Hill project
Another project Roth hopes to use the WHEDA loan guarantee on is an 8,000-square-foot retail development on about half an acre in Milwaukee’s Brewer’s Hill neighborhood.
"We have a small café that would go into the lower level, and second floor office space," Roth said. "The space is at Vine and Hubbard – right on the bluff. The cafe is a startup business that would occupy about two-thirds of the space. Typically, a developer/owner would not take the risk of placing a tenant like this into their business."
A third project is a 10,000-square-foot retail development on about an acre of land near Lisbon and North avenues.
"At this site, we already have under construction a Wendy’s project," Roth said. "We are building a second building, a Playmakers, which is a local athletic apparel store. They have two units already in the market and have been around a number of years. Combined with the Wendy’s and the Playmakers, that is $1 million worth of development there.
July 25, 2003 Small Business Times, Milwaukee