Members of the Milwaukee Common Council’s Zoning, Neighborhoods and Development Committee on Tuesday decided to delay a final decision on the project until a special meeting on Nov. 3.
Seeking to shore up some issues related to the $9.3 million loan proposal for The Moderne development, members of the Milwaukee Common Council’s Zoning, Neighborhoods and Development Committee on Tuesday decided to delay a final decision on the project until a special meeting on Nov. 3.
Some committee members expressed support for the project, yet some raised concerns.
The delay came after a report on Friday from the city’s comptroller office raised some concerns about the loans and said it would be a significant risk for the city to enter into.
“We can’t just say, ‘Thanks Mr. Comptroller, but we are going to ignore you,'” said Ald. Robert Bauman. “To ignore his advice is malfeasance by us as aldermen.”
The Moderne is a proposed 30-story building that would be built on a vacant lot at the southwest corner of Juneau Avenue and Old World Third Street. It would have 203 apartments, 14 condominiums and first floor retail space. The Moderne would be developed by group of investors led by developer Rick Barrett.
The $9.3 million in loans from the city would be the final piece to the financial puzzle to the project, which Barrett says could break ground in a few months. 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.
The city loans for The Moderne are worthwhile because the project would create about 1,000 union construction jobs and boost the largely vacant Park East corridor.
“I think it’s worth taking the risk to provide the construction jobs, build the tax base and demonstrate that Milwaukee is moving forward,” said Ald. Tony Zielinski. “This is guaranteed to create jobs right now.”
Bauman raised concerns that the city loan term sheet provides for personal guarantees by the equity investors in the event of a default. Bauman said a personal guarantee is not good enough and said he wanted a secure guarantee.
“As recent foreclosure actions on local condominium projects clearly demonstrate, personal developer guarantees and buyer deposits may prove insufficient when a project is in financial trouble,” the comptroller’s report states.
The comptroller’s office report also requested that a general default provision be incorporated into the loan term sheet. The details behind that provision have yet to be negotiated with The Moderne developers.
Ald. Willie Wade said he would not support the loans for The Moderne unless the developer agreed to increase the number of minorities that will be working on the project.
The Moderne will has an 18 percent emerging business enterprise (EBE) goal and a 22 percent resident preference program (RPP) goal. That means 18 percent of the construction on the project would be owned by minority-owned Milwaukee firms and 22 percent of the workers would live in the city.
“Those numbers need to come up,” Wade said. “In my aldermanic district we have 50 percent of the black males unemployed. I have too many people everywhere I go coming up to me asking about jobs. If people want to build and they want the city to provide a subsidy then they need to employ our people. Having a big, shiny, beautiful building downtown doesn’t help the people in my district who are starving.”
Committee chairman Ald. James Witkowiak said he hopes these issues can be worked out before the meeting next week.
“I support the project,” he said. “I want to see it get done. There may be a greater risk in not doing this. It’s almost embarrassing that the Park East corridor has not been developed. I think the benefits (of the project) far outweigh the risk.”
The $55.2 million project has a $41.4 million loan from the AFL-CIO Investment Trust, which would 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. Capmark recently filed for Chapter 11 bankruptcy protection. A Bloomberg News report said that Capmark has agreed to sell its loan servicing and mortgage business to Berkshire Hathaway Inc. and Leucadia National Corp.
Barrett said Capmark’s Chapter 11 filing and the pending sale of its loan servicing business will not affect The Moderne.
“They are being taken over, which is great for us,” he said.