The 200 Empty Units in Park Lafayette Are Not The End of Milwaukee Development
Yesterday it was announced that prominent East Side development Park Lafayette is being foreclosed on by Amalgamated Bank of New York, the primary lender on the project. Not surprising to those who have seen the massive towers, Amalgamated Bank is claiming they are owed nearly $100 million by Renaissant Lafayette LLC, an affiliate of Renaissant Development Group. Renaissant Development Group is led by prominent Chicago developer Warren Barr. Park Lafayette was Barr’s first entry into the Milwaukee market. While the foreclosure is certainly bad news for Barr and the bank, it’s not necessarily all bad news for Milwaukee.
- The construction of the towers was finished. There isn’t construction equipment or fences blocking the roads. Makes walking, biking, and driving near the project just a little bit easier. It also allows people to move in, who spend money at local businesses and serve as eyes on the street. Perhaps most importantly for the City of Milwaukee, it allows them to assess the building at a much higher amount. For an example of how this could be worse, look at The Residences on Water on the corner of Juneau and Water. That building is being fought over in court while it sits with fences around it blocking the sidewalk and parking.
- Both towers were built at the same time. It’s likely if only one tower was built, that only one would be ever built. You would have fewer empty units certainly, which would maybe marginally help property values in the area, but at the same time the nation is a massive recession centered around the housing area so things would be terrible regardless, best if the city gets something out of it in return. What is that the city gets? Density. Park Lafayette is 292 units on a rather small lot, that’s future customers for businesses in the area. While the construction of Park Lafayette isn’t encouraging development in the area right now, in the long-term those units will fill, the residents will spend a lot of money at local businesses, and overall the building will generate a lot of positive externalities for the city.
- Two-hundred empty units in an urban, dense development is much better than 200+ empty single-family homes in a suburb. Empty houses are at risk for theft (copper wire, etc) and possess a security risk by eliminating eyes on the street. If you’re going to have 200 empty units, a high rise tower is probably the best configuration possible.
- The construction was entirely privately financed. The City of Milwaukee didn’t have to contribute any public money to make this project happen. Yes, the project dumped a lot of empty units on the housing market, but it’s hard to say the City of Milwaukee should have done something to prohibit an outsider investing money in the city.
- The large development pushed the ceiling for the neighborhood upward. One more large building only serves to dampen public opposition to the next tall building proposed for the area.
- There is hope. Mandel Group, Garrison Partners, and Schmocke & Associates were able to come in and turn around The Pointe on the River. Unit sales just crossed the 50% threshold. Now, Park Lafayette is almost twice the size of The Pointe on the River, so a turn-around in a year is unlikely, but over the next few years new management and an improving economy should make things improve drastically.
- The units aren’t being unloaded on the market as apartments. This makes projects like The Moderne (almost all apartments) make more sense despite the glut of condos on the market. Mandel’s new ONE at The North End is within one unit of being full, and other apartment buildings around downtown and the lower East Side are near full.
- The bank wants Bob Monnat of the Mandel Group to be the court appointed receiver. If there is to be light at the end of the tunnel, bringing in the most successful development team in town is a great start. The sales competency that Monnat and the rest of the Mandel Group has will certainly lead to a fairly-priced, fully-occupied building much faster than almost any other developer or sales team in town could deliver.
So while it’s certainly a shame that the 200+ empty units might be negatively affecting prices of units in the area, things could be much worse. Long-term things still look good for the neighborhood. In the short term it’s hard to say that any development project that has been brought forward has been stalled because of the excess units at Park Lafayette.
Foreclosure on massive residential developments are not unique to Milwaukee. New York City, for instance, is witnessing the failure of the single biggest real estate deal in history, the Stuyvesant Square project valued in the billions of dollars. This is by no means The End for big projects in Manhattan, any more than the Park Lafayette debacle is the end for Milwaukee.
This is simply the same old familiar cycle of boom and bust. Real estate developers get greedy, bankers turn on the spigot and everyone thinks the Good Times will never end. Which of course they do. For those of us under 40, we’re witnesses the first real collapse of confidence in our lifetimes, but we will make it through OK just like past generations did.
At least in this cycle of boom and bust, Milwaukee was in on the boom. Milwaukee was right there on the wave, whereas in previous cycles other places boomed while Milwaukee languished. So that’s another silver lining, I suppose.
One thing that may have put Barr under was the incredible amount of underground parking — 4 levels of it — he was obliged to construct on the site due to Milwaukee zoning requirements.
I was present in Chicago at a meeting when he expressed his amazement about the number of required parking spaces. I told him the funny thing was, in a few years, there would likely be a street rail system passing right in front of the building.
Yes, folks, when cities have rail transit, developers rejoice, since they do not have to provide a crazy number of parking spaces for residents who don’t need them.
Horne
Its amazing the project got financed in the first place; its only 30% sold now. I can only imagine what its presales were at.
I would disagree with the comment “5.The large development pushed the ceiling for the neighborhood upward. One more large building only serves to dampen public opposition to the next tall building proposed for the area.” I would argue that a vacant tall building would only fuel the fires.
Also, Milwaukee zoning requires one stall per unit for multifamily. If he built four levels of underground parking, it was his call. He probably built what he though he would need to sell units, and likely grossly overestimated. Regardless of transit, its hard to sell units without parking.
@Downtown25 Yes, I would say if the building is vacant, you’ll definitely get more of a fight from neighbors. But as sales improve, that will be erased. I wasn’t talking about a proposal tomorrow, more 5 years from now.
I see the benefits in the very long run, but Park Lafayette is not the project to stick up for. The people living in the building now have to share the costs of maintaining a massive building, particularly now that the developer is out of the picture. It is good to have outside investment in Milwaukee, but it seems like the investment will be from Amalgamated instead of Barr. And the neighborhood impact on property values is going to be harsher than you’re portraying. As you look around the city, you see people trying to sell homes in neighborhoods stuffed with foreclosures and facing the frustration of trying to sell for less than a foreclosure or hold onto a property they can’t afford to maintain. Granted, it plays out differently with condos, but the effect is the same.
I don’t think you have to defend Park Lafayette to support smart urban planning and development in Milwaukee. Actually, it seems better to critique the mistakes made and move on with other projects. All of your points are great points (except 5), but it’s hard to miss that there is a downside when a project enters foreclosure.
Downtown25, the four stories of underground parking were not the developer’s call. He only wanted to build 2 stories, but at the zoning hearing, the neighbors demanded four. As a result, the four stories became a condition of the zoning change. And, at $35,000 or more to construct an underground parking space, the developer’s costs increased significantly.
If anyone can find the ZND hearing on this, it was a great (and depressing) discussion.
Any luck on finding a hearing recording/transcript? That’s an incredible price to pay for parking. Partly explains why my old neighbor on Marshall St. was trying to selling a space in his garage for $65,000, claiming it was a bargain since it had the hydraulic lift to fit two cars. I thought he was nuts for other reasons.
I stand corrected. Parking is expensive to build without a doubt and on a triangular site it only get less efficient and more expensive.