Court Approves Sale Of 100 East Building
Ruling clears way for redevelopment. Plus: A recap of the week's real estate news.
100 East. Photo by Jeramey Jannene.
The planned conversion of one of Milwaukee’s tallest buildings into apartments took a major step forward this week, though it could still be three years before anyone moves in.
Milwaukee County Circuit Court Judge Christopher Foley approved the proposed sale of the 100 East office tower to a partnership of Klein Development and Johnny Vassallo.
The partners would pay $28.75 million for the 35-story office tower and its parking structure with an ultimate plan of redeveloping the building into 350 apartments. They have already deposited $2.5 million in earnest money.
The purchase is to be completed May 2, with the remaining tenants to relocate to other buildings.
A foreclosure suit was initiated against the building’s owner, California-based Hertz Investment Group, in 2021. The tower is more than half empty, with Marcus Corp. and Gruber Law Offices representing the two largest remaining office tenants. The desirability of the building for office use has declined as new buildings have featured more natural light, more-efficient floor plans and more tenant amenities.
The Klein-Vassallo partnership was selected from eight bidders. Court documents reveal that Patrick Gallagher of CBRE oversaw two rounds of bidding, narrowed the field to three and then gave the other two remaining parties a chance to outbid the Klein price. No one did. The partners were selected in November and have negotiated the terms of the deal in the ensuing months.
Michael Polsky has acted as a receiver for the creditors, a real estate trust represented by Wilmington Trust. JPMorgan Chase assembled the trust, JPMDB Commercial Mortgage Securities Trust 2016-C4, which holds mortgages for several commercial properties across the country. 100 East represents 2.4% of its holdings. Credit rating agencies flagged the 100 East mortgage as troubled as early as 2018.
The sale will not make all of the creditors whole, but none objected to the sale. An affiliate of California-based Hertz purchased the property, 100 E. Wisconsin Ave., for $78 million in 2016 when it was 88% occupied. According to court documents, there is still at least $50.8 million remaining on the mortgage. After paying the court-approved property manager Friedman Real Estate Group and covering any other transaction costs, the trust would receive the remaining proceeds.
The 435,557-square-foot building was completed in 1989. It is still the second-tallest building in Wisconsin.
Until the foreclosure action started, it was one of the 10 most valuable properties in the city. A lawsuit from Hertz challenging the most recent assessments, which were lowered following the building’s occupancy rate plummeting, was dismissed this week. Court records indicate a settlement is forthcoming. Hertz had sought a rebate of approximately $660,000 in property tax payments, representing approximately half of what it was paying annually.
The top six floors of 100 East are empty after law firm Michael Best & Friedrich relocated to BMO Tower, a move inspired in part by improved floor plans, more natural light and improved aesthetics offered in the newly-completed building. The move was announced in 2016 and completed in 2020 as the new building opened. More tenants are poised to follow it, with Fiduciary Management also likely to relocate.
PricewaterhouseCoopers also relocated from the building to 833 East in recent years.
The housing proposal is a boon to the downtown office market: it would take a substantial amount of office space off the market and push the remaining tenants into other buildings.
The Klein family previously partnered with Vassallo to redevelop the mostly-vacant Posner Building into MKE Lofts. That partnership came via HKS Holdings, which includes Joe Klein as a partner.
Joe’s brother Michael Klein leads Klein Development. Both HKS and Klein Development are currently pursuing hotel projects in the city and have previously developed apartment buildings. Their father, Dennis Klein, is a long-time Milwaukee developer and construction executive currently with C.D. Smith.
Vassallo is an entrepreneur best known to Milwaukee residents for his Mo’s Irish Pub and Mo’s steakhouse. He recently canceled plans for a 28-story tower in Wauwatosa and said he will instead develop a car wash at the site. Vassallo has developed housing in other markets and is also invested in other businesses, including scooters.
The sale includes both the office tower and the skywalk-connected parking structure at 718-722 N. Water St.
Last month, we examined how the building’s declining value is likely to increase the property tax bill of the average Milwaukee homeowner by $4. But a successful redevelopment of the building to 350 apartments could be more valuable than the office building was at its peak and reverse the impact. Furthermore, the effects of improving the downtown office market by reducing the amount of space and pushing the remaining tenants into other properties could also raise assessments at other office buildings.
Photos
Weekly Recap
NBA Approves Haslam’s Acquisition of Milwaukee Bucks
It’s official. Jimmy and Dee Haslam are buying Marc Lasry‘s 25% interest in the Milwaukee Bucks.
The NBA Board of Governors, the league’s ownership board, approved the sale. The Haslam’s already are the majority owners of the NFL’s Cleveland Browns and MLS’s Columbus Crew.
The couple will join Wesley Edens and Jamie Dinan as majority owners of the Bucks. Jimmy Haslam, 68, is the chairman of the Pilot Flying J truck stop chain.
“On behalf of Jamie and the entire ownership group, I want to welcome Dee, Jimmy and the Haslam family to the Bucks,” said Edens. “The Bucks have a special bond with the people of Milwaukee and throughout Wisconsin, and we’re looking forward to working closely with Dee and Jimmy to further build upon our team’s success, both on and off the court. Their professional sports experience and profound engagement and desire to positively impact communities will provide important contributions to our franchise’s long-term success. We’re very proud of the impact our ownership group has had over the past nine years and believe that we’re well-positioned for an even brighter future.”
Wisconsin Center Pauses Art Removal
The Wisconsin Center District (WCD) is pausing its controversial decision to remove a series of literary artworks that have adorned the convention center’s concourse for 25 years.
But the decision doesn’t mean sculptor Jill Sebastian‘s literary piece, which features quotes from many writers, will be preserved as is.
As first reported by Urban Milwaukee, the decision to remove the pieces was made by CEO Marty Brooks and the district’s staff without the consulting the public organization’s board. As part of the $456 million expansion, the board gave Brooks decision-making power on a wide variety of measures to execute the project. That included efforts to harmonize the new facility with the existing one.
In an April 13 letter to the board obtained by Urban Milwaukee, Brooks said the modernization of the existing building “is a critical piece of the overall expansion project.” He said the artists whose pieces would be removed were notified in January, with some electing to remove them if possible.
Court Could Block Northridge Sale To Phoenix Investors
The legal saga surrounding Northridge Mall could be coming to an end. And it could end up with the city taking ownership of the long-vacant mall.
Judge William Sosnay, in a hearing Friday, said it was “premature” to immediately approve the city’s January request to take ownership of the property, but said he would entertain the motion if made after the Court of Appeals rules.
“I will do everything I can to bring it to some conclusion, one way or another,” said Sosnay. The case started on April 11, 2019 when the city announced it was issuing raze orders because the repair costs exceed 50% of the building’s assessed value. Black Spruce has repeatedly contested and appealed the matter.
The city’s deed request would strip the mall’s Chinese ownership group, U.S. Black Spruce Enterprise Group, of possession of the property for failure to comply with a raze order to clear the dilapidated 900,000-square-foot structure. It would end a contempt order that now includes more than $400,000 in fines for failure to secure the property, which has been the site of repeated break-ins in recent years.
New Land Plans New Building For Walker’s Point
New Land Enterprises is looking to repeat its successful Walker’s Point development model on a new site at S. 4th St. and W. Florida St.
The firm has successfully developed three apartment complexes in Walker’s Point, with a fourth approved and now a new project ready to take shape.
New Land, which has developed a number of buildings in Milwaukee, first entered Walker’s Point in 2016 with its completion of the 120-unit, three-building Trio complex. It found repeated success when it began to develop slightly smaller buildings on smaller lots, which managing director Tim Gokhman said in 2021 provide affordable rents for new construction without a government subsidy.
The first smaller building, the 48-unit Quartet, was completed in 2020 and fully leased within a couple of months. The second building, the 66-unit Element, was fully leased as soon as it opened last spring. In 2022, the firm secured approval to construct the 87-unit Via building. Each complex is six stories tall, with four floors of apartments above a two-level parking podium.
Committee Approves $16 Million For New Downtown Park
Three substantial projects took key steps forward Tuesday with the Common Council’s Zoning, Neighborhoods & Development Committee endorsing the use of $21.6 million in tax incremental financing (TIF) to advance their development.
The committee endorsed a $15.75 million plan to develop Vel R. Phillips Plaza, a new public park, along W. Wisconsin Ave. between N. Vel R. Phillips Ave. and N. 5th St. It also backed $1 million to build a street to 10 acres of largely hidden land in the Menomonee Valley, $4.35 million for street improvements just north of Downtown and $500,000 to fund city programs used to attract and retain commercial tenants. All of the funding will come from excess revenue being generated nearby tax incremental financing districts.
The new plaza would be developed atop a city-owned surface parking lot at 401 W. Wisconsin Ave. Located across the street from the convention center, the 30,000-square-foot plaza would include a 2,900-square-foot food or beverage retail space, manicured garden, a flexible space for farmers markets and other events, an informational kiosk, public art installations and a station on Milwaukee County’s Connect bus-rapid transit line. Space would be reserved through the site for a future streetcar line north to Fiserv Forum and Bronzeville.
“We want people to congregate here. We have too many public plazas in Milwaukee that are too empty,” said Department of City Development economic development specialist Dan Casanova to the committee. He said the proposed building and operator would be key, with the city expected to issue a request for proposals later for an operator later this month. The building would also include public restrooms, which could be used to support nearby events like the Milwaukee Night Market.
Neu-Life Plans Development at 12th and Cherry
A nonprofit focused on providing educational and recreational programming for youth is planning a six-story, mixed-use building that would include 36 apartments, a gym, office space, a culinary training space and a rooftop event area.
Neu-Life Community Development, a 23-year-old 501(c)(3) nonprofit, would use the facility to expand its programming. It could also end up housing the youth the organization works with as they age out of its traditional programming.
“The initial goal was to replace the gang mentality,” said founder and CEO Joann Harris-Comodore to the Zoning, Neighborhoods & Development Committee Tuesday. “The next step is to continue that process when they become 18.” She said the goal is to help those young adults, ages 18 to 24, grow to become independent, functional members of the community.
The organization would develop the complex on a largely vacant site at the intersection of N. 12th St. and W. Cherry St. Much of the site is currently used for the organization’s gardens.
Brady Street Hotel Design Approved
The glassy, triangular hotel proposed for E. Brady St., N. Cambridge Ave. and N. Farwell Ave. received a key approval Tuesday.
The Common Council’s Zoning, Neighborhoods & Development Committee voted unanimously to recommend approval of a zoning change to enable the design of the 11-story, 130-room building.
“This is an extremely exciting day for Milwaukee and Brady Street specifically,” said area Alderman Jonathan Brostoff.
“This is a project we are very excited about,” said Michael Klein, president of Klein Development. His firm is partnering with frequent collaborator Jeno Cataldo on the development, which would replace a two-story retail center from 1987 and long associated with former anchor tenant FedEx.
Wisconsin Center Accused of Censorship
The controversy over the planned destruction of a literary art installation at the downtown Wisconsin Center, first reported by Urban Milwaukee, continues to generate news. A story by the Green Bay Press-Gazette today has a headline declaring that “Indigenous writers decry apparent planned destruction of literary exhibit” and offers criticism of the decision by Dr. Kimberly Blaeser, a former Wisconsin Poet Laureate and a citizen of the White Earth Nation Ojibwe in Minnesota, who has work featured in the exhibit installed in 1998.
The installation was a public project, overseen by the Milwaukee Arts Board and public officials, featuring texts from the works of 48 Wisconsin writers through four centuries, including many prominent Indigenous artists and people of color. The texts are wide-ranging in their voices and concerns, but as Blaeser noted, some of the works by Indigenous writers remind visitors of the colonial history of Wisconsin and how Indigenous people and the atrocities committed against them had been forgotten.
“I don’t understand why our leaders would be afraid of history,” she said. “It’s such a tragedy that there would be this erasure.”
Opponents of the removal argue the ongoing, $456 million expansion of the convention center does not require the removal of the exhibit. A group of Wisconsin writers issued a press release blasting the decision and questioning whether the removal is part of an effort to prepare for hosting the Republican National Convention next year and part of a rising national trend of censorship by conservative activists.
Millennial Homeownership in Milwaukee Up 157% in Five Years
Jeremy Ault and his wife Jamie moved to Milwaukee in 2011, renting an apartment in the Riverwest neighborhood of the city.
But shortly after the coronavirus pandemic began in 2020, their landlord informed them he’d be significantly raising their rent.
“That led us to quickly either searching for a new apartment or really getting involved with the home buying market,” Aultid.
After looking at other rentals, they decided to buy a home as it became clear a mortgage would be comparable to what they’d pay in rent. Ault also wanted to live near the school he teaches at so he could continue biking to work.
New Downtown Hotel Approved
The Historic Preservation Commission endorsed the design of a new eight-story hotel after the proposal was modified to emphasize its verticality and inject a sense of “grandeur.”
The proposed Tempo by Hilton Milwaukee hotel would have 161 guest rooms, two restaurants and a rooftop bar. Located at the corner of N. Martin Luther King Jr. Dr. and W. Kilbourn Ave., it would be well suited to serve guests attending events at Fiserv Forum and the soon-to-open Baird Center expansion of the convention center.
In January, the commission and its lead staff member, Tim Askin, had panned the initial design for being a “background building.” The commission has design control of what is currently a surface parking lot because it’s part of the former Milwaukee Journal Sentinel complex that the city designated historic in 2019.
The revised design, created by architecture firm Kahler Slater, won the commission’s approval on April 3.
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