Council approves $9.3 million in loans for Moderne Park East high- rise ready to start construction

By TOM DAYKIN

By TOM DAYKIN

Work on the Moderne apartment and condo high-rise is to begin soon, with completion by fall 2011, following Tuesday's Milwaukee Common Council vote to help finance the project.

Developer Rick Barrett said foundation work will likely start within four weeks.

The 30-story Moderne, at the southwest corner of N. Old World Third St. and W. Juneau Ave., will take about two years to build, he said.

The council voted 13-2 to approve loans totaling $9.3 million to help finance development of the $55.2 million Moderne, which will have 203 apartments and 14 condos.

The project also will have equity financing from Barrett and his partners, and a $41.4 million loan from the AFL-CIO Housing Investment Trust. The AFL-CIO loan is getting a federal guarantee available for apartment developments.

The council vote came after Department of City Development officials negotiated additional measures with Barrett to reduce the city's risk from the loans and to strengthen hiring preference programs for city residents. They include a personal guarantee from Barrett and his partners, backed by a bank line of credit of $1 million and real estate valued at $3.3 million.

Barrett and his partners also are required to spend 25% of the construction costs with disadvantaged businesses, and 30% of the project's construction work hours must go to Milwaukee residents.

Ald. Robert Bauman and other council members sought the personal guarantees in response to a report from Comptroller Wally Morics that said the loans carry a "significant risk" that commercial lenders are unwilling to take.

The biggest risk would be a failure to sell the condos at an average price of $939,000, the report says.

So far, four of the condos have been reserved by prospective buyers.

Bauman and other aldermen acknowledged those risks. But even if the condos sell poorly, they said, the income from the Moderne's apartments and the project's property taxes would together generate enough cash to pay back the city's loans.

Loan supporters said the Moderne would provide jobs, a point backed by union construction workers who attended the City Hall meetings. Development Commissioner Rocky Marcoux also said the Moderne would help encourage more development in the Park East area.

Ald. Michael Murphy said he would prefer that Barrett obtain all of his financing privately, but banks have greatly cut back on lending for even viable projects. "These are unprecedented times," he said.

Ald. Joe Davis opposed the measure because it lacks job training funds. The only other opponent was Ald. Willie Hines, who said the risk is too high.

"The condominium market is struggling," Hines said. "Banks aren't lending to developers, or to (condo) buyers, either."

Barrett expects to sell the condos within four years, which is the term of the city loans. The condos will generate cash to reduce the project's debt. Barrett said that allows him to seek average apartment rents of about $1.90 a square foot, instead of the $2.20 a square foot rate that would otherwise be needed.

Aldermen might make a similar decision soon on another project: the 19-story Bookends North, which would have 224 apartments at the northeast corner of E. Kilbourn Ave. and N. Van Buren St.

The $60.2 million building is proposed by New Land Enterprises and Wiechmann Enterprises, and would be financed mainly by a $51.7 million loan from St. Louis-based Love Funding Corp. The developers are seeking a federal guarantee for that loan, and would also have $5 million in equity financing and a $3.5 million loan from Emerald Isle Partners, of Oakbrook Terrace, Ill.

The developers are seeking a city guarantee for the Emerald Isle loan, with New Land and Wiechmann posting collateral with an assessed value of $1.65 million, and a second mortgage on Bookends North.

The proposed city guarantee will be reviewed by the Common Council's Zoning, Neighborhoods and Development Committee once the comptroller's office completes its report on it.

Copyright 2009, Journal Sentinel Inc. All rights reserved. (Note: This notice does not apply to those news items already copyrighted and received through wire services or other media.)

(c) 2009 Milwaukee Journal Sentinel. Provided by ProQuest LLC. All rights Reserved.

A service of YellowBrix, Inc.