Milwaukee Condo & Real Estate Scene

BizTimes Media: The Moderne ready to go | Business Journal of Milwaukee: Behind the deal - Downturn forced developer to turn to unusual money sources

After three years of working on the $55.2 million Moderne, condo developer Rick Barrett has finally secured a financial deal involving the City of Milwaukee that will enable him to break ground on the latest luxury condominium highrise to be constructed on the southwest corner of Juneau Avenue and Old World Third Street in the Park East corridor.

The proposed 30-story Moderne will feature 203 apartments, 14 condominium units, and first floor retail. Of the 14 condominium units, half will be priced between $250,000 and $500,000. The other half will be priced between $900,000 and $2.5 million. As of this writing, Barrett has reported that four condominium units are reserved; three of which are priced between $900,000 and $2.5 million.

On November 4, Milwaukee’s Common Council voted in favor to provide Barrett with a $9.3 million loan for The Moderne. After receiving approval of the city’s loan, Barrett is expecting to break ground on The Moderne in December.

Barrett indicated that the loan from the city was necessary because the financial services industry has tightened their lending policies substantially during the recession. Since the recession began, real estate developers were finding it very difficult to obtain financial backing from investors.

Common Council is optimistic that this will be the first of many successful projects for the Park East corridor.

Common Council expressed reservations about providing a loan of this magnitude for a condominium development. Critics felt that approving such a loan would put the city’s taxpayers at risk. Many argued that the public sector should not provide financial support that the private sector wasn’t willing to assume. Also, supporting a new condominium development would only create more competition for downtown condominium housing that will continue to keep housing prices in check.

Those who supported the city’s loan indicated that the benefits outweigh the costs of this proposal. The strict lending policies of the financial services industry were preventing real estate developments from breaking ground which also prevented the creation of construction jobs. Common Council members who supported the measure argued that The Moderne would create construction jobs and increase the city’s tax base. I tend to think that this argument is very short-sighted and have expressed my opinion below under the section “My Thoughts”.

In addition to receiving a $9.3 million loan from the City of Milwaukee, Barrett has also secured financial backing from the AFL-CIO Investment Trust, which is serviced by Capmark Financial Group and guaranteed by the U.S. Department of Housing and Urban Development. Other financial supporters include Barrett and his partners.

Barrett expects to sell all of the condominium units within four years - which covers the term of the city’s $9.3 million loan.


My Thoughts

As a REALTOR®, I am happy to see that Downtown Milwaukee is continuing to grow and develop. As a REALTOR®, I am also concerned that the supply of downtown condominium units continues to remain high.

In recent weeks, I have read articles about the foreclosed actions against Park Lafayette and Wisconsin Tower. As I read these articles, I wonder if the market is telling real estate developers to back off. I also wonder if the market is telling our city officials to back off as well.

Those Common Council members who supported this loan argued that The Moderne would add to the tax base of the city. I disagree. The tax base is determined by the assessed values of real estate located in the city. Assessed values are determined, for the most part, by fair market values. As we continue to add more and more competition to our current housing stock, prices will continue to decline. As fair market values decline, so does the assessed values and city’s tax base. Simply adding a new development, such as The Moderne, may not necessarily add to the city’s tax base.

At the end of the day, we’re talking about the addition of 14 condominium units to the total number of condominium units already established in downtown Milwaukee. Will 14 new condominium units significantly influence the current market conditions in downtown?

I guess we will have to wait and see how The Moderne impacts the local economy.

If you were elected as Alderman, how would you have responded to the $9.3 million loan request?

The writers of BizTime Media and Pete Millard, writer for The Business Journal of Milwaukee, provides more details regarding the city’s loan to Barrett and The Moderne. Click here to read BizTime’s version of this story>>> Click here for Pete Millard’s position>>>


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Labels: Economy, Real Estate

posted by David Ray @ 1:24 PM