Gorman & Company

From Foreclosures, Affordable Housing

Affordable Housing Finance, 2014 LIHTC Yearbook

A Wisconsin developer’s large-scale initiative in neighborhoods on Milwaukee’s North Side is helping reverse the damage of the Great Recession and foreclosure crisis.  By purchasing vacant lots and foreclosed homes from the city, Gorman & Co. has aided in neighborhood revitalization, homeownership opportunities, and job creation.

Over the course of seven phases, the developer built or rehabbed 282 single-family homes or duplexes affordable to residents earning between 30 percent and 60 percent of the area median income.

“All of those homes that we redeveloped within the neighborhoods are in a high demand because people in this day and age really find it hard to own a home but want the space of a home to raise a family,” says Ted Matkom, Wisconsin market president for Gorman & Co.

Gorman refurbished the homes, many of which date back to the early 1900s, with modern amenities, appliances and security systems.  “You literally get a new home, in a sense, when you move in,” Matkom says.

After the 15-year compliance period, residents living within the single-family homes will have the opportunity to purchase them for the remaining debt, which is projected to be approximately $35,000.

The acquisition and rehabilitation work also has provided a needed jobs boost in the city.  Gorman partnered with nonprofit Northcott Neighborhood House to create a training program for chronically unemployed local residents with challenged backgrounds.  Through the program, men and women were trained to do construction trade work and demolition work.

Low-income housing tax credits (LIHTCs) were vital to the developer’s work.  The $56.6 million initiative was financed with $44.1 million in LIHTC equity.  Additional financing included Neighborhood Stabilization Program funds from the city of Milwaukee.

“The LIHTC program really makes the housing sustainable for years to come,” says Matkom.  “And it really revitalizes the housing stock with minimal subsidy.”

The Diversification Strategy: Tom Capp and Gorman & Company Develop a variety of projects, Tap Different Funding Sources

Tax Credit Advisor, August 2014

The way that Tom Capp and Gorman & Company, Inc. approach the development of multifamily rental housing, historic preservation, and mixed-use real estate projects is to always be on the lookout – for new opportunities, funding sources and lessons.

“We really consider ourselves community developers as much as we do multifamily developers,” says Capp, the company’s chief operating officer. “We don’t go out and pick a site and say, ‘Hey, let’s go develop a project there.’ The vast majority of our developments have been identified as community priorities by the city, a significant nonprofit, or a housing authority.”

Company Background, Geographic Focus

Based outside of Madison, Wisc., Gorman & Company employs 235 people nationwide, owns and manages almost 4,000 housing units, and manages about 1100 units for other owners. The firm was established 30 years ago by CEO Gary Gorman, a former lawyer who represented developers and syndicators. Capp, born and raised in Chicago, joined the company 20 years ago from a planning and government background, starting as director of a real estate development, and then moving up to executive vice president and later to COO. While primarily a development outfit, the vertically-integrated firm also has in-house construction, architectural design, property management, and asset management divisions.

“As our development leadership takes a project through from beginning to end, we have all of those functions at the table,” says Capp. “That’s our business model. We try to capture the strengths of the integration of all of those elements and the histories and lessons learned in each of those areas.”

The company currently focuses its development in Wisconsin, Illinois, Florida, Arizona, and – new this year – Colorado. In addition to the Wisconsin headquarters, the company has a satellite office in each state (Chicago, Phoenix, Miami, Denver) run by a market president who finds and develops projects in the state. They receive full support from what Capp calls “the mother ship in Wisconsin.” The market presidents, experienced and well-regarded in their states, generally come from the nonprofit housing or housing authority worlds. “Our market president is often the most respected developer in their state,” says Capp. “They take a deep dive in their state, and their integrity is unquestionable.”

Gorman & Company’s projects are primarily infill developments, mostly in urban areas, and frequently in “challenged” neighborhoods. “The lion’s share of what we do is multifamily housing,” says Capp. “And within that space, a large percentage is either workforce housing or low-income housing tax credit developments.” The company has completed about 80 LIHTC projects to date.

In addition, the company develops market-rate housing, commercial, and mixed-used projects. In many cases, the firm utilizes federal—and sometimes also state—historic tax credits, alone or in combination with housing tax credits.
A number of its affordable apartments target local artists and contain live/work units with studio space as well as galleries.

Variety of Projects

A major community development and revitalization project is The Brewery in Milwaukee, Wisc., a redevelopment site near downtown that once belonged to the Pabst Brewing Company. Gorman & Company is methodically developing projects from the 26 historic buildings and sites that were part of the brewery complex. These projects include a mix of historic rehabilitation and adaptive re-use of some of the existing buildings, along with demolition of others followed by new construction. “We committed to the city and other players, before the recession, to play a significant role in redeveloping that area,” says Capp.

The two projects completed so far are:

Blue Ribbon Lofts, a 95-unit mixed income apartment development financed largely with federal low-income housing and historic tax credits.
The Brewhouse Inn & Suites, a 90-room boutique hotel and restaurant funded partly by historic tax credits and by equity raised from Chinese investors under the federal EB-5 program.

Currently under construction:

• A 60,000-square-foot office building funded by equity raised from Chinese investors under the EB-5 program;
Frederic Lofts, a modern-design, 100-unit market-rate apartment project funded with direct equity investments from a Chinese development firm that Gorman & Company met while raising EB-5 funds in China. Capp says the market-rate development will provide a “new kind of hipster housing in this part of downtown.”

Elsewhere, Gorman & Company is developing:

Lion’s Ridge Village Apartments, in Vail, the firm’s first project in Colorado. This involves the construction of four new apartment buildings with a total of 114 units located on part of a 10-acre site occupied by an existing apartment complex purchased by the town of Vail. The town is providing the land through a 50-year ground lease. Seventy percent of the new apartments will be workforce units, deed-restricted as housing for employees of local businesses, including the local ski resort.
Coffelt-Lamoreaux Park, Phoenix, Ariz. In partnership with the Housing Authority of Maricopa County, the company is redeveloping and converting 296 units of public housing to assisted rental housing under the federal Rental Assistance Demonstration program, using federal housing and historic tax credits and tax-exempt financing. The firm has a master development agreement (MDA) with the housing authority to redevelop all of its public housing.
Paradise Pointe Senior Residences, a new 46-unit LIHTC development for seniors in Monroe County in the Florida Keys, Gorman & Company’s third tax credit project in the Keys.

Examples of mixed-use projects completed by Gorman & Company include:

Villard Square, in Milwaukee, containing 47 apartments on three floors above a new 20,000-square-foot city library. The apartments were designed as “grandfamily” housing for grandparents raising their grandchildren.
Grand River Station, in La Crosse, Wisc. This new construction project combines a city transit center with 72 affordable and market-rate apartments. The development also includes 20 for-sale condos on upper floors as well as retail stores and gallery space at the ground level.

“In the last few years, we’ve had pretty good luck in mixing uses in different ways,” says Capp.

The COO says the company is stronger and different than it was five or six years ago as a result of changes made in response to the recession. According to Capp, the firm used to tie its fortunes largely to low-income housing tax credit development. During the downturn, it decided to diversify both in the types of projects it develops as well as the funding sources used.

One new source has been foreign investor capital procured though the EB-5 program. This program fast-tracks the issuance of visas and ultimately green cards to foreigners (and their families) who invest $500,000 or more in specific projects or businesses in the U.S. Solicitation offerings to foreign investors must be made though federally designated regional centers. Gorman & Company has successfully raised EB-5 capital for two projects so far and anticipates more going forward. In fact, the company has established its own EB-5 regional center to expedite the process of raising foreign investor capital for real estate projects in Chicago, Milwaukee, and other parts of Illinois and Wisconsin.

Love for Development

Capp, an affordable housing veteran, continues to enjoy being a developer.

“I came into the development side from the planning and government worlds, which I loved. But there you do policy work and plans. You often don’t see real tangible results.

“What I really love about our role as community developer is getting to creatively devise how to build something that ends up being tangible. Once it’s built you are able to kick it and take your kids by it.”

Capp also relishes improving the lives of the residents of the company’s developments. “When you meet somebody who lives in quality housing that they never had an opportunity to have before, that’s very satisfying,” he says. “I love the very real effects you have on peoples’ lives.”

Historic Tax Credit Tool Box: Three Historic Tax Credit Developers’ Plans for the Future

By John Tess, Heritage Consulting Group, Novogradac Journal of Tax Credits, March 2014

Since 1976, federal tax incentives have been provided to encourage developers to rehabilitate historic properties rather than replace them. Over the years, the preservation tax incentives program has seen significant changes in incentives. The current federal historic preservation tax incentives program provides a 20 percent historic perseveration tax credit (HTC) for qualified rehabilitation expenditures (QREs) incurred by property owners rehabbing certified historic structures for nonresidential or residential rental uses. A 10 percent HTC is available for older buildings placed in service prior to 1936. In addition, because of the success of the federal program, many local and state incentives have been created throughout the country to assist in rehabilitating historic buildings.

It is generally acknowledged that the federal HTC program has been one of the nation’s most successful and cost-effective urban revitalization programs. The National Trust for Historic Preservation reports that since 1981, the HTC has leveraged nearly $106 billion in private investment, created more than 2.35 million jobs and adapted more than 38,700 buildings.

However, the program’s decades of accomplishment faced a significant challenge in 2012, when a federal appeals court denied federal HTCs to an investor in what has become known as the Historic Boardwalk Hall Case. The Internal Revenue Service (IRS) added fuel to the fire when, shortly after the court case, it issued Office of Chief Counsel Memorandum (CCM) 20124002F, which disallowed tax credits claimed by an HTC investor. These two decisions upset the program’s history of success and disrupted many HTC developers’ plans.

Historic Boardwalk Hall and CCM 20124002F     The Novogradac Journal of Tax Credits and other publications have covered the two decisions extensively, but industry stakeholders are still exploring the implications of the latest development, Revenue Procedure 2014-12. In Rev. Proc. 2014-12, released Dec. 30, 2013 and updated Jan. 9, the IRS provided the long-awaited guidance that establishes a safe harbor for HTC equity transactions. As the HTC community reviews that guidance, three major developers share their plans for the future and discuss how the safe harbor affects those plans.

Kimpton Hotels and Restaurants Plans for Growth     Kimpton Hotels and Restaurants was founded in San Francisco in 1981 by Bill Kimpton, an investment banker turned hotelier. Kimpton is generally credited with the introduction of the first boutique hotel and specialty hotel collection in the United States. While Kimpton initially invested in San Francisco, the brand eventually moved into the Pacific Northwest and then across the country. Today, Kimpton owns or manages 62 hotels; more than half of the hotels are in old or historic rehabilitated buildings. Not initially a user of the HTC, Kimpton has found the tax credits to be an essential ingredient in its rehabilitation projects. One of Kimpton’s major historic renovations was the 2000 renovation of Washington, D.C.’s Tariff Building, which is a National Historic Landmark.

Kimpton is in the midst of a period of expansion and growth under the leadership and oversight of CEO and President Michael Depatie. “The time is right to grow our footprint; we will have twice the number of hotels in the next five years,” says Depatie. “Our growth will continue to focus on urban locations and the preservation and restoration of old or historic buildings through adaptive reuse, a practice that has allowed Kimpton to develop and restore prime real estate at the center of bustling urban locations.”

Ben Rowe, Kimpton’s chief financial officer, welcomed the IRS guidance and noted the importance of the HTC in the company’s work. “The Boardwalk situation created a lot of uncertainty in the marketplace, but did not keep us from looking for deals. It’s good to have this situation largely resolved. We expect to see more equity players coming back into the market. Hotel construction is challenging to finance and our historic building conversions would not be feasible without the help of historic tax credits,” Rowe said.

HRI Properties Expects Market to Normalize     Founded in 1982 by Edward B. Boettner and Pres Kabacoff, HRI is headquartered in New Orleans, La. HRI is a full-service real estate development company and is considered a national leader in the historic preservation development community. HRI says it is dedicated to the pursuit of rebuilding neighborhoods and recreating entire communities. Through its subsidiaries, HRI has completed 61 large-scale projects. The projects include 4,854 apartment units, 3,911 hotel rooms and more than 1.2 million square feet of office and retail space and have a total funding value of $1.8 billion. HRI continues its mission by developing technically innovative and aesthetically pleasing landmarks in cities throughout the country.

Hal Fairbanks, HRI’s vice-president of acquisitions, says HRI continues to be aggressive in the marketplace. During the time between the original Boardwalk Hall decision and the release of Rev. Proc. 2014-12, HRI continued to pursue deals under the assumption that the guidance would clarify rather than undermine the ability to use HTC. That is not to say that the market did not slow during the period between the Boardwalk Hall decision and the IRS guidance. Fairbanks noted that while HTC deals continued to be available, the ability to close was tough. Now that the guidance is out, Fairbanks looks forward to the market going back to normal, with some certainty. However, he does note that some investors have been slow to reenter the market place.

Fairbanks says that HRI continues to look for mixed -use projects in urban areas. HRI’s main focuses are the residential and hospitality markets with specialized retailing to support those activities.

Gorman & Company Welcomes Certainty     Gorman & Company was founded in 1984 by Gary Gorman, an attorney turned developer. After graduating from law school in 1980, Gorman represented developers and syndicators who were raising capital from investors. He gained a reputation for crafting complex financial arrangements. Gorman & Company has grown steadily and today the company employs 235 people nationwide with a development portfolio of approximately $560 million. The firm owns and manages nearly 4,000 housing units and manages another 1,100 for other owners, with satellite offices in Phoenix, Miami, Chicago and Milwaukee.

Gorman & Company has carved out a national reputation for downtown revitalization and historic renovations using HTCs and other creative financing vehicles. The firm often finds itself approached by cities interested in the renovation of old factory districts or troubled inner-city neighborhoods.

Tom Capp, Gorman & Company’s chief operating officer, said that the diversity of the company’s projects protected it somewhat from the effects of the Boardwalk Hall case and that he did not notice it to the same extent as other developers. “Every one of our deals generally have quite complex structures with many funding sources,” Capp said. “With resolution of the Boardwalk issues and the new guidance we are sure that it will help put more certainty in our historic deals. Without the credits it makes many of these difficult, if not impossible.”

Regarding growth, Capp said “over the last several years we have been expanding our market area. While we do new construction, we especially like historic deals.” Gorman & Company is continually looking for new deals. The company likes public-private partnerships and prefers housing, although the company finished its first hotel deal in Milwaukee at the Old Pabst Brewery site last year.

Conclusion     It’s safe to say that developers will be developers. Being the chameleons and risk-takers they are, developers will adjust to the marketplace and continue to develop regardless of market condition changes. With respect to the rehabilitation of historic properties, the developers quoted here are optimistic about the market. However, they also feel that historic rehabilitation projects would not occur if not for the federal HTC program. While other incentives are helpful in making these projects work, without the federal HTC program, they could not fill the critical financing gaps involved in rehabilitation projects. Although the Boardwalk Hall case may have temporarily cooled investors’ appetites for HTCs, it does not seem to have changed developers’ appetites for deals. The IRS’ safe harbor ruling has provided the framework for future deals and should foster a period of new projects.

John M. Tess is president and founder of Heritage Consulting Group, a national firm that assists property owners seeking local, state and federal historic tax incentives for the rehabilitation of historic properties. Since 1982 Heritage Consulting Group has represented historic projects totaling more than $3 billion in rehabilitation construction. He can be reached at 503-228-0272 or jmtess@heritage-consulting.com.

Tax credits revive historic renovations

By:  Tom Daykin, Milwaukee Journal Sentinel, February 8, 2014

Jim Haertel was considering the financing options for expanding his tavern at  downtown Milwaukee’s former Pabst brewery.

His decision was made much easier when state officials quadrupled the value  of a tax credit given to developers of historic preservation projects.

“We were on the fence,” Haertel said. “And suddenly that tipped the scales  toward definitely wanting to go for the credits.”

He is among several owners of historic buildings who are tapping the  increased tax credits, which are expected to cost state taxpayers millions of  dollars. The new credit level took effect Jan. 31, following the 2013  approval by the Legislature and Gov. Scott Walker.

The new law raised the state income tax credit to 20% of the qualified  remodeling costs of historic commercial buildings, doubling it from 10%. The  Legislature passed the bill in October, just months after the credit was  increased from 5%. The state credit supplements a federal program that provides  tax credits for 20% of such costs.

The state tax credit’s boost received bipartisan support. Advocates said the  credit increase was needed to help Wisconsin compete with other states for  investor funding of preservation projects, which are more costly than new  construction. In return for the credits, developers follow federal rules on  preservation remodeling techniques and materials.

According to the National Trust for Historic Preservation, 31 states provide  historic preservation tax credits. Most of those credits are in the 20% to 25%  range for commercial restoration projects.

Wisconsin Economic Development Corp., which operates the state program, has  seen increased interest from developers with the higher credit taking effect,  said Mark Maley, the group’s public information manager.

The higher credit may help attract national historic preservation development  firms to Wisconsin, said Milwaukee Development Commissioner Rocky Marcoux.

It also could help bring to life commercial preservation projects that  otherwise would have languished because of feasibility concerns, he said.

“It’s a move in the right direction,” Marcoux said.

That higher credit level could be especially valuable for smaller projects,  said Matt Jarosz, an associate adjunct professor at University of  Wisconsin-Milwaukee’s School of Architecture and Urban Planning. He’s organizing  a March 28 workshop about the state and federal tax credits.

“In the past, small projects just weren’t worth the complexity of the tax  credit program,” Jarosz said. “Moving to the 40% zone can start to make it  possible.”

Rebuilding history

Milwaukee historic developments under consideration include the possible  conversion of the upper floors of a downtown building into market-rate  apartments, Maley said.

The seven-story Posner Building, 152 W. Wisconsin Ave., features Mo’s Irish  Tavern on parts of the first and second floors, but is otherwise largely  vacant.

Kyle Strigenz, co-owner of HKS Holdings LLC, which is considering the  redevelopment plan, declined to comment, saying it was too early to discuss the  possible project. The Milwaukee firm has done other historic preservation  projects, including last year’s conversion of the former JH Collectibles  clothing factory into the 50-unit Junior  House Lofts, 710 S. Third St.

Another proposal on downtown’s west side would convert the Germania  Building, 135 W. Wells St., into 78 apartments, along with 14,000 square  feet of street-level commercial space. The developers, Endeavour Corp. and  Vangard Group LLC, have declined to comment on that proposed project, which  could combine tax credits for both historic preservation and affordable  apartments.

At the Pritzlaff  Hardware Co. complex, at W. St. Paul and N. Plankinton avenues, developer  Ken Breunig is continuing his restoration project and plans to use the higher  state tax credits. Portions of the buildings have been converted into offices  and banquet rooms, and Breunig is proceeding this year with plans to restore  additional space for commercial use.

“It has definitely helped make the numbers work,” Breunig said.

At the former Pabst complex, now known as The Brewery, Chicago-based Blue  Ribbon Management LLC hopes to begin work this spring on converting the former  Pabst bottling  house into apartments marketed to international students at Marquette  University, University of Wisconsin-Milwaukee and other area colleges.

The increased state tax credits “will be a great help” in financing that  development, along with plans to convert a nearby former church into commercial  space, said Tom Gehl, Blue Ribbon Management chief executive officer.

Haertel is adding around 6,000 square feet of banquet space at the former  Pabst brewery’s visitors center and offices, known as Best Place at the Historic  Pabst Brewery, 901 W. Juneau Ave.

Best Place  includes a gift shop, Blue Ribbon Hall banquet room and The Little Tavern on The  Hill. The additional banquet space, converted from an 1880 office building, will  provide an additional room for wedding receptions and other events.

Haertel plans to spend around $750,000, with around $500,000 qualifying for  the preservation credits. Combining the state and federal programs would raise  around $200,000 in tax credits, which Haertel plans to use to reduce his income  tax bill.

A U.S. Small Business Administration loan through First Bank Financial Centre  is providing $670,000 for the project, with Haertel providing around $100,000 in  equity cash. He plans to begin the work in March, and have the banquet room  completed by July.

Cost to taxpayers

Elsewhere in Wisconsin, other projects tapping the higher credits include  separate plans to convert a former Manitowoc factory and a former Madison  seminary into apartments.

Oregon, Wis.-based Gorman & Co. is pursuing the Madison project, which  would create 87 apartments at the Bishop O’Connor Catholic Pastoral Center. The additional tax  credits help attract more equity cash because developers have the option of  selling them to banks and other investors, said company President Gary  Gorman.

“Some of our projects in the pipeline may be more feasible now,” said Gorman,  whose firm’s historic redevelopments include the Brew  House Inn and Suites at The Brewery, at 1215 N. 10th St.

Another project that was already in the works — but now will be easier to  finance — is the proposed redevelopment of a former Mirro Co. factory in Manitowoc into 40 apartments, an $8  million project known as Artists Lofts. Robert Lemke and Todd Hutchison, who  operate Milwaukee-based Wisconsin Redevelopment LLC, are the developers.

The higher credits “really enhance the viability of these projects,” said  Lemke. The firm’s other projects include helping with the planned restoration of  a historic Wauwatosa building into a charter school.

The higher credit comes at a cost for state taxpayers.

The Legislative Fiscal Bureau estimated the credit will cost taxpayers $8.6  million over the next two years, based on the level of past use by developers of  the credit when it was at the 5% level.

The agency also said quadrupling the credit’s value could result in a  significantly higher cost to the state if developers increase their use of the  program.

Supporters say the higher cost amounts to an investment that creates jobs and  higher tax revenues. Lemke also cites another benefit.

“We’re saving these buildings for future generations,” he said.

Read more from Journal Sentinel: http://www.jsonline.com/business/tax-credits-revive-historic-renovations-b99198885z1-244545101.html#ixzz2swIFlHGx Follow us: @JournalSentinel on Twitter

Expert outlines pros, cons for Butte historic preservation for next decade

By Mike Smith, The Montana Standard, January 18, 2014

The panel hoping to chart a firm course for historic preservation in Butte over the next decade is getting lots of advice.

Most of it’s from here — or from near here — but it’s coming from far off as well.

The latest exported advice came from Tom Capp, chief operating officer of Gorman and Co., a Wisconsin-based real estate firm that has helped redevelop numerous historical places in the U.S. and has cast some looks at Butte.

Capp told members of the Historic Preservation Plan Committee this week that Butte has advantages and disadvantages in attracting investors and developers who could restore historic buildings and breathe new life into them.

On the con side, he said, Butte is not an easy place to get to for lots of people. Its smaller population — about 34,000 in Silver Bow County — is less of a factor than its lack of vibrant growth, he said.

On the pro side, “The bulk of the city has a very strong fabric of historic buildings,” he said. “I don’t think the state of Arizona has as many historic buildings as you do in Butte.”

But Capp, who visited Butte last summer and attended the Montana Economic Summit held here last fall, said investors and developers in historic-related projects especially want one thing from any community – a coherent, strategic plan for development.

And, he said, “Both investors and developers will judge communities in how collaborative their private sector is with their public sector.”

A cohesive, strategic plan that touches on all areas of historic preservation in Butte, including the all-important money side, is what the Historic Preservation Plan Committee is working towards.

The panel of 12, which includes developers, preservation professionals and a city-county commissioner, has been gathering information and insight on the issue for months.

That phase is coming to an end and soon the panel will start drafting a plan, one they hope will help guide preservation efforts and steer them in a coherent direction for the next five to 10 years.

Jim Jarvis, Butte-Silver Bow’s historic preservation officer, said Capp’s insight from Gorman and Co. — and that from other developers — is welcome and beneficial.

“I think from Gorman is the idea that the community needs to have its ducks in a row on what they want to see happen,” Jarvis said Friday.

“I think they were talking more from an economic view, which is just one piece of preservation but a very important piece,” Jarvis said. “Without the money, nothing else happens.”

Among Gorman and Co.’s projects is redeveloping an old section of Milwaukee that used to be a Pabst beer brewery.

Some buildings were demolished but some saved and turned into work-and-live lofts and apartments, primarily aimed at artists. There’s also a hotel and restaurant that includes some of the giant old vats, other brewing factory pieces and Pabst signs.

In Butte, Gorman is helping Peter Sorini — a neurosurgeon who recently purchased the old YMCA building at 405 W. Park St. in Uptown – determine new uses for it. Sorini also says Gorman has been looking into the possibility of there being a first-rate convention center and adjoining hotel Uptown.

Capp said Gorman has used numerous funding sources in its redevelopment projects, including state and federal tax credits, environmental remediation and tax-increment financing money and private investments from China.

Butte has its challenges, he said, but “Butte seems to be putting its act together in a collaborative approach.”

Next Steps for Timber Ridge

Plans to redevelop the easternmost portion of the town-owned Timber Ridge affordable housing complex will take a significant step forward Tuesday, Oct. 15 when the Vail Town Council considers approval of a pre-development agreement with a third-party development group. Since February, the town has been working on a redevelopment plan with representatives from Wright and Company, Inc., and Gorman and Company, Inc., after previous redevelopment attempts were discontinued due to financial considerations. The topic is listed seventh on the Oct. 15 Town Council meeting agenda, which begins at 6 p.m. in the Council Chambers with opportunities for public comment.

The current redevelopment proposal includes demolishing 102 existing apartment units located on the easternmost 5.24 acres of the site and replacing them with at least 104 units. The new apartments would be constructed within a mix of three-story buildings surrounded by green space and surface parking. Seventy percent of the units are proposed to be deed restricted which is consistent with the zoning.

Under the proposed agreement, the town would retain ownership of the property using a long-term ground lease to facilitate the redevelopment. The property and improvements would revert to the town after 35 years in an arrangement similar to an agreement currently in place with Middle Creek Village Apartments which will be returned to the town after 53 years.

Following approval of the Timber Ridge agreement by the Town Council, a development application would be submitted to the town on or before Nov. 29 with construction beginning as early as next summer.

Meanwhile, the 96 units on the westernmost side of the site would continue to be used as employee housing to maintain an ongoing inventory of rental units on the property. The town anticipates redevelopment of the western half of the site in a future phase.

Prior to negotiation of the pre-development agreement, the Town Council authorized a market study to be completed in partnership with the developer. The study analyzed rental pricing, historical occupancy rates as well as unit size and amenities to verify the project’s financial viability and its ability to meet the town’s goals and applicable code requirements.

The project team has had previous development experience in Vail, having redeveloped a property once known as “the ruins.” The condominium project, Westhaven at Cascade Village, was completed in 2007 following failed attempts from a previous developer.

The draft of the Timber Ridge pre-development agreement, Resolution No. 13, Series of 2013, is available on the town’s website. To forward comments in advance of the meeting, email the Vail Town Council at towncouncil@vailgov.com.

10/11/2013

http://www.vailgov.com/release.asp?r_id=7901&type=

Former real estate lawyer Gary Gorman overcomes early challenges to build successful business

By Tom Daykin, Journal Sentinel, September 30, 2013

Gary Gorman was a real estate attorney when he decided he’d rather be a developer, instead of the guy who gives developers legal advice.

Gorman & Co. was launched in 1984. Within a few years the firm was focusing on apartment buildings, aimed at lower income renters, partly financed with federal affordable housing tax credits, along with projects that use historic preservation tax credits. Today, located in the Dane County community of Oregon, the firm has 230 employees, operates dozens of properties in Wisconsin, Illinois, Florida and Arizona, and annually develops apartment buildings and other projects costing around $75 million.

The firm’s Milwaukee-area developments include the new Brew House Inn & Suites, a hotel created at the former Pabst brew house, along with Blue Ribbon Lofts, apartments developed within the brewery’s former keg house. The company also plans for another apartment development at the Pabst complex, now known as The Brewery.

Gorman recently met at the Brew House Inn to talk about his early challenges as a developer — including a partner who was a cocaine addict — how the firm grew, and its new foray into the hotel sector. Here’s an edited transcript of that interview.

Q.How did you become a developer?

A. When I got out of law school (in 1980) I was hired by a firm and promoted by that law firm as somebody who knew something about real estate syndication, which is just a fancy term for putting together a group of investors to do deals. I represented developers and syndicators for four years.

Then they offered me a partnership. And I thought, if I become a partner, then I’m going to stay. And it really wasn’t what I wanted to do. I was more intrigued by the business side. So, June of ’84, I left the law firm. I teamed up with two other guys (including a marketing expert). One guy that was older, more experienced and allegedly had more money.

Q.Did it turn out he didn’t have any money?

A. Well, you’re guessing the rest of the story. Our basic strategy was that we were going to put existing properties under contract, we were going to raise the equity capital by selling limited partnership shares, buy the properties, have somebody else manage them, and then we sell them after five years and take a piece of the profits. That was the idea.

So, within about six months of leaving the law firm, the marketing guy and I started seeing these letters coming in from collection agencies, and dunning letters from banks and other creditors to this older guy. The bottom line is he had this white powder problem that I didn’t know about. Should have done better due diligence. His frequent trips to Jamaica were not just to lay in the sun.

Q.What happened?

A. The marketing guy and I left him and formed our own little shop. And we did one deal in 1985 called Seminary Park Apartments, in Evansville, Wis. It was a small deal, 24 units. It was a historic rehab of abandoned school buildings that had previously been a private school for boys. So it had been empty for a long time.

It was immensely complicated for a small deal, and we probably made about $1.50 an hour. But that created a track record. At the end of that deal, the marketing guy said, “I can’t live like this any more. I never know if we’re going to have the deal, not have the deal. I don’t know if I’m going to have a paycheck.” (So the partner left the firm.)

Q.How did it feel to be on your own?

A. It felt a little lonely. Then tax reform started heating up and it eventually passed in 1986. That changed the tax code completely, and it eliminated a lot of the benefits of investing in real estate. But it created a new tax credit, the affordable housing tax credit. So I thought maybe I could work with that.

Q.Did you just immediately think there’s just unlimited opportunity there?

A. No, God no. I thought: Would this ever work? And who would ever invest seeking this credit? And should I go back and beg my senior partner at the law firm to take me back? All those thoughts were going through my head. And there were times when I literally ran out of money.

I worked with a law firm and an accounting firm to put together four private placements in 1987 that were raising capital for (tax credit) deals that another builder built because I didn’t have the capacity to build anything. It was a lot of work.

I got a call one day (in 1987 from Boston Financial). They had a fund that had raised money to invest in these tax credits, and would I be interested in having that fund invest as the equity investor?

Q.And you said, “Would I?”

A. I kind of held the phone away like, is this really happening? Absolutely, I wanted to.

Q.With the advent of the fund, I assume your life got a lot easier in terms of financing.

A. It did. Trying to find investors that put in $5,000 apiece a year was tough. The first institutional deal was a big break-through.

Q.At what point were you starting to do multiple projects a year?

A. I think we did two a year in ’88 and ’89. (As the firm grew, it added in-house property management and construction divisions. In 1995, it hired Tom Capp, a former Fitchburg mayor who is now Gorman & Co.’s chief operating officer.)

Q.Was adding Tom a turning point?

A. It really was. It added a level of political sophistication that, frankly, I didn’t have. He really knows how to work with city planners, mayors, elected officials, plan commissions. He knew that mentality. He had a greater level of patience with the political process.

Then we started to grow, did more projects. All of the equity was from institutional investors. Then we thought we would internalize the architectural function. We did that in ’99. At that point we sort of had the bones of an integrated development firm. That’s where we are today.

Q.What percentage of your business comes from affordable housing developments?

A. Probably 85%.

Q.How did you first get involved in doing the Brew House Inn & Suites?

A. (During a presentation to some Chinese government officials who were visiting Madison, Gorman was impressed with the interpreter, University of Wisconsin-Madison law student Ying Chan. Gorman hired him as an intern.) I was paying him, but I really didn’t know what he was doing. He was going to seminars here and there, and then he left when he graduated from law school.

He called me about six months later and said that he had been successful raising money through this EB-5 program (in which foreign citizens receive green cards in return for job-creating investments in the United States) for an immigration attorney out of the state of Washington who had never done a development deal before. I said, Ying, if you can raise money for someone who has never done anything before in the development area, it ought to be easy for you to raise money for us.

We had done Blue Ribbon Lofts, and we thought, where can we find another historic (preservation) deal that was of some size? Talking to the Zilber folks (owners of the Pabst complex), they pointed us to this building. The reason it’s a hotel rather than an apartment building is that to attract EB-5 capital you have to create jobs. A hotel and (restaurant) produce a lot more jobs than an apartment building.

Q.You’ve never done a hotel before, right?

A. No, but we have a regional manager, Laura Narduzzi, who’s got 25 years experience (in the hotel industry). I completely defer to her judgment on designing the hotel, running the hotel. I’ve stayed in a thousand of them but I don’t know anything about running them. I’m learning a little bit now, though.

Q.What have you learned?

A. The staffing level is much higher than an apartment building. The service level is huge. You have to have skilled, well-paid people on site, all the time.

Q.Are you making money?

A. We’re doing OK. Is it belching cash? No, not in the early phases. But we’re doing a lot better than our projections showed.

Q.Are you going to do other hotel investments?

A. We have a deal in Kenosha, called Heritage House. It’s a historic building. We’re about to convert that into a boutique historic hotel. I just made a presentation to the mayor of Rockford, Ill., and his staff on a project there that would be a historic hotel combined with a conference center. I made a presentation in Butte, Mont., with a concept of a similar combination of a historic hotel and a conference center. It’s opened up another area for us.

Q.But you’re going to continue to primarily be an apartment developer, right?

A. Yeah, that’s our core competency.

New apartments at Pabst win approval

The Milwaukee Plan Commission approved a proposal Monday to develop a 100-unit high-end apartment building at the former Pabst brewery.

As I reported last week, the $20 million four-story building would be at the northeast corner of W. Juneau Ave. and N. 9th St. The vacant lot is just east of the parking structure at the Pabst site, now known as the Brewery.

Gorman & Co., based in the Madison area, plans to begin construction next spring. Known as the Frederick Lofts, it would include underground and surface parking, a fitness center, clubhouse and rooftop deck.

The prospective monthly rents would range from $990 for efficiency units to $1,750 for two-bedroom units.

By Tom Daykin of the Journal Sentinel

http://www.jsonline.com/blogs/business/220242071.html

 

Building a community from both sides: Ted Matkom

See below for the link to the video.

Ted Matkom’s job bounces between both ends of Milwaukee’s social spectrum, from opening a high-end downtown hotel at the former Pabst Brewing Co. site to encouraging residents in central city neighborhoods to unite behind common goals.

The Wisconsin market president for developer Gorman & Co. Inc., Oregon, Wis., is involved in the seemingly distant endeavors with equal enthusiasm. He oversaw development of the 90-room Brewhouse Inn & Suites, which opened in April at The Brewery in Milwaukee, and he is leading the rehab of 200 foreclosed houses in Milwaukee’s central city. About 90 percent of the houses are rented to women and their families, he said.

Matkom said his biggest unmet goal is to unite residents in the areas where Gorman is renovating homes to form tight-knit neighborhoods with shared goals. Matkom said he is not trying to lead, but rather organizing meetings, setting up the coffee and doughnuts, and stepping back.

“One of the biggest surprises I encountered was the true difficulty of community building and community organization,” Matkom said. “Every person has a different agenda and a different goal of how they want their community to look. Everyone wants stability, no crime and rising property values. But there are a million different ways to get there if you ask a million different people. What I have yet to do, and my goal is to do, is to create a community from our scattered site developments.”

A conversation on Matkom’s endeavors churns up a seemingly endless list. He has 10 years of experience as an attorney, where his work included supporting Columbia St. Mary’s expansion of its East North Avenue campus in Milwaukee. After joining Gorman & Co. as general counsel, he traveled to work on projects in Arizona, Mississippi and Illinois.

In Wisconsin, he served eight years on the board of Menomonee Valley Partners Inc., the business group behind the rehabilitation of the once-blighted area into a booming industrial district. From there, he transitioned to serve as president of the 30th Street Industrial Corridor Corp. in northwest Milwaukee.

“I thought the 30th Street corridor was kind of the next frontier of redevelopment,” Matkom said. “It turned out there was a perfect synergy between trying to foster economic development in the 30th Street corridor and trying to foster stabilization in foreclosed, ravaged neighborhoods surrounding the corridor.”

Matkom and Gorman’s housing rehab is concentrated in neighborhoods around the 87-acre former Tower Automotive site, which the city has bought and rebranded as the Century City business park. Matkom is halfway through the fifth phase of the housing effort, each with about 40 housing units.

But there’s a job training component to those projects. After all, Matkom’s hat rack includes a position on the Milwaukee Area Workforce Investment Board Inc.

For the housing rehab, Gorman hired Northcott Neighborhood House as a subcontractor. The Milwaukee nonprofit’s Youth Build program trains 18- to 24-year-olds in construction. Gorman created 28 jobs for Northcott workers through each of the housing rehab’s five phases.

“We were hoping those real-life experiences would help bolster their resumes to go out and find a job in, quote-unquote, the real world,” Matkom said. “What happened, which was a great story, however a little inconvenient for us, was it actually was successful. People were being hired away.”

Currently, Matkom is working with the Northwest Side Community Development Corp. to build a tech school and 43 apartments north of the Century City site. That project, like much of Gorman’s housing work, will compete for state affordable housing tax credits.

Matkom and the Northwest Side CDC previously collaborated on the award-winning Villard Square, a combination library and affordable apartment project at North 34th Street and West Villard Avenue. Howard Snyder, executive director of the CDC, said Matkom and Gorman, though in a profit-making business, take on projects more commonly associated with the nonprofit world.

“He knows there’s a profitable thing to do and a right thing to do, and you don’t find many people with that kind of skill and talent who want to work in these kinds of neighborhoods,” Snyder said. “We’re even looking at the next two projects down the road.”

Asked how his professional background — which started with legal and political science degrees — branched into community development, Matkom dusted off another role he played in the past. He said the two really gelled for him when he served on the Whitefish Bay village board for four years, starting in 2000.

“A lot of land-use issues went through, which really showed to me the importance of good development that was linked with community goals and the participation of the community citizens,” Matkom said. “That whole thing really has resonated with me throughout my career since then and it has really been the core of what I want to accomplish as a developer.”

Personal File

  • Title: Wisconsin market president
  • Company: Gorman & Co. Inc.
  • Age: 46
  • Family: Married 21 years to Beth, with four daughters age 3 to 20
  • Education: University of Wisconsin-Madison undergrad and Marquette University School of Law degree
  • Resides: Whitefish Bay

Judgment Calls

  • Best Decision: “Marrying my wife, Beth”
  • Toughest Decision: “Leaving the law firm to be a real estate developer”
  • Like best about your job: “The diversity of people I encounter every day.”
  • Most important lesson learned: “Always be true to your word.”

Hobbies

  • Pastimes: Golf, soccer and music
  • Band to see at Summerfest: Violent Femmes
  • Last book read: “Montana 1948: A Novel” by Larry Watson
  • Favorite vacation spot: Boulder Junction

http://www.bizjournals.com/milwaukee/print-edition/2013/07/05/building-a-community-from-both-sides.html?page=all