Media & News

$44M renovation coming for historic Phoenix neighborhood

By:  Pete Scholz, Channel 12 News, Phoenix, April 23, 2015

An historic Phoenix neighborhood which was slated to be demolished a few years ago is experiencing a renaissance, of sorts.  Residents took in the latest plans at a community meeting in the Coffelt Public Housing Development Thursday.

To look at the 38 acres of 1950′s barrack-style housing occupying the southwest corner of 19th Avenue and Buckeye near downtown Phoenix is to get a glimpse of Arizona’s history.  And, generations of residents have called the Coffelt-Lamoreaux Public Housing Development home.

“The folks that live at Coffelt take an extreme level of pride for where they live,” Brian Swanton, president of the Arizona Market for Gorman  & Company says.  “They didn’t want to move and they were loud and clear about that.  They wanted to stay.”

Over the past two years a unique, public-private relationship was forged to make sure that was going to happen.

Oscar Perdolmo is a 13-year resident of the neighborhood just southwest of downtown.   “I’m excited because I like living here,” he said. “I like my neighbors and the people I live with.  It’s very calm.”

Excitement grew when the Housing Authority of Maricopa County and their partners at Gorman & Company were able to win National Historic Registration for the site built back in 1953. The designation, along with additional financing, has resulted in a $44 million makeover about to launch in the coming months.

“It’s basically a gut rehabilitation, as we call it,” Swanton explained.  “We’re preserving the exterior facade of the buildings but everything will be brand new inside — the bones of the building.”

Swanton also shared that $90,000 has been budgeted for each of the 301 units to be redone.  From the floors to the roofs, upgrades will include cabinetry, appliances, sinks and flooring.  Well-worn swamp coolers will also be scrapped for new heating and air conditioning units.

In addition, plans are also in place to temporarily move tenants to unoccupied units during construction, which should add a little more peace of mind to anxious residents.

“They came in my home and took an inventory of all of my equipment; all of my furniture,”  Antonio Cabrera, a nine-year resident said. “To make sure that they can move it with no cost for myself once the renovations get under way.”

The project is also adding a new and improved park and community center.  And, the developer is hoping to improve air quality in the neighborhood by improving irrigation and  planting more trees along connecting streets.

According to Gorman & Company, the Coffelt renovation is scheduled to begin on or around October 1, 2015, and last about 17 months. Interest in the program is growing, as well.  Housing Authority of Maricopa County says that the waiting list to move into one of the newly-renovated units stands at 1,000 names.

Gorman teams up with Northcott to rebuild depressed Milwaukee Neighborhood

Click on the link below to read the article on Gorman’s Northside Neighborhoods as published on the Wheda Transform Milwaukee website:

Gorman teams up with Northcott to rebuild depressed Milwaukee neighborhood, Wheda Transform Milwaukee website, 2-2015

Aldermen to consider Warren Buffett’s entry into downtown Rockford hotel plans

By Brian Leaf, Rockford Register Star,  Jan. 31, 2015

ROCKFORD — If it were a boxing match, the hype would be huge at next week’s City Council meeting.

“In this corner of North Main and Mulberry streets,” a ring announcer might say, “weighing in at $14.5 million, with aspirations of turning a crumbling, two-story building back to life as a five-floor, 76-room boutique hotel, from Rockford, Illinois — Joseph James Partners.”

“And in this corner of Wyman and Cedar streets, weighing in at $64 million, a developer pining to turn an eyesore skyscraper into a shimmering waterfront Embassy Suites hotel, the cornerstone of a downtown revival. He’s backed by the world’s best-known capitalist, Warren Buffett. From Oregon, Wisconsin, ladies and gentlemen — Gorman & Company.”

Those ringside at City Hall on Monday will hear aldermen consider only a proposal by Joseph James to redevelop 134 N. Main St., where the advertising agency Trekk used to lease space. But a memo from the heavyweights, who plan to turn the Amerock building into a 150-room hotel, will also be on their minds.

CEO Gary Gorman shocked the city last spring by proposing a $53 million hotel and convention center downtown, the type of central city revitalization that generations of Rockford mayors have tried and failed to orchestrate. Gorman announced Thursday that a subsidiary of Buffett’s Berkshire Hathaway is investing $18 million in the project, which has swelled to $64 million. Plans for the hotel will be finished Friday and bidding for construction contracts will commence the next week, he said.

Gorman’s interest was catalyzed by the $21 million indoor sports center being built in another vacant factory across the Rock River from Amerock and the availability of state and federal tax credits worth up to 45 percent of construction costs. When the sports complex ramps up, proponents say, it will draw thousands of families, players and fans downtown for basketball, volleyball and other sports tournaments.

They’ll need a place to stay.

Joseph James, which is led by SupplyCore CEO Peter Provenzano, submitted its first hotel proposal in November 2013. It initially sought to develop hotel rooms in two buildings, then settled on one hotel with a restaurant in the former Trekk building.

Both hotel camps sent memos to aldermen and city officials this week.

Gorman said he’s concerned about too many new rooms in an unproven market.

“We have done our due diligence analyzing the market trends and data and consulted with our partners on this project and have concluded that another hotel in the downtown opening at the same time or sooner is a serious threat to the viability of our project,” he wrote.

Provenzano quoted a Jan. 24 memo from a hotel consultant hired by the city and Rockford Area Convention & Visitors Bureau, Hunden Strategic Partners of Chicago, that said there’s plenty of room downtown for both projects.

Provenzano said the sports complex is slated to open in June 2016 and he hopes to have his hotel open then. The Gorman project won’t be ready until early 2017, he said. Hunden said both hotels will have time to ramp up and succeed because there is a six-month gap between the scheduled openings. Branded hotels and boutique hotels also serve different types of travelers, the consultant noted.

Provenzeno said one could argue that his project will pave the way for Gorman by helping create a hotel market downtown. With no hotel rooms downtown, there’s a risk that demand will be satisfied by east-side Rockford hotels.

“I hope his project happens,” he said Friday. “We think these projects are very beneficial to one another.”

In 2011, Gorman and Mayor Larry Morrissey were part of an Illinois trade delegation to China, a country that is likely to produce most, if not all, of the 96 wealthy foreigners who will invest $46 million into Gorman’s hotel in a federal cash for a visa program called EB-5.

Morrissey, a three-term mayor first elected in 2005, campaigned on downtown revival. Provenzano, a longtime Morrissey supporter, rehabbed the former Pioneer Life building, 303 N. Main St., for his company’s headquarters and other offices.

Morrissey wants both projects to move forward.

“I’ve had a number of conversations directly with Gary Gorman,” he said. “I think he understands my position and I understand his. He’s got a project. He’s doing everything he has to do to manage it. I’ve committed to do everything I can to do to support his efforts.

“What I’ve explained to him and others is that we’re not just selling one project. We’re selling our downtown renaissance.”

Warren Buffett to invest $18M in Gorman & Co.’s downtown Rockford hotel

By Brian Leaf, Rockford Register Star,  Jan. 29, 2015

ROCKFORD — Warren Buffett’s money has joined Gary Gorman’s plan to turn the former Amerock building into a $64 million hotel and conference center on the west bank of the Rock River.

But the water is not placid.

Gorman is concerned about a separate downtown hotel plan pitched by Joseph James Partners. The Rockford developer wants to put a $14.5 million, 76-room boutique hotel at 134 N. Main St., about six blocks north of the 150-room project that Gorman hopes will carry the Embassy Suites banner. Gorman has applied for the brand with Hilton Worldwide.

A Jan. 24 report from Chicago-based Hunden Strategic Partners, which was hired by the city and Rockford Area Convention & Visitors Bureau to assess the local hotel market, suggests that there is enough room for both projects, saying the proposals represent distinctive products and would provide a critical mass of lodging options downtown instead of just one.

Gorman was drawn to Rockford by a group of historic preservation, Friends of Ziock, that didn’t want to see the city’s original skyscraper demolished. Gorman originally estimated that it would cost $53 million to turn the old factory, first known as the Ziock Building, into a hotel and meeting space.

The price is now $64 million and includes an $18 million investment from a subsidiary of Buffet’s Berkshire Hathaway Inc. The Wall Street Journal highlighted the Amerock project in a story Thursday about EB-5, an immigration program that allows foreign nationals to obtain a U.S. visa if they invest $500,000 in a U.S. project that creates at least 10 jobs.

Gorman’s EB-5 investors, mainly from China, will put $46 million into the Amerock project, which city leaders see as a cornerstone to revitalizing an aged central city.

“A lot of aldermen see this as a showcase development and don’t want to do anything to hinder that,” said Ald. Tim Durkee, R-1, who chairs the city’s Planning and Development Committee.

Late last year, Joseph James, a development company run by SupplyCore CEO Peter Provenzano, proposed developing two hotels: one in the city’s oldest building, the Chick Hotel, and another in the building known for its last tenant, Trekk, an advertising agency that dropped its lease in the decaying building and moved to the east side.

Joseph James later dropped the Chick Hotel from its plans and decided to focus on the two-story Trekk building, 134 N. Main St. The company would add three floors, turning it into a five-story hotel and restaurant. Joseph James has been working with IDM Hospitality Management of Madison, Wisconsin, on its proposal, which has been introduced to the Rockford City Council but not approved.

Joseph James cited a memo from Hunden to support its proposal to Durkee’s committee. The memo suggests that there is room enough in the market for Joseph James and Gorman to succeed. The proposal was introduced but laid over for a month so the City Council could hear from Gorman.

The Register Star could not reach Provenzano or Bryan Davis, director of government affairs for Joseph James, on Thursday for comment.

Observers have commented that they thought they’d never see the day that developers would compete for projects in downtown Rockford, so it is a “positive trend that should be encouraged by both the public and private sector,” Gorman wrote in an email Thursday to Mayor Larry Morrissey, aldermen and city staff.

“It is very clear from our experience that a vibrant city center is the key to creating a thriving community. Having said that, I am very concerned about too many hotel rooms coming into the unproven downtown Rockford market at one time.”

Gorman said his company, which operates in 25 cities in five states, had relied on an earlier Hunden report when it made its decision to invest in a downtown hotel. “The fact that the Hunden letter stated that the market could absorb both our project and the Joseph James proposed project seems to contradict their concerns expressed in the market study they completed just over a year ago.”

Gorman wants first crack at opening the downtown hotel market. Final plans for Amerock will be complete by next Friday, and construction bids will go out the following week, he said.

“We remain confident that we will get the Amerock project done successfully, but bringing on competition before our project is stabilized is not helpful,” he wrote. “I hope that once we are up and stabilized, the market is such that it will support additional hotel rooms. If that is the case, we will welcome the Joseph James project or others like it.”

Hunden reiterated in a Jan. 24 memo to the city and the tourism bureau that two hotels would be better than one and would attract the guests needed for success. Hunden said the market could handle the extra rooms, although simultaneous openings could be problematic.

“However, if the projects open at least six months apart, this will allow each a ramp up-period,” the latest Hunden memo said. “Such a period is the toughest for any hotel, so the spotlight and market demand should be focused on each for their first few months.”

Chinese-Buffett Deal Food for Thought for Seekers of U.S. Visas

Chinese Investors Fueling U.S. Construction Boom, With Green Card as Payoff

Amerock rendering

An artist’s impression of the Amerock development in Rockford, Ill., which is mostly being funded by EB-5 investors. PHOTO: GORMAN & CO.

By WEI GU, Wall Street Journal, January 29, 2015

What was once the only skyscraper in Rockford, Ill., is getting an overhaul under an urban-renewal program that is bringing together Warren Buffett and Chinese investors looking for a U.S. visa.

The plans to turn the 13-story Amerock building, in this declining former industrial city, into a $66 million hotel and convention center is the latest example of how Chinese have fueled a construction boom in the U.S. via the EB-5 cash-for-immigration program.

A subsidiary of Berkshire Hathaway Inc., owned by Mr. Buffett, is in talks to provide equity for the project, which also includes a new train station, a sports center and a park. The debt financing is expected to come from 92 foreign investors, mostly from China. By investing $500,000 each, these foreigners hope to fulfill their American dream by obtaining U.S. permanent residency.

For U.S. developers and investors, such investments make for a cheap source of credit, while immigrant hopefuls need projects that can help them qualify for EB-5 visas by investing at least $500,000 in projects that create at least 10 jobs in the U.S. Chinese nationals accounted for 85% of the EB-5 visas issued in fiscal 2014.

EB-5 investments have gone from small hotels and strip malls to projects run by mega developers. Related Cos. said $600 million from 1,200 Chinese families will help it build the foundation of three skyscrapers at Hudson Yards, New York’s biggest real-estate project in a generation. In San Francisco, home builder Lennar Corp. has raised about $200 million through the visa program for projects that include more than 12,000 housing units on a former naval shipyard. In lower Manhattan, World Trade Center developer Larry Silverstein is trying to raise about $250 million for a 937-foot Four Seasons hotel and condominium property.

“Every day we get information about several new EB-5 projects. It seems that there are more projects than clients,” said Forra Luo, owner of Canway Investment Consulting Service Co. in Shenzhen, in southern China.

It helps to have a celebrity associated with it: The Sage of Omaha is a trusted name in China. That works out to a deal that has many advantages for Mr. Buffett, including tax credits, while for the EB-5 investors, who are funding 70% of the Amerock project, the selling point is mainly the prospect of a U.S. green card.

They will receive an annual interest rate of just 0.5%, compared with the typical 5.5% a year for similar projects, according to Gary Gorman, CEO of Gorman & Co., the developer of the Amerock project. If the project fails to create the necessary jobs, they won’t get their visas.

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“It appears that EB-5 investors assume most of the risks in this project,” said Ms. Luo, who has reviewed the deal’s details and says she hasn’t decided on whether to recommend it or not.

Mr. Buffett, reached by phone, said he doesn’t keep track of individual projects such as the Amerock investment, which is being run by Berkshire’s Affordable Housing Partners. However, he said, Berkshire has invested in dozens of affordable-housing projects over the years in return for tax credits under a 1986 federal low-income housing tax-credit program. Such investments are popular with U.S. banks and other corporations.

The federal government encourages the preservation and reuse of historic properties by offering tax credits, representing a dollar-for-dollar reduction of federal taxes owed. Asan equity investor, Berkshire Hathaway’s subsidiary expects to invest $17.9 million of its own money on top of the foreign investors’ financing. It expects to receive a total tax credit of $21.6 million, in addition to a 99% stake in the project, according to a letter of intent reviewed by The Wall Street Journal.

Berkshire is protecting its downside. If the actual amount of tax credits is reduced, AHP’s capital contribution will also be reduced, the letter said.

Gary GormanGary Gorman, CEO of Gorman & Co., in the Brewhouse Inn & Suites, a brewery-turned hotel in Milwaukee.  PHOTO: GORMAN & CO.

The project-selling document cautions that if things don’t go well, the foreign investors can lose all of, or a substantial portion of, their investment, though Mr. Gorman argues that it is highly unlikely. The EB-5 investors will get paid when the project refinances itself after five years, he said.

“I can tell you Buffett’s company is very thorough at conducting due diligence about the developer and project,” Mr. Gorman said.

Some Chinese investors feel such conditions are well worth it. Jack Sun, who recently immigrated to the U.S. under the EB-5 program, said he wanted U.S. residency for his children’s education and didn’t  expect to necessarily make money from the investment. He didn’t want to lose it, of course: To reduce risks, he used Google maps to check individual projects and carefully read business plans before investing.

Immigration lawyers advise clients to be careful about projects that rely too much on foreigners’ money. “We advise our clients to steer away from projects where EB-5 becomes the chief financing source,” said Jean François Harvey, managing partner at Harvey Law Corp. in Hong Kong who advises EB-5 applicants.

—Anupreeta Das contributed to this article.

Gorman & Company Begins 7th Phase of Milwaukee Northside Housing Initiative

Tax Credit Advisor, January 2015

In early October Gorman & Company broke ground in Milwaukee on the 7th phase of its nationally-acclaimed scattered site, single family home redevelopment.

Gorman & Company’s Northside Housing Initiative is a partnership with the City of Milwaukee and the Wisconsin Housing and Economic Development Authority (WHEDA). Its goal is to resuscitate challenged neighborhoods that have been devastated by the foreclosure crisis. Foreclosed, boarded-up properties are rehabbed into high-quality rental housing. In addition, newly constructed homes are built on vacant lots that residents consider the “broken teeth” of their neighborhood.

This innovated housing initiative also focuses on training  chronically unemployed people from the affected zip codes. The City of Milwaukee offers critical support for the project by assembling the individual properties and contributing them to the initiative.

Grocery store, affordable housing in the works for east Madison’s Union Corners

BRYNA GODAR | The Capital Times | bgodar@madison.com

After months of planning and repeated delays, pieces of Gorman & Co.’s Union Corners project are starting to fall into place.

The project combines a UW Health Clinic, affordable housing and retail on the vacant two-block site along East Washington Avenue, Milwaukee Street and Winnebago Street.

The city approved the medical clinic in early October and the City Council allocated tentative funding for the residential piece in early December. The developer has mentioned potential grocery tenants in neighborhood meetings on the project.

Although the final residential plans have yet to be approved, the developer has proposed two mixed-use buildings, consisting primarily of affordable housing.

In December, the City Council approved the allocation of up to $3 million to assist Union Corners along with two other affordable housing projects: Maple Grove Commons and Tennyson Ridge. All three will be applying for tax credits from the Wisconsin Housing and Economic Development Authority and pre-determined city assistance can aid in that process. The final dollar amounts will be worked out in January.

The Union Corners project will include a total of 90 units, 14 going at market rate and 76 marked as affordable with a range of one to three bedrooms. The majority of the affordable units will target those making 60 percent or less of the area median income, with some targeting those making 20 percent or less.

There will be underground parking and retail on the ground floor of each building, which front Winnebago Street.

Gorman & Co. has also said it is working to bring a grocery store to the development, possibly Fresh Thyme Farmers Market.

The overall project and its components have drawn mixed reactions and desires from the neighbors, including conversations about what “affordable” means and what the buildings will look like.

A second neighborhood meeting on the project will take place Thursday, Jan. 8, 5 p.m. at the Goodman Community Center. The Gorman & Co. team will discuss updates on the proposed building design and the WHEDA application for tax credits.

The construction dates for the project have repeatedly been pushed back and groundbreaking on the residential component is now slated for January 2016 if financing goes through.