Union Corner

Union Corners site plan changes get cool neighborhood reception

By Mike Ivey, The Capital Times, January 22, 2014

New revised plans for the long-vacant Union Corners site at East Washington Avenue and  Milwaukee Street are getting an early thumbs down from some east-side  residents.

Issues being raised include the amount of surface parking for the UW Health  clinic that will anchor the project, the size of the apartment buildings shown  in the drawings and the lack of any significant green space.

“My basic concern is why are the plans we are seeing now so dramatically  different than what was first presented?” says Ken Fitzsimmons, who lives  directly behind the site on Farwell Street.

The plans from Gorman & Co., scheduled for an  informational presentation before the city Urban Design Commission Wednesday,  show some changes from those first presented in 2012 when Gorman was selected as the developer for the 11-acre  site.

New plans feature a pair of four-story apartment buildings at the rear of the  site where it abuts the neighborhood. Initial plans showed the development  stepping back in scale, with the biggest buildings along East Washington Avenue  and smaller buildings toward the back.

“I realize it’s still early in the process, but this is a big deal to us and  we want to know what is going on,” says Fitzsimmons, education director at  Madison Music Foundry and a member of the popular local band, The Kissers.

The city purchased the property out of foreclosure in 2010 and is selling it  to Gorman for $1 in lieu of any tax incremental financing assistance. Developers  are hoping to begin construction on a $20 million, 2-story, 60,000 square foot  clinic building in late summer, with UW Health looking to move in during the  summer of 2015.

The developers have cautioned the plans could change with market conditions,  especially if the demand for owner-occupied condominiums or townhomes picks up.  Development would take place in phases over several years.

But comments posted on the Schenk-Atwood-Starkweather-Yahara (SASY) Facebook page are  showing some major discontent. The initial proposal from Gorman — which  played up amenities like a new library, small scale shopping and public spaces — was generally supported by the neighborhood during a series of earlier  meetings.

Dan Melton writes that he supported the 2012 plans but is worried the  developers are shifting direction in order to maximize return at the expense of  existing residents.

“If Gorman & Co. went back, crunched the numbers, decided they couldn’t  make a profit with the earlier 2012 site plan, then they should have leveled  with us, presented the neighbors with options — and heard which of the  potential site plan changes had support,” writes Melton.

District 6 Ald. Marsha Rummel has been monitoring the  neighborhood comments and has passed them along to the developers. She is urging  residents to attend the UDC meeting, which is scheduled for 4:30 p.m. in Room  LL110 of the Madison Municipal Building.

“I really appreciate the comments and you can be sure I will represent the  collective disappointment that has been expressed here,” she writes in a SASY  Facebook post.

Gorman spokesman Joe Schwenker declined to offer any additional comments  pending the discuss at the UDC meeting.

Drew Hanson, who lives a block from the site on Milwaukee Street, says his  family uses the site now as an ice skating rink and would prefer to see it  developed in a way that enhances the Schenk-Atwood neighborhood. He takes issue  with claims the property is one of the bigger eyesores in the city.

“The plan is supposed to include interesting community space, a commons,  community gardens, pedestrian friendliness and more for the neighborhood to get  excited about,” he writes in an email to the city. “Gorman’s UW clinic renderings that  appeared this week in the CapTimes are none of these things.”

Over the past decade, Union Corners went from one of the most promising  development projects in Madison history to one of its more visible  disappointments.

In 2003 before the housing bust, developer Todd McGrath had plans to turn the  former Rayovac battery plant and a vacant grocery store site into a mix of  housing, retail and open space. The $70 million project was widely hailed as a  game changer that would help spur development along the blighted East Washington  Avenue corridor.

When the recession hit, however, McGrath ended up losing the property in a voluntary  foreclosure. The city of Madison bought the land from M&I Bank for $3.57  million in 2010, with the expectation it could eventually find a private  developer to take over the site once the economy improved.

The city solicited proposals for the site and chose Gorman after other  developers dropped out. In July 2013, the city sold the property to Gorman for  $1 instead of making a TIF loan to the developer.

Madison aims to recoup its estimated $6 million in land and infrastructure  costs through new property taxes generated by the development.

Union Corners construction could begin this summer

By MIKE  IVEY | The Capital Times | mivey@madison.com, January 18, 2014

Developers are close to breaking ground at Union Corners on Madison’s east side, the high-profile but  long vacant parcel at East Washington Avenue and Milwaukee Street.

Gorman & Co. has filed an application with the city for Phase I of the  project, a $20 million, 2-story, 60,000 square foot UW Health clinic.

The general development plan (GDP) will be presented before the city Urban Design Commission at its Wednesday meeting.

Developers are hoping to begin construction on the clinic building in late  summer, with UW Health looking to move in during the summer of 2015, says Gorman & Co. spokesman  Joe Schwenker.

The clinic will occupy the corner of East Washington Avenue and Milwaukee  Street.

More development is slated for the rest of the 11-acre site and plans show a  mix of residential and commercial buildings along both sides of a rerouted  Winnebago Street.

But Schwenker cautions that plans are fluid and could likely change.

“It’s all going to depend on market conditions,” he says.

Also at Wednesday’s UDC meeting, developers will present plans for a 12-story, 109-unit apartment building at 617 N. Segoe Road  near Hilldale Shopping Center.

That project from Madison landlord Jim Stopple has generated strong neighborhood opposition, both from residents in the  adjacent Weston condominiums and those living on the quiet streets behind the  mall.

Over the past decade, Union Corners went from one of the most promising  development projects in Madison history to one of the city’s worst eyesores.

In 2003, before the housing bust sent the national and local economies into a  tailspin, developer Todd McGrath had plans to turn the former Rayovac battery  plant and a vacant grocery store site into a mix of high-density housing,  shopping and open space. The $70 million project was widely hailed as a  game-changer, something that would finally spur development up and down the  blighted East Washington Avenue corridor.

When the recession hit, however, all those dreams were drowned in a river of debt, and McGrath ended up losing the  property in a voluntary foreclosure. The city of Madison eventually stepped in,  buying the land from M&I Bank for $3.57 million, with the expectation it  could eventually find a private developer to take over the site once the economy  improved.

The city solicited proposals for the site and eventually selected Gorman  after other developers dropped out. In July 2012, the city sold the property to  Gorman for $1 in lieu of making a TIF loan to the developer.

The city hopes to recoup its estimated $6 million in land and infrastructure  costs through new property taxes generated by the development.

 

Catching up: Union Corners project slowly moving forward

December 23, 2013 7:30 am  •  DEAN  MOSIMAN | Wisconsin State Journal

If anything defines the much-anticipated redevelopment at Union Corners on  Madison’s East Side, it’s patience. And patience may soon be paying off.

Developer Gorman & Co. signed a purchase and sale agreement with the city  for the site this fall and is close to submitting land use plans for the  long-vacant, city-owned 11.4-acre site at the corner of East Washington Avenue  and Milwaukee Street.

If all approvals and financing are secured, construction on the multiphase  project could begin late next summer, owner Gary Gorman said.

“It’s moving forward. It’s never as fast as we would like,” he said.

“They’re doing a lot of work. There’s just not a lot of this you can see  yet,” City Real Estate Manager  Don Marx said.

In mid-July, after six months of talks, the City Council authorized staff to  negotiate a purchase and sale agreement for an estimated $83.9 million  redevelopment there. The city has already invested about $6 million to buy land,  make public improvements and cover other costs.

On Oct. 30, the sides completed that agreement, under which the city would  sell the site to Gorman for $1, and the developer would apply for $6 million in  tax incremental financing (TIF) support. That would be repaid through new  property taxes generated by the project, which would likely be done in four  phases.

The first phase includes a 60,000-square-foot UW Health clinic with parking,  and the remaining phases are a mix of housing, office, retail space and possibly  a public library branch.

Gorman said he’s about 75 percent done working out the clinic design with UW  Health, has submitted a TIF application with the city, is in discussions with  other potential tenants and will soon submit a general development plan  application, which will trigger a land use review process.

“It’s still a go as far as we’re concerned,” Marx said.

Strolling down the avenue: The renaissance of East Washington continues

By Joe Vanden Plas, InBusiness Magazine, November 2013

Perhaps it began in earnest with the reconstruction of this venerable Madison street, or perhaps it can be traced back to the decision of Shopbop, the Internet-driven retailer, to move its local operations to “The Avenue.” The area was already home to three business incubators — the Madison Enterprise Center, Main Street Industries, and the Metro Innovation Center — so maybe the real entrepreneurial juice came from these facilities and the opening of Sector67, which has found a permanent home in the corridor.

Or maybe the East Washington Avenue renaissance is really due to years of work reflected in the city’s own economic development studies and the East Washington Avenue Gateway BUILD Committee, which many credit for laying the groundwork for what’s happening here.

“We’ve had numerous emails from business owners saying, ‘Hey, it’s great building, it interacts with the neighborhood, and since you have been occupied, our business has gone up $600 a day.’” — Otto Gebhardt, Gebhardt Development, on The Constellation

Whatever milestone you choose, there is a fair amount of nostalgia woven through the activation of what city fathers and mothers call the Capitol East District, also known as the East Washington Corridor. Several development executives who are working with the city to reshape “East Wash” actually grew up in the area, and reclaiming its full potential is personal to them.

Among them is Brad Mullins, a top executive with the Mullins Group, who as a boy would pedal his bike down East Washington to Sears & Roebuck, as it was then known, to buy his fishing lures. Mullins, whose family-owned firm is planning the Yahara River Technology Campus for the 1200 and 1300 blocks, still remembers when the street was a vibrant manufacturing hub featuring names like Gisholt Machine Tool Co. (later acquired by Giddings & Lewis).

Now that the city has turned away from expanding outwardly and has focused on urban infill redevelopment, Mullins is convinced that East Wash can become more vibrant again with new developments served by multiple modes of transportation, additional park development, and a robust underground technology infrastructure that basically runs parallel to the street. “The City of Madison came to recognize that area as the key to the future development, urban infill, within the city,” he noted. “There are only so many cornfields left that Madison can expand or annex into.”

Pam Christenson, economic development director with Madison Gas & Electric Co., says the East Washington Corridor has the potential to connect the energy of downtown Madison with the East Isthmus sense of community. “It’s exciting to see what was an underutilized industrial corridor transform into an entrepreneurial and employment hub for the Madison region,” she says.

Christenson noted that Sector67 began as a place for talented entrepreneurs and young technology startups to collaborate and grow, and morphed into the StartingBlock Madison project, a group of entrepreneurs and civic leaders working to build an entrepreneurial hub within the Capitol East District. In many ways, the East Washington story is one in which one new development led to another, as sources IB interviewed for this story confirmed there is strong interest in further development activity beyond what is profiled here.

Inside these pages, IB looks at four current and future developments that are giving East Washington a new character: the Constellation (700 block); new designs for the 800 block of East Washington; the proposed Yahara River Technology Campus in the 1200 and 1300 blocks; and Union Corners, which could begin to reshape the intersection of East Washington and Milwaukee Street as early as next summer.

Commerce amid the stars

The Constellation, a high-rise development that consumes the 700 block of East Washington, is already built and filled with tenants, but commercial space will occupy the lower three floors. Some of the commercial occupants — the Madison offices of Google, plus Star Bar, Cargo Coffee, and Andersen Dental — are already known, but some of the Constellation’s 30,000 sq. ft. of commercial space is still available for lease.

By economic necessity, the 220-unit Constellation actually pushed the envelope on its 12-story height. Developer Otto Gebhardt was able to convince city planners that it could only work financially at that height, and he received the green light to reach for the stars. According to Gebhardt, the $39 million building is not only working for East Wash, it’s already a boon to other nearby streets, which speaks to the ripple effect an upscale development can have.

“The local businesses have given us nothing but praise, the people on Johnson and Willy streets,” says Gebhardt, owner of Gebhardt Development. “We’ve had numerous emails from business owners saying, ‘Hey, it’s great building, it interacts with the neighborhood, and since you have been occupied, our business has gone up $600 a day.”

The revamping of East Washington Avenue into a residential and commercial hub does not have to be developed by chain reaction. The Constellation’s first floor is all retail — hence the presence of Star Bar and its focus on craft beer and cocktails, and the “drive-through” Cargo Coffee — but rather than bring in a national or regional chain restaurant, Gebhardt favors a tenant mix that includes a local restaurant.

Gebhardt already has turned down a Qdoba Mexican Grill and various retail shops. “On the retail level, I very much want to get a local feel as far as local establishments,” he says.

Meanwhile, Google reportedly has signed a seven-year lease and will occupy most of the second floor, as it remains close to the young computing talent produced by UW-Madison. It’s an open question as to how much Google, which employs about 30 people in Madison, will expand its workforce, but it will have some room to grow.

For commercial tenants interested in calling Google their neighbor, there is roughly 1,200 to 2,500 sq. ft. of available office space for lease on the second level. On the third level, there are a few thousand square feet of available space on either side of the dentist’s office.

The challenge with most commercial projects is financing. Gebhardt explained that financing works a little differently with rental apartments, which do not require preleasing here thanks to a strong market with low vacancy, but financing for the commercial piece involved more negotiation. “With the commercial units, we had to have a certain amount of escrow put aside until we reached a certain occupancy,” he noted. “When it comes to the commercial, the banks are much more sensitive to absorption than they are to the apartments. You do have to make some concessions to get financing for the commercial end.”

While the commercial side makes development tricky, Gebhardt maintains the development must feature interaction with retail, jobs, and residential in the same component in order to energize the block. “You don’t want one of these neighborhoods that is poorly planned out, where you have some jobs but at 5 p.m. the whole block kind of goes dark,” he says. “You’ve got to plan so that it’s successively being activated in the morning, noon, and night.”

Angela Black, an attorney with Whyte Hirschboeck Dudek who has been working with Gebhardt Development on the project, noted the skepticism that greeted the Constellation. One year after some were predicting its failure, she says the Constellation has kicked off what’s going to happen in the East Washington corridor over the next five to 10 years. “I can’t even tell you how many other people I’ve talked to who are planning to do other projects now,” she remarked. “It’s phenomenal.”

800 number

While the Constellation adds hundreds of residents to the area, they have to shop somewhere, and they have to shop for groceries. A couple of years from now, they might find a 50,000-sq.-ft., neighborhood-style grocery (no big boxes need apply) right next door as part of the first phase of another mixed-use development in the 800 block of East Washington, another prime piece of real estate.

Earlier this year, published reports identified that grocer as Metcalfe’s Market, saying the city and developers had reached a tentative deal on a $65 million, 10-story mixed-use project, but Otto Gebhardt says the grocer has yet to be determined. “Right now, it’s an undetermined grocery store,” he stated. “We’re working through the details. It will be a full-service, local type of a grocery store.”

That’s certainly not all there is to Gebhardt’s plans for the 800 block, once the home of a Don Miller auto dealership. Gebhardt, who grew up in the East Washington corridor, witnessed its slow deterioration and has had his eye on developing the corridor for 15 years. His plans for the Constellation and the 800 block are complementary in the sense that he intends to bring 24/7 energy to both.

“We plan on having a large portion of the 800 block for businesses and job creation, and it will have a retail level, kind of like the Constellation,” he says.

In addition to the full-service grocery, the development would feature another residential tower component that would rise partially above the grocery component and have between 175 and 240 living units, and between 50,000 and 100,000 sq. ft. of retail and office space surrounding and above the grocery. The development, which could be funded with the help of tax incremental financing, might also reserve some units for low-income residents and feature owner-occupied residences.

Gebhardt is in talks with the city to determine how high the residential tower can actually rise. “That has yet to be determined, but we definitely have to get a similar height [to the Constellation], because clearly this is one of the few spots in the whole city that you can develop effectively and properly integrate it with the surrounding neighborhoods,” he says.

Gebhardt acknowledged that his company is looking to acquire and develop other East Washington sites, but he added the firm will have its hands full developing the 800 block over the next two years.

Mulling the riverfront

The idea behind the Yahara River Technology Campus is to replace an underused area with an employment center that taps into a talented local workforce. With local business incubators already drawing technology startups to the corridor, information technology will be a focus of this multi-use plan.

According to Brad Mullins, the tech campus vision, which is just starting to be vetted by city staff, already follows the guidelines and principles of the Capital East Gateway BUILD plan, which is effectively the zoning plan for the area, without asking for exceptions or special variances.

“We were able to come up with a very intriguing and desirable plan that would incorporate and maintain some of the structures that have historical interest, like the 1245 E. Washington Ave. building, the 1301 E. Washington Ave. building, and others,” he stated.

The plan incorporates multiple occupants — including small retail (coffee shops, drop-off dry cleaning facilities), multifamily housing, and as many as six office developments — while also trying to “embrace” the Yahara River. “It’s been our position that the Yahara River is waterfront, and waterfront is always a desirable amenity in proximity to any type of development, whether it’s where people live, work, or play,” he says.

Combined with the city’s efforts to redevelop the Yahara River Parkway, Mullins envisions both projects providing greater connectivity, drawing more people to the area, and becoming “all of the above” in the live, work, and play equation.

“You have an area where there has always been the river, and there has always been a park on either side of the river, but it wasn’t really tied together as to the crossings at East Wash, Johnson Street, and the like,” he notes. “If you think of that area, we’ve got Lake Mendota, Tenney Park, just phenomenal facilities, but you really could not get from East Wash to Tenney Park if you were on the south side of the Avenue.

“It wasn’t very convenient because you had to cross six lanes of East Wash, which is really Highway 151. The city’s investment in Yahara River Parkway, creating the Yahara River bike path, has been phenomenal, so literally now you can Rollerblade, walk, stroll, jog, or bike from lake to lake.”

As the city reviews the Mullins Group’s concept for a phased development, the developer talks to would-be business tenants. The company has had discussions with IT groups that would want somewhere between 30,000 to 60,000 sq. ft. of space, and while they are not yet ready to move forward, Mullins says they have identified this area, and some of the Mullins Group’s properties, as places they’d like to be.

Economic realities still dissuade bankers from speculative lending for the project’s commercial pieces, and Mullins would not proceed without securing anchor tenants or preleasing commitments. “It’s really a process of working through those goals before you can really pull the trigger and do a new project,” he stated.

While he doesn’t envision a market within the development for condominium or owner-occupied housing, there is a housing component — and that would be within walking distance of the technology employers where occupants might work. Mullins believes that one reason Madison’s rental housing market is so strong is the Great Recession changed the calculus for many would-be homeowners. The Madison market benefits from the housing needs of employees at Epic and other fast-growing tech companies, but there is more to it than that.

“People aren’t buying houses like they used to,” Mullins stated. “Their kids are in college, or they are grown and gone. Why would they want the burden of a house? Why would they want to put all of their money into a house and see it depreciate when the housing bubble bursts?”

Union dues

At long last, Gary Gorman and Gorman & Co. might be on the verge of developing the long-vacant but important property at East Washington Avenue and Milwaukee Street. After several fits and starts that included the demise of a previous development proposal under a different developer, Gorman & Co. is close to executing a purchase agreement with the city.

The latest tentative deal comes after six months of talks and some concerns about Gorman’s TIF application with the city, but the developer sounds pretty confident that Union Corners is close to being a done deal. “We’ve got a couple of details to work out, but nothing of real substance,” Gorman says. “I can’t say that it’s signed, but the general concept has been approved by the City Council, so it’s now at the staff level, where they are working out the details.”

Local residents have hoped for a quality development for several years, in part because of the impact it could have on the neighborhood. Madison Mayor Paul Soglin calls the 11.4-acre site a very important property that makes a statement about the city, which acquired it for $6 million. In anticipation of development, the city already has made several public improvements.

Gorman has an $83.9 million development proposal that has the support of Madison alder Marsha Rummel, who represents the area. Groundbreaking on the first phase, a UW Foundation medical facility, could be held in the June to August 2014 time frame. There would be four phases in all, but the immediate focus is design work being done by the architecture firm Plunkett Raysich and the UW Medical Foundation staff on a 60,000-sq.-ft. medical clinic.

“With respect to the timetable, we are well into the design process,” Gorman says. “We’ve had a series of meetings between the architects, our firm, and the UW Medical Foundation staff, where they have brought in administrators, nurses, physicians, other health care folks to talk about planning and linkages between exam rooms and records, and they are very, very thorough in planning their facilities in an efficient way.”

The medical facility would require some non-surface parking, whether it’s a ramp or underground, and some surface parking for the convenience of patients. Several sustainable features are also under consideration. “We’re very sensitive to groundwater preservation in that area,” Gorman noted. “We’ve used solar before. We’re looking at materials and a level of LEED certification for the medical facility.”

Phase II would bring a still undetermined number of housing units (most likely 100), with a townhouse-style configuration along Winnebago Street being a distinct possibility.

Like the 800 block project, Union Corners will feature a local grocery store, although more in the 20,000-sq.-ft. range. “Nothing is final, but I think that would be a great addition to the neighborhood,” Gorman says. “I really don’t want to name names because it’s in a preliminary stage, but it would be more of a neighborhood-oriented grocery store as opposed to a big box.”

The grocery, which would be added in Phase III, would face East Washington and be situated to the west of the medical facility. The third phase could also include retail and office space, and a new public library branch.

Phase IV would bring a local restaurant to the existing Sales Center Building site fronting East Washington, on the corner of East Wash and Sixth Street. “It would be a local restaurant group,” Gorman confirmed. “We’ve talked to several and it’s preliminary at this point. There is nothing signed and nothing committed, but we think a restaurant on this site would be a great use.”

Since Union Corners is a multiphase project that will take several years to develop, Gorman currently has no plans to acquire more real estate along East Wash. “We’re just looking at Union Corners at this point, so we don’t have any options for any of the other land along East Wash,” he says.

Gorman grew up in Monona and remembers traveling past the intersection of East Wash and Milwaukee Street for years. During most of that time, it was the site of a Kohl’s store, and having been raised on the east side of town, Gorman would love to see the entire corridor redeveloped.

“I think all the development is great because it’s been an underutilized part of the city for a long time,” he stated. “To have that become an area where there is some density, and to bring people in with purchasing power to support retail and restaurants along the East Washington Avenue strip, it’s a great idea.”Union Corners aerialfromnorth

Developer Gary Gorman was through with Madison — now he’s back for Union Corners

Gary Gorman at his desk at Gorman & Company’s headquarters in Oregon,  Wis.

Seven years ago, after negotiations over city assistance for a development on  the 800 block of East Washington Avenue soured, Gary Gorman  vowed never to work in Madison again.

Gorman had invested two years in “Avenue 800,” initially proposing an $85  million mixed-use project with 309 condominium units in nine buildings, later  downsizing it after the city balked at his request for $7.8 million in tax  incremental financing (TIF). The two sides eventually parted ways over a $1  million difference in TIF, leaving the high-profile parcel next to Breese  Stevens Field vacant to this day.

It wasn’t the award-winning developer’s first dust-up with the city.

Gorman previously was stymied by neighborhood activists from razing the aging  Quisling Clinic at 2 W. Gorham St. to make way for a seven story, 101-unit  apartment. While the art moderne structure was eventually redeveloped into 60  apartments, Gorman maintains he lost money on the deal.

“I won’t say I wouldn’t do another downtown Madison project, but you have to  weigh the rewards with the risks,” he told The Capital Times in a 2001  interview. “And working your way through that approval process is certainly part  of the risk.”

But all that history appears forgotten amid a resurgent real estate market,  the unquenchable thirst among medical providers for more space and a city  administration willing to open its pocketbook for the private sector.

Last week, Gorman & Company inked a deal with the city to rescue the  long-stalled Union Corners site at the corner of East Washington Avenue and  Milwaukee Street. Anchoring the proposed $84 million project is a  60,000-square-foot UW Health clinic.

Back in 2003, before the housing bust sent the national and local economies  into a tailspin, developer Todd McGrath had plans to turn the 11-acre Union  Corners site into a mix of high-density housing, shopping and open space. The  $70 million project was widely hailed as a game-changer, something that would  finally spur development up and down the blighted East Washington Avenue  corridor.

When the recession hit, however, all those dreams were drowned in a river of  debt, and McGrath ended up losing the property in a voluntary foreclosure. The  city of Madison eventually stepped in, buying the land from M&I Bank for  $3.57 million, with the expectation it could eventually find a private developer  to take over the site once the economy improved.

Enter Gary Gorman, who is back working with the city on the Union Corners  site. His proposal was selected by an ad-hoc special committee in November after  competing developers dropped out.

Gorman says there was nothing special about his decision to jump back into  the local development game. He was approached by UW Health officials about  building a new clinic at Union Corners and decided to take a look.

“That is what really sparked it,” he says. “An opportunity presented  itself.”

UW Health officials are ready to get moving. The provider was looking to  replace its aging East Towne Clinic and also has a track record in working with  Gorman, who bought the Quisling Clinic from UW Health 15 years ago.

“We were very impressed with the way he worked with the community and  neighbors in the area as well as coordinating with the city staff and  departments,” says UW Health spokeswoman Lisa Brunette.

Not everyone sees it exactly that way.

Former Madison Mayor Dave Cieslewicz, who was involved in  the failed TIF negotiations with Gorman on 800 East Washington back in 2006,  notes Gorman’s past support for current Mayor Paul Soglin. Gorman had backed  Soglin in his 2003 upset loss to Cieslewicz and again in 2011 when Soglin turned  the tables on Mayor Dave.

“I liked Gorman’s proposal for East Wash, but he was asking for an exotic  financing mechanism that drew the strong objections of city staff and was  rejected by the Board of Estimates,” says Cieslewicz. “It’s ironic that he’s now  reviving Union Corners.”

Campaign finance records show Gorman contributed $250 to Soglin in his run  against incumbent Mayor Cieslewicz in 2011. But Gorman maintains the change in  the mayor’s office had no bearing on his decision to tackle Union Corners.

“There was nothing political about it at all,” he says.

And it’s not like Gorman, a 1973 graduate of Monona Grove High School, has  been sitting on the sidelines stewing over deals gone bad. On the contrary, his  firm has been busy working in a variety of markets outside Wisconsin, even  tackling an affordable housing project in Gulfport, Miss., in the wake of  Hurricane Katrina.

In fact, Gorman & Company has carved out a national reputation for  downtown revitalization and historic renovations using tax credits and other  creative financing vehicles. Rather than having to look for business, the firm  has found itself sought out by cities looking for developers willing to work in  old factory districts or troubled inner-city neighborhoods.

“Frankly, we haven’t done much work in Madison since Avenue 800 because so  many other communities want us working there,” says Tom Capp, chief operating  officer at Gorman & Company.

In Phoenix, the firm has been pursuing transit-oriented developments designed  to incorporate housing, offices and commercial space around that city’s new  light rail system. It has also built affordable housing designed to bring more  residents into the downtown.

In Miami, the firm has worked with world-renowned architect and planner Andres Duany to develop “workforce housing” for employees in  the Florida Keys tourism industry who otherwise couldn’t afford to live near  their jobs.

“Our wheelhouse is really about community building,” says Capp, a former  mayor of Fitchburg who has spent the past three years living in Miami overseeing  those efforts.

Closer to home, Gorman & Company has made a big name for itself in  Milwaukee. The firm has tackled some 30 housing projects in Wisconsin’s largest  city over the past decade, including two redevelopments at the former Pabst Brewery just north of downtown.

The company has twice been lauded by the Business Journal of Greater  Milwaukee for residential development of the year: in 2006 for the Historic  Lofts on Kilbourn Avenue and a year later for the Park East Enterprise units on  Vliet Street.

Count Milwaukee Mayor Tom Barrett as a big fan. He still remembers Gorman  from the late 1970s when both were long-haired students at the UW-Madison Law  School thinking of ways they could change the world.

“Yes, Gary has been an opportunist but these are opportunities nobody else is  taking advantage of,” says Barrett. “Maybe the best thing I can say is he hasn’t  been afraid to invest in places other people wouldn’t touch.”

A father of five, Gorman has long shown an affinity for  crafting complex financial arrangements. His first job after graduating from law  school in 1980 was representing developers and syndicators who were raising  capital from investors.

But Gorman soon found himself more interested in doing his own deals than  negotiating on behalf of others. In 1984, he founded Gorman & Company and  two years later began taking advantage of the new federal Section 42 tax credits  that helped provide low-cost financing for projects with an affordable housing  component.

Under the program that still exists today, a developer secures the credits  and offers them to investors in exchange for cash that can be used to lower  borrowing costs. Investors can then use the credits to offset their tax  liabilities on other income.

Gorman also saw Section 42 as a good business approach since competitors  either didn’t understand the process or didn’t want to jump through a lot of  hoops. One of Gorman’s first major projects — some 200 apartments built in  several phases near Elver Park — was financed with Section 42 tax credits.

Today, Gorman & Company employs 235 people nationwide with a development  portfolio topping $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.

But Gorman has never been one to flash the cash. For years his company  operated out of a small office on South Park Street next to Copp’s grocery. Only  later did he move the headquarters to a restored schoolhouse in Oregon.

Given all that success, Gorman could be throttling back and  spending more time with his family, but says he is looking forward to watching  Union Corners unfold.

“I know there is some history there, but it’s still a great site,” he says. “We’re also getting a lot of interest from businesses who want to locate there  and that is very encouraging.”

Although it’s been a while since Gorman has worked with the city, his  reputation for being a tough negotiator hasn’t changed. It took nearly six  months of discussions before the city and Gorman finally reached a deal on the  Union Corners property.

Under the plan approved by the Madison City Council July 16, the city will  sell the property to Gorman for $1 in lieu of making a TIF loan to the  developer. The city then hopes to recoup its estimated $6 million in land and  infrastructure costs through new property taxes generated by the  development.

Plans call for development in four phases: The first is 60,000 square feet of  medical clinic space with parking at the corner of East Washington Avenue and  Milwaukee Street, followed by 50 to 100 residential units. Phase 3 calls for  retail, a public library and office space. More retail, a restaurant or  additional housing are eyed for phase 4.

The deal includes exceptions to current city TIF policy, including allowing a  corporate rather than personal guarantee for repayment and no requirement that  the city take a share of the profits if the project is sold before the city  recoups from the developer the $6 million it has already invested in the  site.

Former east side Ald. Brenda Konkel, who went to bat for Gorman on his 800  East Washington proposal during her days on the council, says she always  respected him as both a quality developer and tough negotiator. But she worries  that Gorman’s arrangement with the city signals a worrisome trend.

“This is a really good example of how lax our TIF policy has gotten,” she  says. “The last time (with Gorman) the personal guarantee was a deal breaker but  this time no one even batted an eye. The candy store is wide open.”

Still, city officials say they are comfortable with the plan since it also  includes a caveat that the city could reclaim any undeveloped property back for  $1 after five years if Gorman does not develop the entire parcel.

“It’s an unusual case,” admits city economic development director Aaron  Olver.

Soglin says he is confident that Gorman can pull everything together and  doesn’t anticipate any future setbacks.

“I don’t think Gary would have invested this much time into it if he didn’t  intend to take it all the way through,” Soglin says.

Watching with mixed emotions as the plan unfolds is Lance McGrath, who has  taken over management of McGrath Associates following the illness of his  brother, Todd. The family firm took a body blow with the Union Corners meltdown  but has gotten back into the development game of late with several smaller  apartment projects.

“We have moved on but wish Gary nothing but the best,” says Lance  McGrath.

Meanwhile, plans are now moving forward on the same site where Gorman’s  earlier plans fell through.

In June, following a quick negotiation, Gebhardt Development and Metcalfe’s  Market reached a tentative deal to purchase land from the city for a $65  million, 10-story mixed-use project. That deal calls for the city to sell a  4.5-acre site on the north side of the 800 block of East Washington Avenue for  $3.15 million.

Plans there call for a 50,000-square-foot Metcalfe’s grocery with a rooftop  garden, along with up to 240 residential units, including 45 low-income units. A  second phase calls for 22 condominiums, 65,000 square feet of commercial space  and more parking.

The project has generated a lot of support from the adjoining neighborhood  and city officials anxious to move vacant property onto the tax rolls.

But here’s the kicker: The new developers are looking for $7.9 million in TIF  to make it happen. That’s $100,000 more than Gorman had sought seven years ago,  but Gorman’s “Avenue 800″ was valued $20 million higher.

Gorman a leader in using visa program to attract Chinese investors

Gorman & Company has long been known for using government tax credits to  finance real estate developments with an affordable housing or historic  preservation component.

And now the Oregon-based firm is tapping foreign investors hungry for green  cards.

Using an arcane government program that offers visas to foreigners who invest  money in targeted areas in this country, Gorman in 2011 secured $11 million from  Chinese investors for the 90-room “Brewhouse” extended-stay hotel at the Pabst  brewery site.

Run through the U.S. Immigration Service, the EB-5 visa program provides two  years of residency to foreign nationals and their families who invest a minimum  of $500,000 in cities with high unemployment or “Targeted Employment Areas.” The  investment must help to create or preserve at least 10 jobs for U.S.  workers.

To arrange financing for the Pabst project, Gary Gorman made four trips to  China over six months to work out the details. He is now so bullish on the  program his company has applied, and was recently certified by the federal  government, to be one of some 330 regional centers nationally — six in Wisconsin — to handle investor visas, allowing Gorman to collect a fee for the effort.

“It’s a complicated process but more people are starting to use it,” says  Gorman.

The EB-5 visa program has been around since the Immigration Act of 1990. A  2005 audit, however, found the program was not getting as much use as Congress  had anticipated. So in early 2011, the Immigration Service streamlined the  application process to attract more participants.

By the end of 2011, more than 3,800 EB-5 applications had been filed compared  to fewer than 800 applications in 2007, according to the Government  Accountability Office.

But don’t expect Gorman to tap Chinese or any other foreign investor for the  Union Corners project.

“It’s more likely we’ll raise our money for that one,” says Gorman, noting  that Madison’s unemployment rate is also too low to allow investors to take  advantage of the $500,000 limit.

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City, Gorman finally strike deal for Union Corners project

2013-06-14T08:45:00ZCity, Gorman finally strike deal for Union Corners projectDEAN  MOSIMAN | Wisconsin State Journal | dmosiman@madison.com |  608-252-6141madison.com

After six months of talks, the city and Gorman & Co. have a tentative  deal to develop the long-vacant, city-owned Union  Corners property on the East Side.

Gorman has proposed an $83.9 million mixed-use project featuring a UW Health  clinic, housing, neighborhood grocery, restaurant and parking for the 11.4-acre  site at the intersection of East Washington Avenue and Milwaukee Street.

The city and neighborhood have been awaiting a project on the prime site for  nearly a decade. A previous proposal by another developer failed in the bad  economy.

“It’s an extremely important site,” Mayor Paul Soglin said. “It impacts the  immediate neighborhood. It makes a statement about the city.”

The city and Gorman have been negotiating land sale and development  requirements, and the deal has been hung up on how city financial support would  occur if the project is done in phases, as Gorman wants.

A tentative letter of intent has encouraged city officials but still leaves  details that must be resolved.

“I’m really thrilled,” said Ald. Marsha Rummel, 6th  District, who represents the area. “It’s  taken a while. It’s been a roller coaster on whether it will happen or not.”

The redevelopment, Rummel said, would make the site a destination. “It  becomes a neighborhood, with services and housing and a real interesting sense  of place.”

Gary Gorman or a company spokesman could not be reached.

The city already has invested about $6 million to buy the land, make public  improvements and cover other costs.

Under the letter of intent, the city would sell the site to Gorman for $1 and  the developer would apply for $6 million in tax incremental financing (TIF)  support for the entire project.

The city would be repaid for its $6 million investment in the land and other  costs by new property taxes generated by the redevelopment.

Gorman would develop the project in four phases.

The first would include 60,000 square feet of medical clinic space with  parking at the corner of East Washington Avenue and Milwaukee Street. The second  phase would have 50 to 100 residential units and parking. The third would have  retail and office space that may include a public library branch and more  residential units with parking, and the fourth more retail, a restaurant and/or  residential units.

The phasing may present challenges for securing the $6 million in TIF. The  first phase, the most certain, is not expected to demonstrate a financing gap to  justify the entire $6 million, and there are questions about details and timing  of later phases.

It will be a “tall order” for Gorman to deliver a TIF application for the  entire project to merit $6 million because the developer has yet to solidify  final phases, city TIF coordinator Joe Gromacki said.

The letter of intent anticipates exceptions from city TIF policy to allow a  corporate rather than personal guarantee for repayment of the TIF support and to  have the city forgo a percentage of profits if the project is sold to a third  party, Gromacki said. Gorman might need other exceptions depending on final  numbers, he said.

The deal, however, protects the city because after five years the city could  reclaim any undeveloped property for $1, Gromacki said.

“Working with Gary Gorman is a real challenge, and I say that in a  complimentary way,” Soglin said. “He’s demanding of independence as a developer,  but he has a strong history of delivering a quality project.”

Soglin said he doesn’t want to prejudge Gorman’s TIF application and prefers  to take one step at a time.

Rummel said she is comfortable with the deal.

The letter of intent will be referred to city committees and decided by the  City Council  as soon as July 16.

If the council approves the letter, the city and Gorman would negotiate a  formal purchase and sale agreement and Gorman would move to TIF and land use  review processes.

The city has been awaiting a project for a long time.

McGrath Associates, the former property owner, proposed a major mixed-use  project in 2004 and after a lengthy review process won broad support from city  officials and residents for plans. But the condo market softened and the project  stalled in June 2007.

The city bought the site for $3.57 million in December 2010 and invited  development proposals in June 2012. Five entities responded with Gorman and  Livesey Co./Stone House Development emerging as finalists. Livesey/Stone House  offered a $43.5 million mixed-use project.

In November 2012, a special city committee recommended Gorman’s proposal  after Livesey/Stone House stepped back. But the committee said the city should  negotiate with Livesey/Stone House if talks with Gorman  collapse.

http://host.madison.com/news/local/govt-and-politics/city-gorman-finally-strike-deal-for-union-corners-project/article_a3926a1f-1555-577a-bafc-4117195764bf.html#ixzz2WBvVaTax

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City and Developers Complete Union Corners Agreement

Medical clinic, library branch and housing part of new development

Union Corners has been vacant for quite some time but the City sees its redevelopment as one of the crown jewels of resurrecting the Capitol East corridor. The red bricks (at right) from the French Battery Company plant will be incorporated into the new development.

Union Corners has been vacant for quite some time but the City sees its redevelopment as one of the crown jewels of resurrecting the Capitol East corridor. The red bricks (at right) from the French Battery Company plant will be incorporated into the new development.

The City of Madison and Gorman & Company of Oregon, Wisconsin have signed a Letter Of Intent to proceed with developing Union Corners. District Six Alder Marsha Rummel announced the successful negotiations with Gorman to purchase the City-owned property in an email to constituents. When completed the development will include a health clinic, Madison Library branch and 50-100 housing units.

Rummel, whose district includes the Union Corners property, will introduce a resolution approving the Union Corners Selection Committee’s recommendation of Gorman & Company as the developer and authorizing the City to execute a purchase agreement for the property in the sum of $1.

The project will commence in four phases, the first being a 60,000 square foot University of Wisconsin Health System medical clinic with parking. Phase 2 will feature 50 to 100 residential units with parking, Phase 3 and 4 may include a public library branch, more residential units, other retail spaces and of course parking. The last two phases may be developed out of order based on market conditions.

The Union Corners Master Site Plan. Courtesy: City of MadisonPer the agreement the developers must demonstrate the entire project requires $6 Million in Tax Incremental Financing (TIF), provided by the city, to earn the public assistance. The LOI notes that Phase 1 may be developed without the financing. At the time of closing Gorman must have a signed lease for a medical clinic tenant and secured through private financing at least 15% of the cost of the entire project.

Read the LOI here

The push to develop the site has been going on for a decade starting with McGrath Associates which had an approved plan with neighborhood support for mostly residential buildings in 2004 but the economic downturn derailed the project by 2007. Union Corners had been dying a slow death for decades as businesses struggled to exist on that corner and Ray-O-Vac’s manufacturing plant faded away. In 2010 the city purchased the site for $3.57 million and issued an RFP in June 2012.

Gorman Associates' mix of commercial and residential is highlighted by their "Townhomes at Union Corners" neighborhood concept.

Gorman Associates’ mix of commercial and residential is highlighted by their “Townhomes at Union Corners” neighborhood concept.

Four developers and one community group submitted RFPs but one by one before the committee took any action each of the groups dropped out until only Gorman remained.

“My thanks to all the stakeholders who worked for so many years to create a new Union Corners neighborhood!” Marsha Rummel said in the email.

The resolution to be introduced by Rummel has a few stops to make before the Common Council. It must be approved on July 8 by the Board of Estimates (4:30 in Room 260 of the Madison Municipal Building), and the Plan Commission (5:30 in Room of the City-County Building) as well as the Economic Development Committee which has not set a meeting on the matter.

Assuming all the hurdles are cleared the Common Council could adopt the resolution as early as July 16.