Not just school building’s future but also Montessori and Renaissance

By Phil Pfuehler, River Falls Journal, Mar 26, 2014

The school board has a big decision to make about the historic River Falls Academy building. But after its March 24 regular meeting, it’s clear the bigger decision is what to do about 200-some students housed in the Academy for the Montessori and Renaissance programs.

A marketing executive from Wisconsin-based apartment developer Gorman & Company explained to
a school board audience its bid to recast the older portions of Academy building into 24 rental units.


Gorman’s Ted Matkom said his company has renovated and converted other old buildings, including those on the National Register of Historic Places, into low-income apartments, offices, condos and senior living complexes.

In River Falls, Matkom said Gorman’s $10,000 bid for the Academy would convert the 1927 and 1950 portions into 24 low-income apartments. The building’s notable historic features would be preserved.

The Academy’s 1991 addition that now houses the elementary Montessori program would be leased back to the school district for $1 a year.

The bid’s deal hinges on several tax credit options that Gorman would apply for to subsidize its costs.

One is called “Market Rate” and involves seeking “historic tax credits” at the state and federal levels to cover 40% of the project’s costs.

Two other options are to seek more tax credits through the Wisconsin Housing and Economic Authority (WHEDA).

The second of these two WHEDA options provides the largest percentage of tax credits (9%) but is very competitive and time consuming.

Matkom estimated the Academy conversion project would cost $6 million to $7 million.

He said Gorman was in no hurry to start, which was good because obtaining one or more of the tax credit options will take time.

Asked about Gorman’s interest in the River Falls Academy, Matkom said: “I love the neighborhood, I think it’s phenomenal.”

He added the building has great visual appeal because of its “ornate nature” and “1920s architecture.”

A large school board audience came primed with questions.

Bob Ebert lives in an old house near to the Academy on Pearl Street. Ebert wondered how 24 new apartment units would affect street parking in the neighborhood.

(Earlier it was reported that Gorman would use an old gym at the Academy to build underground parking, but that turned out to be not true.)

“Parking can be a real issue, especially in the winter,” Ebert said. “We need two off-street parking spots for each of those units.”

Several mothers of current or future Montessori students posed questions, including:

–Would there be background checks of apartment tenants to ensure the safety of students still using the newer part of the Academy?

–How would the school and apartment portions be kept separate and secure, and how would problems such as tenants smoking and having parties be handled to protect the school’s integrity?

–Would increase tenant traffic increase the chances of accidents for the students?

–How would the apartment complex affect neighboring property values?

–How would school safety be ensured while construction was occurring to convert part of the building into apartments?

–If there was a fire in an apartment, would there be adequate notification for the school to be evacuated?

School board member Manny Kenny assured the crowd that nothing would be done at the Academy that “would put our children at risk.”

Kenny said that no one had all the answers, but asked for the public’s trust. He guaranteed the school board will craft and present a plan that emphasizes student safety.

For the complete story and more school board coverage, including calendar makeup days, see the March 27 print edition of the River Falls Journal.

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.

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.”

Developer wants to rehab 120 foreclosed Milwaukee homes

By Sean Ryan, The Business Journal, January 15, 2014

Gorman & Co. Inc. wants to buy 120 tax-foreclosed homes from the city of Milwaukee and rehab them as affordable housing for new renters, and eventually owners, for $22.5 million.

The projects center on three Milwaukee neighborhoods where city-owned foreclosed houses are concentrated, including areas around the former Tower Automotive plant, said Ted Matkom, Wisconsin market president for Gorman, based in Oregon, Wis.

The developer since 2008 has fixed and leased 200 houses in Milwaukee under this initiative, Matkom said.

The project funding requires state affordable housing tax credits that Gorman will apply for later this month. Gorman will file three applications, Matkom said, one each for houses in the Franklin Heights, Sherman Park and Tower Automotive neighborhoods.

Under the proposal, Gorman would buy foreclosed houses from Milwaukee for between $1 and $5,000, depending on the condition of the building, Matkom said. Gorman would fix them up and rent them to low-income residents for 15 years. After 15 years pass, the current occupant can buy the building for $30,000, paying off the remaining debt on the rehab projects, he said.

“A lot of multi-family buildings kind of get tired as they approach the 15th year,” Matkom said. “This product actually gets more attractive as the 15th year approaches.”

Milwaukee’s Zoning, Neighborhoods and Development Committee on Tuesday unanimously endorsed selling the houses to Gorman.

Ted Matkom of developer Gorman & Co.

Four-story apartment project planned near downtown Waukesha

By:  Sean Ryan, Milwaukee Business Journal, December 4, 2013

Gorman & Company, Inc. is proposing a four-story building with 56 apartments, most of which would be affordable, on East Main Street in Waukesha where city officials are encouraging redevelopment.

The project is planned for a vacant, 2.3-acre site north of Main Street and west of the railroad tracks in a former railroad right-of-way. The project would have 14 market-rate units, 14 units with services to support veterans, and affordable apartments, said Ted Matkom, Wisconsin market president for Gorman, of Oregon, Wis.

“We have always been looking for the perfect site in downtown Waukesha and this was available through a broker,” Matkom said. “Several people referred us to this site because it was challenging.”

Gorman in early 2014 will apply for about $850,000 in affordable housing tax credits from the Wisconsin Housing and Economic Development Authority for the roughly $10 million project, Matkom said. If awarded the credits, the project could start construction in about a year for a 2015 opening, he said.

The area, east of Waukesha’s downtown, has older houses and vacant properties that city officials would like to see redeveloped, said Jeff Fortin, Waukesha community development specialist.

Waukesha’s Plan Commission will review Gorman’s project plan Dec. 11.

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

Vail Town Council to weigh new plan to redevelop Timber Ridge housing project

By RealVail, October 14, 2013

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 sixth 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 at www.vailgov.com. To forward comments in advance of the meeting, email the Vail Town Council at towncouncil@vailgov.com.

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.



Former seminary could be transformed into housing community

By Brent King, Communications Director, Diocese of Madison, for the Catholic Herald, September 26, 2013

MADISON — A Madison icon, the former Holy Name Seminary, a neo-colonial revival landmark that welcomed its first students in 1964 and has served as the Bishop O’Connor Catholic Pastoral Center (BOC) since the seminary was closed in 1995, may be transformed into a multi-family housing community, officials at the Diocese of Madison announced September 25.

The diocese signed a letter of intent with Gorman & Company to enter exclusive negotiations for a development contract and 60-year lease agreement to renovate the building as a “certified historic rehabilitation” in compliance with historic preservation guidelines prescribed by the National Park Service.

According to the letter of intent, the Diocese of Madison would retain ownership of the BOC land to be leased, as well as determination over the future use of the approximately 72-acre Bishop O’Connor Center.

The landmark building that would be redeveloped by Gorman would revert to diocesan control at the end of the 60-year lease period. In the interim, the diocese would relocate its administrative offices, and those of Catholic Charities and its family of other tenants, on a mutually convenient date before construction starts.

The diocese retains the right to approve the final redevelopment plan — which calls for residential use — before a binding lease is executed.

Gorman & Company has agreed that the O’Donnell Chapel, located at the center of the building, would be sensitively preserved in a manner consented to by the diocese. Both parties would also jointly approve an appropriate name for the redevelopment that reflects the historic significance of the property, for Catholics of the Madison Diocese.

Looking to future

In commending the potential of the BOC redevelopment project, for the future of the diocese and the partnership with Gorman & Company, Bishop Robert C. Morlino observed: “While giving thanks to God for all His gifts in the past, and for the tremendous blessings of the present, this project allows us, in a very concrete way, to look forward to the Church in the future.

“Although growth nearly always involves some level of sacrifice, this project, carried out with an excellent partner, will allow the Church to preserve, for the long term, Her material goods, while focusing most urgently on that which is most precious — the faith of Her people.”

The diocese’s decision to sign a letter of intent with Gorman & Company to repurpose the building is grounded in years of due diligence through its committee and leadership structure to determine the future of the aging and underutilized seminary building.

A strategic stewardship plan for the BOC’s assets is a key element in supporting the diocese’s goals, including the cultivation of future Church leadership through the dynamic growth of the diocese’s seminarian program, which has quintupled under the direction of Bishop Morlino in the past 10 years.

Engaged experts

As part of its multi-staged evaluation process, the diocese engaged several recognized experts, including Kothe Real Estate Partners and zumBrunnen — a national leader in facilities forecasting — to assess the financial viability of the BOC and to help forge viable options to address the building’s aging structural and systems issues.

Among the findings by the diocese’s consultants were that the Bishop O’Connor Center will require over $15 million in capital improvements during the next 30 years, but only sustain an average projected building utilization rate of 36 percent.

Despite the diocese’s strategies of diversifying the tenant base, which includes administrative offices for the diocese and other Catholic non-profit organizations, apartment suites for active and retired priests, conference and meeting space, retreat guest rooms, as well as a catering business — the 232,000-square-foot building was never designed for mixed use and offers only 59 percent leasable space, creating an ongoing operating challenge.

Diocesan officials observed that the concept to repurpose the building as housing (which was proposed by Gary Gorman after the diocese approached him for assistance in identifying sensitive and reality-based solutions) offers a singular opportunity for a historically sensitive development that is highly compatible with the neighborhood and guided by a local Catholic developer who has established a national reputation and outstanding track record for award-winning historic preservation projects:

“In a search for a respectful, viable, and exciting solution for the future use of the Bishop O’Connor Catholic Pastoral Center, we prudently sought professional advice from internal and external leadership. Ultimately, this led to seeking the expertise of Gary Gorman based on his leadership and involvement with Catholic Charities and All Saints Senior Neighborhood, along with his extensive professional experience on a national scale with adaptive reuse of significant and historic buildings through Gorman and Company, Inc.,” remarked Msgr. James Bartylla, vicar general of the Diocese of Madison.

“Gary’s creative proposed solution of adaptive reuse of the Bishop O’Connor Catholic Pastoral Center, that retains diocesan ownership, respects the historic legacy of the property, and compliments the character of the neighborhood and needs of the community, is a testament not only to his professionalism but also his active Catholic faith. We’re grateful for his critical contribution to this proposed project.”

If the Gorman development moves forward, diocesan officials predict savings on BOC operations in the range of $500,000 annually, as well as a positive revenue stream over the life of the lease to help sustain its numerous ministries and parishes throughout the diocese.

For more information about the Diocese of Madison, its mission, outreach, and apostolates, visit www.madisondiocese.org

Priests comment on proposal
Msgr. Michael Burke, pastor, St. Maria Goretti Parish, Madison

“My priesthood has been linked for over 40 years to the building, grounds, and wonderful history of the Bishop O’Connor Catholic Pastoral Center: as a student, instructor, vocation director/recruiter, and rector of Holy Name Seminary for 19 years, as well as being the current pastor of St. Maria Goretti Parish area in which the center is located. For nearly two decades after the closing of Holy Name Seminary, we have seen many noble and worthy attempts to operate the facility as effectively and efficiently as possible, even though its large size and initial design as a seminary doesn’t lend itself to such a use. I’ve been a member of the finance council of the Diocese of Madison and for over two years we have investigated with diocesan staff, Bishop Morlino, and consultants to come up with a proposal on the effective use of this property. Today’s proposal before Bishop Morlino and the Diocese of Madison presents us with the opportunity to retain ownership of the building and property, reduce our operating and capital costs, design more modern, cost effective and efficient office space for diocesan personnel, and carefully weigh how this beloved property may benefit the Diocese of Madison in the future.

“My dad took me to the dedication of the seminary 50 years ago. Bishop O’Connor, Bishop Hastrich, Bishop O’Donnell, and Bishop Wirz gave their life and ministry to this sacred property. If Bishop Morlino approves this proposal it will greatly honor the efforts of these Bishops and all the people who have been associated with this sacred ground. May the Holy Spirit and Holy Name of Jesus continue to guide us in the future. Keep hope alive.”

Msgr. Daniel Ganshert, pastor, St. Henry Parish and St. Bernard Parish, Watertown

“Fifty years ago the people of the Diocese of Madison contributed to the construction of a building to honor the name of Jesus of Nazareth.

“For me it has become a brick and mortar sermon on the mount where countless people continue to be blessed by its existence. This new development will assure its future as a landmark for generations to come.”

Fr. Randy Timmerman, pastor, St. Dennis Parish, Madison; Holy Name Seminary graduate

“This plan is courageous for the needs of today and prudent for the future of the diocese.”


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.