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.