In the race to attract tenants and put together a deal to build a new office building in downtown Milwaukee, a joint venture of Wauwatosa-based Irgens Development Partners LLC and Milwaukee-based Van Buren Management Inc. recently took a major step ahead of their competition.
Milwaukee law firm Godfrey & Kahn S.C. recently announced that it has signed a lease to be the anchor tenant in Washington Square, a mixed-use building with office, parking and retail space that Irgens and Van Buren plan to build on a parking lot southeast of East Mason Street and North Jefferson Street in downtown Milwaukee.
The plans have not been finalized yet, but Godfrey & Kahn will occupy 90,000 to 100,000 square feet of space in the building said Nic Wahl, Godfrey & Kahn’s incoming managing partner.
The building is expected to be about 22 stories tall with 250,000 square feet of office space, said Jackie Walsh, executive vice president for Irgens. If other anchor tenants commit to the project the building could be as tall as 26 stories with more than 300,000 square feet of office space. If Godfrey & Kahn is the only major tenant the building could be limited to 20 stories tall with 200,000 square feet of office space.
For several months downtown Milwaukee office building developers have chased three potential anchor tenants that have been in the market for new downtown office space: Godfrey & Kahn, Von Briesen & Roper S.C. and Baker Tilly Virchow Krause LLP. Von Briesen & Roper is seeking about 75,000 square feet of office space and Baker Tilly is seeking about 65,000 square feet of office space.
According to commercial real estate sources, Von Briesen and Baker Tilly have both narrowed their options down to the Washington Square project and a development by Weas Development at a site southeast of Broadway and Michigan Street downtown. The Weas project would be a 15- to 17-story building with 200,000 square feet of office space on 8-10 floors, 7 floors of parking and first floor retail space.
The Weas project probably needs both Baker Tilly and Von Briesen to be viable.
Some sources said that Von Briesen would be willing to share the Washington Square building with Godfrey & Kahn, despite the firm’s strong desire to leave the 411 E. Wisconsin Ave. building, which is anchored by the Quarles & Brady law firm, which has a sign on top of that building.
“I don’t know that (having two law firms in the same building) is a problem,” Walsh said. “It’s never been brought up as a problem by either party.”
“(Von Briesen) has clearly said, ‘no, (sharing the building with Godfrey & Kahn) is not an obstacle,'” one source said. “If the other parts of the deal make sense, they would do that.”
However, another source said that while Von Briesen is willing to share a building with another law firm, it would rather not.
That could make Baker Tilly the key to the Weas Development project. If Baker Tilly commits to that project then Von Briesen may follow it, which would get the Weas project off the ground. But if Baker Tilly chooses the Washington Square project, Von Briesen may follow them to that project because the firm will have no other viable new office building project to go to.
Other developers that have proposed new downtown Milwaukee office buildings include Rainier Properties LLC, which includes developers Bruce Westling and Gary Grunau, who plan to build a 15-story building northwest of Water Street and McKinley Avenue along the Milwaukee River with 280,000 square feet of office space and a Marcus Corp. multi-screen movie theater complex; and Next Generation Real Estate Inc., which had proposed a 6-story office building southeast of Wisconsin Avenue and Broadway, replacing several buildings that are more than 100 years old.
However those projects have been unable to attract interest from the anchor tenants currently in the market for new office space downtown.
Walsh said there are some other tenants in the market for new office space downtown, which she declined to name, but they are smaller tenants.
The Washington Square project also has the advantage of the combined experience and resources of Irgens, one of the Milwaukee area’s most prominent commercial real estate developers, and Van Burean, one of the largest owners of commercial real estate in downtown Milwaukee.
“(Washington Square is) a leap ahead of the others now,” said Terence McMahon, principal of The Boerke Company Inc. and Von Briesen’s representative. “I think (the tenants) have been waiting to see which one is a legitimate project and which ones are hopeful.”
By securing Godfrey & Kahn the Washington Square project is now closer to being “legitimate” than the others.
Irgens and Van Buren have been in discussions with Von Briesen and Baker Tilly, Walsh said.
“I’m very hopeful (the Godfrey & Kahn deal) makes a difference,” she said. “Both (Von Briesen and Baker Tilly) are represented and it’s very hard to tell.”
Irgens and Van Buren have had preliminary discussions with potential funding sources for Washington Square, Walsh said. Now that they have an anchor tenant for the project, they get begin detailed negotiations for financing, she said.
“We tested the waters to see if there is interest (from banks),” Walsh said. “We can have serious discussions now that the (Godfrey & Kahn) lease is executed.”
The total cost of the project has yet to be determined, but Walsh estimated it will be about $75 million to $80 million.
The developers also plan to seek financial assistance from the city. Only preliminary discussions have been held so far with city officials, Walsh said. However, the developers think that an arrangement similar to the Cathedral Place project could be worked out, in which the city provides assistance to pay for the cost of the parking structure, which the city would own. In addition to owning the parking asset, the city could use parking revenues in addition to tax incremental financing (TIF) to pay for its subsidy, Walsh said. She said the project may need about $20 million to $25 million in support from the city.
Department of City Development Commissioner Richard “Rocky” Marcoux said he could not comment on the Washington Square TIF request until seeing a detailed proposal.
“We need to see more of the detail and get specifics,” he said. “It would obviously create some construction jobs and grow the tax base. But we need to look at what’s in the best interest for the taxpayer.”
