RACINE — The promised $50 million @North Beach housing development at the former Walker Manufacturing site has hit another snag, delaying the start of construction for several more months.
Mayor Cory Mason and Kevin Newell, president of Milwaukee-based Royal Capital Group, announced the company’s intentions almost exactly one year ago, on Dec. 5, 2018. The plan was for the mostly residential construction project of 242 market-rate apartments just north of Pugh Marina at 1129 Michigan Blvd., along the lake. Mason said Royal Capital would buy the city-owned site for $3.2 million.
That plan was to develop just the eastern portion of the old Walker site in the first phase, leaving another large portion of the property available for development in the future.
The project was initially expected to consist of:
- A seven-story apartment building, including a two-story parking structure;
- A five-story apartment building with one story of parking and a total, between the two structures, of 241 parking spaces;
- A total of 242 market-rate apartments ranging from one to three bedrooms each;
- A total of 364,666 square feet of new construction; and
- About 4,400 square feet of retail space, possibly including a restaurant.
Mason called it the city’s largest development project in about a generation.
Construction was expected to start last spring — both the public infrastructure and private development — and take about 18 months to build. But preparatory steps have dragged into the second half the year, and so far no actual construction has begun.
Now, another significant delay looms.
Different lending climate
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“When this project was first announced and the original agreement reached, the national banks and financial institutions were quite eager to finance this project to the full extent of needed construction without the need for credit enhancements or government guarantees,” Shannon Powell, Mason’s communication director, said last week.
“At that time, the city and the developer had discussed the possibility of (Royal Capital) improving the long-term profitability of the project by seeking a 40-year-amortization, HUD government loan guarantee to the principal construction financing,” he said, referring to the U.S. Department of Housing and Urban Development.
“But pursuing that option would have added six months or more to the project, and given the positive financing climate at the time, we all opted to move forward without the HUD guarantee.
“However, in the intervening time-frame, the same national financial institutions that they had been working with have grown substantially more conservative in their outlook and practice and, as a result, the City has asked the developers to forego attempting a construction start ahead of winter, and instead use the time from now until next spring/early summer to gain approval of the HUD loan guarantee so that the project has much more robust financial underpinnings.”
Within days, he said, the city will join representatives of Royal Capital in a meeting with HUD to discuss financing the project. City officials intend to “proactively extend the closing date to assure the project’s success” and thus expect construction to start in late spring to early summer of 2020.
Mason remained upbeat about the ultimate result.
“Once built, the @North Beach project will be transformational for the lakefront, and I get asked frequently, ‘When is construction going to start?’ he said. “We all want to see the project get built, but as mayor, I have to protect the taxpayers who are putting public resources into this development. As soon as it seemed like the banks were becoming more conservative with their financing, we intentionally asked Royal Capital to reach out to HUD.
“Ultimately, the HUD financing will put both the city and the developer in a stronger financial position to ensure that the project gets built.
“The drawback to going through HUD is that it can take six to nine months to go through the process. However, it is the hope of both the city and Royal Capital that construction will begin on their market-rate housing development in the summer of 2020.”