Financing Comes Together for Suburban Milwaukee Luxury Apartment Redevelopment
- Jan 31, 2011
Wauwatosa, Wis.–There’s a gap in the supply of luxury apartment properties in Wauwatosa, Wis., a Milwaukee suburb just three miles outside the city, and HSI Properties plans to help fill the void with The Enclave. The property will offer 152 high-end residences that, judging by the Federal Housing Administration’s willingness to get involved with the $24 million redevelopment endeavor, will likely find a receptive audience.
The four-story apartment community will occupy a four-acre site that was formerly home to the headquarters of event marketing firm Derse Inc. at 1234 N. 62nd St. AG Architecture Inc. designed the project, which will result in four floors containing one-, two- and three-bedroom luxury residences. Responding to the call for premier accommodations in the area, HSI and AG Architecture put their heads together on the vision for the property’s amenities, which will include a clubroom, business center, exercise facility and green roof gardens. While The Enclave will be high on luxury amenities, it will feature rental rates that cannot be found at comparable apartments just minutes away in Milwaukee. “Our site is a suburban alternative to renting in Milwaukee,” Ryan Schultz, HSI principal and co-founder, explains to MHN. “Renters will see a 15 to 20 percent discount in an urban-suburban environment with all the same amenities you would expect from higher-end properties.”
The 2007 lending climate, during which many developers built just because loans were free flowing, is like a dream that never happened. The credit crunch is slowly loosening its grip, but money is still hard to come by for multifamily projects. Most frequently, developments that attract financing are the ones located in markets that show signs of existing and/or increasing demand. In greater Milwaukee, strengthening conditions cannot be ignored. In 2010, the city’s apartment market maintained a vacancy rate in the 5 percent range, a figure that is poised to decline to just over 4 percent in 2011, and densely populated suburban areas like Wauwatosa will lead the way with the highest occupancy and rent gains, according to a first-quarter report by Marcus & Millichap Real Estate Investment Services.
Employment levels have more than a little to do with the market’s enviable statistics. “There are tons of high-paying jobs within a two- to three-mile radius of the site,” Brettt Haney, HSI principal and co-founder, tells MHN. “There’s a huge research park where GE Healthcare has a facility. The region’s biggest medical cluster is about one-and-a-half miles from the project. And the University of Wisconsin-Milwaukee is set to break ground on Innovation Park down the street, and that will create a lot of research and corporate jobs. We believe the Wauwatosa submarket has a bright future.”
HSI raised $4 million from private equity investors, and Milwaukee’s apartment market fundamentals were strong enough to help HSI secure a promise for construction and permanent financing totaling $20 million for The Enclave through FHA’s HUD 221(D)(4) program. “It was not so much challenging as it was time consuming,” Schultz says of securing the FHA loan. “Funding for new construction is at a premium, and credit plays a major role. We were fortunate to have some high-capital investors involved in the project. Investors and demand are key, so we felt confident, but because FHA is one of the few lending vehicles out there, that created the logjam.” He adds that it is imperative to have a skilled and knowledgeable mortgage broker to help orchestrate a financing package; HSI relied on Grandbridge Real Estate Capital.
And with funds at the ready, the redevelopment project is positioned to get underway. Existing industrial buildings encompassing a total of approximately 100,000 square feet will be demolished in February to make way for a groundbreaking in April. The first residences will be available beginning May 1, 2012.
The Enclave will be HSI’s third major new construction project, with more are on the horizon. “The two major indicators we try to focus in on are job growth and population growth,” Schultz says. “If a region’s got those two things, like certain markets in Texas, it’s going to have a need for housing.” But it’s not just the major cities that are on the company’s radar; there are more towns like Wauwatosa that are ripe for luxury multifamily development. As Haney notes, “There are segments where, even if the metro area is not booming, there are certain submarkets that are on the upswing.”