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Public Financing for Mandel Project --- Redevelopment of the Slums of Shorewood ?

Mandel Project, TIF, Shorewood, Public Financing, BUT IF, Walgreens

The proposed Mandel Project in the 4000 block of N Oakland in Shorewood has generated a lot of controversy.

 

 

In my prior posting SHOREWOOD VILLAGE OFFICIALS RESPOND TO QUESTIONS ABOUT FINANCING ON PROPOSED MANDEL PROJECT (WALGREENS & RESIDENTIAL DEVELOPMENT)

 

 

Board President Guy Johnson and Trustee Jeff Hanewall kindly responded on the proposed project, you can read their comments at this link to that posting:

 

 

http://www.baysidenow.com/blogs/communityblogs/121057778.html

 

 

Basically, the Shorewood Community Development Agency (CDA) has proposed an expansion of the current TIF (Tax Incremental Financing), in order to provided financing to the developer (Mandel) in an amount somewhere between $8,725,000 and $10,000,000

 

 

As noted in the Project Plan for the Creation of Tax Incremental District No. 4, Draft April 26, 2011 and presented by the Shorewood CDA, part of the criteria that makes this project eligible for TIF purposes is the following “finding” under WI Law (66.1337 (2m)(b):

 

 

Not less than 50% by area of the real property within the District is in need of rehabilitation Or conservation work within the meaning of Section 66.1337(2m)(b) of the Wisconsin Statutes. Furthermore, any property standing vacant for the entire seven years preceding adoption of the Creation Resolution does not comprise more than 25% of the area in the District in compliance with Section 66.1105(4)(gm)1. of the Wisconsin State Statutes.

 

 

The amended Section 66 … reads:

 

 

Section 452. 66.435 of the statutes is renumbered 66.1337, and 66.1337 (2), (2m) (a) (intro.), 2. and 4. and (b) and (3) to (7), as renumbered, are amended to read:



99 Act 150, s. 452 - continued    
    66.1337 (2) FINDINGS. It is hereby found and declared that there exists in municipalities of the state slum, blighted and deteriorated areas which constitute a serious and growing menace injurious to the public health, safety, morals and welfare of the residents of the state.

 

 

Seeing that part of the criteria for the expenditure by Shorewood for the Mandel project, I was surprised; as I think a fair number of other Shorewood residents will be, to find that we are Cleaning up the Slums and Blighted Areas of Shorewood, with this project.

 

 

The FIRST Criteria that MUST be met in order to use a TIF for this sort of project, is meeting the “BUT FOR” clause.

 

 

According to the WI Dept of Revenue:

 

 

 For Tax Incremental Financing (TIF) to benefit municipalities as it is supposed to, developments that get TIF assistance must meet a standard called the “but for” test. The name comes from the expression, “The development would not occur but for the use of TIF.” To say this means that the proposed development would not happen if the financial support available from TIF was not used.

 

 

WE NOW NEED TO ANSWER THE QUESTION OF WHETHER DEVELOPMENT WOULD HAPPEN IF PUBLIC FUNDING WAS NOT PROVIDED BY SHOREWOOD.

 

 

And the Answer to that question has been public for some time now.

 

 

Roundy’s which owns Pick n Save, owns the entire block on which the current Pick n Save is located, and INCLUDES the entire building which houses Walgreens and the former Schwartz’s Book Store.

 

 

After Schwartz closed, Open Book, a co-op, tried to make a go of a co-op bookstore in that space that Schwartz had. 

 

 

Pick n Save the Landlord of the space, according to information from the Co-op Board, would not negotiate a long term lease agreement, as Pick n Save is planning an expansion of the Shorewood store, as it deems it too small.

 

 

Our public officials know that Pick n Save has been planning this for some time.  The ultimate plan is to raze the Walgreen’s building, build the new Pick n Save there, and then raze the current Pick n Save building, and put up a parking structure.

 

 

THIS HAS NOT BEEN A SECRET!!!  It has been well known in the village, that Walgreens had to move --- and where more likely to move, than across the street to an open parking lot??

 

 

I am a licensed real estate broker in Wisconsin.  I have also taken all the appraisal classes, and I passed both the Wisconsin and Federal exams for appraisal licensing.  I  know the basics of appraisal.

 

 

There are several ways to appraise a property, the most common are:

 

1)      Replacement Cost

2)      Income Approach

3)      Market Value

 

 

When working with a business like Walgreens, their main concern of course is primarily the Income Approach.  All retailers are concerned with their “sales per square foot”.  The more potential for sales per square foot, the more value the property is to them.

 

 

An recent example to the extreme, is this from the Wall Street Journal:   “ Abercrombie will pay seven million Hong Kong dollars (US$900,000) per month for a 25,000-square-foot store, more than twice what was paid by Shanghai Tang, according to a report by real-estate firm Cushman & Wakefield. “ 

 

 

You can bet that Abercrombie is looking for some huge numbers on the sales per square foot, if they are going to pay almost $10,000,000 per year in rent!!!  The GAP, Apple and other stores are also signing leases in Hong Kong’s exclusive retail districts, for similar amounts.

 

 

Which brings us back to Walgreens?  I think we can be fairly certain that Walgreens is not going to pay that kind of money to be in Shorewood --- but we can also be fairly certain that Walgreens does not want to leave the Shorewood market, where it is probably doing a good deal of business sales per square foot!

 

 

Real estate, whether residential or commercial, is all about Location, Location, Location!

 

 

Shorewood will never attract the ultra high end fashion stores --- those in Shorewood who can afford that kind of store do day trips to Chicago, or weekend trips to New York. 

 

But a retailer like Walgreens is a natural for Shorewood, especially with our aging population, they want to be in our market place --- and we certainly don’t have to pay them to stay here!

 

 

Regarding the proposed Mandel project, there are also several concerns besides the public financing aspects.

 

 

1)      The developer is saying that they cannot make money from their proposed project, due to the costs of the parking structure, and that is the main reason they are asking us for our public money.  I think it would be interesting for Shorewood to examine whether they should build the parking ramp as the Village, and whether the Village would make money from that ramp.

 

 

2)      The proposed residential aspect of the project calls for one, two and three bedroom apartments.  (Which I will bet will all be converted to condo’s as soon as that market picks up) --- the problem here is that Shorewood is ostensibly encouraging new residential housing to attract families with kids for our school system.  This development would better fit that roll if it was all 3 bedroom units, with in unit laundry.  That would attract families with kids!

 

 

3)      The proposed development is way too tall for the area.  Why not lower the 5 story portion to 3 stories, with underground parking going down 2 or three levels.  They will achieve the same or more space as the present proposal, yet not drown out all their neighbors --- especially the Presbyterian Church across the alley to the west.

 

 

4)      The oddball out in the present proposal is the Sendiks building.  It will be dwarfed both to the north and south by larger structures, and it is a rather bland building.  The Sendiks store should become part of the development, with a new building that fits in with the height and architecture to both sides of it.

 

 

That is my assessment of this latest proposal by Shorewood to use public funds for private business.

 

 

WHAT DO YOU THINK?

 

 

 

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