Downtown Vacancy May Soon Be Filled

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Owner hopes condos, parking will revive site

By TOM DAYKIN
tdaykin@journalsentinel.com
Posted: May 11, 2006

You could say the long-empty, decrepit office building, sitting near Water St. and Wisconsin Ave., one of downtown Milwaukee's most visible corners, sticks out like a sore thumb. But that would suggest this property attracts attention.

Instead, the eight-story building is lost between its higher-profile neighbors, the 100 East office tower to its south and a 16-story office building to its north.

"It's a dead, lifeless building," said Sheldon Oppermann, of Compass Properties LLC, which owns the 80,000-square-foot building at 731 N. Water St.

That may soon change. Compass, which also owns the neighboring 295,000-square-foot office building at 735 N. Water St., is seeking financing -including help from City Hall - to revitalize both properties.

The plan: convert the entire ground floor and the eastern half of the upper floors at 731 N. Water into a parking structure, providing additional parking spaces for 735 N. Water tenants. That would help draw more businesses to 735 N. Water, which has lost tenants in recent years to newer downtown buildings.

The western half of 731 N. Water, which overlooks the Milwaukee River, would be converted into condominiums, with one unit on each of the seven upper floors, Oppermann said. Selling those residential units, each with about 3,500 square feet, would generate cash to help pay for the parking structure, he said.

Compass hopes to begin the work as soon as it can obtain financing, Oppermann said. He declined to provide a specific budget estimate but said it will cost several million dollars.

He wants the parking structure to be completed by the end of 2007, when much of the Marquette Interchange reconstruction will be done. When that traffic-snarling project is finished, there will be a burst of interest from suburban businesses seeking to move downtown, Oppermann said. Those companies, he said, want to attract and retain professional employees by locating near downtown's attractions, nightlife and new housing - emulating Manpower Inc.'s recent decision to move its headquarters to downtown from Glendale.

"There's going to be a ton of people who don't want to be anywhere but downtown," Oppermann said.

Some commercial real estate brokers are skeptical that a large number of suburban companies are poised to move downtown.

However, Compass, owned by Stevens Point insurance executive John Noel, already has attracted some suburban tenants to 735 N. Water. They include Key Engineering Group Ltd., which moved from Cedarburg in 2004 and is leasing 5,200 square feet.

Key Engineering moved downtown in order to be closer to its clients, including banks, law firms and real estate developers, said Ken Wein, president. The move also put Key Engineering, a growing firm that operates offices in Washington, D.C., and Green Bay, closer to Mitchell International Airport and to its clients in northern Illinois, Wein said.

Other tenants at 735 N. Water include Chicago-based Private Bancorp Inc., which began leasing 13,000 square feet in 2005 when it opened a PrivateBank and Trust Co. branch. That brought a renovated lobby to the building.

A piece of history

The building at 735 N. Water qualifies as a historic property. It was completed in 1913 as the headquarters for First Wisconsin National Bank, which was later known as Firstar Bank before its acquisition by U.S. Bank.

The 731 N. Water building has a less distinguished past. Built in 1962, as an annex for First Wisconsin, it has been vacant for more than 15 years, the legacy of a prolonged legal dispute and split ownership between it and 735 N. Water.

Carley Capital Group of Madison sold both buildings in 1988 to American Landmark Properties Ltd. American Landmark didn't want to buy 731 N. Water but agreed to take it in order to obtain 735 N. Water. Carley agreed to finance the sale of 731 N. Water but later went bankrupt. The creditors formed Cardes Corp., which took over 731 N. Water in 1993.

Cardes and American Landmark, of Skokie, Ill., ended up fighting in court.

The unusual litigation centered on the utility systems - water pumps, heating equipment, chillers and electrical conduits - that served both buildings, which are connected. The systems are based at 731 N. Water, with the utility bills split between the two properties. American Landmark and Cardes argued over how those bills should be calculated.

Cardes finally sold 731 N. Water in 2001 to American Landmark to help settle the dispute.

Parking is an issue

Compass bought both buildings from American Landmark in 2002 for $11 million, according to assessment records. The purchase included a parking ramp at 740 N. Water St., built in 1928, that provides 300 spaces for the tenants of 735 N. Water.

But that's not enough parking for 735 N. Water to remain competitive, especially with new downtown buildings that come with modern parking structures, Oppermann said. The ideal ratio is to have two parking spaces for every 1,000 square feet of office space, he said, which leaves 735 N. Water about 300 spaces short.

As a result, only about 65% of 735 N. Water is occupied, down from 93% occupancy when Compass bought the building, Oppermann said. The building has an assessed value of $11 million, down from just more than $13 million in 2005.

"To keep this building relevant, I need more parking," Oppermann said.

Oppermann figures he can squeeze about 110 parking spaces into 731 N. Water. That will require installation of a freight elevator, which a valet will operate, to bring cars from the ground level to the upper floors, he said.

Oppermann hopes city officials will provide some financial help for the parking portion of the project. Compass might seek a tax incremental financing district, in which property taxes generated by the improvements pay back funds provided by the city.

The Department of City Development has not received a formal proposal from Compass, department spokeswoman Andrea Rowe Richards said. She said department officials are in the discussion stage with Compass.

Compass also may seek to connect 731 N. Water to the downtown skywalk system through its southern neighbor, the 34-story 100 East office tower, at 100 E. Wisconsin Ave. A doorway could be built to connect 731 N. Water to 100 East, which is connected to the skywalks.

Through the skywalks, and their connections to The Shops of Grand Avenue and other downtown buildings, the condos planned for 731 N. Water would be more marketable, Oppermann said. Northwestern Mutual Life Insurance Co., 100 East's owner, is open to the idea, said Joseph Weirick, president of Polacheck Property Management Co., which operates 100 East.

"We think it would be a positive thing to expand the skywalk system downtown," Weirick said.

The 731 N. Water building needs help. A tour reveals crumbling ceiling tiles, a strong, moldy odor and gulls that have made the penthouse balcony their home. But there are also good views of the river through large windows, and the building's redevelopment potential is evident.

A residential development along the river side "has to be the best use of the property," Oppermann said.