Cermak Fresh Market at Freshwater Plaza

Sponsor: Wangard Partners, Inc.

Type of QALICB: Real Estate SPE Wangard Affiliate

Owner: Wangard Partners, Inc.

City and State: Milwaukee, WI

Contact Person: Jonathan Ward

Phone: 414.777.1200

Contact Email: [email protected]

Allocation Amount Requested: $17,000,000

Brief Description of QALICB:

Wangard Partners Inc. and its partners have proposed a new $48 million Cermak Fresh Market and mixed-use development on a former brownfield site in Milwaukee s Walker s Point neighborhood. The project will provide access to fresh food and neighborhood services and create up to 450 new jobs in the heart of Milwaukee s Hispanic community.  The project is located at the northeast corner of South 1st Street (WI -32) and East Greenfield Avenue in a severely distressed census tract.  Walker s Point has seen new investment in recent years and this project will act as an anchor to attract additional investment. It will serve as the gateway to the University of Wisconsin Milwaukee s School of Freshwater Science and the Inner Harbor Project (industrial park) taking place just to the east.  Wangard currently has the property for the project under contract and the City will provide Tax Increment Financing (TIF) to support the development.  The project has receiv  ed a let  ter of intent from Cermak and letters of support from the Hispanic Chamber of Commerce, Rockwell Automation (who employs 2,200 people next door) and other community groups. 
  
New Markets Tax Credits are being requested for the acquisition of the project property and the construction of only the first and third phases of the project. The first phase is a 42,000 SF Cermak Fresh Market for nearly $12 million and the third phase is an L-shaped, four-story building wrapping the corner with first-floor retail and housing above totaling $15 million which, combined with phase one, will total $27 million to be financed with NMTCs. Greater Wisconsin Opportunity Fund has agreed to commit $10 million in allocation. 
 
The second phase will be two, single-tenant buildings, with 3,100 SF and 3,500 SF respectively for $3 million, and the fourth phase will be a 45,750-square-foot office building and 226-stall parking structure on East Greenfield Avenue for $18 million.  All four phases together will comprise a total investment of nearly $48 million. 
 
Collaborative efforts with city officials, including the Alderman in the district and the Mayor, community groups, neighborhood associations and the Hispanic Chamber of Commerce of Wisconsin have been enacted to ensure the success of the project.  All of the aforementioned groups support the project.  Despite the property being zoned industrial and the City of Milwaukee initially desiring that the property be used for industrial purposes, the community requested that a grocery store be developed -- within a one-mile radius of the proposed site, there are no comparable grocery stores (most of the grocery stores available consist of mom-and-pop stores, typically less than 1,000 SF).  Given the extreme amount of community support, the City of Milwaukee has agreed that a new grocery store is an appropriate use of the property, but has required that phase three of the project be built simultaneously with phase one.  With this development, fresh, affordable and healthy foods will b  e made m
 ore accessible to the community.  
 
To facilitate construction of the grocery store, Wangard Partners, Inc. and its partners will sell a pad ready site to the owner and operator of Cermak Fresh Market, which will own 100% of the grocery store.  Cermak has signed a letter of intent and the agreement to facilitate this sale is under review by Cermak s attorney and comments are expected shortly, although no substantive comments are expected given previous written agreements between the parties.  Cermak Fresh Market is a Chicago based supermarket chain that specifically caters to Hispanic communities as well as a variety of other ethnicities (depending on location), including Mexican, Puerto Rican, Greek, Italian, Polish, Russian and other European and Latin American cultures. It boasts the best quality in hand-picked fresh produce, local and international groceries, superior meats from the Certified Angus Beef brand, a fresh fish selection, wholesome dairy, a fresh bakery and a large selection of both foreign and  domestic
  beverages.  With rapidly growing Hispanic population and immigrants from other regions, Cermak Fresh Market has grown to over 11 grocery stores, it has served millions of customers, and continues to expand throughout the Greater Chicago and Southeast Wisconsin areas. Besides the growing customer base and competitive prices, Cermak also attributes its success to its commitment to superior fresh foods and the utmost quality of customer service.  
 
A special purpose entity consisting of a Wangard affiliate (80%) and the grocer (20%) will own phase three of the project, although it will be managed by Wangard pursuant to its typical asset management and management agreements.  This phase will consist of approximately 16,500 square feet of retail space and approximately seventy-two micro units, studios and one- and two-bedroom apartments.  At least 20% of the units will have an affordable component.  While Wangard is seeking a variety of potential retailers to lease space, in order to ensure the success of the development and to serve the needs of its tenants, it is also seeking a healthcare tenant to provide health services to low-income persons, as there is a shortage of healthcare providers in the area.  Two to three heath care providers have confidentially expressed interest.  Additionally, while Wangard anticipates a near full lease up of phase three based on discussions with potential tenants, it is willing to master lease a portion of phase three to the extent necessary to accommodate tax opinions and New Markets Tax Credit regulations.
 
The anticipated community benefits are seen in the form of economic development, job creation and services for the community including a potential health user for low-income or underserved populations.  When all four phases of the project are complete, we estimate a total of 450 jobs to be created, which will in turn spur additional economic improvement within the community. Pre-development methodologies to benchmark these goals were based on Wangard s prior development experience and industry standards for job creation. As with almost all Wangard developments, the buildings will include sustainable features such as energy efficient windows and appliances along with low flow faucets and fixtures in phase three. Furthermore, the project will incorporate a storm water management system that will direct all storm water directly into Lake Michigan after being cleaned through filtering bio swales on site, which will relieve pressure on Milwaukee s stormwater tunnel system. 
 
Additionally, the project is a brownfield development. Wangard is in the process of conducting environmental evaluation and has applied for a brownfield grant and a brownfield loan for environmental clean-up.  Wangard has extensive experience administering both programs and recently successfully used the proceeds of a brownfield loan as a leverage source in a New Markets Tax Credit transaction.  Wangard s grant and loan applications have received an extremely positive reception from Wisconsin Economic Development Corporation who administers the brownfield grant and loan program and from, the City and EPA, although finalization of the terms remains. 
 
Finally, Wangard Partners is an Hispanic American owned business and is committed to hiring minority firms for the project work.  Wangard s commitment to work with emerging and minority contractors, low-income and local workforce and implementing workforce training programs will be outlined in its agreement with the city in securing Tax Incremental Financing, which is expected shortly.

But For Statement:

Without the receipt of NMTC this deal would not be possible. As stated above, New Markets Tax Credits are being requested for the acquisition of the project property and the construction of only the first and third phases of the project. The first phase is a 42,000 SF Cermak Fresh Market for nearly $12 million and the third phase is an L-shaped, four-story building wrapping the corner with first-floor retail and housing above totaling $15 million which, combined with phase one, will total $27 million to be financed with NMTCs. Greater Wisconsin Opportunity Fund has agreed to commit $10 million in allocation.
 
Without this additional funding of NMTC, the project would depend on a leveraged loan whose annual debt service could not be supported by the annual income created by the grocery store and mixed-use project. Currently as modeled the NOI for is $808,000 for the mixed-use building and $546,000 for the Cermak.  Without the NMTC contribution, the debt service coverage ratio on a loan that covers the amount of the NMTCs for the mixed-use building is 0.94 and for the grocery store is 0.84.  As such, the gap in NOI could not support a fully levered loan without the NMTC. Additionally, although we do anticipate receiving Tax Incremental Financing from the city along with a WEDC Brownfield grant, neither has been confirmed and both must still go through the appropriate approval processes. Even with these programs in place, the site still has significant site work to be completed along with environmental remediation that are not fully covered through this financial assistance.  

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