Historic Germania Building brings market-rate, affordable apartments to downtown Milwaukee

Tom Daykin
Milwaukee Journal Sentinel

Perhaps the notion of people with a wide variety of incomes living in the same apartment building shouldn't be considered exotic.

After all, a typical office has people with salaries ranging from entry-level to executive. And the redevelopment of downtown Milwaukee's Germania Building is creating apartments aimed at people who work nearby.

The building's 90 units are split roughly 50-50 between those rented at market rates, with the rest set aside at lower rents for moderate-income residents.

"Statistically, it's very unusual," said Kirk McClure, a University of Kansas professor who studies affordable housing.

The $22 million development also brings the restoration of a well-known historic building.

"The Germania is a unique product," said Kalan Haywood, president of Vangard Group LLC.

Haywood's firm joined Cardinal Capital Management Inc. and Endeavour Corp. in converting the eight-story building, 135 W. Wells St., from offices to apartments.

The Germania also will feature around 7,000 square feet of street-level commercial space. The developers aren't actively marketing that space yet because the nearby Wells St. bridge will undergo a six-month reconstruction starting next March.

The Germania's one- and two-bedroom apartments have market-rate rents ranging from $1,225 to $1,800 a month. The market-rate units are larger than the affordable units, but have the same furnishings.

The affordable apartments have below-market monthly rents of around $725 to $875. Those units are set aside for people earning no higher than 60% of the Milwaukee area's median income.

Many of those renters will likely be earning $30,000 to $35,000 annually, said Erich Schwenker, Cardinal Capital president.

That could include teachers, city employees, waiters, hotel staff and people who work at Milwaukee Repertory Theater, Schwenker said.

Some of those jobs are tied to new downtown developments, including hotels, restaurants and the future Milwaukee Bucks arena, Haywood said.

The Germania also is the latest in a series of buildings on or near W. Wisconsin Ave. that have been converted from underused offices to apartments in recent years.

They include The Buckler, with 207 units at 401 W. Michigan St.; the 105-unit MKE Lofts Downtown, 152 W. Wisconsin Ave.; and the 49-unit 700 Lofts, 700 W. Michigan St.

Work begins this summer on creating 50 apartments at the Century Building, 808 N. Old World Third St., and 144 apartments at 735 W. Wisconsin Ave.

"The Germania didn't happen in a vacuum," Haywood said.

The market-rate units will likely be rented by younger professionals.

The building's residents, whether they rent market-rate or affordable units, could be at the same workplace, Schwenker said.

"They're just working at different economic levels," he said.

Tammy Bartley, an administrative assistant at Engberg Anderson Architects, and her son will move from the Riverwest neighborhood to one of the Germania's affordable units.

Bartley was attracted by the building's amenities, and its location within a mile of Engberg Anderson's offices in the Historic Third Ward.

"I can actually walk to work," she said. 

So far, 40% of the Germania's apartments have been leased. Schwenker expects all  the units to be rented by late November. 

It's unusual for such mixed-income projects to lease out their market-rate units so quickly, said McClure, an urban planning professor.

People who can afford the market-rate apartments often hesitate to live in mixed-income buildings if the share of affordable units rises above 20%, McClure said.

"If you are rich, you have choices," McClure said.

The exceptions to that rule are mixed-income developments in such cities as Seattle, Boston, San Francisco and Washington, D.C., that have strong demand for urban housing, McClure said.

In other cities, including Milwaukee, such a development must be "an exceptional building in an exceptional location" in order to be successful, he said. 

The Germania's developers believe the building's central downtown location, as well as its amenities and historic character, make it a good investment.

The apartments feature large windows, some offering views of downtown's skyline; hardwood floors, stainless steel kitchen appliances and washers and dryers. 

The Germania's amenities include a club room, fitness center and concierge service. Parking is offered at a surface lot at the northwest corner of W. Wells and N. Old World 3rd streets.

Milwaukee-area developers that receive federal affordable housing tax credits generally set aside at least 85% of those units at below-market rents. 

That was Haywood's initial plan for the Germania Building, which was unveiled in January 2014.

The Wisconsin Housing and Economic Development Authority in October 2014 awarded tax credits to Vangard.

Vangard planned to develop 74 two- and three-bedroom apartments. All but a handful of the units were to be provided to families at below-market rents.

That project ran into delays.

The Germania was a half-empty office building. But it still had tenants that needed to have their leases bought out.

Meanwhile, as the developers did additional evaluations of the property, they found much higher cost estimates for such items as installing new sprinkler systems and upgrading the elevators.

"This is a very expensive rehab," Schwenker said. 

Finally, Haywood and Schwenker liked the idea of developing apartments with a wider range of incomes, including more market-rate units.

"If the building is all low and moderate income," Schwenker said, "is that really integrating people?"

In January 2016, one month after the last office tenants moved out, the developers unveiled a new plan to develop 90 apartments — including 44 affordable units.

The new financing package greatly reduced its use of federal affordable housing tax credits.

That allowed the developers to lower the share of affordable units from an initial level of over 90% to just under 50%.

A $10.5 million loan from the Wisconsin Housing and Economic Development Authority became the main funding source, according to a city report.

Financing for the development included state and federal historic preservation tax credits.

The project also received $1.5 million in city cash.

Those funds will be paid through property tax rebates over roughly 20 years. The redeveloped building's assessed value is expected to increase from $3 million to $7.5 million, according to the Department of City Development. 

Ald. Robert Bauman, whose district includes downtown, opposed city financing for the Germania. He called it a bailout for the developers.

However, the Common Council and Mayor Tom Barrett in April 2016 approved the financing package. The building's renovations began shortly thereafter.

The project includes restoring the building's four copper domes, as well as retaining its marble lobby and stairways.

The pentagon-shaped Germania was built in 1896. It housed Germania Publishing Co., owned by George Brumder.

"The firm was founded in 1873 to accommodate the needs and demands of Milwaukee's large German population for books, newspapers and magazines in their own language," according to the Wisconsin Historical Society.

The German language press declined in the 1920s. By the 1940s, the Brumder estate had sold the building, according to the society.

It continued to serve as an office building for decades.

The building's prominent role in the growth of Milwaukee's German community makes it an especially important property to preserve, Haywood said.

"This is in the history books of Milwaukee," he said.

Tom Daykin can be reached attdaykin@jrn.com