Construction on the first phase of Union Corners, the ambitious 15-acre redevelopment project on Madison's east side, has ground to a halt due to the soft condominium market.
"It's a classic case of timing," says developer Todd McGrath. "When we started four years ago, the housing market was strong. But as we went on costs went up, interest rates went up, and the demand side went down."
McGrath says that when his partners looked at the risks, "there was a unanimous feeling that we should wait at least a year before we go ahead with the housing."
Ald. Marsha Rummel is disappointed to hear the news: "It's unfortunate because Union Corners is a very exciting project. It's a poster child for how to create a new neighborhood."
The site, on the corner of East Washington Avenue and Milwaukee Street, was once home to a Kohl's food store and the old Rayovac battery factory on Winnebago Street. The project was the subject of a lengthy neighborhood planning process and emerged with strong City Hall support, including a phased $4.9 million subsidy in the form of tax increment financing for the owner-occupied housing.
Union Corner's $60 million first phase -- now on hold -- included five buildings with 63 apartments, 140 condominiums and 100,000 square feet of commercial space.
After the site was cleared, ground was supposed to be broken for the housing this spring. But that never happened. Ongoing construction on the site is for the East Washington Avenue reconstruction, not Union Corners.
McGrath says the project will now try to move ahead with developing the commercial space. "We're actively looking for a partner, a developer who would be interested in taking on the commercial space while we focus on the residential," he says.
"We understand why they made the decision, but it was disappointing. It would have been a good use for that corner," he says, referencing the prime commercial location at East Washington Avenue and Milwaukee Street.
McGrath's plans to change focus are complicated by the fact that the city subsidy is tied to the condo construction, not the commercial development. He's hopeful the TIF agreement can be restructured.
"That makes some sense," says Ald. Brenda Konkel. "I don't think anybody wants to see Union Corners fail. There's a lot of support for it.
"But however the TIF deal is rearranged," she adds, "it needs to be fair for the city."
A few years ago, neighborhood activists were projecting a bonanza of TIF revenue that could be used for public purposes like the construction of the long delayed Central Park.
But the big private sector projects expected to generate the redevelopment money have failed to launch. Curt Brink's ambitious if not far-fetched plans for the Mautz Paint property never got off the drawing boards, while Gary Gorman, in a dispute over TIF, pulled the plug on the $58 million Avenue 800 project slated for the Don Miller property on East Washington Avenue.
The suspension of Union Corners is just the latest example of how chilled the once hot downtown development market has become. Earlier, Randy Alexander temporarily shut down his Capitol West construction to retool his condo plans (and lower his prices) for the softer residential market.
Last month, Alexander went a step further, replacing plans for an 84-unit condominium tower at 333 W. Washington Ave. with a proposed 151-room Hyatt Place Hotel.