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Consideration for approval of a term sheet for tax incremental financing with the Irgens Corporation for a multi-family development within the Research Park
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Submitted by:
Mark Hammond and John Ruggini
Department:
Development and Finance
A. Issue
Irgens, through its affiliate Research Apartment Development Partners, LLC, has submitted an application requesting Tax Incremental Financing (TIF) to support the development of a 204-unit market-rate apartment complex at the northeast corner of Wisconsin Avenue and N. Mayfair Road within the Milwaukee County Research Park within the newly created Tax Increment District 16.
B. Background/Options
Project Overview
The proposed development consists of a four-story multi-family apartment complex featuring 204 market-rate units with approximately 205,600 gross square feet and 167,099 net leasable square feet. The project site encompasses 3.667 acres and will include a mix of studio, 1-bedroom, 2-bedroom, and 3-bedroom units designed to meet current market demands.
The development will provide 270 parking stalls, including 195 below-grade structured parking stalls for resident use and 75 surface parking stalls for residents and visitors. Amenities will include a fitness center, outdoor courtyard space, club room, pet wash and exercise area, and electric car charging stations.
Construction is anticipated to begin in the second quarter of 2026 with completion expected by December 2027. The total project cost is estimated at $59,800,000.
Extraordinary Project Costs
The developer has identified unique and extraordinary costs associated with developing within the Milwaukee County Research Park that create a financing gap. These extraordinary costs include structured and surface parking requirements, sanitary sewer extension, electrical car charging infrastructure, soil stabilization, affordable housing fund contributions, and union premium costs mandated by MCRP requirements. The developer is requesting gap financing through a TIF district to address these above-market development costs.
Current Market Conditions
The multifamily housing development market is currently facing significant headwinds that make projects like this particularly challenging to finance and execute. Rising construction costs, elevated interest rates, increased material expenses, and labor shortages have substantially impacted development feasibility across the region. These market conditions have resulted in the delay or cancellation of numerous residential projects throughout southeastern Wisconsin. The confluence of these factors has created a financing environment where even well-conceived projects in strong locations struggle to achieve financial feasibility without some form of public-private partnership.
Despite these challenges, market analysis indicates strong demand for quality rental housing in Wauwatosa, particularly in locations with good accessibility and amenities. The proposed rental rates for this development are at or above industry averages, demonstrating market confidence in the location and project quality.
Economic Impact
During the 18-month construction period, the project is expected to employ approximately 140 skilled tradespeople. Upon completion, the development will create and sustain a minimum of four permanent positions for ongoing operations and management.
The project will generate significant property tax increment that will be available to support not only the development itself but also future infrastructure and improvements within the Research Park and surrounding area.
Affordable Housing Contribution
In lieu of incorporating affordable units within the project, the developer has committed to making a one-time contribution of $222,000 to the City of Wauwatosa Affordable Housing Fund. This contribution will help the City advance its affordable housing objectives while allowing the project to maintain its market-rate financial structure necessary for feasibility.
Research Park Master Planning Alignment
This project represents an important step in the continued activation and development of the Milwaukee County Research Park, consistent with the current joint master planning effort being undertaken by the City and Irgens. Although not yet adopted, the master plan envisions a vibrant mixed-use district that includes residential, office, retail, and medical uses. This multi-family development will help establish the residential component envisioned in that plan and will contribute to creating the critical mass necessary for the Research Park to achieve its full potential.
Additionally, the tax increment generated by this development will create surplus revenue that can be leveraged to help offset some of the likely infrastructure costs associated with implementing the broader master plan vision. This creates a sustainable funding mechanism to support the transformative investments needed to fully realize the Research Park's potential as a key economic development asset for the community.
Financial Analysis
An independent financial feasibility analysis was conducted by Robert W. Baird & Co. to evaluate the project's economic viability and the appropriateness of the requested TIF assistance. Baird's analysis examined rental rate projections, construction costs, capitalization rates, cash-on-cash returns, and internal rates of return.
Key findings from the analysis include:
- Proposed rental rates are at or above industry averages for comparable properties
- Construction costs per square foot are within industry standards
- Project financial metrics fall within acceptable ranges for developments of this type
- The requested TIF structure utilizing a Pay-As-You-Go (PAYGO) method is the recommended approach for municipal TIF incentives
C. Strategic Plan (Area of Focus)
This project aligns with multiple areas of the City's Strategic Plan:
Economic Development: The project represents significant private investment in the community, supports job creation during construction and ongoing operations, and contributes to the tax base while activating underutilized land within the Research Park.
Housing: The development adds 204 market-rate housing units to the community's housing stock, helping to address regional housing demand and providing quality rental options for residents who wish to live in Wauwatosa.
Placemaking: The project contributes to the evolution of the Research Park into a mixed-use destination and helps create the critical mass necessary for successful placemaking in this area of the city.
Sustainability: The inclusion of electric vehicle charging stations and structured parking that reduces land consumption aligns with the City's sustainability objectives.
D. Fiscal Impact
To be discussed in closed session.
E. Recommendation
Staff recommends approval under the terms provided in the Baird analysis and sending this to the Common Council for consideration.
This recommendation is based on the following considerations:
- The project addresses a demonstrated market need for quality rental housing in a challenging development environment
- Independent financial analysis confirms the project's viability and appropriateness of the requested assistance
- The affordable housing fund contribution of $222,000 advances important community objectives
- The development aligns with the Research Park master planning vision and will help catalyze additional investment
- The project will generate surplus tax increment to support future infrastructure improvements needed for full Research Park build-out
- The economic impact during construction and ongoing operations provides community benefit
- The PAYGO structure protects the City's financial interests by ensuring payment only occurs as increment is actually generated
recommendation
The Committee may convene into closed session regarding this item pursuant to Wis. Stat. §19.85 (1)(e), to deliberate or negotiate the purchasing of public properties, the investing of public funds, or conducting other specified public business, whenever competitive or bargaining reasons require a closed session. The Committee may reconvene into open session to consider the balance of the agenda.