A Tale of Two Sides of the Street

Four years ago, the address West Burleigh Street at Highway 45 glistened with promise as a developer's diamond in the rough.

Swathes of land covered by asphalt, concrete, car dealer showrooms, mechanic garages and warehouses lured real estate investors to seal deals on acres that sold for slightly more than $200,000 to up to $1.32 million apiece in 2007.

The land's allure: high visibility and easy access from Highway 45 within a stone's throw of the premier Mayfair Mall shopping corridor.

On the north side of West Burleigh, a site best known as the Burleigh Triangle, the Chicago-based HSA Commercial Real Estate Inc. snagged the best price-per-acre deal. Within one week in the summer of 2007, HSA closed on two separate real estate deals, securing 62.3 acres for a total of $15.2 million.

The per acre price paid by HSA: $219,057 in a 38.62-acre land deal, and $284,450 in a 23.73-acre deal.

On the south side of the street, land prices paid by a local developer went far north.

Developer Jeffrey P. Klement, of the Franklin-based Icon Development, in 2007 paid nearly five times the per acre price paid by HSA for the former Schlossman's Dodge City and Frascona Buick car dealerships.

Klement, as majority owner of One 14 Place, LLC, paid $1.1 million per acre for Schlossman's 3.47 acres in January 2007. Six months later, he claimed the 2.31-acre former Frascona dealership site for $1.32 million per acre.

Total sale price for the car dealer lots combined: $6.91 million for a total of 5.78 acres.

Four years later, those high-priced car lot acres are headed for the sale block, while HSA moves cautiously forward with scaled down development plans for its warehouse site across the street.

Although the West Burleigh at Highway 45 address retains value, the ambitious visions of 2007 crumbled along with the economy.

HSA is with a healed version of early, elaborate plans for its site, which included a dense, mixed-use development that heavily favored higher value office and residential over retail. Rather than tearing down and building new, HSA now plans to to create a retail complex that, in its first phase, would bring best-in-class tenants into 250,000 square feet of renovated space on the western edge of the land, facing Highway 45.

The 5.78 acres across the street, meanwhile, will be on the sale block in two weeks, to be marketed by a court-appointed receiver for the properties.

Icon Development's plans for the car dealer lots in 2007 were ambitious. The proposal called for a nearly $130 million development that would include an 18-story condominium tower with units that would sell from $375,000 to $1 million, a medical office complex and a 240-room hotel with room rates of more than $150 a night.

Thirteen months after those plans earned preliminary approval from the city, the addresses 11221 W. Burleigh and 11333 W. Burleigh were the subjects of an April 2009 foreclosure suit filed by Harris, then Amcore Bank, against One 14 Place and Klement, its majority owner. The case was converted to a Chapter 128 receivership earlier this year, and Milwaukee attorney Michael Polsky, a shareholder with Beck, Chaet, Bamberger & Polsky, S.C., was appointed receiver to sell the properties.

Polsky said he will contract with the Chicago-based Atlas Partners, LLC, a national real estate consulting firm, to market and sell the parcels. Polsky said the properties will be marketed without a listing price, and will require court approval for a recommended sale to the highest and best bidder.

Harris was awarded a $5.95 million judgment in its foreclosure suit against One 14 Place, although the final judgment amount is fluid as daily interest rates, legal fees and other costs to maintain the property mount, according to Patricia Gibeault, attorney for Harris and a partner in the Madison law firm Axley Brynelson, LLP.

City records show no real estate taxes have been paid on the Klement-owned lots since the 2007 purchases. The resulting city tax tab for 2007 through 2010: a back tax total of nearly $396,500, with interest and penalties of $123,600, for a total city tax bill of $520,100.

Klement did try to get out of his One 14 Place investments on West Burleigh. The lots went on the market in October 2008, at an asking price of $8.9 million. A month before the foreclosure suit was filed, in March 2009, the asking price dropped to $7.3 million.

Klement filed for bankruptcy in 2010, two years after a series of foreclosure suits against him began streaming into the Milwaukee County circuit courts.

Neither Gibeault nor Polsky expect that Harris will fully recover its costs related to the One 14 Place loans. 

"Real estate values in the current market are significantly different than what they were a few years ago, which creates a lot of different opportunities" in marketing and selling the property, Polsky said. "At this point, I'm optimistic, but I can't predict the ultimate sale price."

Polsky expects to secure an offer within four months, which then must be approved by the bank and the court. Gibeault said the bank has the right to reject offers, but the final sale decision is up to the court.

Once the properties are sold, Gibeault said, "after closing costs, the next dollars go to the bank." 

Given the stagnant economy and a lack of comparable commercial land sales within the area of West Burleigh and Highway 45, it is difficult to pinpoint the fair market value for those 5.78 acres, according to Steve Miner, city assessor.

The city’s current assessment rate is 103 percent of fair market value, which puts the combined 2010 assessed value for the car dealer lots at about $3.92 million, or $3 million less than the combined 2007 sale price. Recent real estate sales within the city, however, trend toward prices last seen in 2005, Miner said.

"They bought those (West Burleigh lots) up at the peak of the market ... with all the headiness of that time," Miner said. "Will it sell for that same amount? I don't know."