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Eschweiler Study by City Shows Major Discrepancies vs. Mandel Plan

While total project costs estimated by developer and independent consultant are nearly aligned, they are vastly different where they count — in the difference in cost of restoration of old buildings and the cost of new ones.

Always read the fine print.

A study commissioned by the city to analyze a developer's projected costs for a residential project on the historic Eschweiler Campus has now twice been presented publicly, and certainly scrutinized in private.

But the conclusion presented in the Springsted Report — agreeing that the costs of the project are “within the range of those provided by the Developer” — seems to conflict rather widely with the very numbers gathered to support that conclusion.

Data appended to the Springsted Report say it should be $1.7 million cheaper to restore the Eschweilers than Mandel Group says it would be, a difference of nearly 15 percent.

They also say that the proposed new construction would be $6.45 million, or 26 percent, more expensive than Mandel says.

City Attorney Alan Kesner said Monday that he had been over those figures and confirmed that they were accurate — although he said he was offering no interpretation of them as differing from Springsted’s conclusions.

Preservation turns into possible demolition

Springsted was asked to look at two options presented unofficially by Mandel Group, the winner of a request for proposals from the property's new owner, the UWM Real Estate Foundation.

Mandel had proposed to UWM that it could build a residential apartment development of 168 new units while also preserving and restoring the Eschweilers. But Mandel came back 14 months later to the Wauwatosa Historic Preservation Commission and said that upon closer examination, that plan was not economically feasible.

At best, Mandel said, it could get only 41 apartment units out of the four main buildings of the historic campus, those designed by Alexander Eschweiler.

Saying that it would cost more than $11 million, plus $4 million in unidentified “soft costs,” to reconfigure and restore the old buildings into just 41 units —putting the per-unit cost at $365,000 — Mandel said he would lose money on the proposition. The new construction, in Mandel's estimate, would cost only about $150,000 per unit to build.

The only option that would provide reasonable profitability, Mandel suggested, was to demolish three of the four buildings and restore only the main Administration Building. Even so, principal Barry Mandel and his representatives said in August, there would be a financing gap of $2.5 million that they would need the city to close with TIF funds — essentially, the cost to restore the public portion of that building.

This "memorial" plan, as Mandel called it, would also have added more new construction to the development, growing from 168 units to 192 units, placing some on the footprint of one of the demolished Eschweilers.

Independent analysis sought

After preservationists bridled at the idea of tearing down three of the buildings and challenged Mandel's assumptions, the city hired Springsted to do an independent analysis.

When Springsted's 18-page report came back to the city, it summarized that Mandel's figures were approximately accurate. It also supported the conclusion that reconfiguring and restoring the old buildings as apartments was economically infeasible for Mandel, and would leave a $6.5 million financing gap.

It also supported the finding of a $2.5 million financing gap for the option of tearing down all but the Administration building.

In fact, as pointed out at a January meeting of the Common Council Committee of the Whole by Springsted vice president Mikaela Huot, the total project building costs determined by its report were higher than Mandel's.

Read the fine print

But Springsted really was asked to tell Wauwatosa whether Mandel's projection on the restoration of the historic buildings was accurate, and therefore infeasible, because that was considered the main point of concern. The summary says yes, but the actual data suggests otherwise.

Behind Springsted's 18-page written report lies an appendix in the form of a spreadsheet, squeezed to fit on an 8½-by-11-inch sheet.

The printed resolution of the document is so small it is next to impossible to read, even with a magnifying glass. During the Committee of the Whole meeting on Jan. 22, Ald. Jill Organ tried to get into some of the figures with a little success, but she admitted her inability to make head or tail of some of the numbers.

Organ could and did read that it looked to her like the Springsted report concluded that it was about $1.7 million cheaper to restore the Eschweilers than Mandel had suggested. But Organ could get no further in the hard-to-read spreadsheet and did not pursue the matter.

Wauwatosa Patch, having already published a story that reflected Springsted's conclusion confirming Mandel's numbers, decided to take a closer look based on Organ's concern.

Sprinsted vice president Mikaela Huot did not return repeated phone calls requesting comment.

Restoration costs

Springsted's final figure for the restoration was $9.9 million compared to Mandel's $11.6 million. As already noted, that's a 15 percent difference of $1.7 million.

Springsted’s report also added a “contingency cost,” standard industry practice but something not included in the Mandel report. Remove that, and cost comes down to $9.3 million.

Mandel did not include its unspecified $4 million in “soft costs” to Springsted for its analysis, and without that figure, the per-unit cost of restoring the historic buildings as apartments comes down to $282,000.

Using the same math, if the Springsted numbers are correct, Mandel could actually restore and reconfigure the Eschweilers into 41 apartment units not at $365,000 per unit, or $282,000 per unit, but at less than $227,000 per unit.

New building costs

That historic building restoration cost has been the figure in everybody's crosshairs, but the real shocker in Springsted’s report is the divergence from Mandel’s estimate of the cost of its new apartment buildings.

Springsted shows new building costs — with the contingency included— to be about $30.4 million. The Mandel estimate is just $23.9 million.

That suggests the per-unit cost to build 168 units is not less than $150,000, as Mandel suggested, but just over $180,000 each.

Doing the math, then, Mandel’s report contends that building new would cost almost $200,000 less per unit than restoring. The data appended to the city-commissioned Springsted report puts that difference as close as $45,000.

Where does Wauwatosa go with this report?

Nearly every city official involved so far has expressed a love and devotion to the Eschweilers in heart and soul, but most have so bemoaned the cost of preserving them that demolition of most of the group has become almost a foregone conclusion.

But if the city's own commissioned study is correct in its fine points – the crunched numbers, provided by independent experts – then those costs of restoration might not be so unbearable as had been thought.

Of most concern would be proceeding with any demolition plan based on a belief that preserving the buildings is “economically infeasible.”

But it must also be of some concern that the city is being asked to fill one or another of two projected financing gaps with public funds that would be intended to preserve historic structures — but might actually, in part, be subsidizing new construction.

Namaste February 06, 2013 at 02:52 AM
$1.6 million to convert the power plant for use as an indoor swimming pool was an included cost for renovating the Eschweiler Buildings. The power plant was the first building that the Mandel Group was going to demolish per their presentation to the Historic Preservation Commission. The alders of Tosa need to slow down and get all the "facts" straight before they make decisions based on the fact that UWM REF owes the County another payment in 2014.
Christine McLaughlin February 06, 2013 at 02:16 PM
If by power plant you mean the utility building behind the main building, that's always intrigued me. It's the easiest and cheapest building to restore. Though I'll admit, I see it as a brew pub with lovely outdoor dining, not a swimming pool!
Namaste February 06, 2013 at 03:01 PM
Yes, they refer to it as the power plant or maintenance building. I think that little building has a lot of potential... a microbrewery with a beer garden on the roof would be a creative use of that bldg with its wonderful views.
Katherine Collins February 07, 2013 at 03:02 AM
I'm a bit confused. Why is the City of Wauwatosa responsible for their profitability on this project. They're the ones who purchased the property with the known criteria tied to the deal. Let them out of this deal they have breached by not being able to live up to what they said they were going to do and allow the city the opportunity to reclaim this last bit of greenspace for Wauwatosa. Many other honest businesses would have jumped at this land if the criteria UWM Foundation is now laying out was even an option when it was up for sale. They made poor decisions, or knew that it couldn't be done and knew they would be able to squirm their way into having their cake and eating it too. I say run then out of Wauwatosa.
Katherine Collins February 07, 2013 at 03:06 AM
It's time for the citizens of Wauwatosa to get together without city council people and file suit against these 'officials' for misappropriation of funds.

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