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Rash of Hotel Proposals for Downtown Milwaukee Seeking City Funds Causes Concern with
 Marcus Corp., the Owner of Three Downtown Hotels - InterContinental Milwaukee Hotel,
  Hilton Milwaukee City Center and the Pfister Hotel
By Tom Daykin, Milwaukee Journal SentinelMcClatchy-Tribune Business News

Mar. 14, 2007  -A rash of development proposals would add 1,000 high-end hotel rooms to the roughly 2,000 already on the market -- if developers were to win financial backing from the city.

Those public financing plans have drawn criticism from executives at Marcus Corp., downtown's largest hotel owner as well as concern from Mayor Tom Barrett.

"The question there is, how much can the market absorb? All of that comes into play when you're talking about the issue of public support," Barrett said Tuesday.

The answer will likely come this spring. The Department of City Development will evaluate pending downtown development plans, including several hotel proposals, that are seeking city financing, Barrett said.

That "big picture" study, to be completed by May 1, will consider the effects of new developments on existing businesses and projects, such as The Shops of Grand Avenue and redevelopment of the former Pabst brewery. That will help city officials better determine which proposals should receive financial help, Barrett said.

The proposals include office buildings and retail space. But the profusion of downtown hotel proposals seeking city funds is the main factor driving the study, Barrett said.

Rebuffed by city officials

Among the developments seeking city financial help is Park East Square, proposed by Chicago-based RSC & Associates.

Park East Square's $77 million first phase would include 126 luxury apartments, a 148-room hotel and 80,000 square feet of retail and office space. It would be on 2 acres, bordered by N. Milwaukee, N. Jefferson and E. Lyon streets and E. Ogden Ave.

RSC owner Richard Curto has assembled $14 million in equity financing and is arranging for a $54 million construction loan. Curto is seeking $9 million from the city, but has been rebuffed by Department of City Development officials.

Without those public funds, Curto said, he will shrink the project. He said the city funds would pay for improvements tied to the retail and office portions of Park East Square and would not subsidize the hotel.

However, Curto's proposal doesn't fit the city's master plan for the Park East area, which envisions a residential development, with a small amount of retail space, at the Milwaukee St. site, said Joel Brennan, of the Department of City Development. Brennan said the housing development envisioned by the plan can be done without city funding.

Other downtown development proposals seeking city financial help include local developer Doug Weas' plans for a 150-room Renaissance ClubSport by Marriott. The hotel is part of a mixed-use project that Weas hopes to build at the southeast corner of N. Broadway and E. St. Paul Ave.

Ald. Mike D'Amato, chairman of the Common Council's Zoning, Neighborhoods and Development Committee, said he thinks the downtown study is designed to hold off Curto's request for city aid.

D'Amato said he supports the study, but said "it should not act as a moratorium for projects between now and May 1." The city could gain higher property tax revenue by helping finance Park East Square, rather than settling for a smaller project at that site, D'Amato said.

Slicing the pie thinner

The city study isn't being done in reaction to Curto's proposal, Brennan said.

Brennan also said the study wasn't launched because of concerns raised by Greg Marcus, executive vice president of Marcus Corp., which operates three downtown hotels: InterContinental Milwaukee Hotel, Hilton Milwaukee City Center and the Pfister Hotel.

Marcus, in a March 6 letter to Barrett, said efforts to "subsidize construction of hotel rooms without first stimulating demand for those rooms" will "simply siphon off demand from existing (privately financed) hotel rooms."

"They're just dividing the pie into thinner slices," Marcus said Tuesday.

There are downtown hotel proposals that haven't yet sought city financing. They include two hotel plans from local developer Robert Ruvin and his partner, Dallas-based Gatehouse Capital Corp.

Ruvin and Gatehouse last week announced plans for 120-room Aloft Hotel. It will be part of mixed-use development that will include the new offices for Cramer-Krasselt ad agency, north of W. Juneau Ave. and east of N. Old World Third St. Just west of that site, Ruvin and Gatehouse plan to build a 20-story condominium and commercial development, including a 180-room Kimpton Hotel.

Meanwhile, a mixed-use development that includes a 128-room Staybridge Suites extended stay hotel is under construction at the southeast corner of N. Water St. and E. Juneau Ave. That project, led by Development Opportunity Corp., of Fort Myers, Fla., is not receiving city financial help.

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Copyright (c) 2007, Milwaukee Journal Sentinel

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