Brett McPherson spent most of the last four years selling condos, tracking sales, debriefing buyers and sellers, and creating a database on condos in five Downtown ZIP codes. Now McPherson has a Web site, milwaukeecondoguru.com, that is spilling the beans on which Downtown developments are appreciating and which aren’t.
Developers would rather see Milwaukee’s self-appointed “Condo Guru” drawn and quartered than quoted here. “McPherson doesn’t know what he’s talking about,” says Rick Barrett, who is developing The Moderne high-rise in the Park East corridor.
But even city of Milwaukee Commissioner of Assessments Mary Reavey concedes McPherson’s central point, that some condos have depreciated. Her office has already cut some assessments by 5 percent, she says.
McPherson, a broker for nine years (now with North Shore Homes, Inc.), says there’s a glut in the market: 927 condos are listed for sale by MLS, or “1.5 years of inventory,” he says. That’s bad enough, but of the 602 Downtown condos sold between mid-2007 and mid-2008, only 99 fetched more than $400,000. And today, 50 percent of the condos on the market are half-a-million dollars or more. ThatÕs a staggering 4 1/2-year inventory.
As more condos have come on market, it’s raised the bar on quality and amenities. McPherson tracked resales of individual units and found two areas appreciated most what he calls “Milwaukee’s Gold Coasts.” The first, located along North Prospect Avenue, is home to high-end condos like the Cudahy and Barry MandelÕs University Club Tower. The other hot spot is along the Milwaukee River in the Third Ward.
There, he says, Peter Renner’s developments outperformed the others. McPherson’s spreadsheets show that the The Harborfront, Hansen’s Landing and The Waterfront condos averaged 14 percent appreciation when resold. Larger units did even better. McPherson credits Renner’s soundproofing, spacious decks and reasonable prices for units that come standard with high-quality finishes like thick granite countertops, marble baths, custom cabinets and maple millwork. In a market where condo prices run from $150 to more than $400 per square foot, units in Renner’s latest project The BreakWater, which is under construction on Franklin Avenue at the northern end of the first Gold Coast Ð “sell for $225 a square foot for some of the best quality in the city,” McPherson says. “Renner’s all ego, but his layouts make sense and they’re beautifully finished.” The BreakWater is 65 percent presold.
Meanwhile, on the second Gold Coast, condos in Mandel’s Marine Terminal Lofts that face the river are appreciating in value, while those facing the city are holding their own. But “the cost-conscious” construction of Stefaniak Group’s Water Street Lofts Phase I and II has combined with “a terrible reputation for noise level” to erode resale values there. “They’re depreciating,” McPherson says. “People look at the trim and they say, ‘This is garbage.’ ” Broker Jean Stefaniak, who sells the units, admits sellers have had difficulty competing with newly constructed condos.
Values are also going south at Mandel’s Trostel Square. Last October, one Trostel condo sold for a $45,000 loss; another sold in May at a $62,000 loss. “If we get a serious recession, does that ‘developing’ area continue to redevelop? Or does it slip back?” McPherson asks. Mandel Chief Operating Officer Robert Monnat says, “It’s been disappointing to see that entire Beerline neighborhood not appreciate as much as other areas of the city ƒ but on the other side, people can get a lot of value for their money.”
Then there’s Gordon Knoll, a nice project in the wrong spot, McPherson says. “A Riverwest address never helps, not with the shootings and it’s right next to a tower of subsidized housing. Now that there’s plenty of product, buyers are fussier.” A broker for the project did not return our call.
Also a challenge: the apartment-to-condo conversions at The Blatz and Landmark on the Lake. Here, developers drastically cut prices. Upgrades that once cost $20,000 extra were later included in the base price, McPherson points out.
The economy has also affected buyers. Two years ago, many wanted a little weekend place in the city. “The idea of having a pied-a-terre Downtown and a second home in the country or in Florida or Arizona doesn’t exist anymore,” McPherson says. “Now, when people talk about the urban lifestyle, they really are talking about living there full-time, and that means they need the garage, guest bedroom, office and storage space to go with it.” That’s boosted the resale value of three-bedroom condos. Resales of Renner’s largest 2005 units showed increases of up to 30 percent over their original purchase price.
But even larger units could be a hard sell on the high end, McPherson says. “Look at The Moderne. They’re trying to market a third of them for more than $2 million, some as high as $3 million. That project will never fly.” But developer Barrett says, “Our units have only been on the market for eight months and we’ve already sold 16, and all but one was over $500,000.”
McPherson also says The Residences on Water “are all wildly high-end without a view. This is not Chicago. How many homes in the Milwaukee metro area are assessed at $2 million? And of those people in Mequon, Richfield and Oconomowoc, how many want to move Downtown?” Sales manager Lisa Aldrich counters that her units start at $234,000 and there’s only one at $2.3 million. The project also includes a hotel in its lower levels, which allows for some built-in advantages.
“We’ve had a lot of interest because of the extra amenities we’ll provide: valet parking, a concierge, free hot breakfast every day and a complimentary reception three nights a week. It’s a new concept to Milwaukee, but in other cities, those amenities have added $100 a square foot.”
Time will tell who is right. Meanwhile, McPherson retreats not to an urbane high-rise, but to a 100-year-old Victorian home he’s refurbished on the city’s East Side. No condo for the condo guru, it seems.
