By Ryan Whisner
Through approval of a master development and professional services agreement, the Fort Atkinson City Council committed Tuesday to pay for professional services and deliverables from Hoffman Development Group and CedarPrise, LLC., in anticipation of future development of the Banker Road neighborhood development.
As approved, total cost of the city’s initial commitment is not to exceed $35,000. The city has contracted with the group for a 12-month term.
The first phase of development on the site is expected to be four to five buildings on the southern portion of the site that will include 120 to 140 multi-family market rate units. Based on the projected timeline, construction is anticipated to start in the third quarter of 2023.
“What every city is telling us is there are so many businesses looking to expand or relocate to our community, but they can’t because there’s not quality, affordable housing,” said Steven Roark, co-founder, and manager of Hoffman Development Group.
As for which comes first, the businesses or the housing? Roark said his company has found it’s the housing first to entice the businesses to relocate.
He defined the role of the city as providing service to the community through economic development to ensure there is quality, affordable housing and infrastructure in place. For its role, the Hoffman Development Group invests its services in the pre-development portion of projects.
“We look to get reimbursed at the close of financing and then paid for our services going forward,” Roark said. “Throughout this whole pre-development process, we are pre-underwriting the financing internally so we continue on a path where we’re deciding (to) go or no go at every single point where there could be a critical decision.”
Upon reaching a point where the project is fully entitled, meaning all governmental and regulatory approvals for a project to be built on a particular parcel has been met, financing is closed.
“We are not building it for ourselves,” he said. “At a point in time, when the project is fully entitled and shovel ready, a new ownership group will step into our shoes, we will assign them our development agreement that we have with the city of Fort Atkinson, and they will hire us then to build the project for them.”
The new owners will be vetted by Hoffman Development Group, financing partners and the city before the development agreement is signed over. As for prospects, Roark said potential investors could come from anywhere from Chicago to Door County and beyond.
“We have groups in Chicago that we’re working with already,” he said. “We do have groups in Wisconsin that have said you know, when you get fully entitled and shovel ready, give us a call.” Also, Roark noted that because of his own 25-year history on Wall Street, he has a lot of New York-based relationships that have interest in projects in Wisconsin that know and trust him and the Hoffman Development Group.
“We aren’t the ultimate decision maker, we just do our work on behalf of the city and let the city be the ultimate decision maker,” he said. “This is city-owned land. This is a public-private partnership. We’re here to serve you. We’re here to serve the citizens. This is not a piece of dirt that we’re buying and building spec. Everything we do is in collaboration and it’s always the city that has the final vote.”
Development of the Banker Road neighborhood began in 2018, when the city purchased three parcels totaling 75-acres near the intersection of Banker and Hoard roads in the Town of Koshkonong. The $750,000 purchase was made with anticipation of sale of the property for a planned neighborhood development.
“I think it’s important for everybody to remember that this land was owned by a contractor who was planning to develop it and did not have a lot of experienced in development,” said councilperson Mason Becker. “It’s been extremely fortunate that the city was able to purchase that land and ensure that the development happened within the city and happened in a controlled, proper fashion, rather than what we might have ended up with otherwise”
Since the acquisition, the city has taken the preliminary steps toward development of the site. The property was formerly annexed into the city in 2021 and the city contracted with Vandewalle and Associates to create an approved neighborhood plan for the site. The council ‘s unanimous approval of a master development agreement with Hoffman Development Group and CedarPrise last week was the next step in the process.
“Obviously, we as a city want to start developing that property, and meet the needs of the community through housing,” said councilperson Eric Schultz. “I know one of the key comments I’ve heard is that there’s not enough places to move.”
He noted that the first phase being considered is to serve those immediate needs with dense multi-family housing.
Council President Chris Scherer agreed.
“The only thing we would hear from our constituents is can you break ground yesterday,” he quipped.
As the project moves forward, additional development agreements will be reviewed and approved for “new owners” of the property, as Hoffmann Development Group continues working with the city on the next area of the planned neighborhood.
Per their own definition, Hoffman Development Group and CedarPrise are a one-stop, turn-key real estate development group that does everything from visualization, conceptualization, planning, design, architectural, construction management, all the way to certificate of occupancy.
“We take each other’s strengths, and we meld them into a cohesive group that can work with a community like Fort Atkinson, bringing home all those abilities in order to develop a complete project from start to finish,” said Steve Wille Hoffman Development Group co-founder and manager. “Every one of our developments has a component that will support and make a community thrive and grow based on what we’re providing. Our major intention is always to make sure that we’re providing a product that will work for the municipality and the community at large.”
To ensure those goals are met, Wille said city and Hoffman Development Group staff will be meeting on a weekly basis going forward.
“The last thing we want is for misunderstanding gaps or overlaps for that matter,” he said. “We want to make sure that we’re communicating in a very purposeful way, very efficient way but yet, making sure that we over communicate, because there’s many things that you can have gaps in those communications, and we want to make sure that we eliminate those.”
As the project moves forward, Wille noted that Hoffman Development Group is constantly making sure the project is viable.
“That’s really the bottom line to this, so that by the time we’re done, vetting everything we know that it will make money that it will pencil and that our investors will invest in it,” he said.
Although not member of the council at the time the land was purchased, councilperson Megan Hartwick pointed out the importance to all the council members and the community at-large that the project was done correctly.
“This was a huge investment for our city and has huge potential to make a really big difference for our community,” she said. “Based on everything we’ve seen so far, the expertise, the knowledge, and the background, and also, the actual investment from your company that comes along with that, certainly makes me feel very confident that this would be the proper way to get this done correctly.”
Within Tuesday’s discussion, it was noted that no additional tax dollars are being expended as funds are being drawn from the remainder of the borrowing that was approved for the original Banker Road property purchase.
Fort Atkinson City Manager Rebecca Houseman LeMire said there is $126,139 remaining in that fund to be used for planning, annexation, project costs and other items to support development. In addition, she noted that all services and documents prepared by Hoffman Development Group as part of the agreement will remain the property of the city if the agreement expires after the initial 12-month term. The intention is for the partnership to continue throughout the development of the entire 75-acres.
Further expenditures are expected to be covered via tax incremental financing. Under the initial master development agreement, there is no tax incremental financing commitment. At its September 27 meeting, the Fort Atkinson Plan Commission will be reviewing plans for two new tax incremental districts within the city. The proposed TID No. 9 would encompass an area along the community’s northwest corridor, including the Banker Road development. If approved, LeMire noted that use of TIF funds will be an option for financing additional agreements as the development continues to advance.
“This will be in stepped approach phases over time,” Wille said. “We want to make sure that the taxes being collected are going to help pay for the next set of developments that are going to happen. That’s why we don’t necessarily start everything at one time, we allow the taxes collected to help finance the rest of the of the development.”
Commitments the city must meet under the approved agreement include commission of a housing study, which has already been completed.
In addition, LeMire said the city is complete a wetland delineation, an environmental phase 1 report, an endangered species evaluation, surveying and planning and site pre-development work. Per the agreement, Hoffman Development Group will be performing all those tasks, in addition to determining the feasibility of private financing and seeking and vetting development partners.
To kick off work on the development, one of the first checkpoints in the process is commissioning of a market report. The Hoffman Group uses a company called Bowen National Research to review the rental and housing markets in the project area.
Joe Truehart, Hoffman Development Group vice president of construction, said the market research area for this project included Fort Atkinson, Jefferson, Lake Mills and Whitewater area.
On the rental portion of the report, he said there were 428 units across 8 properties that were analyzed, 100% of which were occupied. Three were market rate properties, one fit into the low-income housing bracket with a waiting list of 30 families.
Also, Truehart said only one of the eight comparable properties was built with in the last 10 years.
“There’s not a lot of new stock on the market right now,” he said, noting that most multi-family housing in the area is 15 to 20 years old.
Also, from a single-family home perspective, homes sold in 2022 built since 1990 had a median price of $300,000. Newer homes build since 2010 had a median price of $350,000.
“The modern single-family homes are expanding the premium prices in the area,” Truehart said.
Becker acknowledged the validity of the report’s findings, recalling a housing study commissioned by the city a few years ago that showed similar findings.
“We haven’t had a new apartment building in Fort Atkinson in I believe about four years so there’s obviously so much pent-up demand,” he said.
According to Truehart, more than 50% of the renters analyzed would qualify for the affordable component of Hoffman Development Group projects. All projects developed by the company has an affordable component in an 80/20 split. For every development, 20% of the units are considered “affordable.”
“We are targeting in those 20%, those with under 60% average median home income cap,” Truehart said. “It’s meant for individuals that aren’t necessarily in the lowest income, but we’re kind of hitting that middle gap of income.”
Per the market report, currently, the AMHI for the area of the study is $47,580. He said for those with an income level of 60% of that, would be the cap for the income level that you’d be allowed to enter one of the reduced rent rate properties.
However, the company representatives were very clear, this is not “workforce housing” or “low-income housing.”
“This is market rate housing, all of the units are designed to look identical, there’s no difference between what’s market rate and affordable, it’s just whatever key is available when an affordable, qualified tenant walks up to the leasing office,” Roark said. “When we are the developer, when we assign that development agreement, it is developed to exactly to the specs that we told the city we’re going to build it too.”
One of the biggest challenges facing developers currently is inflation. Truehart noted that rental rates are simply not increasing at the same rate as construction costs.
“Construction costs are skyrocketing through the roof and we’re still trying to keep the rents low,” he said. “That’s why when we’re building in a community such as Fort Atkinson, it can be a little bit of a challenge, but we can combat those issues with the density. If we build 120 units or 140 units, we can build a little bit more volume to help combat those construction costs.”
The full proposal is here: http://fortatkinsononline.com/wp-content/uploads/2022/09/Ft-Atkinson-002.pdf.
Fort Atkinson Municipal Building, file photo/Kim McDarison.
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