Komatsu, Michels developments in Milwaukee Harbor District approved for $47 million of city financing

Two big developments planned for Milwaukee's Harbor District — both anchored by corporate offices — would get city financing help under plans that received preliminary approval Tuesday.

The projects, led by Komatsu Mining Corp. and Michels Corp., together would receive up to $47 million in city cash. That would come from new property tax revenue created by those developments.

Together, Komatsu's future global headquarters and River 1, a mixed-use development featuring Michels' Milwaukee-area office, would bring initial investments of $334 million to the Harbor District.

The Harbor District is about 1,000 acres bordered roughly by South First Street, the lakefront, the Milwaukee River and Bay Street/Becher Street.

The district land and water use plan, approved this year by the Common Council and Mayor Tom Barrett, calls for converting empty lots and other sites into such new uses as light industrial buildings, offices, housing, retail space and parks.

The council's Zoning, Neighborhoods and Development Committee is now recommending approval for helping finance the Komatsu and Michels projects. The full council will review those recommendations at its Dec. 18 meeting.

Komatsu headquarters

The Komatsu project is the larger of the two developments and drew the most questions from committee members.

It would be the largest industrial development in Milwaukee in decades, and currently could be the nation's largest industrial development at an urban site, Development Commissioner Rocky Marcoux told committee members.

City financing for the $285 million Komatsu development could eventually total $40 million.

Komatsu in September announced plans to relocate its manufacturing operations now based at 4400 W. National Ave., West Milwaukee, as well as corporate offices at Honey Creek Corporate Center, 135 S. 84th St., on Milwaukee's far west side.

The new corporate campus would be on a 52-acre site overlooking the inner harbor at the end of East Greenfield Avenue. That includes a city-owned site and the former Milwaukee Solvay Coke Co. property.

Komatsu hopes to break ground by fall 2019 and begin using the buildings in 2021, said John Koetz, Komatsu's president of surface mining. 

The company expects to have 598 employees at the Harbor District site by 2023, according to a contract between Komatsu and the city. 

The city's annual payments to Komatsu would total $18.2 million by 2034 — if the company has 946 employees by that year, according to that agreement. The annual payments would be proportionately reduced by around $19,000 for each job that falls short.

Those annual payments could eventually total $25 million — if Komatsu creates 1,300 jobs in the long term.

Also, the city would spend $15 million to build a public RiverWalk and other public improvements. The RiverWalk would extend from the end of East Greenfield Avenue up the Kinnickinnic River to South Kinnickinnic Avenue.

Komatsu's initial phase will feature 170,000 square feet of office space, a 500-stall parking structure, 410,000 square feet of manufacturing space and a 20,000-square-foot museum and training building.

Those buildings are expected to total an estimated $64.4 million in new property values. Komatsu's corporate campus could eventually total 2.5 million square feet.

The zoning committee voted 4-1 to endorse the financing plan, with Ald. Robert Bauman opposed. 

Bauman is concerned that Komatsu's initial job count in 2023 would equal around 11 jobs per acre. He called that "pathetic" for a "prime piece of real estate." 

The city's goal is to create 18 to 25 jobs per acre. That would be achieved by 2034 under the company's growth plans.

Bauman said the Harbor District land and water use plan included a vision for office buildings, with much higher job counts, at the Komatsu site.

"Now, that's development, in my humble opinion," Bauman said.

Marcoux said those plans were conceptual, while Komatsu's proposal was "a reality."

River 1 development

City financing for the $49 million River 1 development would total $7.1 million.

Brownsville-based utilities and infrastructure contractor Michels Corp. in August announced its plans to develop River 1 west of South First Street and north of West Becher Street overlooking the Kinnickinnic River. It is the site of the former Horny Goat Hideaway tavern.

The development's first phase will feature an eight-story building, with around 130,000 square feet that Michels would eventually anchor with up to 400 employees; a 1,000-space parking structure; and a RiverWalk.

Michels hopes to begin construction of the first phase within 90 days, said Dave Stegeman, chief legal officer and vice president of mergers/acquisitions and real estate. He said other businesses are considering moving to the first office building.

That phase would be completed by summer 2020, and have an initial assessed value of $23.3 million.

The proposed city financing package would include $3.4 million to pay for 70 percent of the RiverWalk and $2.5 million to make improvements to Becher Street. Additional costs include an environmental cleanup.

River 1's additional buildings could eventually include two more office buildings, each with 50,000 square feet; an apartment building with around 120 units and a restaurant on the ground floor; and a hotel with roughly 120 rooms, according to conceptual plans.

With those additional buildings, River 1 would total over $100 million.

The zoning committee voted 5-0 to endorse the River 1 financing plan.

Tom Daykin can be emailed at tdaykin@jrn.com and followed on Instagram, Twitter and Facebook.