Madison College Selects Finalist for DTEC
A Project Stands Alone
|The Madison College board will be voting on Dr. Jack
Daniels III’s recommendation to accept the
proposal of Hovde/Drury Southwest to lease the
Madison College DTEC site.
There was a review team with outside consultants. The review team consists of myself, my CFO/VP for administration, my director of facilities,
a consultant for key commercial and another real estate consultant, DL Evans. We wanted then to look at this. And we worked with our legal
team on this as well.”
What Madison College was basically looking for was a no muss-no fuss project that had a good chance of passing all of the regulatory bodies
that would look at it and would contribute a significant amount of funds to Madison College’s general operating funds.
“We looked initially at what are the general aspects of their proposal,” Daniels said. “What did they submit? Who are their team members? We
went in depth into that area and had about 20 percent of the weight. We looked at the technical aspect of their proposal. That was another 30
percent of the weight. And then their financials was about half of the weight. We were looking at how they could fund the project without
incentives like tax credits, affordable housing credits and TIF funding. What was their ability to do that? So we scored all of those initially when
we got them in after we did the first review. And Hovde came to the top of the list.”
The Madison College evaluation team then looked deeper at the proposals.
“Everyone has to go to the city,” Daniels emphasized. “They have to take their proposals through every unit in the city. Would they ask for a
TIF? Would they be looking for historical tax credits or low-income housing tax credits? We then looked at all of those other risks that were
involved with their proposals. What were the market data that substantiated the assumptions they were making? What were the project
financials? Was there any equity coming from the developer themselves into the project? What is their commitment because one thing you don’
t want to do is have a project developer who sells it out after five years. Then where are we left? What was the financial strength of the
leases? And was there adequate parking on site? Parking downtown is a huge issue. And we didn’t want to be able to look at how they use, for
example, the parking structure across Carroll Street from where we are. The contingencies were 20 percent weighted, the risk assessment
was about 30 percent of the weight and the bulk of the weight, 50 percent, was what is the return on investment? What will the college be
gaining out of this? We looked at present value. We looked at aggregate values and what would be the cost when it is completed. What can we
expect? We did the deep dive and rescored and Hovde came out on top again.”
Hovde was emerging as the clear leader from every angle that they looked at the data. They looked at the equity the partners were putting into
“Alexander was putting in $347,000, Baum, $30 million, CD Smith, $38 million, Hovde, $36 million and Sherman $7 million,” Daniels noted.
They looked at how much Madison College would be receiving in annual rents and across the entire length of the lease.
“The first five years is difficult to look at in terms of apples to apples because some will give you upfront money, there will be some escalators
during the first five years,” Daniels noted. “We started to see the balance come out in year five. In year five, Alexander’s annual rent would be
$303,000, Baum, $301,000, CD Smith, $402,000, Sherman, $583,000 and Hovde, $750,000. The Sherman proposal was a little bit misleading
because what they did was put in some escalated fees in until year 15 when they thought they would go back and refinance and those would
be lower costs, so you see a huge dip. In year 25, they would only be giving us $150,000 per year. But Hovde would have escalators and at the
end of the 99-year lease, we would be getting $4.5 million annually. And no one else had at least half of that. And so, when you look at it, Hovde
almost doubled what the others are. We also looked into the values. Over the whole period of the total payments, Hovde pays in $205 million.
The closest was Alexander with $101 million.”
Madison College also wanted a stable partner, one who would retain ownership of the project long into the future.
“When we looked at the Hovde/Dreary Southwest, both of these firms are financially strong,” Daniels said. “They are family owned businesses
that have been around 30 plus years. Both firms have long-term develop and hold tendencies. They don’t get rid of their properties. They are
sensitive to the community interests because they talked about the adaptive reuse of the building. They aren’t tearing it down. How do you
reuse what you have? They have experience with similar projects, particularly in the downtown area. And the concept design is built to build
according to the key principles and values that are described in the city’s downtown plan. They are aligned. So what happens is on the
Wisconsin Avenue side is where the office building would be. The hotel will be built using the 1920s-1950s building on Carroll Street with a
courtyard in the middle.”
Daniels is bringing the Hovde proposal to the Madison College board on May 3rd. And if the board approves the selection, don’t expect
construction and renovation to happen anytime soon.
“They have to go through the city’s process, which is about a year,” Daniels said. “WTCS has a two-step process. The first-step that we will do,
if the board approves, is go to WTCS in July with our first conceptual reading of it. We’ll give them information that is similar to what I talked
about. We will also bring in what a sample lease is going to look like. The WTCS will not give approval until everything is done. That means the
contingencies — we’ll load it up with contingencies — have to all be resolved. All of the regulatory issues have to all be resolved before they
actually can vote on it for approval. I don’t expect that to happen until early winter of 2018. We would be fully vacated sometime in the first two
quarters of 2019.”
And if there are changes to the project as it goes through the city’s regulatory process, the changes will have to be again approved by the
Madison College board.
Daniels is very excited about the project and its prospects of becoming a reality.
“When you think about Hovde, they have experience with Ovation,” Daniels said. “They also built 316 W. Washington, the old ATT Building.
Dreary has experience. They took a very similar building that was owned by the Cleveland Board of Education and redid that building. They
maintained it and redid it. Dreary has been trying to get into this market for years. In fact, they are building their first hotel in Wisconsin in
Milwaukee. This would be their second.”
It appears that it is all systems go as the DTEC project enters its next phase.
By Jonathan Gramling
The process formally began last May when the Madison College board gave
preliminary approval to Madison College President Jack Daniels III and his team to
move forward in seeking bids to lease the Downtown Technical Education Center,
DTEC, as a part of an overall configuration of Madison College campuses in the
The college then put out a RFQ, a Request for Qualifications, and based on those
responses, selected five teams to respond to a RFO, a Request for Proposals, which
the five teams submitted in March.
“We’ve been doing lots of reviews, and analytics and deep dives,” Daniels said.
“We’ve asked lots of questions. We’ve brought some developers back in to get
clarity on their proposals. We met with the city — city planning, city TIF, city zoning
and city transportation, all of those elements — to try to figure out what is going to be
the best project. The other thing is we don’t want to be recommending someone
when we know that project would never make the light of day downtown. We needed
to determine what was actually workable. So what we ended up doing with the five
proposals is we put together a scoring sheet. That scoring sheet very closely
resembles the scoring sheet the city used for Doyle Square. It was in three different