Condos paying off for village and developers
Due to successful sales, the development is on track to be completed in three years, rather than six. Photo by: Submitted Photo
Village of Sussex — A unique financial partnership between the Village of Sussex, an investment firm and a builder is resulting in the successful development of a mid- to high-end condominium project on the southern boundary of the village along Highway 164.
There are 15 building sites remaining of 56 lots developed for the ranch-style condos at the Glen at Seven Stones that range in price from slightly above the mid-$250,000 range to about $400,000, according to Cornerstone Development of Pewaukee.
The village is gaining more than $1 million in taxable value per acre for the 17-acre development and earning five percent on its more than $1 million investment each time a condo unit is sold, according to Village Administrator Jeremy Smith.
In late 2011, the village agreed to finance the public improvements that were needed for the development with the understanding that the developers would repay the city for $1.25 million note plus interest through special tax assessments.
Without the village financing, the project may not have gotten off the ground, according to John Whalen, owner of Cornerstone Development.
"The village, in effect, was our bank," Whalen added.
Whalen believes there is a burgeoning condominium market in Lake Country because as many local homeowners grow older, they became interested in smaller housing that requires less maintenance than the large, and often upscale, single family homes many of them live in.
"They want to change how they live, not where they live," he explained.
Whalen won relatively easy approval for his project from the village in 2009. However, because of the Great Recession and increased banking regulations, he could not get financing for the project despite applying at more than 40 different financial institutions.
About two years later, Whalen partnered with HGP Investments of Menomonee Falls and the village to put together a financial plan to get the project off the ground.
Village officials recognized that if they could finance the sewer and water utilities, along with the streets and sidewalks, needed for the development, and do it the fall of 2011 and spring of 2012, the builders and developers could go to market with their product in the spring of 2012.
By financing the public improvements, the largest single investment of the project, the village put the builders and developers in a position where they could seek construction loans on each individual unit, which is more attractive to bankers, than a single large loan on the entire development.
"Now that we are successful, I suddenly have all kinds of friends in financial institutions," quipped Whalen.
Sales have been so successful, the development is on track to be completed in three years, rather than the six years village officials had anticipated, because of the condition of the housing market at the time the notes were issued.
"John Whalen is the cat's meow when it comes to selling condos. He really knows how to get it done," observed Herb Gross, who along with his brother Pete, owns HGP Investments.
HGP has paid off more than $800,000 of the $1.25 note, according to village officials.
"It has been a huge win for Cornerstone, it has been a huge win for HGP and it will be a huge win for the village," Gross added.
Whalen credits Village Administrator Smith and Village Attorney John Macy for putting the financial package together.
"They both are very sharp and know what they are doing. The village had done this on another project a number of years ago. So, this was not new to them," Whalen added.
"Sussex is fortunate to have a lot of great things going on in our community. The Glen at Seven Stones has certainly been part of our success. It has been a tremendous project for the village," Smith said.
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