Madison officially parted ways with Gebhardt Development on the downtown Judge Doyle Square project Tuesday and will move forward with another local developer to build an apartment complex that includes affordable units.
After negotiating with Gebhardt for 11 weeks, the city’s Finance Committee recommended after a closed meeting Aug. 26 to terminate negotiations and open them with Stone House Development, one of the three original applicants that included Gebhardt and the Milwaukee-based Mandel Group.
Angie Black, an attorney representing Gebhardt, said the Finance Committee’s decision came as a surprise.
“We’d like to continue the job we started,” Black said.
The city determined that the progress of negotiations around the affordable housing component and the scope, timing, and cost of modifications to the city’s underground parking facility was insufficient, according to the resolution adopted Tuesday on a voice vote.
“I think it was very much a good faith negotiation. Gebhardt wanted to do this job and worked hard to get it,” project manager George Austin said. “There was an effort on both sides to get to yes and to build this project, which was more ambitious than the other two projects proposed.”
Madison was pursuing a development agreement with Gebhardt to build a housing structure on top of ground-level commercial space and private parking — collectively called the podium — that is under construction above the underground garage on the block that includes the Madison Municipal Building.
Throughout the negotiation process, the Finance Committee objected to Gebhardt’s plan of separating the units by income restrictions as well as costly modifications to the base layers of the structure.
In its original proposal, Gebhardt Development proposed separating 78 affordable housing units — reserved for residents making salaries at or below 60% of the county median income — from the rest of the 118 market rate units. The developer later offered options that wouldn't restrict housing by income but would increase the cost.
In the course of negotiations, the construction firm Gebhardt was working with, JP Cullen, pulled out of the partnership.
Ald. Mike Verveer, District 4, said the decision to cease negotiations with Gebhardt was a “difficult” one.
“It simply came to the point where that ambitious program was not going to work, and we could not fit that program, that building to meet the parameters of our parking garage and the podium,” Verveer said.
Stone House Development's proposed a 159-unit apartment project and 7,000 square feet of retail space in the podium that would cost an estimated $40 million. Occupancy in 37 units would be restricted to renters with household incomes at or below 80% of the Dane County median income.
Stone House would also request $1.2 million from the city in affordable housing funds and pay the city $5 million to purchase the air rights and the podium.
Rich Arnesen, principal at Stone House Development, said his firm's proposal does not require modifications to the podium.
“What we strived to do was to maximize the density given the capacity of the existing structural columns and systems,” Arnesen said.
City staff originally recommended adoption of the Stone House Development proposal, in part, for its straightforward approach. Alders opted to pursue Gebhardt’s more ambitious proposal, which required the many project components to work “perfectly,” Ald. Rebecca Kemble, District 18, said.
“I’m really kind of disappointed that it didn’t, and I don't think it’s anyone’s fault,” Kemble said. “Now we’re at a point in time where we really need a straightforward development."