Madison is again squabbling with a developer over part of the massive Judge Doyle Square project covering parts of the Madison Municipal Building and Government East parking garage blocks Downtown.
Beitler Real Estate Services of Chicago is taking steps to build a hotel to serve Monona Terrace, one of two glass-sheathed buildings it eventually hopes to construct on the Government East block.
But on May 3, Beitler sent the city two notices of default on a development agreement between the parties. The letters claim the city has failed to clarify which conditions in a zoning approval letter apply to the hotel and not the city’s demolition of Government East and Beitler’s intent to build a housing tower on the block. The company says the city has also failed to provide information on the history of approved plans approved for both blocks.
The city, in responses on May 16 and Wednesday, said Beitler is responsible for addressing conditions and that it has the correct zoning to proceed on the Government East block. Beitler’s continued use of notices of default for “picayune matters” only makes it harder for the developer to obtain financing and “is a breach of Beitler’s duty of cooperation and good faith,” the city said.
In January, to resolve a different legal spat over part of the project, the City Council approved paying Beitler $700,000 in exchange for the developer giving up its rights to develop the Municipal Building block. The city has issued a new request for proposals for housing or commercial uses there, and three developers — Stone House Development and Gebhardt Development, both of Madison, and Mandel Group, of Milwaukee — offered responses for projects now under city review.
The mix of setbacks, progress and terse correspondence raise questions about how the Beitler redevelopment will unfold. The city’s Finance Committee discussed the matter in a closed session on Tuesday.
“All filings necessary to keep the project on track have been made to date,” city attorney Michael May said Thursday. “Other than the exchange of letters, there have been no other formal legal developments.” He declined further comment.
Mayor Satya Rhodes-Conway could not be reached.
Downtown Ald. Mike Verveer, 4th District, who represents the site and sits on the Finance Committee, said, “This continues to be a very frustrating relationship. It’s frustrating to all of us at City Hall. I’m hoping we can repair the relationship and move forward productively. My confidence level ebbs and flows.”
James L. Oakley, an attorney who represents Beitler, said the developer needs to know which zoning and building permit conditions it needs to abide by.
“Beitler is not refusing to fulfill any conditions,” he said. “It needs to understand what conditions relate to its hotel. That’s been our concern. We’re fully intending to do this. That’s why we care about this stuff. At the most basic level, I believe the city wants to have the hotel. I know Beitler wants to build it.”
For at least eight years, the city has wanted to redevelop parts of blocks that now hold the Municipal Building and Government East parking garage south of Capitol Square.
In 2016, after several misfires, the city chose Beitler to develop both blocks with plans eventually emerging for a $186 million project with hotel, housing and commercial space in three glassy buildings with underground parking.
The city is now completing a $50 million, 560-space public underground parking garage on the Municipal Building block to replace Government East.
In May 2018, the City Council approved $11 million to construct ground-level commercial space and two floors of private parking — collectively called the podium — above the underground garage. The council’s vote, however, prompted Beitler to sue Madison the next month. The developer argued the city unilaterally seized its development rights on the podium, while the city maintained Beitler asked it to consider building that portion of the project due to rising construction costs.
Beitler dropped the lawsuit in August, and the two sides continued negotiations.
In January, to resolve the dispute, the council approved paying Beitler the $700,000 to give up its rights on the Municipal Building block. Beitler, meanwhile, was to proceed with the development of the roughly 250-room hotel and 204 apartments in separate towers on the Government East block.
Although legal problems were seemingly resolved in early January, each side then claimed that the other was in default of a development agreement. In an exchange of letters in February and March, Beitler claimed city actions have made it “impossible” to get timely financing, and the city threatened termination of the agreement.
Yet, in following weeks, came some progress.
Earlier this month, Beitler filed an application for a major alteration to previous plans to replace underground parking with a hotel swimming pool, a requirement of the hotelier. The Plan Commission is due to take that up in July. Meanwhile, the council has approved Beitler’s request to lease 40 parking stalls for valet parking in the new public parking garage.
Then, on May 3, Oakley sent the city notices of default.
“It is critical the city provide the requested information as soon as possible so that Beitler can work to satisfy the conditions in a timely manner,” Oakley wrote. The city has refused to provide information on specific implementation plans for both blocks and has prevented its project director, George Austin, from responding, he said.
On May 16, May sent an initial response describing Oakley’s correspondence as “most unusual” and doing nothing to advance the construction of the hotel.
On Wednesday, May followed with a letter addressing the notices. He said the city has no duty to remove or satisfy conditions of the private development, and if Beitler has a question, the city will assist as appropriate. But “Beitler’s refusal to address the conditions because it does not wish to incur the expense is no reason for Beitler to fail to live up to its obligations under the development agreement, or to attempt to impose those obligations on the city,” he said.
The city has responded to questions posed to Austin about zoning on the two blocks, and because Beitler no longer has an interest in the Municipal Building block, it has no right to ask questions about it, May said. The Government East block has the correct zoning, he said.
Beitler is still reviewing the city’s latest correspondence, Oakley said.