Josh Krsnak, president of Minneapolis-based retail and office property owner Hempel Cos., recently joined with Milwaukee investors Tony
Janowiec and Chuck Biller to buy the Shops of the Grand Avenue.
By Journal Sentinel, Jan. 8, 2016of the Milwaukee
A craft brewery and a climbing wall are among the possible additional uses the owners are considering for downtown Milwaukee’s Shops of Grand Avenue.
“We’ve been talking with a lot of different people, just kind of getting ideas,” said Josh Krsnak, president of Minneapolis-based Hempel Cos.
“We want to make the Grand Avenue a destination again,” Krsnak said Friday.
Hempel, which operates office and retail properties in the Twin Cities, is partnering with principals from two Milwaukee-based parking structure operators and investors, Interstate Parking Co. and Aggero Group LLC, that in late December bought the mall. He visited Milwaukee this week to discuss the Grand Avenue’s future with his partners, possible tenants and others.
The new owners “are well down the road” in negotiating a lease with Ross Dress for Less, Krsnak said.
Ross, which would lease almost 30,000 square feet at the former Linens n’ Things space in the mall’s Plankinton Arcade, is among the nation’s largest off-price clothing and home fashion chains. The Dublin, Calif.-based retailer is opening other Milwaukee-area stores and would be next to the mall’s T.J. Maxx store.
Also, Interstate Parking plans to move its offices from the nearby Empire Building, 710 N. Plankinton Ave., to 6,000 square feet at the mall, Krsnak said.
Krsnak and his partners, Tony Janowiec, a principal owner at both Interstate Parking and Aggero Group, and Chuck Biller, Aggero Group managing director, are not naming other prospective tenants.
There’s strong interest in the Grand Avenue, Krsnak said. The 293,596-square-foot mall has several vacancies in both the Plankinton Arcade and the West Arcade, the portion of the mall that connects to the Boston Store building.
“Right now, everyone wants to talk to us,” Krsnak said.
“We think there’s a fair amount of good things happening,” Biller said.
The new owners will be selective in considering prospective tenants, Krsnak said. They should complement existing retailers, some of which are doing well, said Krsnak and Janowiec.
“It’s not all about building revenue,” Krsnak said. “It’s about building the right tenant mix that’s best for the long term.”
He said that’s a contrast from the approach of the previous owner, a group led by Brooklyn, N.Y., investor Alexander Levin.
Krsnak said Levin’s strategy was to spend “as little money as possible” to maintain the property, while reaping the cash flow from the retail space and especially the Grand Avenue’s 1,748-space parking structure.
“They made a ton of money” doing so, Krsnak said.
Levin and his investors paid $16.5 million for the Grand Avenue in 2014. It was sold on Dec. 18 for $24.6 million through two transactions: one involving the mall and one for the parking structure.
According to state real estate records, the parking structure was sold to Milwaukee Parking JV Owner 1 LLC for $23.1 million. The retail space was sold to Haggeros Mall LLC for $1.5 million. The new principal owners have shares of both groups.
Separating the Grand Avenue’s ownership into two groups makes sense, Krsnak said.
Janowiec and Biller have an expertise in parking structures, while Krsnak has experience with retail properties.
The parking structure, among the largest in downtown, is underused, Janowiec and Biller said. Interstate Parking can make some upgrades and combine it with the firm’s other downtown parking structures to offer its clients more options, they said.
Janowiec and Biller have long wanted to acquire the Grand Avenue parking structure but knew it wouldn’t be sold unless the buyer also acquired the retail space.
So, Janowiec approached Krsnak in August about the property. The two met as University of Minnesota students, and Janowiec’s firm operates a parking structure at Canadian Pacific Plaza, a downtown Minneapolis office tower that Hempel Cos. recently sold for $69 million.
Having two separate but cooperative ownership groups also allows possible additional partners to more easily invest in just the retail space, Janowiec and Krsnak said.
Krsnak said the new owners have already been approached by investors who want to buy the Plankinton Arcade.
The new owners control the arcade’s lower level, street level and second floor. There are few retailers there, with some of the arcade space filled by nonprofit groups and other uses, including an office furniture virtual showroom.
The Plankinton Arcade’s remaining upper floors, including apartments and University of Wisconsin-Milwaukee’s School of Continuing Education, are controlled by other owners, including the UW System and developer Ken Breunig.
The Plankinton Arcade is attracting prospective buyers because “it’s a cool historic building,” and part of its space can be more easily converted to offices than the West Arcade space, Krsnak said.
The West Arcade has more retail activity, including the third-level food court. It features an atrium, just off W. Wisconsin Ave. at N. Old World 3rd St., where Krsnak said a possible climbing wall could be installed to attract a younger crowd.
But that concept, along with the possible craft brewer, are just at the ideas stage, he said. And redeveloping the mall will take time.
“It’s not an easy puzzle to put together,” Krsnak said.