The City Council has unanimously agreed to increase the developer’s incentive for the long-discussed apartment buildings on Lake Avenue in Racine.
The agreement provides an additional $3.5 million for constructing a 202-unit, market-rate apartment building at 233 Lake Ave.
Downtown Racine’s First New Construction Project in Over 20 Years
The project, known as Breakwater, is the first new construction downtown in over 20 years. In 2021, the council had agreed to offer the developer a $2.6 million incentive, which would be paid partly through an infrastructure grant and partly from TID 14 funds.
Due to construction inflation, the project cost has increased by $8 million since then. The company managed to reduce the funding gap to $7 million through some cuts and grants.
How Are Builders and Developers Navigating Inflation?
According to the revised agreement, Hovde Properties will bear half of the $7 million, including the interest increase, and the city will cover the other half upon the completion of the construction.
At the Tuesday meeting, Randy Guenther from Hovde Properties said that the company was transparent with the city about the cost increases they faced and provided proof of them. Guenther added that many builders and developers are facing similar challenges today.
However, the company will not receive any funding from the city until the building is constructed and has its certificate of occupancy.
What is Construction Inflation Currently?
According to Guenther, construction inflation is currently around 24% to 25%, depending on the location, and interest rates have doubled.
When Will Construction Begin?
Construction is set to begin in March, and because the developer is using public funds, they must participate in Racine Works, which requires 20% of work hours on the project to be filled by Racine residents.
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