Lake Geneva has been in the news lately, and it’s not because people just recently figured out that crystal clear water is soothing to look at and fun to swim in. My beloved town has been the subject of articles that have appeared in the Chicago Tribune and the Wall Street Journal, and I imagine many more publications that I don’t pay attention to. The reason for all this national attention has something to do with politics, something to do with 710 acres of farm land, and something to do with two big personalities. Sounds like the trailer voice over for a George Clooney movie, but it’s just life in lake Geneva, and I’m about to weigh in on the ridiculousness of it all.
In a nutshell, here’s the story… A few years ago a hotel operator from New York showed up in Williams Bay with a plan to buy and develop the Yerke’s property owned by the University of Chicago. Williams Bay residents summoned all of their conflicted, anti-development anger, and kicked the New York group out. The New York group had a major hankering for a Lake Geneva development, which I completely endorse and understand, so they entered into a partnership to develop 710 acres of land on Lake Geneva’s south side (like Chicago’s south side, but not at all). They wanted to build around 800 residential units, a winery, and a 100 room hotel. The developer basically met the use that the city had planned for when they formulated their Master Plan a few years prior, so the deal seemed like a slam dunk. Instead of being happy, now it was Lake Geneva’s residents turn to be angry. They didn’t want the New York developer and his hotel. They put up signs. The city council, feeling pressure from residents that were packing council meetings, put the development to a referendum. No word if Jimmy Carter labeled them racist for being opposed to the plan. The referendum failed, and Mirbeau was told to pack up. Mirbeau wasn’t pleased, and this summer, they sued the city of Lake Geneva for reasons unbeknownst to me, but rest assured, they probably stem from the city essentially leading the developer on and causing them monetary damages. Phew. And that’s just part of the story…
In all this turmoil, the Mayor of Lake Geneva kicked some aldermen off the council, saying they were acting inappropriately by having “secret meetings”. Oh, and they voted in an ex-mayor to hold a vacant seat in the city government. This angered the sitting mayor, and some say that’s why he kicked off the aldermen. City residents were just pleased that the mayor didn’t plow up the runway at the Grand Geneva in the middle of the night. (laugh) The aldermen were BFF’s with the ex-mayor from town, and the ex-mayor had a view on the development that was opposite of the sitting mayor. Who had what view isn’t important, but what is important is that the current mayor and the ex-mayor went to high school together. One was a jock, the other was a chess player. The aldermen were angry, and this mess played out in newspapers and blogs until just this past week when the ex-mayor chose to resign his post. The aldermen who were exiled where restored, and apparently all is well. Except the ex-mayor may or may not have a cooler car than the current mayor, and this may or may not be making the current mayor angry and/or jealous. I think the New York developer is still suing…
There it is, in a very vague, very uninformed, figurative nutshell. The truth is, I don’t know many of the details of this, because I don’t care one little bit about it. Why not? Well, because I think high school spats between grown men are ridiculous. I also think politics on the local level are ridiculous, which is why I’m not going to run for any local office anytime soon. I would consider becoming Governor of Wisconsin, so feel free to write my name on your absentee ballot. I would also love to replace Russ “Nancy Pelosi is my best friend and mentor” Feingold, but then I’d have to hang out in Washington DC and I don’t think I could trade boating on Geneva for boating on the murky Potomac.
The mess that the city has found itself in may be nuanced beyond my desire to understand, but I think the issues are easy when viewed from a different angle. That being said, let’s tackle the issues as I see them. First off, you have the issue of a Master Plan. If you’re unfamiliar with the concept of a Master Plan, just know that it’s a zoning and future development plan for a municipality. A consulting firm comes in, collects a fat check, then circles some undeveloped parcels and, using orphaned Monopoly pieces, place hotels, houses, and apartment buildings on those vacant parcels. At that point, the city, with their newfound direction, thinks they’re in control of their development destiny. The reality is, once a city puts down “hotel” on a parcel and a developer comes in to pitch a hotel on that site, they city has already essentially approved the development before they have a chance to review it, simply because they already approved that sort of application in their master plan. The Mirbeau/Hummel (Hummel is the guy who owns the 710 acres) group is upset, probably at least partially because the city called for a more dense development, and thus presumably less desirable, on that site than the group proposed, and the group was still turned down.
Secondly, there’s the problem of old high school enemies clashing later in life. I had a high school class with four boys in it. David, Jon, Jon, and Jon. I’ll let you guess who the leader was. To this day, two of those Jon’s won’t come over with their wives for dinner on the same night, because 15 years ago they didn’t like each other. So school boys should not grow up to be mayors. And ex-mayors. Did you see the way the current mayor rolled his eyes at the ex-mayor when the ex-mayor revved the engine of his cool car outside the city hall last Wednesday night? OMG!
The other issue with this whole Lake Geneva mess is the actual lawsuit from Mirbeau and friends. I was reading in the Wall Street Journal yesterday about the development issues plaguing the ultra wealthy. Mr. Robert Sillerman, of American Idol fame, tried to develop a stretch of sand in the Carribean. The market turned, people realized there are thousands of islands in warm locales to choose from, and his high end hotel/golf course/residential development is failing. The story said he may lose $180MM of capital, and even Mr. Sillerman admitted that he may have exhibited what he calls “an element of hubris”. Chicago native, Ty Warner apparently may lose some New York hotels if he can’t restructure a $345 million dollar mortgage. Ouch. Mr. Warner really has no excuse to act this way, since he should just let me help him find a Lake Geneva vacation property a little closer to home. The financial malaise of these super-rich aside, the point here is very simple to understand. Developers, even super wealthy ones, aren’t doing well.
And that’s assuming you think losing $180MM is just “not doing well”. The thing that I find pretty strange about the Mirbeau development is the insistence on the part of the developer that this development is a good idea. In theory, I think the development could be a good thing for our market. The winery sounds nice, and maybe The Tool Man could come and coo about getting drunk on Lake Geneva grapes. The hotel is a good idea, and I think a small, high end, boutique hotel would do well, even if that location is a bit odd as it’s not central to downtown Lake Geneva. That lukewarm endorsement of the concept out of the way, the Mirbeau folks need to realize there’s no market for what they’re trying to build here.
The development boom of the past 11 years was built, at least partially, on the theory that we’d never run out of out buyers. 2008 proved that not only can we run out of buyers, but we can run out of them at the same time that we have more desperate sellers than ever. That confluence of opposing factors has caused the worse real estate market since the early 1980’s, and unfortunately, it’s not a conflict that will rectify itself anytime soon. We’ll always have buyers for Lake Geneva vacation homes, but we already have enough inventory to meet the needs of those buyers. If you want largess, we have Geneva National and Abbey Springs, with more than 1700 approved units between the two of them. The market here has just about anything a buyer could want, and the introduction of 800 new residential units that are best suited for vacation home buyers just isn’t something we need. For a developer to fight for the right to develop a product that has no end user is opposite of what development is supposed to be. Development is supposed to fill a need, not attempt to force an 800 pound square into a 40 pound circle.
There’s no way to know where the market is heading, but I do know that it’s not heading in a direction where absorption rates will increase to the point where 800 unit developments will flow onto the market successfully. I’m fully aware that the 800 units would trickle onto the market, but even if the initial phase calls for 150 units, which it would have to in order to allow the developer to recoup some of the massive infrastructure charges they’ll incur, I doubt the markets ability, or desire, to take on that additional inventory. I write that even with the expectation that our market will improve over the next 12-24 months, but I also write with curiosity about what even a healthy market in the greatest vacation town in the Midwest will be able to endure. Then again, 75% of the guys in my senior class had the same name, so what do I know.