Northwestern Mutual Life Insurance Co. would tear down the 500,000-square-foot office building, known for its brown color, and replace it with a new office tower at least 14 stories taller. Credit: Journal Sentinel files

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Northwestern Mutual Life Insurance Co. plans to build a new office tower, housing hundreds of employees, at its downtown Milwaukee campus and is seeking $48 million in city financing for the $300 million project.

The new building, with 840,000 square feet, could be more than 30 stories, and would be among downtown's largest office buildings. It would replace Northwestern Mutual's 16-story building south of E. Mason and east of N. Cass streets and would be built at that location once the existing building is demolished, the company announced Wednesday.

City financing would come in the form of a tax incremental financing district. It would be Milwaukee's largest such tax district if the Common Council approves the proposal from Mayor Tom Barrett's administration. Northwestern Mutual would spend its money upfront and recover $48 million through property tax rebates over 25 years.

Those rebates would reduce the higher costs that the company would face from building downtown compared with what it would cost to add offices to its Franklin campus at S. 27th St. and W. Drexel Ave.

The downtown project would retain 1,100 employees now housed at the building that would be razed, said company executives and city officials. Northwestern Mutual, which has 3,600 downtown employees, continues to grow and expects to add up to 1,700 additional downtown employees by 2027.

"This will be a signature development that makes a huge statement about the attractiveness of the whole Milwaukee metro area," said John Schlifske, chairman and chief executive officer. "We are going to be here and continue to play a vital role in this community for generations to come."

The life insurance and financial services company also has 2,000 employees at its Franklin campus and expects long-term job growth to continue there, Schlifske said.

The office tower proposal "sends a tremendous message about the viability of downtown Milwaukee," Barrett said.

Northwestern Mutual in September 2011 announced plans to demolish the 16-story building, which was constructed in 1979. The company said the 500,000-square-foot building, known for its brown color, faces extensive long-term maintenance costs.

The company plans to relocate employees who work there to other downtown and Franklin buildings.

Northwestern Mutual is buying a building at 733 N. Van Buren St. to provide temporary office space during the project. The company will build a skywalk to connect that building to its historic headquarters building at 720 E. Wisconsin Ave. The downtown campus includes buildings at 611 E. Wisconsin Ave. and 818 E. Mason St.

Demolition would begin in next year's fourth quarter, and construction on the new building would start in 2014.

The new building would be completed in 2017. Its design and specifications haven't been created, but it likely would be more than 30 stories, Schlifske said. The company also is considering ways to create more parking spaces for its growing downtown workforce.

Northwestern Mutual executives considered both Franklin and downtown as options for replacing the building, said Tim Gerend, a vice president who's overseeing the plans.

The company chose downtown in part because Milwaukee "is a great place to live and work," Gerend said.

"I grew up in Milwaukee," Schlifske said. "I love Milwaukee."

Schlifske and Gerend said the downtown campus, within a short walk of Lake Michigan, the Milwaukee Art Museum and other attractions, helps Northwestern Mutual attract and keep good employees. The new building will strengthen that appeal, they said.

Northwestern Mutual's plan depends on obtaining city financing assistance, Schlifske said.

The company said it would spend $300 million on the project. The building's taxable value - to be determined by the assessor's office - would be below that amount, which includes the cost of furnishings, equipment and other items not subject to property taxes.

Under the financing proposal, Northwestern Mutual would recover 70% of the new building's annual property tax bills until those funds totaled $48 million. That would take an estimated 25 years, according to the Department of City Development.

Once the amount was reached, all of the new building's property taxes would go to the city, Milwaukee Public Schools and other local governments.

The proposed tax incremental financing district is "a once in a generation" chance to ensure that Northwestern Mutual makes its investment and retains and adds 2,800 family-supporting jobs downtown, Barrett said.

The project also would create hundreds of construction jobs, Barrett said. By accepting city financing, Northwestern Mutual would be required by city ordinance to hire small, emerging and female-owned businesses for 25% of its total construction costs and to use Milwaukee residents for 40% of the construction work.

The tax financing district would help reduce Northwestern Mutual's higher expenses from building downtown, instead of in Franklin, Schlifske said.

Because downtown sites are typically smaller than suburban sites, buildings must be taller, which makes them costlier, Schlifske said. Also, working around underground steam tunnels that run just below the company's downtown site adds to those costs, he said.

Common Council President Willie Hines issued a statement indicating support for the tax district proposal.

"I am excited about this announcement and the prospect of this terrific development," Hines said. "My colleagues and I look forward to discussing the specific proposal with a company that comes to the table with a 150-year track record of supporting our great city."

LARGEST TIF DISTRICTS

At $48 million, the tax-incremental financing district proposed to help finance Northwestern Mutual's office tower would be Milwaukee's largest. Other Milwaukee projects with large tax districts include:

The former Pabst Brewery redevelopment, $29 million

Manpower Inc. headquarters, $26 million

Redevelopment of the Park East area, $24 million

The Menomonee Valley Industrial Center, $21 million