As Three-Sixty asks for delay on Kmart development, La Crosse city councilman Woodard questions other project

A La Crosse city committee approved Monday a request to delay development of the old Kmart site.

Three-Sixty Real Estate Solutions wants to extend the delay by another 18 months — it has already delayed since July of 2022. The company told WIZM last August high interest rates, material costs and shortage were the cause for delay.

The city’s Judiciary and Administration (J&A) committee will vote on the extension request during Tuesday evening’s meeting, before it heads to the full council next week.

The company’s plan, roughly, is to tear down the Kmart and add 206 apartments and three mixed-use townhomes, as Three-Sixty Director of Development Jeremy Novak described on La Crosse Talk PM (Novak joins 6 minutes, 30 seconds into show, and we dive into the Kmart details at the 20:30 mark).

City council member Chris Woodard is on that J&A committee. The District 9 rep. does have at least one question about Three-Sixty’s delayed plans at the Kmart site, having to do with it recently acquiring land from Mayo to develop into 50 residential housing units.

“ It’s confusing for me because Three-Sixty can’t put it together to build this big (Kmart) development,” Woodard said Monday on La Crosse Talk PM (7-minute mark, below), “but recently they’re going to come in to cahoots with Mayo to build on the Washburn Garden site? So those two things aren’t really adding up for me.”

Whether Woodard brings up Three-Sixty’s Mayo acquisition in the Washburn Neighborhood, he wasn’t quite sure.

“ I don’t know about how I can ask them that, while keeping it related to the agenda item,” Woodard said. “I still have to think about that.”

Always the question with the site is: ‘When is the Kmart getting demolished?’

Novak said back in January of 2022 that Kmart would come down that summer — a year ago. But last August, he said it’s all or nothing — when Kmart comes down, the rest of the buildings need to go up.

“ Having a big pile of dirt out there isn’t any better than what’s existing,” Novak said. “So we’re at this point, we’re waiting until we can get the project to a point where it looks like it will be successful.”

Woodard disagrees with the pile of dirt reference.

“ Ultimately, I think we need to do the right thing first and get rid of that building because it’s an eyesore,” he said.

But Novak has his reasons. He said the building — and the parking lot — have been put to use a few times for things like the ski patrol equipment swap and parking for construction workers at Mayo, who then get shuttled to the new hospital construction site.

“ There’s some synergies that we’ve created by just leaving it as it is,” Novak said.

As for the need for a delay with the cost of the project, Novak talked about that, as well.

“ In the last 18 months, interest rates have gone up significantly on financing,” Novak said in August. “Our conversations with contractors, as we work to price out the construction, costs have gone up, I would say on average about 30 to 35 percent, from what they were a year to two years ago, and that’s across the board.

“And then the other piece is rents have not increased, and certainly we don’t want to just increase rents to cover those two factors.”

He also gave an analogy for how those factors would affect how much monthly rent would be for potential tenants.

“ If interest rates have gone up from 3 percent to 8 percent — that’s a 5 percent increase in financing costs,” Novak explained. “And just on a $10-million loan, for example — we’re doing easy math — that’s $500,000 a year, just in interest increase alone. And so, if we did a 72-unit building, for example, that $500,000 increase in interest, on a 72-unit building, per month, would be roughly right around, I think, about $580 a month, that you’d have to increase rents just to cover that interest cost.”

Novak added that, in this analogy, rent would go from $1,200 to around $1,800 and they don’t see that as feasible.