Neutral faced $25 million gap on Milwaukee timber tower

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Madison-based Neutral, the developer behind the Neutral.Edison timber tower, which paused work in downtown Milwaukee, was found to be short of $25 million of its project budget. The developer and city officials discussed how to ensure the project can move forward.

Neutral led construction of a 31-story, 378-unit luxury apartment tower at 1005 N. Edison St., which broke ground in June 2025. The tower would be the tallest mass timber building in North America. However, construction paused unexpectedly in September, and Fond du Lac-based C.D. Smith Construction has been absent from their site.

Neutral cited rising costs and tariffs as reasons behind the project’s pause. Much of the foundation has already been poured and some C.D. Smith workers were seen dismantling the site. With winter a few months away, city officials on Monday discussed potential outcomes for the development.

The project budget was around $205 million, but the developer saw a “large swing” above expected costs at around $230 million, said Lafayette Crump, commissioner of the city of Milwaukee Department of City Development, at a Zoning, Neighborhoods and Development Committee meeting. The complete project cost wasn’t disclosed.

In January, Neutral announced it closed on $133.3 million in construction financing from Little Rock, Arkansas-based Bank OZK and Chicago-based Pearlmark Real Estate.

Neutral, Milwaukee Mayor Cavalier Johnson and Crump met late in September to discuss the work pause.

“Based on my understanding of what’s happened is, yes, they’ve seen some cost overruns and as they look at being responsible about completing the project over the next couple of years,” Crump said at the meeting. “If those cost overruns to continue at the same pace, it would be challenging to complete the project. So, they’re engaging in value engineering right now to determine what is necessary to still deliver the project that they have promised to investors, lenders and to the city.”

Robert Bauman, chair of the ZND committee and alderman representing much of downtown, asked if the $25 million gap would be filled by value engineering. Crump answered in addition to tweaking the project, the developer would seek an additional infusion of cash. The commissioner didn’t say whether Neutral had raised $205 million.

Crump said he didn’t know whether the general contractor was owed money and added there was some speculation surrounding the relationship between the contractor and the developer. The two would continue working together on next steps, he added.

The commissioner said he expected Neutral to continue to communicate with the city about the project status, and talk with lenders, contractors and potential equity partners. He said his and the mayor’s expectation was the project would be built to completion, and added “We’re not going to see an empty site for months and months.”

The project doesn’t use any public funding from the city and Neutral funds construction through equity, loans and individual investors. The developer hasn’t reached out for financial assistance, but Crump noted the DCD has new guidance on workforce housing for developers. If Neutral wanted to shift its unit mix to include workforce housing units, there could be discussions about tax-increment district funding, he added.

The plan would ensure that the risk remains with the developer, and the DCD would support the developer with permission from the council, Crump added.

Neutral officials weren’t present at Monday’s meeting. The developer didn’t immediately respond to a request for comment about the status of the construction site.

The DCD selected Neutral’s proposal to redevelop the city-owned parking garage for the Marcus Performing Arts Center. Neutral submitted a proposal with mixed-use, mass timber proposal featuring hundreds of housing units and hotel rooms. The project was valued around $700 million.

Bauman wants the DCD to issue a new request for proposal for the parking garage following the pause at the Neutral.Edison project. At the same meeting, the commissioner asked for time until Neutral could sort out its issues at the Edison site. The committee held off on a vote for DCD to prepare a new request for proposals.