Welcome to Gorman :: News & Awards

His firm, Gorman & Co., 1244 S. Park St., has partnered with communities on projects that include historic restoration or housing for people with physical disabilities.

He recently announced a joint venture with Horizon DBM, a Verona developer of elderly housing, to start Five Star Management Services. The new company will oversee nearly 5,000 rental units developed by both companies.

Gorman, who earned economics and law degrees at UW-Madison, practiced law for about four years before starting his real estate development company in 1984. A federal tax-reform act two years later provided the opportunity for him to build and manage affordable housing by taking advantage of low-income tax credits.

The company builds about $30 million worth of housing each year and manages about 2,100 apartments after recently selling off about 500 units.

In the Madison area, Gorman & Co. is developing the 104-unit Avalon project off Verona Road near Allied Drive and a 300-unit condominium and retail project along East Washington Avenue. The company also is developing two West Side condominium projects, Crosswinds at Hawks Landing and Southern Hill along Mid-Town Road.

Q: What differentiates Gorman & Co. from other developers?

A: I think fundamentally we work in partnership with communities. What we try to do and our strategy is to go to communities and ask the key people within the community -- planning directors, mayors, alders -- if a developer ever asked them what they wanted done in their community, what would they say?

We do ask that question. First of all, you get shock because nobody ever asks them what they want done. It's almost always the developer deciding what they want and trying to push it through the system.

We typically are asked to do the more difficult projects in that community, either rebuilding a property that's considered troubled, building something new that acts as a catalyst to revitalize a neighborhood or doing something different that the community may have in mind. But it's almost always a partnership type of arrangement. I think that's a significant thing that sets us apart from most developers.

The other thing that sets us apart is our willingness and our inclination to deal with complexity both in terms of approval processes and financial structures to get things done. We're the largest user of the Section 42 affordable-housing tax credit in the state -- virtually however you measure that from the beginning of the program in October 1986 or on an annual basis.

Almost always there's some piece of financing that is local-government related whether its TIF (tax incremental financing), block-grant money or some other kinds of funds -- tax-exempt bonds. Virtually all of our financing packages are very complex.

Another thing that distinguishes us is we try to do niche development. What I mean by that is we've done artist loft housing in historic buildings. We've done affordable rental housing for physically disabled folks where the physically disabled are involved very early in the process. We ask and we listen: What would you as physically disabled folks like to see in the community where you would live?

Then we go to the broader community, the municipality typically, and we say here's a specialty housing need that exists in your community. We can deliver this, but here's what you have to bring to the table in order to accomplish that, whether it's a contribution of land, tax incremental financing or some other sort of soft money type of piece.

We did that in Kenosha, where Kenosha County sold us land for $1 to accomplish the construction of affordable rental housing for the physically challenged. There are other examples like that, but it's the specialty niche, complex type of deals that set us apart.

Q: What impact will the formation of Five Star Management Services have on the company?

A: Chuck Heath, who is the CEO of Horizon, and I have been friends forever. We've talked about whether it makes any sense for the two companies to do something jointly at any point. We've had a cooperative relationship for a long time where we've referred opportunities back and forth to each other.

But those kind of conversations segued into talking about property management and how both firms could do it better. It became very clear that if we joined our property management divisions, we would be able to create the critical mass in order to afford to have very talented people dedicated to property management who gave the kind of support to the front-line folks that's needed to really deliver the kind of service that ought to be delivered. So fundamentally what we think will happen as a result is that we'll have a much higher-quality property management capacity.

We were able to attract a guy named Bob Hanrahan to be the CEO of this new enterprise and will also be an owner of Five Star. He was a senior portfolio manager at a national pension fund advisory firm. He was in charge of evaluating, hiring and firing property management companies around the country. He's seen systems from a lot of different property management companies in terms of what works and what doesn't.

We'll have a full-time director of maintenance who will craft preventative maintenance programs for each of the buildings. The one capacity that I'm really excited about is we'll have a director of education that will run what Bob is referring to as "Five Star College," where we'll recruit interns that have an interest in property management. We'll have them work at least one summer and then if they like us, we like them, we bring them on as a leasing agent and then as an assistant manager and then as a manager all while they're getting different segments of education that allows them to build the skill set to really be a qualified and capable manager. To have the resources to support the front-line people in a first-class way is what I think Five Star will bring to us.

Q: How did you decide to focus your company on apartments and Section 42 housing?

A: I practiced law for four years and ... I represented developers and real estate people. In June 1984, I decided to leave the practice of law and go into the real estate business.

Shortly thereafter, the initial trial balloons of tax reform were floated by the Reagan administration. There was a question as to what would the real estate business look like post-tax reform because even the initial trial balloons indicated major changes. So when tax reform passed in October 1986, I had to make a decision as to what I would do under the new rules.

An analogy would be like if you were used to playing basketball under the current rules and all of a sudden you have to play with a square ball. I mean it was very different rules.

That tax-reform act of 1986 created this new affordable-housing tax credit, Section 42 of the Internal Revenue Code. I thought a small shop in the middle of the country that doesn't have access to large pools of capital might be better suited to try to figure out this complex new tax credit rather than trying to compete with people that were trying to generate income through formation of large capital pools that I wasn't really equipped to do.

So, that's what I did. I decided to focus efforts on learning and implementing projects using the new Section 42 tax credit. I worked with an outside builder and a group of broker-dealers to raise capital to invest in projects that someone else was building that qualified for the Section 42 tax credit.

It was interesting because back then. I remember going over and sitting down with WHEDA. I had a printout from my accountant that said I needed a certain amount of tax credits. They just said 'oh, well what do you need' and typed out a letter and signed it and that was it. I had the allocation of tax credits in one meeting.

Now there's this elaborate scoring process and you compete against all of the other developers that are interested. It's a different world.

Q: What are the plans for Gorman & Co.?

A: We're doing our first project in Illinois. We're rebuilding the original Moline High School right now. We're in the Fox River Valley, up in Sheboygan, but the bulk of our work is in the southeast part of the state. I think we're doing our 14th project in the city of Milwaukee. We've done two in Cudahy. We're in Kenosha.

In terms of growth, we'll continue to grow using the specialty product in the same methodology that we have. That's sitting down with mayors and planners and saying what would you like done and dealing with the more difficult projects. Geographically, we will expand, but not in any sort of radical way.

Having said that, though, we're always open to other opportunities. What's truly tempting is that the Gulf Coast states have received a special allocation of affordable-housing tax credits as a result of the hurricane damage. They've received a special allocation of 10 years' worth of tax credits to be used in the next three years. That creates an opportunity. On the other hand, there are huge obstacles for a Wisconsin developer to go to Mississippi and try to figure out how to do anything.

What's most likely is we'll continue working on our specialty niches like the housing for the disabled and the artist live-work loft housing.

We've proposed our second project that we call live-work lofts for the entrepreneurial class. There's a project under construction in Milwaukee right now called Park East Lofts where we have affordable apartments, but we also have business centers, office space and some apartments where people can use it as an office and a customer can access that space off the street. It's almost like a combination apartment-office, where someone who wants to be an entrepreneur can work into that status by utilizing the facilities where they live. That's been well-received and supported by the community in Milwaukee.

Executive Q&A
Gary Gorman President, Gorman & Co.
1244 S. Park St.
Employees: 145
Annual revenue: $70 million
Year started: 1984
Family: Wife, Mallory, and five children