One of the key players in discussions over a controversial city-backed Edgewater Hotel expansion has also been one of the quietest.

But National Guardian Life, a small mutual insurance company founded here in 1910, owns a crucial piece of lakefront real estate that apparently makes the entire $109 million venture feasible.

If the deal goes forward as planned, the insurer stands to collect $3 million - nearly three times the assessed tax value - for a 20-foot-wide strip of land along Wisconsin Avenue. The land is needed to make room for a new 11-story hotel tower that is part of the Edgewater Hotel makeover envisioned by the Hammes Co,, which would develop the site.

The developer is proposing to buy roughly 24,000 square feet of land from two parcels owned by the insurance company. That works out to about $125 per square foot, arguably one of the priciest pieces of vacant downtown land in memory.

Hammes will pay another $5.5 million to buy the Edgewater property itself at 666 Wisconsin Avenue. That transaction would effectively close out National Guardian Life's ownership stake in the hotel, says Hammes Co. President Bob Dunn.

National Guardian - which posted profits of $19.3 million in 2007 and another $3.5 million last year despite the sour economy - has held a 30 percent ownership piece of the art deco Edgewater Hotel, an arrangement that dates to the 1950s. The Faulkner family of Madison, which owns the other 70 percent of the hotel, would also be bought out by Hammes Co. if the project moves ahead.

Headquartered in a six-story glass building at 2 E. Gilman St., National Guardian Life has long commanded the high ground overlooking Lake Mendota.

In an interview with The Capital Times, Company President John Larson says the company had not been actively marketing its valuable lakefront property but was willing to entertain an offer from Hammes. "We felt it was in the best interests of the city to help the project go forward," says Larson.

According to the Hammes application with the city for $16 million in tax incremental financing, one of the two parcels owned by NGL along Wisconsin Avenue is a 62,000-square-foot lot of undeveloped lakefront property at 530 N. Pinckney St., assessed for tax purposes at $2.47 million. Hidden by trees, the parcel has been eyed by developers for years, but the company has never moved forward on a sale.

"It seems like every 18 months or so we would get approached, and at one point we actually put out a request for proposals," says attorney David Walsh, one of the prominent local names on the National Guardian Life board.

The other NGL parcel at 2 E. Gilman is assessed at $9.24 million: $4.87 million for the glass office building, and $4.37 million for the 87,300-square-foot lot on which it sits.

Despite the hefty price tag, city officials have not blinked at the cost. TIF coordinator Joe Gromacki said in an initial analysis that the Hammes Co.'s nearly $9 million in land acquisition expenses were "not unreasonable" compared with other projects encountered recently.

While NGL would receive top dollar for its vacant land, a new hotel tower would cost the insurer a view of the lake - especially for its top-floor tenant, the Grant Thornton accounting firm. "If you get up high enough, you can see the lake, but the trees in front block a lot of the view," says Larson.

Officials from Grant Thornton did not respond to questions about losing their view or whether they would receive a reduction in rent from their landlord if the hotel tower were built.

Some architectural critics have suggested that instead of going up 11 stories with a new hotel, the developers instead should turn the building on its side, reduce its height and have it follow the shoreline. That scenario would require using the entire National Guardian Life parcel that runs from North Pinckney Street to Wisconsin Avenue along the lakeshore, a move Larson has not ruled out.

"I think it's fair to say we would consider any offers," says Larson, a second-generation president of the firm.

Hammes officials said Monday they were willing to consider some design changes to the project but were not pursuing additional real estate from NGL at this time. Hammes has said it would secure private financing for the balance of the project but has yet to reveal those details.

National Guardian has been involved in controversial real estate redevelopments before - albeit nearly a half-century ago. The construction of its headquarters building in 1963 took down the William F. Vilas house on the corner of East Gilman Street and Wisconsin Avenue, a mansion that Frank Lloyd Wright once called "the best house in Madison."

But for the most part, the company has stayed out of the spotlight.

It's also been very conservative with its money. The insurance company now holds more than $2 billion in total assets, with nearly $1.6 billion of that in bonds, according to its 2008 annual report. The rest of its assets are in a mix of mortgages, cash and short-term investments - with less than 5 percent in riskier stocks. "The company has never taken a lot of risks," says Walsh, a board member since the 1980s.

The company has been growing steadily over the past decade, however, largely through acquisitions and mergers. One of the bigger deals came in 1999, when it purchased Settlers Life Insurance Co. of Bristol, Va. - a deal financed in part with a $30 million loan from the state of Wisconsin Investment Board.

Perhaps its biggest challenge has been competing on basic life insurance policies with much larger firms, such as Milwaukee-based Northwestern Mutual, which counts $155 billion in total assets. To find a niche, the major product marketed today by NGL is a specialized form of insurance to cover the expenses of a funeral. So-called "pre-need" life insurance accounted for $161 million of $210 million in premium sales in 2008.

Insurance matters aside, Walsh thinks the Edgewater expansion will be good for both National Guardian Life's bottom line and the community as a whole. If nothing else, it would give the insurance company and its 180 employees better access to the lake and a chance to stroll on the grand public plaza that developers have pitched as justification for the proposed $16 million in taxpayer support.

"The bottom line is the Edgewater is a jewel that belongs to the entire city," says Walsh. "It deserves our support."