Cedar Rapids unlikely to front $23 million for 28-story high-rise

CEDAR RAPIDS — City officials are dissecting the merits of three proposals for a new downtown high-rise, including a $103 million, 28-story tower that's the biggest ever brought to city leaders and also seeks the most ever in public assistance — $23 million up front.

A recommendation from city officials could come by the end of this week.

All three projects meet different needs for the downtown area — housing, parking and added property value — but they are different enough Cedar Rapids Mayor Ron Corbett said he hopes the two projects not selected don't just walk away.

'These buildings are different enough, all three could be viable in our community,' Corbett said. 'For those that don't win, let's look at other grounds in our community.'

While privately held, available land exists downtown, Corbett said. Several plots have been discussed for redevelopment over the years, such as a site near the library where the 'Banjo Building' sits or a parking lot near the Great America building, Corbett said. The city hasn't received requests for the vacant city land where some still hope to build a casino, and there's no rush to put it back on the tax rolls, he said.

Developer Jesse Allen's 28-story One Park Place with a boutique hotel, grocery store and rooftop restaurant quickly created a buzz due to its scale — it would be the tallest building in the city.

City officials haven't settled on a project, though.

Developer Steve Emerson has proposed the $33 million, 11-story Aspect building with a grocery store and health clinic, and developer Fred Timko filed papers for a $33 million, 14-story Avalon Sky Lofts with 116 apartments.

The building selected would replace a parking lot at the southeast corner of First Street SE and Third Avenue SE downtown. City Council is expected to select a proposal at its May 24 meeting.

Financing, housing

Jennifer Pratt, the community development director, said fronting money is risky in that it would require selling bonds to pay for it. The request is not necessarily a deal breaker, though.

'The city would rather not see upfront money and we try to avoid that,' Pratt said. 'It puts funds at risk. We have worked on many projects that have requested upfront money and found a way to do the project without it being upfront.'

Pratt said the only other project that received such upfront funding was when the city provided $5 million to help with demolition and infrastructure costs for the Westdale project.

The number of years it takes to cover costs typically takes precedence over dollar amount in evaluating projects, Pratt said.

'How fast can we pay it back, and how fast would we start collecting ourselves,' Pratt said.

Corbett agreed, noting, 'There's no way we'd be able to provide that up front.'

He noted the amount is about one-quarter of the city's $100 million annual general fund budget. However, he added, 'every deal has some level of negotiation.'

Financing plans and housing are some of the biggest differences in the proposals.

Allen estimates One Park Place will generate $3 million per year in taxes and the city would recover its $23 million in seven years. By comparison, the Aspect and Avalon projects seek a 15-year, 100 percent tax break.

'We wanted to make this most appealing,' Allen said. 'It is three times bigger in size of value, and double in height.

'When you look at that in terms of what we are asking compared to them, we are creating an immediate tax base for the city in year one. In year 15, we'd create an additional $24 million and they'd just be starting to make money.'

Allen, who hasn't worked in Cedar Rapids before but has built several structures in Iowa City, said he didn't set out to propose a 28-story building. It kept getting taller as business people asked to be included, which is evidence by the six letters of intent, he said.

'Early on in the discovery phase, we learned there was a much stronger economy in Cedar Rapids than it appeared, that's why we included all those letters of intent,' he said. 'We knew there was a big residential need, a need for a hotel, parking.

'When we started looking at needs, we kept finding more people interested and wanting to be in the building, so we added more floors.'

For housing, which is a defined need and a goal for the downtown area, Avalon pitched 116 apartments priced from $635 to $2,225 per month. Aspect would have 11 luxury condos with an average price of $450,000. One Park Places would have 90 condos ranging in price from $299,000 to $799,000.

A panel of 11 people including a banker, tourism official, architect, economic-development leader, two developers and five members of Cedar Rapids city staff are reviewing the proposals. They will make a recommendation on which project they believe is the best use of the site.

Caleb Mason, Cedar Rapids economic-development analyst who is in that group, said the panel will consider each project based on a series of objectives and a backdrop of city priorities. Is the project financially viable? Does it use the whole site? Does it promote economic development?

The recommendation will be made by a consensus of the panel, and they could notify applicants on Friday, he said.

'In this case, we are going to do a lot more due diligence than we have in the past just because it is a bigger scale than what we've done in the past,' Mason said.

Mason said a number of contingencies likely will be placed on whichever proposal is selected by City Council. An outside consultant could be brought in to evaluate the financials, he said.

He doesn't anticipate any of the projects would begin construction this year.

'We are bringing this to the starting line,' he said. 'There are a number of contingencies we'd have to work through. The deal isn't done until the development agreement is approved.'

The development agreement is the public contribution to the project.