Business

New faces, old land spark downtown Cedar Rapids development surge

Decade of major public works projects gets the attention of investors

The World Theater building is seen Wednesday from an upper floor of the former Guaranty Bank building in downtown Cedar Rapids. Heart of America Group plans to renovate and redevelop the 300 block of Third Avenue SE that includes the building. (Liz Martin/The Gazette)
The World Theater building is seen Wednesday from an upper floor of the former Guaranty Bank building in downtown Cedar Rapids. Heart of America Group plans to renovate and redevelop the 300 block of Third Avenue SE that includes the building. (Liz Martin/The Gazette)
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CEDAR RAPIDS — After a decade of major public infrastructure projects, Cedar Rapids is experiencing the next phase of a post-2008 flood renaissance fueled by private investment, a host of new faces and action on long vacant or underused land that could transform parts of downtown with new and repurposed buildings, an influx of urban housing and public amenities.

Mike Whalen, a hotel and restaurant developer who ran for Iowa’s 1st Congressional District in 2006, is among the new investors and the man behind a $51 million plan to renovate the historic Guaranty Bank Building and adjacent World Theater. The site would become home to a boutique hotel and also a modern hotel — repurposing a block that had been half surface parking.

“We invest in the future,” said Whalen, whose Heart of America Group has offices in Des Moines and Moline, Ill. “We are not flippers. We are holders. We design, build and operate. A $50 million project is big for us. It’s big for anyone. We are not going to go into a community that is not in an ascendant position.”

Cedar Rapids has 21 projects in the downtown area of at least $10 million each, totaling $333.4 million, completed in the past three years, under construction or in negotiations for public incentives, according to a report created by the Cedar Rapids Metro Economic Alliance.

Not included is redevelopment of the vacant former casino site at First Street and First Avenue SW, which Indiana suitor Flaherty & Collins predicted represented more than $50 million in investment; the long dormant Banjo Refrigeration block just east of the Cedar Rapids Public Library, which has drawn interest from a separate developer; or the $20 million privately-led recreation initiative called ConnectCR, which would restore the urban Cedar Lake and create an iconic pedestrian bridge over the Cedar River.

“I think these sites, Cedar Rapidians have gone by and said, ‘Why doesn’t somebody do something with that?’” said Cedar Rapids City Manager Jeff Pomeranz. “I think we’re seeing a lot of those kinds of sites getting redeveloped.”

When looking citywide, the number of projects above the $10 million threshold expands to 37, worth more than $1 billion, across a variety of sectors including housing, industrial and commercial projects.

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Cedar Rapids Mayor Brad Hart noted in his State of the City address last week that construction permits jumped 55 percent in 2018 to $376 million — an all-time high for the city.

Longtime business staples also have stepped up. Those include Cargill, which is undertaking a $37.6 million plant expansion; United Fire Group, which has $33 million worth of downtown projects including renovation of the 10-story American Building; and CRST, whose $37 million, 11-story office tower finished in 2016 was one of the first major private investments after the 2008 flood.

Josh Seamans, vice president of Cushman & Wakefield Iowa Commercial Advisors, is helping establish an Eastern Iowa presence based in Cedar Rapids for one of the world’s largest commercial real estate brokerage firms. He said debt rates remain historically low and city leaders have been “very proactive” in trying to promote development.

“To be honest, the flood gave us a clean slate for development in that area,” Seamans said. “As tragic as it was, it allowed for developers to come in and re-imagine that area and make improvements. It’s been a snowball effect where we had a few projects come out of the ground, which has spurred new projects.”

Dave Swenson, an Iowa State University economist, was less exuberant.

He said Cedar Rapids is in the middle of the pack for economic health among Iowa’s large metros and is lagging in terms of redeveloping its downtown. Cedar Rapids now is benefiting from a population shift favoring urban living and out-migration from rural areas, he said. He questioned the wisdom of heavy public incentives to lure private development, as well as the city owning the DoubleTree Hotel and Convention Center.

“You are not behind the curve, it’s just your turn,” he said. “The economy is not growing that fast, but the population is growing. It is probably a relatively safe investment. And, the city is finally starting to deal with downtown flood issues. That also sends a message to market.”

Whalen credits public investment and a pro-development city leadership team as catalysts for an “explosion” the likes of which Cedar Rapids had not seen.

“There is really a positive mentality right now, and that is the kind of community we want to be in,” Whalen said. “The commitment to the public infrastructure projects showed the private sector that community leadership was there and committed to rebirth and renewal of the core of the community.”

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In the years after the flood, city leaders invested more than $100 million in building a new public library and renovating Greene Square, the DoubleTree Hotel and Convention Center, McGrath Amphitheatre and NewBo City Market.

City Council member Dale Todd, whose district includes downtown, NewBo and Kingston Village, describes these projects as anchors around which much of the development being seen today has grown.

“There’s synergy where mass creates more mass and the mass starts with the anchors,” Todd said. “If you look at the anchors, we are seeing growth in concentric circles expand around them.”

Pomeranz said the city has tried to position itself for development.

One of the biggest factors was creating a standard set of public incentives so a developer knew a certain type of project in a certain location qualified for a specific tax rebate. It is no longer a matter of negotiation — just a straight forward understanding of how much public participation to expect.

The predictability is essential, he said.

The city also has slowly sold off property it bought out after the 2008 flood, seeking to not inundate the market, and set parameters for how it would be used and look.

For example, the city opted to work with local developer Steve Emerson and his planned $73 million, 25-floor high-rise with a ground-floor grocery store on a key city-owned block near the Paramount Theatre.

Pomeranz said city development leaders, including himself, Community Development Director Jennifer Pratt and Economic Development Manager Jasmine Almoayed, also have cultivated relationships that helped lay the ground work for some of the projects and new players emerging today, he said.

Other investments also have made a difference. A $6 million downtown lighting project is replacing streetlight fixtures, and over several years the city has upgraded the riverfront, which helps better present the city to prospective developers, Pomeranz said.

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Almoayed said some of the efforts, including an online tool kit for developers, has helped Cedar Rapids appear on more radar screens nationally.

Some of the new players come with solutions for properties that long presented obstacles to redevelopment, she said.

“We’re getting to a point now where we’re seeing the footprint of the greater core area of the city expanding so much,” Almoayed said. “It’ll be exciting to see what happens with the MedQuarter District.”

Pratt added that the College District, Kingston Village and the connection of Sixth Street NW to Ellis Boulevard, which will open up the near northwest quadrant, as also holding promising opportunities.

Ron Corbett, the former Cedar Rapids mayor and now business retention and expansion strategist at the Economic Alliance, said the 2008 flood aside, it took a while to climb back from the late 2000s recession.

Projects that got “deferred and deferred and deferred” created a pent-up demand that is starting to be met. That has lead to a “positive feeling about the future of the economy,” he said.

Recent progress in hammering out a long-term plan to pay for and build an extensive flood control system for the east and west sides of the Cedar River downtown also has fostered assurances of commitment to the downtown.

Some properties that sat stagnant had changes in ownership, which in some cases allowed new opportunities, Corbett said.

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“Every community has underutilized or underdeveloped properties,” Corbett said. “One thing that has certainly helped, after the city became a major property owner from the flood buyout, the city strategically put those properties out to bid. That competition really got developers thinking and then people started looking at other land they could develop.”

A group called 2001 Development Corp., which is led by longtime local business leaders, has served as a quasi-land bank, keeping prime real estate in “friendly hands,” Corbett said.

That is to say 2001 acquires and holds land until a project comes along that matches the city’s vision, Corbett said.

For example, the firm was behind the purchase of the Dupaco Community Credit Union property on the Banjo block, and held property eventually used in a land swap of what became the new City Hall and new federal courthouse, he said.

Aside from Whalen and Flaherty & Collins, other new faces include Richard Sova, a Chicago area developer who is working on a $23.7 million, three-story apartment complex with commercial space at the old Loftus Lumber site on the 300 block of Ninth Avenue SE. The property in the heart of the NewBo District had sat for years as a largely unused parking lot with a few warehouse buildings in the back.

Closer to the city center, Iowa City developer Jesse Allen made a splash when he proposed a $100 million, 28-story tower a few years ago. The project didn’t come to fruition, but Allen purchased two single-story office buildings on First Street SE for $2 million and still is expected to redevelop those.

Nate Kaeding, the former Iowa Hawkeye and San Diego Chargers kicking standout and Iowa City native, also has turned his eyes north. Kaeding, who has been involved in several developments and business ventures in the Iowa City area, was part of the Built to Suit development team that secured city land behind Dash Coffee Roasters for a $6.3 million, five-story apartment complex with a green roof. He’s also exploring an assisted living development on Center Point Road NE and massive residential development off Wright Brothers Boulevard SW.

Kaeding said he sees a strong lease and rental market and healthy indicators for the future. The population slowly is growing and downtown has a solid employment base, he said. Growth in Kingston Village and the MedQuarter is promising, as are downtown amenities like the McGrath Amphitheatre, access to the Cedar River and the commitment to flood protection, he said.

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“They’ve done an amazing job building amenities downtown,” Kaeding said. “It is a really attractive place to play, and I think that’s why you are seeing so much interest.”

l Comments: (319) 398-8310; brian.morelli@thegazette.com

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