116 3rd St SE
Cedar Rapids, Iowa 52401
CEDAR RAPIDS — A $50 million project to restore the historic Guaranty Bank Building and partially restore the Old World Theater into hotels — put in jeopardy for months by the COVID-19 pandemic — is getting another chance at life in the heart of downtown.
Cedar Rapids city officials and the developer with the Heart of America Group have revived talks to build two hotels under the Marriott flag on most of the block at Third Street and Third Avenue SE, hoping about 200 additional hotel rooms will support larger conventions at the nearby DoubleTree by Hilton Cedar Rapids Convention Complex and draw visitors to downtown businesses.
Developer Mike Whalen, president and chief executive officer of the Heart of America Group — which has offices in Moline, Ill., and Des Moines — said at the onset of the COVID-19 pandemic in March, when the first cases were confirmed in Iowa and businesses shut down for several weeks, the project was fast approaching the second phase of historic tax credit approval.
He said he had to inform the city the project needed to be put on hold for the time being, however, as business halted at his firm's hotels.
City Manager Jeff Pomeranz said the renewed discussions are in the early stages. Whalen and city officials spoke Friday in general terms of picking up work again and plan to talk soon in more specific terms.
The project still needs to go through various approvals through the Iowa Economic Development Authority to secure the historic tax credits.
'March, April of '20, we were looking at the project no longer having life, so it's just great news for the project and great news for the community and downtown,' Pomeranz said.
Now that talks are beginning again to advance the project, Whalen said he's hoping to resume work in 2021.
It would take 14 to 16 months to build, he said, so the new target completion date would likely be the end of 2022 or in 2023, pending the historic tax credit approvals.
'It was our hope that when the smoke cleared, and cleared in a positive way, which I think it's starting to very much so, I think we'll see the light at the end of the tunnel in a way that we didn't four or five months ago,' Whalen said.
The development agreement, which is set up in two parts, would return to the City Council for a vote with an updated timeline. Developers had hoped to start work on both projects by October 2019 and have them complete in 2021.
The terms for the Guaranty Bank Building, 222 Third St. SE, include a minimum $20.3 million investment and renovation and adaptive reuse of the 78,500-square-foot building, including a Johnny's Italian Steakhouse on the first floor and 75 to 80 guest rooms on floors two through six. This is slated to be a Courtyard by Marriott.
The terms of the second part include redeveloping vacant land in the 300 block of Third Avenue SE where a parking lot now exists. The agreement calls for a minimum investment of $30.5 million, construction of a nine-story, 84,000-square-foot hotel including a shared health fitness center on the first floor and 115 to 125 guest rooms on floors two through eight. On the rooftop of what is slated to be an AC Hotel by Marriott, there would be a restaurant and bar called The Republic and 1,500 square feet of event space.
The World Theater is not addressed in either agreement, but Whalen said he is exploring potential third-party funds to help rehabilitate it.
'I'm kind of excited about it. I really was enamored with the project and then the city was really excited,' Whalen said.
Council member Dale Todd, whose district encompasses the downtown area, said Whalen sees the growth potential in the relationship between downtown and bike trails with the ConnectCR project, a privately led effort to revitalize Cedar Lake north of downtown and build a pedestrian span called the Smokestack Bridge over the river south of downtown.
The Guaranty Bank block development is a complicated project with several layers of financing, Todd said, but Whalen is banking on the future of Cedar Rapids' downtown space.
'In times like these with an economy that's on the verge of a depression, this says something about the strength of Cedar Rapids that quality developers like Mike Whalen want to try to make things happen here in Cedar Rapids,' he said.
'Rock 'n' roll 2021'
By the time the Guaranty Bank block development comes to life, officials hope the economy will have rebounded from the pandemic and demand to return for hotel rooms and large events in Cedar Rapids.
Since the pandemic has disrupted large gatherings, Whalen said 'the problem with the hotel business is business.'
Leisure travel is not back to the same levels but has improved since March, he said. Whalen said he isn't seeing larger business travel revive yet as companies delay returns to office work and avoid congregate settings like conferences, though some smaller firms are coming back.
As experts race to develop a COVID-19 vaccine, Whalen said he anticipates business will pick up closer to pre-pandemic levels by the late first quarter of 2021.
'Rock 'n' roll 2021 is what I'm calling it inside my company,' he said of his expectations.
Ron Corbett, a business retention and expansion strategist at the Cedar Rapids Metro Economic Alliance, said the demolition of Best Western Cooper's Mill hotel near downtown left only the DoubleTree by Hilton, with 270 rooms, to support the conventions. Having an additional hotel downtown was anticipated to help with that moving forward.
COVID-19 has disrupted convention activity in 2020, he said, but added that 'eventually we'll get through this and we'll be back to hosting conventions and we'll be able to have larger conventions if the Guaranty project moves forward.'
Before the pandemic, Corbett said, many new hotel rooms came into the market on Highway 100, Edgewood Road, near The Eastern Iowa Airport and in Marion. The hotels have helped support additional demand from activity at the Prospect Meadows sports complex.
And the convention activity could help revive a local economy as Cedar Rapids businesses cope with the toll COVID-19 has taken on revenue.
Cultural organizations and not-for-profits grappling with dwindling revenue during the pandemic benefit from hotel-motel tax revenue the city takes in from overnight guests. Downtown restaurants and shops earn cash from workers who buy coffee in the mornings, grab a bite to eat on their lunch breaks or stick around to grab a cocktail after work.
Having a vibrant convention industry in Cedar Rapids to host state, regional and national events would be a boon for not only tourists, Corbett said, but for the community as it would attract business downtown once again.
'There's enough base activity to support the hotels that we have here in town, maybe not at the same level, but I think once business travel starts back up that we'll continue to see the strong demand for the hotel rooms — just not as strong as it was prior to COVID,' Corbett said.
Pomeranz said he thinks the Guaranty Bank project still makes sense in the long term, where the world faces an unknown 'new normal' after a COVID-19 vaccine, and expects the development will be a boon to the city's efforts to draw visitors downtown.
'Business is already coming back in many different areas in the hotel industry, and we think that's going to continue to improve, so I think it will be always be an enhancement to the DoubleTree,' Pomeranz said. 'It's just going to take a little bit of time.'
It will be a complicated development no matter what the COVID-19 situation is in the months and years to come, said city Economic Development Manager Jasmine Almoayyed.
City officials trust Whalen as the developer to think ahead, she added, while he makes investments amid uncertainty and building a hotel that works for the future.
'We're in the middle of it and there is no vaccine and there is no solution to the pandemic at this point, but it seems like all the greatest minds in the world are currently working on trying to get this problem under control,' Almoayyed said. 'You've got to hang onto some level of optimism that there will be a time in the not-too-distant future ... where it will once again be safe to hold conventions and (for) travel to pick back up again.'
Comments: (319) 398-8494; email@example.com