Cedar Rapids City Council pleased Westdale Mall has become ‘major economic hub’

CEDAR RAPIDS — The city of Cedar Rapids is working to amend its agreement with the developer undertaking Westdale Mall’s transformation to allow the developer to tap into a reserve fund created when loans associated with the project were restructured.

In 2018, the City Council signed off on restructuring loans for the mall’s redevelopment into a mix of shops, housing, dining, offices and hotels. The $90 million transformation of the 1979-built mall began in 2013.

Specifically, the developer secured a $21.5 million loan. That was used to pay out existing loans and retired a $5 million city bond.

A reserve fund of $2.28 million was established from the loan proceeds. This fund provides payment of any debt shortfall payments above the semiannual tax increment financing payments that service the loan. The fund amount represents the highest annual debt service payments for the loan.

Under a term sheet outlining deal points the council approved Tuesday, city Economic Development Manager Caleb Mason said the proposal would adjust financial arrangement with a proposed schedule to reduce debt service reserve and surplus funds based on an incremental taxable value increase.

“As that incremental taxable value increases over time, essentially the city’s risk decreases, and it would allow the developer to have access to those debt reserve funds,” Mason said.

The reserve funds would be released in a process aligning with city assessments, which are sent by April 1, to make adjustments. The reduction to the debt service reserves would be aligned with that schedule and in accordance with the lender’s release of funds.

The developer would have to use those reserve funds to pay either property taxes or development-related expenses, Mason said.

Each year, the developer would have to provide a statement detailing the previous year’s construction activities to quantify what will come online as well as anticipated construction for the current calendar year.

The site’s 2022 assessed value is $62 million — an increase of $54.6 million over the predevelopment value, Mason said.

Currently under construction are Home2 Suites by Hilton, Boulder Tap House, Take 5 Oil Change and 11,000 square feet of mixed-tenant commercial space. The developer also has sold additional properties for development by others.

Todd Nelson, executive vice president and chief financial officer of Frew Development Group, recently estimated the whole redevelopment will be complete within the next two to five years. Its completion depends on what offers come in on the remaining four lots.

Council member Ashley Vanorny — who represents District 5 covering much of the southwest quadrant, including Westdale — said the retail market has shifted significantly since the site’s redevelopment began, and the community needed to move beyond the original images proposed.

Vanorny said she hoped to see reduced parking spaces, but felt the residential development occurring on the site will help strengthen the Westdale Area Neighborhood Association and overall walkability.

“This is a major economic hub,” Vanorny said. “The success or failure of it is something that has weighed on a lot of people in these homes.”

Council member Dale Todd said this venture was initially risky, but has been a success.

“It’s been refreshing to see growth in that quadrant of town that at times we’ve been ridiculed for it, but there are a lot of other communities where parcels of land like that are simply sitting empty with no future in terms of development,” Todd said.

The amended development agreement is expected to come to the council this month.

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