Cedar Rapids developer looks to turn old Dragon building into $4.2 million mixed-use project

CEDAR RAPIDS — The long-vacant historic downtown property that formerly housed the Dragon Restaurant may be revitalized and turned into a $4.2 million mixed-use building, potentially serving as the precursor of another go at redeveloping the nearby Guaranty Bank site.

Aspect Investments LC, an entity of local developer Steve Emerson, was awarded city financial incentives this week and is seeking state tax incentives to pursue an adaptive reuse of the three-story brick building at 329 Second Ave. SE — which city officials hope will fuel investment at a site that has languished for years.

Emerson’s interest in the old Dragon building raises the prospects of another attempt to transform the Guaranty Bank block to the west, where plans for a massive renovation of the site into two hotels have faltered. City assessor’s records still list Guaranty Realty as the owner of this building, as well as of the Guaranty Bank and Old World Theater properties off Third Street and Third Avenue SE.

GLD Commercial last summer had listed those properties and an empty parking lot for sale together, but the listing no longer appears to be online. Mike Whalen, president and chief executive officer of the Heart of America Group, had proposed an approximately $50 million investment to restore the Guaranty Bank buildings until that endeavor was put on ice amid the COVID-19 pandemic.

Emerson said he still is exploring whether he can make a project work at the Guaranty Bank site. Depending on how financing comes together, he said there is a possibility of tackling both projects — the Guaranty Bank and old Dragon building — or perhaps just one of them. He did not answer whether he had purchased the whole site.

“We’re trying to evaluate it,” he said. “We’ve got a couple ideas. … We like our old buildings.”

The Second Avenue SE building is where the Dragon Restaurant — long Cedar Rapids’ only Chinese restaurant — was located for 55 years. It most recently held the Hazzard County saloon until the business moved across the street in 2018.

The 14,400-square-foot commercial building would be transformed into 13 apartments on the second and third floors: five studio, seven one-bedroom units and one two-bedroom unit. The first-floor commercial space would be taken up by a tenant who provides fitness coaching, Emerson said.

The project will adhere to historic rehabilitation standards, honoring the building’s history. The spelling of the building’s name has varied over the years, but records show it was referred to for the longest period as the “Muskwaki” building, which became its historical name. It was built in 1897 by Ben Heins and designed by W.A. Fulkerson, who wanted to honor the Meskwaki Native American tribe.

The Cedar Rapids City Council on Tuesday approved a local match needed to apply for the state workforce housing tax credits — a 10-year, 100 percent reimbursement of the increased value of the project. The project will generate an estimated $514,000 in taxes over a 10-year period, of which $380,000 would be reimbursed.

This project was among 10 overall seeking workforce housing tax credits from the Iowa Economic Development Authority, which is anticipated to make awards in August.

Without a mix of local and state tax incentives, Emerson said it’s unlikely this project can work. He also plans to apply for state brownfield/grayfield reinvestment tax credits later this year, as this project needs “lots of love.”

The interior especially is in pretty dire shape, Emerson said, but it’s laid out nicely to be turned into housing. He plans to add an elevator and staircase to make it safe and code compliant.

The residential units could be market-rate housing or possibly done in conjunction with Foundation 2, which is taking over the nearby Witwer building as its headquarters. Emerson said he is in discussions to determine if the organization needs additional housing for youth transitioning out of foster care.

Complying with the standards of the State Historic Preservation Office of Iowa will be an exciting challenge, Emerson said. His team is looking to keep intact the building’s original character, including elements such as a historic glass wall, while still fireproofing and soundproofing it to make it suitable to be used as housing.

“It’s got some charm, it’s just hidden in the water stains and the rotting away of the building,” Emerson said.

Council member Dale Todd, who represents District 3 that encompasses downtown, said this redevelopment would likely be a heavy lift, and he applauded the developer for taking steps to repurpose the building.

“It's languished out there for 30 years and being able to maintain the historical context of the building, I think is a huge win for all of us,” Todd said.

Council member Scott Overland said the building has gone without significant investment for years, though the exterior has interesting brickwork.

“It'd be great to get that not only in great shape in the downtown area but also provide some additional affordable housing,” Overland said.

Agreeing this adaptive reuse would be a “heavy lift,” Mayor Tiffany O’Donnell said this is courageous development that “aligns so much with what we're trying to do as a city.”

“Talking about what endures, this is going to be character that's consistent with our downtown,” O’Donnell said.

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