116 3rd St SE
Cedar Rapids, Iowa 52401
CEDAR RAPIDS — The historic Guaranty Bank building and Old World Theater property is now listed for sale as efforts to transform the buildings into two hotels and restaurants as a “cornerstone” project in the heart of downtown Cedar Rapids have faltered, the potential developer said Monday.
“That one specifically does not appear to be on the horizon,” Mike Whalen, president and chief executive officer of the Heart of America Group, said of his proposal that called for an approximately $50 million investment to restore the buildings on most of the block at Third Street and Third Avenue SE.
“ … In the end, there was maybe a difference of opinion with the owner as to the value of the property that could not be resolved.”
GLD Commercial lists the selling price at $3.1 million for the property, which was built in 1895. According to the listing, the buildings total 101,302 square feet on 1.59 acres. Guaranty Realty still owns the property.
“It’s an important site,” City Manager Jeff Pomeranz said. “We know that there have been several companies that have been talking to (the owner) and GLD about the Guaranty site and we certainly hope that it’ll be redeveloped in the near future. In the meantime, we’ve had interest from other hotel developers for the downtown area, such as the First and First West site” at First Avenue W and First Street SW, under construction as an entertainment destination.
Adam Gibbs, vice president of GLD, said the property has been marketed for about 90 days locally and regionally, and there is a “fair amount of interested parties” so far considering some kind of historic tax credit redevelopment.
It’s not yet under contract, Gibbs said, but GLD has received a couple letters of intent and engaged in conversations with a few potential developers. He said those interested parties — a mix of local and regional developers — have indicated a potential to put in a hotel in a portion of the property and most likely a housing element.
“I think they see the significance in both the location of this property downtown and that it makes up most of that city block,” Gibbs said. “The building itself, primarily the Guaranty Bank building, has some historical significance here in town. I think for those reasons, it’s really helped capture attention of some folks who aren’t already doing business in Cedar Rapids.”
Project ‘teed up’ before pandemic
Whalen said he and the city had the project well teed up before COVID-19 upended business as usual in March 2020. With leisure and business travel grinding to a halt for months, he said the pandemic “decimated my company for a while.”
The Guaranty Bank project envisioned about 200 additional hotel rooms, which Cedar Rapids officials say are needed to attract larger conventions at the nearby Alliant Energy PowerHouse convention complex and to draw visitors to downtown businesses.
“We know that there’s a need for another downtown hotel and there has been for quite some time," Whalen said.
The proposal called for the 78,500-square-foot Guaranty Bank Building, 222 Third St. SE, to undergo a $20.3 million transformation into a Johnny's Italian Steakhouse on the first floor and 75 to 80 guest rooms on floors two through six, branded as Courtyard by Marriott.
The second part of the proposal called for redeveloping the vacant parking lot in the 300 block of Third Avenue SE. A $30.5 million, nine-story, 84,000-square-foot hotel was proposed to be built there, 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 was slated to be an AC Hotel by Marriott, plans envisioned a restaurant and bar called The Republic and 1,500 square feet of event space.
The World Theater was not addressed in either agreement, but Whalen has said he was exploring potential third-party funds to rehabilitate it.
The scale of the Guaranty Bank project was broad, Whalen said, and the remaining work to be done with regard to the historic elements “was a heavy lift, to say the least.”
Gibbs said the property is structurally sound with no major structural issues to the GLD staff’s knowledge, but the buildings that make up the project are all dated.
“I think regardless of who goes in, just about every interior surface is going to have to be redone,” Gibbs said.
City Council member Dale Todd, whose District 3 includes downtown Cedar Rapids, said the project is difficult to embark on.
“There is substantial risk for any developer to want to tackle this project,” Todd said. “Our downtown commercial landscape is evolving as we speak, and there is always an extra element of risk when you get into an old building like the Guaranty.”
The Iowa Economic Development Authority had awarded the developer a $1 million redevelopment tax credit, but the project never secured state historic preservation tax credits.
The Guaranty Bank project was initially included in Cedar Rapids’ pitch for state Reinvestment District funds. But after the IEDA awarded $9 million to divvy up across multiple downtown projects — less than the city’s initial request of $39.5 million — city officials said the Guaranty Bank project and developer Steve Emerson’s proposed high-rise near the Paramount Theatre weren’t far enough along to receive a slice of the funds.
‘We want to be in Cedar Rapids’
Whalen said he has recently had discussions with city officials about projects at other sites that might be feasible in the downtown area. He declined to disclose specific details, including potential locations.
“There are different options they want me to pursue, and I’m working with them on that,” Whalen said. “It might not be exactly the same project that we had before, but we want to be in Cedar Rapids.”
Now, Whalen said his company is experiencing a record year. Leisure travel has soared since the early days of the pandemic, though business travel hasn’t quite returned to pre-pandemic levels, so he hopes to see revenues return to normal by mid-2023.
Still, supply chain issues and cost increases have dramatically affected projects, Whalen said, while his company has housing projects underway in Des Moines and Chicago.
Todd said the city will “undoubtedly” have to kick in tax incentives to make a project feasible at the Guaranty Bank site, or else the building will continue to deteriorate. He said the city should bring together some of its larger developers to explore options.
“Any successful downtown has a healthy mix of new and old historical,” Todd said. “It would be a shame to lose one of our linchpins because of a tepid response from the development community. … Right now there are no good options. We need to figure out something that makes sense.”
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