Cedar Rapids Council backs $15 million Smulekoff’s redevelopment

CEDAR RAPIDS — History got only good news Tuesday at City Hall.

First, a recommendation from the city's Community Development Department to demolish the 128-year-old Knutson Building was put on hold as the City Council opted to delay its decision on the structure's fate until it can hear from the city's Historic Preservation Committee.

On a second front, the council unanimously directed the city manager to negotiate a development agreement with local developer Steve Emerson, whom the city picked from among six developers to buy and transform the former five-story Smulekoff's Home Store, built in 1904, for a new future.

Afterward, Emerson said he expects to begin the $15 million Smulekoff's project within a couple of months.

He said his plan calls for the second and third floors of the building to become corporate headquarters of a company with 100 or more jobs that will be new to the city. Each of the top two floors will house 16 market-rate apartments, both one-bedroom and efficiency units, which will target young professionals as tenants. Part of the fourth floor may also be used as office space if needed, he said.

Emerson said the first floor of the Smulekoff's building will house an event center, which will host everything from corporate training sessions to weddings. He said a newer, one-story addition to the historic building will become indoor parking for tenants.

Caleb Mason, the city's redevelopment analyst, told the council that Emerson's proposal was the only one that featured a potential tenant to use part of the building as a corporate headquarters. For the most part, the other five proposals envisioned that the building's top four floors would become apartments, he said.

The potential tenant was identified to the city, but has not been publicly disclosed.

In answer to a question from Mayor Ron Corbett, Mason said a local evaluation team scored Emerson's proposal at the top, in part, because it featured an office use with 100 or more new jobs. The city will insist that Emerson find another office tenant from outside the city if the company that he and local economic development officials are negotiating with picks another location instead. City officials said the company also is looking at Dallas.

Council member Scott Olson applauded Emerson's idea for 32 'micro-apartments,' which Olson said are 'very hot' in Des Moines for young professionals.

Emerson will buy the building and invest $15 million into the project. In return, he will receive a 10-year, 100 percent property-tax break on the value of the new investment. The tax incentive is based on the premise that the city isn't getting the tax revenue now and wouldn't without the investment.

The council meeting had been shaping up as a possible death sentence for the Knutson Building, which sits next to the Police Department and the city's new $8 million riverfront amphitheater across the Cedar River from downtown. On Monday, Mayor Ron Corbett, who opposes the building's demolition, said he thought the majority of the council disagreed with him.

However, Tuesday morning, Jennifer Pratt, the city's development director, sought and won a delay of the council's vote after the Historic Preservation Commission asked for a chance to discuss the Knutson Building again and to make a recommendation.

The commission meets at 4:30 p.m. Thursday in the lower-level Training Room at City Hall. The City Council likely will return the matter to its agenda on June 9 or 23.

Council member Ann Poe, who is the council's liaison to the Historic Preservation Commission, said Tuesday she agreed that the commission should revisit the Knutson Building before the council makes a final decision on the building.

Tuesday night, Tim Blumer, a partner at KHB Redevelopment Group LLC, said he did not understand why the city's Community Development Department was recommending demolition of the Knutson Building rather than accepting his firm's proposal to redevelop it.

He said the building's historic value is 'irreplaceable' and said renovations could provide restrooms, a concession area and a waiting room for performers next door at the amphitheater.

Earlier Tuesday, Beth DeBoom, president of Save CR Heritage, said the delay on the Knutson Building was welcome.

'Let's hope that a little breathing room and public feedback yield some alternatives to imminent demolition,' she said.

Mark Stoffer Hunter, a historian at The History Center and a member of the city's Historic Preservation Commission, said he expected the commission to 'keep pursuing preservation of the structure to the end.'

In a memorandum to the City Council before its Tuesday meeting, the city's Community Development Department said the proposal from KHB Redevelopment Group LLC would require the city to give the firm an upfront payment of $750,000, sell the building to it for $1, provide a 10-year, 100-percent property-tax break and require the city to assume an estimated $100,000 in extra costs for the building's flood protection. A second option was to mothball the building, which has structural issues and has been deemed by the city as 'unsafe to enter.'

The city bought the building for $1.5 million in 2012 to move a salvage company out of the building, which sits next to the city's new $8 million riverfront amphitheater.