Cedar Rapids counters Westdale request for cash with a loan guarantee

CEDAR RAPIDS — City Manager Jeff Pomeranz said Monday the city's Westdale Study Committee has proposed a counteroffer to keep the $90 million-plus Westdale Mall redevelopment project moving ahead without acceding to the developer's request for more cash.

The committee's proposal will allow developer John Frew to obtain a loan in phases from a Cedar Rapids bank for $11.5 million instead of obtaining that amount in upfront city money because the city will guarantee the loan, Pomeranz said.

'This is a mechanism that gets Frew his money, provides reasonable protection for the city, and allows the project to continue to move in a positive manner, which I think is important,' Pomeranz said.

The Westdale Study Committee's proposal will be presented to the City Council on Tuesday, at which time the council will be asked to give the city manager permission to amend the city's development agreement.

Before the city makes good on its loan guarantee, Frew would be required to use revenue from several other avenues. These include property tax revenue being returned in the first few years of the project in trade for his investment, his share of revenue from the sale of any lots on the Westdale property and ongoing revenue from Westdale tenants.

"This is a mechanism that gets Frew his money, provides reasonable protection for the city, and allows the project to continue to move in a positive manner, which I think is important."

- Jeff Pomerantz

Cedar Rapids City Manager

In addition, Frew must create a reserve fund so money can be drawn from it to pay the bank loan. He and partner Todd Nelson must make a personal commitment to pay the bank loan.

If for some reason, the city must pay on the loan, the city will take over the land lease on the property, Pomeranz said.

The proposed deal also extends the life of the property-tax break in his existing agreement with the city on the Westdale property from 14 years up to 20 years. The tax break — called tax increment financing — allows Frew to keep what he would pay in the incremental increase in property taxes over the period that is brought about by the investment.

Pomeranz said Frew and Cedar Rapids Bank & Trust Co. have agreed with the outline of the city committee's proposal.

Westdale Mall had been in decline for a number of years when Frew and Realtor Scott Byers stepped forward in December 2012 to bring new life to the long-failing Westdale Mall.

Byers, a real estate agent at Gibbs Lamb Drown Commercial, led a group of local investors in buying the 72-acre, 33-year-old, half-empty mall from two out-of-state owners. Frew then took on the job of transforming it into a $90-million-plus mix of retail, office and housing.

The mall no longer exists. All of the mall but three of the mall's four anchor spaces have been demolished, and J.C. Penney and Younkers continue to operate in what are now stand-alone stores without a mall connected to them.