Cedar Rapids Council Approves Westdale Renovation Plan

By Rick Smith, Reporter

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By Jay Knoll

CEDAR RAPIDS, Iowa — The City Council on Tuesday sorted through the risks before unanimously approving City Hall incentives for the $90-million plan to transform the long-beleaguered, half-empty Westdale Mall into a new commercial/residential center around the existing anchor stores.

The largest of the risks comes at the start, a $5 million upfront grant to permit developer John Frew and his Frew Development Group to demolish much of the existing mall and prepare the 71-acre site for new construction, Joe O’Hern, the city’s executive administrator for development, told the council in a lengthy discussion of the Westdale project at Tuesday’s council meeting.

O’Hern explained that the city rarely provides upfront grants for development project, but he said the Westdale redevelopment project would not have gone forward without the upfront money.

The city also provided upfront money to build a parking ramp for the Physicians’ Clinic of Iowa’s new medical facility, which opened in April, O’Hern noted.

In both the Westdale and PCI projects, the City Council will recoup the upfront costs from the increased revenue from property taxes — an incentive called tax increment financing — that comes to the city because of the increased value that comes with investment in a project.

O’Hern said the Westdale project will need to see $17.5 million in private investment for the city to recoup its upfront costs. In a worst case situation, where there is no investment by the developer, the city’s $5 million will still have prepared the site for future development, O’Hern noted.

In total, the council-approved development agreement with Frew Development Group LLC calls for the city to return to the developer 100 percent of the incremental increase in property-tax revenue from the project for 12 years, which may amount to $20 million, the city estimates. Part of that amount will stay with the city to cover the initial $5 million grant.

Council members Pat Shey, Kris Gulick and Scott Olson all asked O’Hern questions, wondering what the city’s recourse might be should Frew Development Group default on the agreement.

O’Hern said the property owner, which is a group of investors led by local Realtor Scott Byers, could step in and find a new developer or the city might seek to attract another developer with the City Hall incentives still in place on the project.

"It’s not a slam dunk by any means, but it’s a good opportunity and a good investment for the city," O’Hern said.

He noted the city has built into the development agreement a requirement that a certain amount of investment must be made at certain periods over 10 years to continue the city incentives.

Council member Olson, a commercial Realtor, said the Westdale redevelopment project was "not the normal deal," but he added that many local investors have joined Frew in investing in the redevelopment project and so they have an interest in seeing it through, he said.

Council member Justin Shields noted that developer Frew — who is the city’s project manager on its hotel and convention complex project — has been in the city for two years all the while looking at the transformation of Westdale Mall as his next project.

"He’s not coming into this blind," Shields said. "He’s taking a chance and we’re taking a chance on a very good project."

Byers, the Cedar Rapids Realtor who purchased the Westdale Mall in December, told the council that the development agreement between city and developer likely would need "course corrections" over the life of the project, in which he said there could be hundreds of millions of dollars invested at the 71-acre mall site.

Frew noted that his firm, which unveiled plans at a public meeting last week, has signed contracts to lease the property for 80 years to develop and manage it.

"We’re committed to the project. We’re ready to go. And we’re not going to waste any time," he said.

After Tuesday’s meeting, he said the demolition of the former Wards store, now vacant, could start next month.

Council member Chuck Swore said Tuesday that City Hall has been dangling incentives to developers like those offered Frew for six or seven years in hopes of finding someone.

Mayor Ron Corbett noted that Westdale Mall was valued at $25 million 15 years ago, and now it is valued at $7 million. The city has lost a huge amount of property-tax revenue for years on the property, he said.

"The community wants something done about this property," Corbett said. "They have wanted something done about this property for a long time. That’s why they always ask us, ‘What are you doing about Westdale Mall?’" … Now we have it. We’ve put it all together."

Corbett predicted that the project would surpass $90 million in investment.

"I think they’re going to blow the numbers away," he said.’.
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