CEDAR RAPIDS — The developer behind the renovation of Westdale Town Center — formerly just Westdale — says refinancing two loans should allow construction to ramp up after being stalled for the past year.
Frew Development Group has been paying essentially out of pocket about $2 million per year on loans, company president John Frew said. Payments for a “horizontal loan” or a loan for infrastructure, such as roads, has eaten away capacity to build, he said.
“I can’t say how restrictive the loan was,” Frew said during a phone interview. “I expect to have many buildings under construction next year.”
Refinancing, which is not a done deal and still is being negotiated with an out-of-state lender, would require an amendment to an agreement with the city of Cedar Rapids.
This is because the city guaranteed a $11.5 million loan with Cedar Rapids Bank and Trust to keep the project going in 2015.
With the city’s blessing, Frew took out another a $2.75 million, third-party loan in 2017. He said he still owes about $12 million between the two loans.
The city was expected to be removed as guarantor of the loan in June 2020 if Westdale is current in its payments, has net operating income of $925,000 and has $500,000 in cash reserves in excess of the operating reserve.
It’s unclear how refinancing would affect that.
The city also fronted $5 million and committed tax rebates as part of a 2013 development agreement worth $11.7 million, which allowed him to recoup tax dollars through tax increment financing, or TIF, to put toward the project. TIF is a mechanism for sequestering a property’s increased tax revenue for use in a designated area.
A public hearing on the amendment is scheduled for Sept. 25, with a City Council vote potentially the same day. Casey Drew, the city finance director, said the city is required to give notice of potential changes to the agreement even if nothing comes of it.
“Nothing is happening with any of the Westdale TIF at this time, but what we have to do is notify the other public entities that are part of the TIF — the county, the school district,” Drew said.
“This is the required step we have to do at this time. It doesn’t bind the city to do anything and we might get to Sept. 25 and not take any action.” The Westdale redevelopment was an ambitious undertaking, and money has been an issue throughout.
The mall has seen its assessed value plummet to $7.3 million in 2013. Frew proposed a $90 million redevelop plan, tearing down much of the mall and rebuilding into a mixed use space with shopping, living and entertainment.
The redevelopment has brought a Ross Dress for Less, PetSmart, Burlington, a host of eateries and a hotel, among other new businesses.
However, the retail market nationwide has tightened, and just this year one of the anchors — Younkers — closed, cramping progress. The developer has had to make adjustments, such as eliminating green space, but it still is pursuing the mixed use vision, Frew said.
“We lost a year of progress in part because of headwinds because of the retail economy,” Frew said. “We lost Younkers, but our stores out there that we have as tenants … are doing well. But we are not adding and people can see that.”
First up, if refinancing goes through, Frew said construction would begin on a mall-side housing project this fall.
The four-story development, which is already designed and would be located just west of Tru by Hilton hotel along Williams Boulevard SW, would include 33 living units on upper floors and retail on the first floor.
Next year could see at least two and up to seven new buildings being constructed, he said.
Frew said he is working with a national lender on a “unique” type of loan that would allow him to use property tax revenue from TIF to pay down the loan, which in turn would free up money to build.
Westdale is generating “way more property tax revenue than we need,” he said, but the current loan doesn’t allow him to tap into that revenue.
Retailers are interested in existing buildings, he said.
“Robust” interest exists for the Younkers space — not taking over the full 100,000 square foot footprint, but parts of it, Frew said. Another company has interest in the second story of the old Von Maur space, which now has Ross Dress for Less on its first floor, he said.
Frew said he is not planning to sell Westdale. The property was put on the market a year ago — not expecting to sell but to test the strength of the redevelopment concept — and he took it off the market after a few low-ball offers, he said.
“Frew development will be in Cedar Rapids for a long time, and at Westdale for along time,” he said. “We aren’t going anywhere.”
Scott Olson, a City Council member and a commercial broker, noted the Westdale project has hit every city benchmark requirement and now has an assessed value around $60 million.
Olson said if the refinancing goes through, it would buy Frew Development a little more time to bring projects to the table and meet its obligation. That in turn would be good for the city because it could reduce its exposure.
“At that point, tax revenue would cover any issues,” Olson said.
Original Article from The Gazette, full text here: https://www.thegazette.com/subject/news/business/refinancing-westdale-loans-cedar-rapids-construction-can-begin-frew-development-group-younkers-closes-tif-westdale-town-center-construction-next-year-20180907