Cedar Rapids officials: Time to move ahead from Hy-Vee First Avenue store closure

Grocery market study, First Avenue East micro-area action plan to help guide efforts to replace crucial store in city’s core

Hy-Vee First Avenue Cedar Rapids
The Hy-Vee store at 1556 First Ave. NE in Cedar Rapids will be permanently closing June 23, 2024. IMAGE VIA GOOGLE

Cedar Rapids officials have reiterated their strong and emotional reaction to Hy-Vee’s unexpected decision to close the company’s grocery store at 1556 First Ave. NE, but are now generally indicating their intent to find a constructive solution to the upcoming closure – one that will help the surrounding neighborhood avoid becoming a “food desert” for its many lower-income residents.

The council amended the regular agenda for its May 14 meeting to include a presentation from city manager Jeff Pomeranz and community development director Jennifer Pratt on actions taken by the city regarding the store closure, announced by Hy-Vee May 9 in a move that “blindsided” city officials.

The store will close at 6 p.m. June 23, Hy-Vee officials have confirmed.

Mayor Tiffany O’Donnell said in the wake of the announcement, she had an “enlightening” telephone conversation with Hy-Vee leaders May 13.

“I think it’s safe to say they know a little bit more about the store that they closed and the city in which they closed it after this phone call,” she said. “As I shared with them, the question was really never about their books, or their financials. I don’t want to know their books. We know we wouldn’t have given them the incentives to come there if we thought huge profits were really the goal at the end of this … but from the shock that we felt to the absolute anger that we felt, now it’s just action, and really just a solution.”

Mr. Pomeranz outlined the city’s communications about the Hy-Vee store over the past year, beginning with a May 1, 2023 meeting at which Hy-Vee corporate officials first indicated their plans to close the First Avenue location, and confirmed that the lease for the store was set to expire.

“We had elected officials involved, some staff officials, and in our discussions with Hy-Vee, we were very clear that this was going to be a really significant negative blow to our community, and that in our minds closure of the store was unacceptable,” Mr. Pomeranz said. “They (Hy-Vee)  initially had a series of questions for us about the potential for investment of the property. And some of that didn’t have anything to do with the grocery store.”

As city leaders delved into the situation, they learned that Hy-Vee didn’t own the store building at 1556 FIrst Ave. NE, so most discussions thereafter were held with Net Lease Capital Advisors of Nashua, New Hampshire, which owned the store at the time and leased it to Hy-Vee.

After a series of discussions over several months, Mr. Pomeranz said – including a trip by city leaders May 22, 2023 to meet with Net Lease Capital leaders at the International Council of Shopping Centers (ICSC) annual convention in Las Vegas – city leaders confirmed Nov. 15, 2023, that Hy-Vee had signed a new five-year lease agreement for the First Avenue store.

Indeed, Net Lease Capital senior vice president Bill Flynn was quoted in the May 14 council presentation as writing to Cedar Rapids leaders in November, “I am pleased to announce that we have successfully extended the lease with Hy-Vee for another five years. Your work and support behind the scenes made a significant difference in getting this deal done.”

Then suddenly on May 9, Mr. Pomeranz said, Ms. O’Donnell received an “unfortunate” call from Hy-Vee officials indicating their plans to close the First Avenue store in Cedar Rapids, as well as stores in Waterloo and Davenport – all three located in economically disadvantaged neighborhoods.

“The look on the mayor’s face was one of disappointment and shock,” Mr. Pomeranz said. “We had been working through this entire process all along, and no one anticipated that we would just receive this notice from one of the legislative vice presidents informing us of this failure.”

The Hy-Vee property was subsequently sold in February 2024 to a different real estate holding company in a transaction valued at $2.28 million, according to Cedar Rapids assessor records.

Ms. Pratt outlined a pair of initiatives that are expected to help the city find a solution to the store closure. The first is a grocery market study, completed in September 2023, that focused on the community’s core area and the market’s strengths – a study that will now become “a tool when we go out to promote and attract (retail grocers) to our community.”

The second, just completed this month, is a First Avenue East micro-area plan, originally slated to be launched May 15 at the city Development Committee meeting – but accelerated to be unveiled at a stakeholder meeting at 3 p.m. May 14.

“We’re really wanting to identify those immediate needs that we know are going to be out there, and the resources that are already available,” Ms. Pratt said.

For her part, Ms. O’Donnell didn’t back down from her reaction to the announcement.

“What upset me specifically about this was the lack of consideration in letting us mitigate the challenges that were going to be dealt us,” she said. “In no uncertain terms, I said (to Hy-Vee) ‘you know, your challenges became our challenges in a 45-minute time period.’ I don’t like that. I don’t think you should like that. I think our community deserves more. This is the second-largest employer in the city that has without a doubt, through its employee ownership and its donations, contributed a ton to nonprofits and opportunities in our community. And unfortunately, as I shared with them, there’s a stain on that, due to the way that this was handled.”

City council member Dale Todd, who was instrumental in negotiating an agreement with Hy-Vee officials in 2001 to redevelop the First Avenue store, said he received what he termed a “911” message from Ms. O’Donnell on May 9.

“That doesn’t happen often,” he acknowledged.

He also noted that he had been working with Hy-Vee officials over the previous year, attempting to prevent the store’s closure.

“We were asked by Hy-Vee last year to keep this quiet,” he said. “And that was done particularly with an understanding of the trauma that it would cause to the neighborhood and their store employees, if they found out that Hy-Vee was even considering closing the store. As a city, we’re not exactly great at keeping secrets but this is one that we did keep. These are sensitive issues, and we did a d–n good job of doing our due diligence, doing what the other party asked us to do.”

He also defended the 2001 deal the city negotiated with Hy-Vee, which included $975,000 for land, $376,000 for building construction, an $18,000 “contingency” and some “interim financing.”

“It was a little bit more than typical, because the cost of developing in the urban core was more than Hy-Vee buying a farm field and developing out there … It was controversial back then, but in terms of looking back it was the right thing to do. And I have confidence in the team and the leadership in getting to a point where we’ll have some options.”

Council member Ashley Vanorny noted that she’s long been concerned about food insecurity in the city’s core neighborhoods, and that sustainability has been a key part of city development planning in recent years.

“We learned a lot from the derecho about how quickly the bottom could fall out and destabilize a community, “ she said.”A lot of the practices that you’ll see in our strategic plans talk about having walkable and accessible fresh foods … to see Hy-Vee destabilize these communities with their actions is really concerning to me. Personally, I feel like it’s time for a better partner who understands the industry that they’re in, and that’s the industry of serving people. Maybe it’s a bit controversial, but I say that because they’re divesting from, and honestly abandoning, the most complex neighborhoods in Davenport, Waterloo and Cedar Rapids … (but) I also feel confident in my council colleagues, given the work that the discussion that we’ve had, to take this seriously to rapidly implement processes so that we don’t leave anybody hanging, because we can’t. We are committed to not allowing that to happen, because that is what Cedar Rapidians deserve.”

Already, city leaders are considering a myriad of options to replace the Hy-Vee store and its crucial neighborhood functions, including a walkable location and a full-service pharmacy.

Mr. Pomeranz confirmed that city officials continue “working and communicating” with Hy-Vee.

“We certainly have the goal of keeping the store open,” he said. “But we also know that it’s going to be extremely difficult, based on what we’ve been told by Hy-Vee.”

He said that the city has “at least one meeting set up” with a grocery company, “so we’re looking forward to that.”

He also noted the possibility of partnering with a local nonprofit agency to establish a new grocery presence at the First Avenue site, similar to the partnership with Matthew 25 that led to the opening of the Cultivate Hope Corner Market on Ellis Boulevard NW in April 2022.

Ms. O’Donnell said she’s now prepared to help the city move forward.

“We will find a solution,” she said. “We’re going to need, as a community, to move past that ugliness, for lack of a better word. When used I use the word abandoned, I actually meant it, and I reinforced that with leadership. That’s exactly how I felt. (But) we have got to move beyond that to that place of hope, to that place of solution. We are on it.”