Cedar Rapids seeks to modify agreement with Westdale redevelopment firm

Cedar Rapids officials are in the process of modifying its agreement with Frew Development Group for the ongoing redevelopment of the Westdale Town Center, including a plan to reduce a debt service reserve fund for the project. Caleb Mason, the city’s economic development manager, outlined the proposed modifications to the Cedar Rapids City Council at their regular meeting Feb. 28. Mr. Mason noted that in September 2018, the council authorized a restructuring of financing for the redevelopment of the former Westdale Mall property in southwest Cedar Rapids. That plan provided a restructuring of existing loans for the project and repaid a $5 million city bond that had funded reconstruction of the ring road around the property’s perimeter. Frew then secured a new, $21.5 million loan, with payments to be serviced by the increment generated by the project, and extended the duration of Tax Increment Financing (TIF) reimbursements to 20 years, extending to fiscal year 2036. The plan also established a $2.26 debt service reserve fund (DSRF) from the loan proceeds, which would guarantee payments in the event that the project’s increment was insufficient to service the project’s debt in any given year, and established a surplus fund for any increment above the debt service for any given year. “So there's kind of two layers of protection for this loan,” Mr. Mason said. “The city is obligated to replenish the debt service if there is a shortfall, and the developer would reimburse the city for any advances (surpluses) that would occur.” A proposed new term sheet would include modifications to the 2018 development agreement, Mr. Mason said, including a schedule to reduce the debt service reserve fund and the surplus fund over time based on increases in the Westdale project’s incremental taxable valuation. “Essentially, the city's risk decreases, and it would allow the developer to have access to those debt reserve funds,” Mr. Mason said. The modified plan would establish an annual process of notifying the developer of any value adjustments based on assessor’s reports, and would require any released debt service reserve funds to be used for property tax payments or other development-related expenses.

Frew will also be required to provide an annual statement detailing the previous year’s construction activity, including total investment, buildings under construction and other improvements, report anticipated construction at the site for the current calendar year, and provide documentation that the debt service funds are being used for eligible development expenses. The proposal would also maintain an existing 2018 agreement with Frew mandating a minimum assessed value for the development until the loan is fully repaid. Mr. Mason noted that the Westdale redevelopment project has a $62 million assessed valuation as of 2022, an increase of $54.6 million over pre-development value. Todd Nelson, executive vice president and chief development officer for Frew Development Group, said in a CBJ article in January that just a handful of lots remain to be developed at the 72-acre Westdale property. Commenting on the development agreement, councilmembers praised the progress on redeveloping the Westdale site. “I just want to commend you (Mr. Mason) and the city manager for this initial, I would say risky, venture, but at the time based on the economy, there were not many other options,” Mr. Todd said. “And with your due diligence, you've obviously made the right choice. This has been a good move. And it's been refreshing to see growth in that quadrant of town. At times, we've been ridiculed for it. But there are a lot of other communities where parcels of land like that are simply sitting empty with no future in terms of development. So, congrats on a good move.” “We have seen the retail market shift significantly, and I know that we've talked about this project quite a bit,” councilmember Ashley Vanorny added. “I will say as a westsider, this is a major economic hub, and the success or failure of it has been something that has weighed on a lot of people in these homes. I will say too that although those original pictures were very pretty, it is time for us to move past them. We're going to keep doing great things, but it's going to be very different than what we originally thought. What I would encourage us to keep trudging towards is reducing some of the parked space there.” The council voted unanimously to authorize Mr. Mason to formalize details of an amendment to the development agreement, a resolution of moral obligation and revised loan documents with Frew’s lender, which will be considered for formal approval at one of the council’s March meetings.