Business leaders perfect the art of the deal in 2013
Friday, December 27, 2013 7:00 AM
Getting things done requires patience, persistence and persuasion, as Iowa industry leaders demonstrated in 2013.
Business leaders led the way in making Iowa a national leader in wind energy - thus lowering energy costs for consumers and reducing air pollution. They spent years collaborating, networking and donating their own money or company contributions to create a beautiful riverwalk along the Des Moines River downtown, expand gardens at the Greater Des Moines Botanical Garden and update a landmark downtown plaza.
They’re expanding and renovating their headquarters and production plants to add millions of dollars in property tax revenue to city coffers, and they’ve wheeled and dealed to fuel a wave of development in downtown Des Moines.
It’s been quite a run, with many of the deals being years in the making. So take a few moments to see if you agree with our picks for the top deals of 2013.
- Anne Carothers-Kay, managing editor of the Business Record
Top energy Deal:
MidAmerican’s $2 billion wind expansion
Deal details: MidAmerican Energy Co. in May announced a nearly $2 billion project that will add up to 1,050 megawatts of wind generation capacity in Iowa by 2015. The move means MidAmerican will be generating about 40 percent of the electricity it produces through wind power. The 448 new wind turbines will generate enough power to supply about 317,000 average Iowa homes, MidAmerican said.
Deal makers: MidAmerican Energy CEO Bill Fehrman has aggressively pursued the build-out of more wind production capacity by his company, a move championed by Gov. Terry Branstad as a positive force for job creation and economic growth in the state.
The impact: The wind expansion will enhance economic development and provide in excess of $360 million in additional property tax revenues over the next 30 years, MidAmerican officials said. It also will pay landowners $3.2 million a year. Additionally, all of the turbine blades will be manufactured in Iowa at Siemens Energy’s Fort Madison plant. MidAmerican did not seek any state economic development incentives for the project, and the company said the additional wind energy capacity will be built at no net cost to its customers. The project is expected to help stabilize electric rates by providing a rate reduction totaling $10 million per year by 2017, commencing with a $3.3 million reduction in 2015. In the short term, adding more towers is expected to create approximately 460 construction jobs over a two-year period and an estimated 48 new permanent jobs.
Runner-up: State approval of Interstate Power & Light Co. Marshalltown generating station
Top political Deal:
Legislature finally revises commercial property tax formula
Deal details: Dating from the 1970s, there’s been partisan debate about the need to correct inequities in the way property tax bills are calculated for residential and commercial properties. When he returned to the governor’s office, Terry Branstad made the issue one of his top legislative priorities, but he failed to get results until the 2013 legislative session. For years, owners of commercial and industrial properties have paid taxes calculated on 100 percent of valuation, while residential taxes are levied on about 50 percent of valuation. The new law reduces the commercial valuation to 90 percent in two phases. It also provides $125 million in credits to owners of commercial and industrial properties through 2015, provides 100 percent backfill to local governments for revenue that would not be realized because of reduction in taxable value, and limits assessment growth to an annual maximum of 3 percent, down from 4 percent, on residential and agricultural land.
Deal makers: You can thank the federal Patient Protection and Affordalbe Care Act, in large part, for providing a key bargaining chip for passage of commercial property tax reform. Under that statute, health care coverage is expanded for low-income residents, but a U.S. Supreme Court ruling left expansion of Medicaid up to the states. Iowa Senate Democrats wanted Medicaid expanded to cover more people; Branstad favored a different plan. Eventually, Branstad accepted expanded coverage in exchange for support from Senate Democrats on property tax reform.
The impact: Local governments stand to lose about $741 million over 10 years, although some of that loss will be tempered by state reimbursements. Owners of commercial property should see their overall valuations increase as they recoup revenue that would have been lost to taxes. The law also was a compromise of sorts, with Branstad originally seeking commercial and industrial property tax reductions of 40 percent.
Runner-up: Polk County voters approved an $81 million bond referendum to create a courts complex by renovating the historic county courthouse and reserving its courtrooms for civil cases, turning the former county jail into a criminal courts center, and converting the former J.C. Penney Co. Inc. building into offices for the county attorney and administrative functions. In 2008, voters rejected a referendum with a much higher price tag.
Top office expansion Deal:
Principal’s multimillion-dollar renovation
Deal details: The city of Des Moines was awash in big development news last year, particularly downtown. The significance of one really big project can’t be overstated: Principal Financial Group Inc.’s February announcement of an initial $238.5 million overhaul at its downtown campus. Part of a 10-year plan to improve Principal’s buildings and create collaborative workspaces for a changing workforce, the initial $238.5 million will be used to renovate the corporate headquarters at 711 High St., the company’s signature high-rise at 801 Grand Ave. and what is called the “Z building” at 600 Seventh St. Improvements should be completed by 2017. Later phases could bring the price tag to more than $400 million.
Deal makers: The Greater Des Moines Partnership and Downtown Community Alliance worked with Principal, the city of
Des Moines and the Iowa Economic Development Authority to secure economic and environmental incentives for the project.
The impact: “An investment of this magnitude is a tremendous vote of confidence for Des Moines’ continued standing as a worldwide leader in the financial and insurance industries. It also highlights Principal’s long-standing position as a great corporate steward downtown and represents a continuation of that commitment for future generations. The company’s investment will make its buildings more competitive and increase the assessed value,” according to a city staff report on the project. Principal’s plans also have pushed forward the city’s efforts to rebuild a parking garage at Seventh and Grand and focus on improving the Keosauqua Way entrance to downtown.
Runner-up: Wells Fargo & Co. broke ground earlier this year on a $100 million expansion of its West Des Moines campus. The company will add 265,000 square feet of space; a 50,000-square-foot cafeteria and training center; and a second parking garage with 1,400 spaces. Wells Fargo will be able to accommodate 1,800 workers in the new office building, with room to spare for more employees.
Top manufacturing Deal:
Kemin Industries’ $40 million expansion
Deal details: In October 2010, Kemin Industries Inc. announced a five-year, $40 million expansion plan to significantly increase the size of its research and production facilities on the east side of Des Moines. The plan called for Kemin to hire nearly 100 additional workers locally, a goal it surpassed by 37 employees when it dedicated its new 46,000-square-foot Molecular Advancement Center this past August. The comprehensive project has added six new manufacturing facilities and three research facilities, with a new headquarters building now in the planning and design stages and scheduled to be completed in 2017.
Deal makers: Kemin CEO Chris Nelson and his staff worked with Iowa Department of Economic Development officials to secure a $1 million forgiveable loan for the project, as well as with city of Des Moines and Polk County officials to arrange a five-year property tax abatement on the value of the improvements and a $500,000 economic development grant through a tax increment financing agreement. Officials also coordinated purchases of public land needed for the company’s expansion.
The impact: In its 50-year history, the family-owned Des Moines company has grown to nearly 2,000 employees worldwide, producing ingredients for the global food and feed industries, and operating in more than 90 countries. Its expansion fills a vital need: With a global population that will exceed an estimated 9 billion people by 2050, the world will need 70 percent more food.
Runners-up: DuPont Pioneer Johnston campus expansion; John Deere Des Moines Works expansion in Ankeny
Top recreation Deal:
The Principal Riverwalk is finally finished
Deal details: Principal Financial Group Inc. announced in February that its riverwalk project in downtown Des Moines was officially complete. The project originally launched in 2004 as a gift to the city of Des Moines to celebrate the financial services company’s 125th anniversary,
Deal makers: In 2002, Principal CEO J. Barry Griswell announced that the company would contribute between $5 million and $10 million to the riverwalk’s first phase, which was expected to cost $15 million to $20 million. Eventually the project’s price tag grew to more than $70 million. By the time it was finished, Principal’s expected contribution was more than $20 million. Current CEO Larry Zimpleman and Chief Marketing Officer Mary O’Keefe also played significant roles in bringing the project to fruition. The Ruan, Hubbell and Brenton families helped finance the project.
The impact: Now complete, the riverwalk features pedestrian bridges, public spaces, world-class art and links to nearly 300 miles of paved recreational trails in Central Iowa. The long-term vision was to improve the quality of life for those who call Central Iowa home.
Runner-up: In May, a 33-mile diagonal trail loop to the Raccoon River Valley Trail was completed. The trail from Waukee to Perry to Herndon creates a 72-mile loop to the 89-mile trail. The loop is now the longest interior loop trail in the country, according to the trail’s website.
Top Legal Deal:
Des Moines must refund $40 million in franchise fees
Deal details: After a decade fighting a challenge to a utility franchise fee, the city of Des Moines ran out of legal options and was ordered to repay its residents $40 million, plus $7 million in fees to attorneys who sued the city over the issue. Polk County District Judge Joel Novak has ruled that a court-approved administrator could begin distributing claims forms to Des Moines residents who paid a city-instituted surcharge on their utility bills between 2004 and 2009. Novak earlier determined that the city owed residents $40 million after a determined resident and team of dogged attorneys brought the case to court in 2003 and successfully battled the city’s efforts to have their case thrown out of court. The lawsuit went to the Iowa Supreme Court twice and took a brief trip to the U.S. Supreme Court, with the city losing at every round. The Iowa Legislature legalized the fee in the wee hours of the 2009 legislative session.
Deal makers: Resident Lisa Kragnes filed the lawsuit and was represented by attorneys Brad Schroeder, Bruce Stoltze and Steve Brick. The third-party administrator, Rust Consulting, will determine the amount of individual refunds.
The impact: Because the city doesn’t have $40 million in a rainy-day fund, its options are to issue general obligation bonds and
back them by raising the franchise fee to 7.5 percent from 5 percent for a temporary period, a move that requires voter approval,
or raising property taxes an estimated 41 cents per $1,000 of valuation for a period of 20 years.
Top transportation Deal:
Alice’s Road extension breaks ground
Deal details: Officials broke ground this fall on a 1.5-mile stretch of road to extend Alice’s Road from University Avenue in Waukee south to Ashworth Road in West Des Moines. Eventually a $28 million interchange over Interstate 80 will be built to tie Alice’s Road into 105th Street in West Des Moines.
Deal makers: For Waukee’s portion of the project, Community and Economic Development Director Dan Dutcher credits Mayor Bill Peard and Director of Development Services Brad Deets, and many other city officials, as having been involved in the process that has taken at least 10 years. The city has also worked well with West Des Moines to make the interchange a reality, he said. Owners of properties to the north of the interchange have played a part as well, including Knapp Properties Inc.
The impact: In Waukee, the project will open up 1,300 acres to a projected $2.5 billion in private investment. It is expected to create about 25,000 new jobs and add 17,000 residents to the city. “This is our real opportunity to have an area where we can compete effectively for economic development deals that come to the area,” Dutcher said. West Des Moines planners estimate that the 105th Street development will open about 860 acres to a projected $1.78 billion in private development and create 18,000 jobs.
Top sports Deal:
Des Moines draws Iowa Wild hockey team
Deal details: An American Hockey League team had already failed once in Des Moines, but officials announced in April that the Iowa Wild, an affiliate of the National Hockey League’s Minnesota Wild, would come to Wells Fargo Arena starting in the 2013-14 season. Chris Connolly, general manager of the Iowa Events Center, said all parties involved are optimistic that AHL hockey will work at the arena this time, largely because of the Minnesota Wild’s commitment to a farm club just three hours away in Des Moines.
Deal makers: Jim Mill, now the general manager of the Iowa Wild, called John Page, chief operating officer of Global Spectrum, the company that manages the Iowa Events Center, in July 2012 to talk about the potential of moving Minnesota’s then-AHL affiliate, the Houston Aeros, to a different market. Page directed Mill to call Connolly in Des Moines. From there, informal and formal discussions began. The Polk County Board of Supervisors were brought into the mix in October, and Minnesota Wild owner Craig Leipold visited Wells Fargo Arena in December 2012.
The impact: The Wild bring an additional 38 events to Wells Fargo Arena, which means 38 extra days when people are eating at downtown restaurants and drinking at downtown bars. So far, attendance has been in the top quarter of the league, Connolly said. Additionally, between the sales staff, equipment managers, trainers, players and coaches, about 50 people, including President of the Iowa Wild Todd Frederickson, are living in Des Moines who might not otherwise be here.
Top Fundraising Deal:
$18 million for Botanical Garden
Deal details: Plans to turn the Des Moines Botanical Center into a first-rate public garden took a giant step forward in 2013. By mid-March, more than $9.7 million in capital funds had been raised; $645,000 a year in operational support had been secured for the first 10 years; a phone and direct-mail fundraising drive was in the works; and a landscape architect was designing the master plan for the 14-acre riverfront campus. In the end, the horticultural institution, now called the Greater Des Moines Botanical Garden, overshot its $10 million goal by raising $11.8 million After a three-month closure, the Botanical Garden reopened its doors in September. New exterior gardens are to open next summer. In addition, the organization kicked off the $6.2 million “We Are a Garden Now” campaign, marking a second phase of fundraising for two additional gardens and expansion of the Botanical Garden’s curation and educational activities. As of December 2013, a total of $13 million had been raised.
Deal makers: J.C. “Buz” Brenton, Fred Weitz, Tom Urban and Janis Ruan were major players, who in 2009 and 2010 worked behind the scenes to move the project forward. At one point, they pledged a combined $2.5 million to “set the tone for others.”
Impact: The renovated facility will provide recreational opportunities, stimulate the local economy, expand science education and promote tourism to Central Iowa, said Debra Peckumn, the garden’s development director.
Runner-up: The $11 million capital campaign to renovate Cowles Commons, formerly Nollen Plaza, into a 21st-century park and event space and create an endowment for future maintenance and upkeep. The fundraising goal was met this year, and construction is scheduled to be completed by the end of 2014.
Top technology Deal:
Facebook data center in Altoona
Deal details: Officials announced in April that Facebook Inc. will build a new data center on a 194-acre site in Altoona. Altoona City Administrator Jeff Mark said key factors in Facebook’s decision to choose Altoona included MidAmerican Energy Co.’s nearby substation and water and electric rates that were less expensive than other possible locations.
Deal makers: Officials at the Greater Des Moines Partnership, including David Maahs and Stacie LoVan, were instrumental in putting together initial meetings and site visits. The Iowa Economic Development Authority negotiated $18 million in tax benefits through the High Quality Jobs program. Mid-American Energy had representatives working out the center’s energy details. And Altoona city officials, including Mark, Community Services Director Vern Willey and City Clerk and Finance Officer Randy Pierce, worked with Facebook on things such as water and sewer needs and costs. There were so many people involved that Mark said it’s impossible to recognize them all.
The impact: Facebook will invest at least $299.5 million in the project and could invest up to $1.5 billion eventually. The Iowa Economic Development Authority approved tax benefits for Facebook to create at least 31 new jobs at a qualifying wage of $23.12 per hour. And, Mark said, “It really puts (Altoona) on the map.” The data center location will
be across Interstate 80 from Bass Pro Shops, making that a visible area for economic development.
Top land Deal:
Riverfront YMCA for sale as prime riverfront land downtown
Deal details: The Riverfront YMCA, longtime headquarters of the YMCA of Greater Des Moines, is for sale for $5.5 million, but the building at 101 Locust St. probably won’t be around for long. The 1.86 acres it sits on is more valuable than the 56-year-old building. Getting to this point was a little complicated. The Riverfront YMCA property is available because the YMCA obtained the old Polk County Convention Complex from Wellmark Blue Cross and Blue Shield, which obtained it from Polk County, which picked up the former J.C. Penney Co. Inc. building from Wellmark. It’s all part of a grand redevelopment scheme for downtown that was made possible by a group called Des Moines Redevelopment Co., which was organized after a push to get local businesses and community leaders more involved in downtown revitalization by real estate developer Bill Knapp, who said others were too busy to take on the role he played.
Deal makers: Knapp might have led the charge, but he was helped along the way by business partner and good friend Jim Cownie, and Hubbell Realty Co. President and CEO Rick Tollakson. A good degree of credit also goes to Wellmark Chairman and CEO John Forsyth, whom Knapp describes as a tough negotiator. Without Forsyth’s cooperation, none of the pieces would have fallen into place.
The impact: City leaders envision upscale apartments, restaurants and possibly other retail establishments on the riverfront lot.
Top retail Deal:
Mills Fleet Farm opens gigantic store in Ankeny
Deal details: Bigger than the Scheels All Sports store in Jordan Creek Town Center or the Bass Pro Shops in Altoona, Brainerd, Minn.-based Mills Fleet Farm opened in Ankeny in July. The 261,000-square-foot store at 3875 S.E. Delaware Ave. sells farm supplies, hunting gear, guns and ammunition, food, clothing, pet supplies, lumber and more. (It’s your first stop in case of a zombie apocalypse.)
Deal makers: Several years ago, Mills Fleet Farm CEO Stewart Mills was on his way home to Minnesota from a meeting in Des Moines. He saw a billboard advertising land for sale along Interstate 35 near Ankeny. It was nearly 7 p.m., but Mills called the number on the billboard anyway, which connected him to Ankeny-based Denny Elwell Co. Mills made a stop at the developer’s office and met with Denny Elwell Co. CEO Chris Murray, who happened to be in the office at the time. According to Murray, the two men sat down, talked and struck a deal that night. The city of Ankeny originally approved a site plan for the store in 2007. Mills Fleet Farm has a practice, Murray said, of only opening one store per year, so the Ankeny store didn’t open for six more years.
The impact: The Ankeny store created 175 new jobs and is the second Iowa outlet for the chain.
Runner-up: Dick’s Sporting Goods last month opened a 55,000-square-foot store in Jordan Creek Town Center in West
Des Moines. It’s the chain’s fifth store to open in Iowa, but the first in Greater Des Moines.
Top insurance Deal:
Big insurer gets bigger with $1.8 billion purchase of Aviva USA
Deal details: West Des Moines-based Aviva USA was seeking a suitor after its British parent, Aviva PLC, announced its intent to sell the business in December 2012. Following nearly a year of speculation, Aviva PLC announced in October 2013 that it had reached an agreement to sell its U.S. subsidiary to Athene Holding Ltd., with the backing of investment conglomerate Apollo Global Management, for an estimated $1.8 billion.
Deal makers: Bankrolling the deal was Apollo Global Management, a Bermuda-based global investment company led by Jim Belardi with more than $113 billion under management. Iowa Insurance Commissioner Nick Gerhart approved the deal, setting conditions to safeguard the interests of annuity holders.
The impact: The completion of the deal and the company’s combination with Delaware-based Athene Annuity & Life Assurance Co. made Athene one of the largest issuers of fixed annuities in the country. Athene Holding pledged that the company’s headquarters would remain in West Des Moines, where Aviva had two years earlier completed a $135 million building. Athene officials also pledged to maintain a significant employment presence in West Des Moines. Before gaining the Iowa insurance commissioner’s approval of the deal, Athene sold Aviva USA’s life insurance arm and cut approximately 10 percent of Aviva USA’s workforce.
Runner-up: Principal Financial Group Inc. acquires Chilean pension management company AFP Cuprum SA for $1.5 billion.