The Fifth luxury high-rise development is losing a climbing wall and jazz club that were initially proposed for the $100 million project between Walnut Street and Court Avenue, but gaining a 50-room boutique hotel.
The hotel will help keep stalls occupied in a 564-space parking garage, an important consideration under a complex incentive package with the city of Des Moines that is intended to get the city out of parking ramp ownership and still manage some risk that Mandelbaum Properties is taking as developer of the project. In addition, a portion of its revenues will be used to pay the city's share of costs for the convention center hotel under construction at Fifth and Park Avenue.
Mandelbaum's project, the feature being a 32-story tower that will front Walnut, is planned for the spot taken up by a now-shuttered and soon-to-be demolished city-owned parking ramp.
Justin Mandelbaum said the addition of a boutique hotel fits an original goal of the project. Further, it leads to a cleaner project with each element — from high-rise to parking ramp to theater — following a linear path along Fifth Avenue.
The parking ramp is the first phase of the project. City Councilwoman Christine Hensley asked that performance goals be included in the final development agreement. The negotiations for identifying those goals and setting deadlines has been part of a process putting the finishing touches on the agreement. The project was first proposed in 2014. Current timing has the final development plan set for public hearing on March 20.
Possibly the thorniest aspect of the development agreement has been finding a way to build the $40 million privately owned parking ramp and still eliminate some of the pitfalls that appear inherent with ownership.
The city of Des Moines will underwrite any potential shortfall in debt payments on the ramp revenues for 20 years at 1 percent interest. The repayment will begin in the 21st year with the city sweeping 80 percent of cash flow. In addition, the city will forgive $6.8 million in developer's costs for clearing the site and building the ramp. Though final numbers have not been determined, the current estimate on the shortfall loan is about $30 million.
In addition, a 100 percent, 20-year property tax rebate with an estimated value of $3.4 million is part of the incentive package for the ramp.
The high-rise will have 200 luxury-rate apartments above the hotel. The estimated cost is $53 million, with an incentive package that includes a 10-year sliding scale property tax abatement; a 100 percent, 20-year TIF rebate, with a cap on payments established in the 11th year and the excess applied to the parking ramp loan. In addition, the city will return $4 million from the sale of the property. The value of the TIF is estimated at $2.8 million.
The theater would receive a 100 percent, 20-year TIF rebate, also capped in the 11th year with the excess used to help repay the parking ramp loan. Theater users would be able to park for free for three hours. The estimated value of the TIF is $4.3 million.
Mandelbaum said the Weitz Co. will be the general contractor for the project and Chicago-based Solomon Cordwell Buenz (SCB) is the architect.