Des Moines to consider financial assistance for downtown skyscraper, Ingersoll apartments
Development plans are moving forward for two new apartment buildings with affordable housing units in Des Moines, and the City Council on Monday will consider financial incentives for both.
A 33-story high-rise apartment tower could fill the site of the long-vacant Kaleidoscope at the Hub, 515 Walnut St., in the city's core. The estimated $133 million project, resuscitated by local developer Joe Teeling of St. Joseph Group, would consist of 360 multifamily apartment units and 1,400 square feet of commercial space on the first floor.
The now-closed Star Gas Station at 2701 Ingersoll Ave. also could be demolished to make way for a three-story, mixed-use building with 20 multifamily units and 6,500 square feet of retail space on the first floor. The $7.2 million Star Apartments would be the first in Des Moines to get a federal grant to use an eco-friendly building material called mass timber.
The Des Moines City Council on Monday will consider ways to help fund the developments. Council members will vote on preliminary terms of a development agreement, including $5.7 million in tax increment financing, for the downtown apartment tower and another $370,000 in American Rescue Act Plan funding for the Ingersoll project.
Though both projects face hurdles with rising interest rates and construction costs, city officials and developers see them as wins for clearing up abandoned properties and helping fill a need for affordable housing units in Polk County.
A 2018 housing study showed the county needs to add 57,170 housing units by 2038 to accommodate new workers in the region. Nearly half should be rental units, the majority of which should charge less than $1,250 a month to be affordable to the workforce, the study found.
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An 'opportunity to change our skyline': High-rise apartment tower at 515 Walnut St. could move forward
The fate of a proposed high-rise at 515 Walnut St. was in question for years as its original developer, Des Moines-based Blackbird Investments, became embroiled in lawsuits for failing to pay its loans on other high-profile projects in Des Moines and across the state.
The building on the site once housed the indoor mall and food court known as the Kaleidoscope at the Hub, whose tenants, mostly locally owned small businesses, were kicked out at the end of 2018 to make way for the project.
As plans for development stalled and slowly faded, the building, left abandoned and aging, has struggled with litter and graffiti. Yet it still serves as an important link on the skywalk.
Teeling, who manages an equity fund started by Blackbird Investments, told the Des Moines Register in October he plans to revive the project on the Kaleidoscope property. While the property is owned by the equity fund, Teeling is working through his development company on the tower's plans.
Teeling has the original architectural plans from Blackbird Investments, though they are subject to change.
The ambitious 360-unit, 33-story multi-family apartment tower would have a coffee shop, bike storage, and a dog park on the first floor. The second floor would have a shared workspace, conference room, fitness room and yoga studio. On the top floor would be a gaming lounge, dining lounge, rooftop deck and cantilevered pool hanging over the street.
The project would qualify for tax increment financing, an economic development tool governments use to waive property taxes on the value of improvements to a site to offset the cost of construction. Des Moines has proposed giving The St. Joseph Group $5.7 million in tax increment financing over a 14-year period.
In addition, Des Moines would provide $2 million in grants, paid in $500,000 increments over four years. The St. Joseph Group also would file for 10-year declining residential tax abatement on the project, according to a memo to the City Council. When the project is completed, the city would provide St. Joseph Group with an additional $500,000 in ARPA funding.
In exchange for financial incentives, The St. Joseph Group has agreed to provide 72 residential units at rent rates affordable to households that earn 50% or less of the area median income, which in 2022 is $42,250 a year for a family of four. All units would be a mix of studios and one and two bedrooms.
The Des Moines City Council on Monday will consider a non-binding agreement, which Deputy City Manager Matt Anderson said gives the developers an opportunity to raise more funds with the city's commitment in hand.
Should the project be successful, Anderson said it will help fill in affordable housing gaps in Polk County and transform an "eyesore in the community."
"For us, that's the motivation for entering into this deal," Anderson said. "You don't get many opportunities to change your skyline. And this is one of them. We've all been scratching our heads wondering what on earth we should do with the Kaleidoscope."
But in a tough economy, where construction prices and interest rates are skyrocketing and contractors are facing workforce and material shortages, attracting investors and getting the project to the finish line will be a challenge, Anderson said.
The St. Joseph Group secured a commitment letter from an investment bank to finance a portion of the project, Teeling previously told the Register. If the council approves the preliminary terms Monday, he said he will work to secure the remaining funding and price out the project.
"The bottom line is we've come a very long way and we still have a few hurdles to cover," Teeling told the Register Friday. "At the moment, today, we feel good about where we're at."
Demolition on the Kaleidoscope could start in spring 2023, according to the city.
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Star Apartments on Ingersoll Avenue will have 100% affordable housing units
Similarly, the proposed three-story apartment building at 2701 Ingersoll Ave. could eliminate an aging, condemned lot. Cutler Development, owned by Scott and Molly Cutler, plans to make all 20 units at Star Apartments affordable.
The project has been in the works since May, when the husband and wife duo approached the city with the intent to buy the "neglected, nuisance property," said Ryan Moffatt, economic development coordinator for Des Moines. The couple recently completed a similar mixed-use project in West Des Moines' historic Valley Junction.
"We're encouraged to see this priority site for us get cleaned up on what is a really important corridor for the city," Moffatt said.
The building would include three studios, 14 one-bedroom units and three two-bedroom units. Twenty percent of the units would be reserved for tenants who earn 30% of the area median income, which in 2022 is $29,550 a year for a family of four. Another 20% would rent at 60% area median income, and the remainder at 80% area median income.
Cutler Development weaved together several sources of financing for the project, Moffatt said.
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The $7.2 million building would be financed by construction loans and developer equity. It also would use a $250,000 grant from the United States Forest Service for its use of mass timber, a sustainable product made by pressing together smaller planks of wood into larger pieces, similar to wood beams found in some historic structures.
On Monday, council members could approve $370,000 in American Rescue Plan Act funds for the project.
The commitment to affordability and unique construction type could "set a tone" for other similar small-scale developments in the area, Moffatt said.
Construction is expected to begin in the spring of 2023 and be finished in 2024.
Editor's note: This story has been updated to reflect an additional grant the city will consider for the skyscraper at 515 Walnut St.
Virginia Barreda is the Des Moines city government reporter for the Register. She can be reached at vbarreda@dmreg.com. Follow her on Twitter at @vbarreda2.
This article originally appeared on Des Moines Register: Apartments with affordable housing seek Des Moines city incentives
