In a move that could dramatically alter downtown Des Moines, the City Council will vote Monday on a potential development agreement to take over a Nationwide Mutual Insurance Co. office building.
The $30 million deal would give Des Moines the five-floor, 360,000-square-foot building at 1200 Locust St., city officials said in a news release Friday. City leaders are looking to renovate the building, possibly as a new home for the police department, which is currently in a 103-year-old structure on the east bank of the Des Moines River.
They said city workers operating out of the similarly aged Argonne Armory building, also on the east bank of the river, and at other sites could benefit, as well.
The agreement with Nationwide would include the acquisition of a 1,690-space parking garage at 1200 Mulberry Street, just southeast of the Locust Street building and linked via the skywalk. The city would pay an extra $10.6 million for the garage, though the two sides don’t expect to close that deal until 2025.
Assistant City Manager Matt Anderson told the Des Moines Register that the agreement would have wider effects for downtown, particularly along the east bank of the river. The move could give developers the chance to renovate the police headquarters at 25 E. First Street, just off the Court Avenue bridge, and the armory building at 602 Robert D. Ray Drive.
The U.S. Government Services Administration already has indicated the U.S. Courthouse at 123 E. Walnut St., also on the east riverfront, will be available as surplus property once a new courthouse under construction on the west bank of the river opens next year. That offers another redevelopment opportunity on the east side of the river.
Anderson said the city’s deal with Nationwide will put more workers downtown, a boon for shops and restaurants that have seen an exodus of weekday foot traffic since the start of the COVID-19 pandemic two years ago.
“This won’t be the last building that needs some creative solution,” Anderson said. “… But this definitely helps.”
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“This project will add more everyday foot traffic to the west side of Downtown and open up opportunities for creative development on the east side of the river,” Greater Des Moines Partnership Chief Operations Officer Tiffany Tauscheck added in a statement. “We look forward to seeing what the future holds.”
At the same time, the sale takes a prominent downtown building off the tax rolls, a blow for both the city’s and Polk County’s future revenue. Nationwide pays about $2 million a year in taxes on 1200 Locust St., a building with an assessed value of $30.6 million.
The city could make up for the loss by selling the armory building or the police headquarters.
The City Council will vote on the development agreement at its 5 p.m. meeting Monday. If the elected officials approve the deal, the city will seek an architectural firm to advise how Des Moines should renovate the building.
Anderson has said city officials are prioritizing the police department and the agencies that have worked out of the 88-year-old armory building, which include information technology, development services, neighborhood services and the litigation department.
Anderson added that the Nationwide building also could host housing department employees now at Polk County River Place, 2309 Euclid Ave., about 5 miles north of City Hall. Other potential occupants include some of the departments at City Hall, among them the clerk’s office, the engineering division, finance and city lawyers.
“Everything’s on the table,” Anderson said.
In a sign of how soft Des Moines’ downtown commercial real estate market is, Nationwide began seeking a tenant for the 1200 Locust St. building two years ago after it became clear there would be no rapid return to the office for employees who’d worked at home since the beginning of the COVID-19 pandemic. Kieran Sherry, Nationwide’s senior vice president of corporate real estate, told the Des Moines Register that the company had not managed to sign a deal for any of the building’s five floors.
Sherry said a couple of local companies toured the space.
“The folks that were looking at the building as an option were generally relocating from other buildings in the greater Des Moines area,” he said.
Ohio-based Nationwide employs about 3,000 workers in Iowa, mostly in property, casualty and agribusiness insurance and technology. Of those, about 1,000 workers report to the company’s other downtown building, at 1100 Locust St.
The company has been moving employees to that building from 1200 Locust St. for the last couple of months to prepare for the sale. Sherry said the deal with Des Moines should not impact the retail businesses on the first floor of 1200 Locust, which include Jimmy John’s, Blu Thai Food and Sushi, and Dough Crazy.
In 2005, when Nationwide announced plans to build the 1200 Locust St. office and expand its 1100 Locust St. property, the city agreed to construct three skywalks to the buildings at a cost of about $2.3 million, according to Register archives. The city also granted a $1.2 million tax abatement.
In addition, the City Council agreed to pay the company a $350,000 annual grant for two decades. The city still owes about $4.6 million through the fiscal year ending June 30, 2031.
The state, meanwhile, paid about $18.5 million in tax credits and a forgivable loan, Iowa Economic Development Authority spokesperson Staci Hupp Ballard said.
“Nationwide remains fully committed to Des Moines,” company spokesperson Ryan Ankrom said in a statement. “1100 Locust Street continues to be a key facility for us, and we have no plans to vacate that building.”
Des Moines officials have wanted to relocate police for years
City planners have long looked to move the police department from its current headquarters, which started life as a combined courts and public safety building in 1919. With about 500 employees, the department had office space in seven other buildings as well in 2016, when the city studied what kind of building the police needed.
That study concluded that the city would need to build a 250,000-square-foot building to house the full department in one space. In particular, the department needed a large footprint for its police academy, evidence storage, a crime lab, a dispatch center and meeting rooms.
City officials estimated construction would cost $160 million, a figure that has likely ballooned since a pandemic building boom, supply chain disruptions and other factors have pushed up the cost of building materials and labor.
“That is a pretty hefty price for everybody,” Des Moines Facilities Manager Jim Hoff said.
Likewise, city leaders have tried to move employees out of the armory building for several years.
Anderson said the roof has leaked several times, a particular problem for an area that houses the IT department. Hoff said the windows leak during heavy rains. The city looked to replace the windows in 2016, he said, but officials didn’t want to spend the estimated $1.2 million.
Meanwhile, Hoff said the old air conditioning system gives workers problems. He said the neighborhood services department had to work without it twice this summer when compressors broke down.
Anderson said the city set aside $36 million in its capital improvement project budget to construct a new building on an empty site across Robert D. Ray Drive from City Hall. But just as with a new police headquarters, Anderson now doubts the city could finish the project at that price tag.
The deal could open up the riverfront for more development
After signing the agreement with Nationwide, Des Moines officials would have a nine-month due-diligence period to study how they want to renovate 1200 Locust St. Anderson said consultants will tell them which departments should go together.
He is not sure yet how all the moves will shake out. Given the problems at the Armory, he said he wants to get workers out of the building “as soon as possible.” At the same time, if city leaders were to dedicate 250,000 square feet to house the whole police department in one building, the department would occupy about 70% of the new space.
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He added that he doesn’t believe any workers would move in until at least 2024, after consultants’ studies and contractors’ renovations.
That said, Anderson believes the move to 1200 Locust St. would cause other dominoes to fall. City officials previously entertained a developer’s proposal to turn the Armory into a riverfront concert venue, an option they could explore again. Anderson said the site could also house apartments, condos or townhouses.
He added that the space across from City Hall, where officials planned to build a replacement for the Armory, could now be a park or plaza. Developers could renovate the current police headquarters. Even City Hall itself is on the table.
He compared the space to the old downtown library across the river, which developers turned into the World Food Prize Hall of Laureates.
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“A model like that is attractive,” Anderson said. “But the other possibility is, it just stays City Hall.”
Rather than issue a bond, city officials plan to fund renovations at 1200 Locust St. with a lease purchase agreement. A bank would buy the building from Nationwide and lease it to the city until Des Moines paid off the debt.
As part of the agreement with Nationwide, Des Moines officials must line up financing for both the building and the parking garage within nine months of signing the contract — even though the city won’t buy the parking garage for several years.
Finance Director Nick Schaul said he already met with a bank in early July to get an idea of what kind of interest rate the city could secure. Schaul declined to say what feedback he received.
He said he will shop the deal to several local lenders if the City Council approves the agreement Monday. But he also believes interest rates will continue to rise over the next year, given the Federal Reserve’s commitment to increase the cost of borrowing to slow the pace of inflation.
The faster Des Moines leaders get a deal done, the more money they likely will save the city, he said.
“It’s one that I would rather get done sooner than later,” he said.
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The proposed adaption of the Nationwide building to public use follows another deal reached last summer. EMC Insurance Cos. announced it would at least temporarily turn the former Younkers department store site at 701 Walnut St., across from its headquarters, into a much-needed city park while putting plans for an expansion there on hold.