With the University of Iowa’s $20.6 million purchase of 45 percent of the Old Capitol downtown expected to be approved by the Board of Regents on Thursday – making it the full owner of the nearly two-block former shopping center — the campus will nearly double what it already spent on the purchase. the first 55 percent.

Purchase agreements provided to The Gazette show the campus since first signing ownership agreements with the Old Capitol Group in 2005 has paid more than $20.8 million in three deals — a total that does not does not include updating and maintenance expenses for the 206,558 square feet it owns.

That total also does not include the more than $1 million the university has paid the group since 2015 to lease space in the 374,463-square-foot center for its downtown UI Rapid Care location Health Care, the UI Department of Public Safety and UI Students with Disabilities. Campus Services and CoWork Commons on the second floor.

At $20.6 million for the remaining 167,904 square feet of central space that the university doesn’t yet own — mostly on the first floor, occupied by restaurants and stores — the university would pay about $123 per square foot .

“You couldn’t replicate that cost per square foot to rebuild,” David Kieft, UI senior director of academic affairs and real estate, told the Board of Regents Wednesday — ahead of Thursday’s formal review of the proposal .

Implications of the tourist tax

When the university bought its first 68,000 square feet of downtown space in 2006, it paid $165.50 per square foot, or $11.3 million. That deal included several options to buy more space, which the university exercised over the next few years — paying an additional $8.5 million for 101,185 square feet, then $1.14 million for 12,623 feet. squares previously occupied by a theater.

Regarding the new $20.6 million deal, Kieft said the university will cover its initial 10 percent deposit with reserve funds.

“The remaining 90 percent will be funded by a commercial loan that the university will take out,” he said. “The university may not use any type of tax-exempt financing bonds to acquire real estate with income-producing commercial leases.”

As part of the agreement, the university agreed to take over the center’s existing leases and make changes, upgrades and improvements only as “funding becomes available in future years and “retail and restaurant environments will continue to evolve.”

Although UI officials have not indicated how many leases it might acquire under the purchase agreement, the Old Capitol Group currently lists more than 25 companies in its directory, including Chipotle, Buffalo Wild Wings and CVS.

Asked about the possible tax implications for the city of Iowa City of selling a private entity to a tax-exempt public university, Kieft said Wednesday that “ongoing discussions” are taking place both internally and with the city.

The university, he said, aims to maintain property tax revenue in the city — as long as there are revenue-generating commercial leases in the space.

“Whether it’s a payment in lieu of taxes agreement, where we keep a certain portion of the building on the tax roll, our intent is to keep those taxes paid to the city on the commercial portion of the building,” Kieft said. “It’s certainly not our intention to remove it from the tax rolls.”

“The last thing the university wants to see”

This is due to the urban link that the shopping center has had with the university since its creation in 1981, next to the campus. In its heyday, the facility was renamed Old Capitol Mall in 1995 and featured presenters like JC Penny and Younkers.

Other stores at the time included The Buckle, Claire’s, Foot Locker, Express and Victoria Secret. But the mall struggled during Coral Ridge Mall’s debut in 1998, tearing up its anchors.

“And in 2003, the mall was saved from collapse and bankruptcy by a consortium of local investors,” Kieft said.

The university’s relationship with this consortium grew into an important partnership, including during the 2008 floods, when the university exploited mall space for its bookstore and relocated its student union.

“We don’t immediately need space,” Kieft said. “But this is less about the short- or long-term need for commercial space on the first floor of the building and more about the university gaining control of a significant footprint in the heart of our campus.”

The parties agree that a sale would benefit the owners, the university and the city, Kieft said.

“As the property management team pursues other investment opportunities and no longer owns this building,” Kieft said, “the last thing the university wants to see is management and remaining ownership be transferred to outside investors.”

Vanessa Miller covers higher education for The Gazette.

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