CHARLES CITY, Iowa (AP) - With its imposing clock tower and weather vane perched over a stately white facade, the three-story McQuillen Place stands poised to become a centerpiece of this small city’s Main Street.
Inside, its newly constructed apartments showcase scenic views of the downtown strip, nearby Victorian homes and the wider Cedar River Valley.
The mixed retail and residential development would be the envy of many small Iowa towns. But for more than 15 months, the 45,000-square-foot complex on 123 N. Main St. has sat empty, its construction halted agonizingly short of completion.
Lead developer and Charles City native Charles Thomson blames one entity for bringing the project to a screeching halt: The state of Iowa.
McQuillen Place originally qualified for a special tax credit that Thomson was depending on to help pay for the $9 million project. But after the project missed a key construction deadline, the state refused to issue the award - even though Thomson said the work is now about 90 percent complete.
Thomson, an attorney who splits time between Charles City and Chicago, told The Des Moines Register events spiraled out of control from there.
“I knew it would be hard,” he said ruefully. “I wish I’d known it would be this hard.”
State economic development officials declined to discuss their decision with the Des Moines Register, citing pending litigation. But a spokeswoman for the Iowa Economic Development Authority laid out the agency’s stance: The tax credit rules required developers to finish construction within two years.
Work on McQuillen Place has been ongoing for more than four years and still isn’t complete.
Thomson counters that state officials are too focused on big, metropolitan projects - he pointed to the more than $200 million in incentives tech giant Apple received to help build a data center in suburban Des Moines.
The state would be better off, he said, paying more attention to struggling rural communities like Charles City, population 7,400.
“If they want small towns in Iowa to survive,” he said, “they’re going to have to change their attitude.”
The McQuillen Place project is now tangled in litigation: The developers are suing the Iowa Economic Development Authority that denied the tax credits. The bank that partially financed the project is suing for foreclosure. And the developers are counter-suing the bank over a litany of claims.
In the meantime, one of the biggest projects to hit downtown Charles City in a century sits at a standstill. Plywood sheets and heavy-duty plastic shroud the first level of windows, and huge pieces of construction equipment sit idle on the gravel-covered main floor.
“It’s a definite frustration for everybody involved,” said Mark Wicks, executive director of the Charles City Chamber of Commerce. “There’s been too much put into it at this point. It’s not something you can walk away from.”
As in many small towns, residents in this northeast Iowa community struggle to find desirable housing.
With its higher construction costs and lower resale values, rural Iowa isn’t as enticing for developers as booming metropolitan areas. Aging homes also present difficulties in small towns, where owners may never recoup renovation costs.
More than half of Iowa’s housing stock was built before 1970. And nearly 150 Iowa towns have had no new housing built since at least 2010, according to U.S. Census figures.
More than half of Floyd County’s 7,500 homes and apartments were built before 1960.
McQuillen Place would bring 33 apartments to Charles City through a mix of market rate and subsidized units. The average rent would be about $850 for a two-bedroom apartment.
“This is 33 living spaces right in the heart of our downtown,” Wicks said. “That is something that is desperately needed.”
Even in its uncompleted state, McQuillen Place is a unique project. The sprawling lot sat vacant for decades after a 1987 fire destroyed the Union House hotel.
While many communities have added upper-story apartments downtown or redeveloped commercial spaces, Wicks said few have pursued projects as ambitious as McQuillen Place.
“This is the biggest scale of a project I’ve seen in a town our size or even remotely close,” he said. “And I know that’s one of the reasons the state was excited about it.”
Standing atop the reflective white rooftop of McQuillen Place, Thomson brims with hometown pride, bragging about the quality of the burgers at the local bowling alley and pointing out the nearby house where his grandmother once lived.
A lawyer for a Chicago-area company, Thomson alternates residency between a tiny apartment in the Windy City and a three-story Victorian manse in Charles City.
McQuillen Place, named after his grandfather’s family, is somewhat hallowed ground for Thomson. The former structure here once housed his father’s Ben Franklin department store, where Thomson got his first job pricing candy in the basement.
That’s why he wanted to build something special in Charles City and help transform a void on Main Street into a community focal point, he said. Still, he says he’s probably a “little crazy” for spending so much time and money on the effort.
“But I would think the state would want to encourage nutty people like me,” he said, “rather than send a message to all the other Charley Thomsons out there that if you put your neck on the line, there’s a pretty good chance we’ll pull the rug out from under you.”
Thomson relied on a patchwork of funding to finance McQuillen Place, including a personal investment, an equity investment from the architect, state tax credits and federal funding made available to replace housing stock lost in 2008 floods.
He said the Iowa Economic Development Authority wasn’t clear about its deadline requirements for the roughly $500,000 it awarded in enterprise zone tax credits. But by the time the state pulled the credits, they were already intertwined with other financing.
Thomson said the bank called its $3.9 million construction loan after it became clear the project wouldn’t receive the tax credits.
That collided with general construction delays from a shortage of skilled tradesmen, which halted work in October 2017. For now, the litigation has dashed hopes of any quick completion of the project.
“Until that gets resolved, there’s not too much that will happen,” said Charles City Mayor Dean Andrews.
For the people of Charles City, the prominent corner at the busy crossroads of two highways promises to be the most important in town if McQuillen Place ever opens.
“But where it sits now, it’s not the most important. It’s really the most embarrassing corner in town,” the mayor said. “But if completed, it would be a showcase.”
Andrews said he hopes Thomson can find a way to finish McQuillen Place or step aside and allow someone else to finish it.
Even unfinished, it has its admirers. Its aesthetic fits in with the downtown’s historic mix of brick and stone structures.
“It’s a beautiful building,” Charles City Administrator Steve Diers said. “That was a reason the city was looking to get involved.”
City officials, who viewed McQuillen Place as a catalyst for downtown, offered a $900,000 tax increment financing loan toward the project. But those incentives passed when the project missed the city’s completion deadline.
Even with the frustration, Diers remains optimistic that the building will be completed. Eventually.
“We’re just trying to figure out what that process will be. I don’t have that answer,” he said. “The longer they drag on, the more expensive it gets overall.”
James Gray, a Chicago architect who owns a minority equity stake in the project, said the development team desperately wants to finish its work.
He said finding capital will be easy, but they need clarity from the bank about an agreeable resolution for moving forward.
Gray estimates McQuillen Place needs about $1 million and six months of work to finally open the doors.
“We’re sitting here chomping at the bit,” he said. “We want to get it done.”
Gray said no one is as frustrated with the project as its developers: He noted his firm is carrying more than $2 million of high-interest debt it sunk into the building.
But this is personal for him, too.
A native of a small town in east-central Illinois, Gray is intimately familiar with the narrative of rural decay.
He saw McQuillen Place as a point of pride for Charles City. That’s why developers included an illuminated clock tower and a three-story, open-air walkway cut through the structure connecting the sidewalks of Main Street to the parking lot in back.
He envisions McQuillen Place serving as a beacon for natives and visitors alike, the first thing travelers spot on their drives back home for the Fourth of July or Christmas holidays as the highway slopes toward downtown.
But for now, that dream seems a long way off.
In their lawsuit against the state, lawyers for McQuillen Place argue that the Iowa Economic Development Authority’s decision to pull tax credits from the tardy project was both unconstitutional and based on an erroneous interpretation of the law.
Though McQuillen Place lawyers argue that the state could have waived its two-year deadline, Assistant Iowa Attorney General Alan Nagel wrote in court documents that the suit was moot because state law codified the two-year deadline for the tax credits.
Meanwhile, the First Security Bank and Trust is trying to recoup the construction loan it made to McQuillen Place. The bank argues it is owed the principal balance of about $3.9 million, accrued interest of $99,128, late charges of $385,188 and accruing interest of 11.75 percent per year following the March 2018 filing of the lawsuit.
Developer Charles Thomson personally guaranteed the loan, putting up his home and his interest in a family farm as collateral. In its countersuit, McQuillen Place accuses the bank of fraudulent lending practices, slander and breach of contract. The developers argue they relied on the bank’s expertise with state economic development incentives.
Bank President and CEO Kurt Herbrechtsmeyer declined to comment for this story.
A jury trial is set for November 2019.
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Information from: The Des Moines Register, http://www.desmoinesregister.com
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