War over the Warden
KDG sues city for possession of vacant property
The firm tasked with developing the Warden Plaza almost four years ago is in a legal battle with the city to retain ownership of the property.
KDG, of Lee’s Summit, Missouri, has filed a complaint with the U.S. District Court Northern District of Iowa requesting a jury trial.
KDG received the title to the Warden in April 2017 from the city with the understanding that it would redevelop the eight-story structure.
At that time, Kevin Kearns, managing member of KDG, was excited to get the project underway. The firm was to invest $30 million into the vacant landmark.
The Warden was built in stages between 1914 and 1926. It was developed by Theodore Warden, an Ohio coal mine investor. The U-shaped structure, which sits where the road slopes along First Avenue South kitty-corner to the Municipal Building, has sat empty for about 15 years. Back then, it was home to apartments. For what was once a treasured piece of architecture, passersby now see shattered windows, boarded up entrances and profanity written in dust along the storefront windows.
KDG’s initial plan for the Warden at 908 First Ave. S., called for retail space on the first two floors and about 100 apartments on the upper floors.
But through a series of setbacks regarding parking, asbestos removal and historic tax credits, the project has stalled out.
In September 2019, Kearns said the project didn’t make sense without the use of historic tax credits.
And in its complaint with the District Court, KDG alleges the city misrepresented the tax credits KDG would qualify for.
KDG contends that the city’s historical filings treated the Warden and the neighboring Wahkonsa Annex as the same building. Therefore, KDG alleges it was unsuccessful in getting those federal tax credits.
Kearns also previously said the potential development lost two years while the National Park Service decided if the Wahkonsa Annex was a separate structure, which it is.
That ruling was necessary because the Warden Plaza is within the downtown district listed in the National Register of Historic Places.
City Attorney Mark Crimmins said the historic tax credits were awarded to KDG, but that the firm doesn’t get them until they start working on the project.
“The problem is they never started the project so the time for those credits expired,” Crimmins said. “They had a certain timeline to do the work.”
Furthermore, Crimmins said the firm can reapply and be awarded the credits again in the future.
“They can reapply for the tax credits and be as eligible as the last time,” Crimmins said. “The basis of the lawsuit is that we (city) made false representations to the IEDA (Iowa Economic Development Authority) that caused them not to get the additional tax credts. They had already been awarded them and the time expired. They say they will be unlikely to get tax credits again, which is not true.”
In June 2019, the city received a $500,000 grant from the U.S. Environmental Protection Agency to help pay for asbestos removal at the Wahkonsa Annex. The city government committed $100,000 in matching funds, making a total of $600,000 available for the work.
Some of that money was already spent to hire experts to analyze the scope of the asbestos problem and prepare plans for removing it.
In May, the city expressed its frustrations with a lack of progress on the Warden. At that time, Mayor Matt Bemrich said it had been months since the city had had any communication with company leaders from KDG. Bemrich had also previously doubted the firm’s efforts in applying for tax credits.
In the spring, the city was prepared to get the building back from KDG. According to court documents, in June, the city demanded KDG return the Warden title to the city.
Then in July, KDG filed its complaint.
KDG alleges in its complaint that the city didn’t cooperate on parking for the Warden project.
“The city’s inconsistent and ever-changing positions on available parking for the Warden Project have frustrated KDG’s development efforts,” the complaint reads. “KDG needs the city to commit to a parking solution before KDG can submit its tax credit applications and receive financing.”
The complaint also lists the demolition of the Wahkonsa Annex as a sticking point, saying it cannot move forward until that building comes down.
In the meantime, KDG says it has continued to finance the project at its sole expense.
It is asking the court to order KDG retain ownership and bar the city from claiming any right to the property.
Court documents show a trial ready date of Jan. 10, 2022.
Crimmins doesn’t anticipate that happening.
“I am confident the lawsuit will be dismissed at some point in time by the court,” Crimmins said.
Crimmins said the city plans to file a motion asking the court to dismiss the case.