Skyscraper duel: Blackbird raising tower to 33 stories, dumping investor
An apartment tower planned in at the former Younkers site in downtown Des Moines will include a swimming pool that hangs over the edge of the 33-story building — giving swimmers a view straight down.
The race to build Iowa’s tallest residential tower has a new leader.
Blackbird Investments, the Des Moines-based developer planning to build a high-rise apartment complex at the former Younkers building site, has added seven floors to its proposal, increasing the height to 33 stories.
Blackbird’s tower would be one floor taller than the 32-story apartment complex proposed two blocks away by Mandelbaum Properties.
The increased height comes as part of a larger project shakeup. Blackbird has split with primary investor CA Ventures, a deep-pocketed Chicago development firm, and is instead pursuing a loan backed by the U.S. Department of Housing and Urban Development. The $104 million project has also been given a new name: The Blackbird.
Justin Doyle, a partner in Blackbird Investments, said the firm is on track to obtain the HUD loan and break ground by early summer.
But officials with CA Ventures have raised questions about the project’s viability.
“We mutually parted ways over the project's ambitions not aligning directly with what we would consider reality,” J.J. Smith, a principal with CA Ventures, said in an email. “I have the highest regard for the Blackbird team and can appreciate their visions for the project, but we at CA have to pick projects that stand the greatest chance at success, and for us, this wasn't one of them.”
Doyle rebuffed CA Ventures' critique and said the project is moving forward.
Blackbird, he noted, owns the land, has signed a development agreement with the city, has chosen a general contractor, has completed architectural plans, raised equity from local investors and is nearly ready to apply for building permits.
“It is 100-point-0 percent going to happen,” Doyle said.
City officials expressed confidence in Blackbird’s proposal.
“Their tenacity is nothing short of remarkable,” economic development coordinator Rita Conner said. “They don’t approach anything halfway."
Tower size, design scuttled deal
CA Ventures brought experience and money to the deal. The firm has built dozens of residential skyscrapers around the country and was going to provide most of the equity.
But conflict arose over the size and cost of the building.
Doyle said CA Ventures wanted to shrink the tower so it would more neatly fit into a portfolio of mid-rise apartment buildings to be sold later in a real estate investment trust, or a REIT.
CA Ventures also would have retained a majority ownership stake, which was unpalatable for Blackbird’s partners, who have not worked with outside investors and wanted the building to stay in local hands.
"I'm going to own this thing; I'm going to operate this thing," Doyle said. "I don't want to hand it over to some insurance REIT."
The design was also a source of conflict. Blackbird's plan calls for a concrete building with floor-to-ceiling windows and a cantilevered swimming pool hanging from the top floor.
Des Moines-based developer Blackbird Investments has released new plans for an apartment tower at Seventh and Walnut streets. The $85 million building would stand 26 stories tall and feature a hanging rooftop pool.
Amenities such as a patio, a fitness center, a virtual reality cave and a sauna would fill the top two levels. The basement garage would include electric cars for tenants to rent.
There would be a public patio on the skywalk level and a pocket park on the ground floor.
Smith said Blackbird’s “lofty design aspirations” increased the costs beyond the threshold for which CA Ventures could expect a reasonable return on its investment, considering the current Des Moines rental rates.
“It hit a tipping point where CA doesn’t believe the project can be financed in its current state without something giving,” Smith said in an email.
Officials with Blackbird said they were willing to take a smaller return on investment to build something they could be proud of.
“It’s a legacy project,” said partner T.J. Jacobs. “This is something that will be a landmark project for Des Moines.”
Both sides said the partnership ended amicably.
'It doesn’t hurt that it is a little taller'
The Blackbird would fill a lot at 701 Walnut St. where half of the former Younkers department store was destroyed in a massive 2014 fire. Blackbird also owns the salvaged half of the department store and is renovating it into an apartment complex called The Wilkins Building.
Blackbird's original proposal to build a 26-story tower came months after Justin Mandelbaum released plans for The Fifth, a 32-story apartment complex at Fifth Avenue and Walnut Street.
Although observers were quick to compare the two projects, Doyle and Mandelbaum insisted they did not want to engage in a competition.
But it might have turned into one.
In an interview this week, Doyle said he did not set out to top Mandelbaum by one floor. Adding seven stories and increasing the unit count from 276 to 336 made financial sense and allowed Blackbird to double the amount of amenity space in the building.
“It’s the economic sweet spot for us,” he said. “It doesn’t hurt that it is a little taller than the other tower being built, but that was not the driver for us.”
At 33 stories, The Blackbird would be taller than every building in the state except for 801 Grand and Ruan Center, and it would be slightly taller than the 33-story Marriott, partner Ryan Doyle said.
The top several floors would have unobstructed views, with it rising above The Financial Center, the EMC building and Hub Tower, he said.
Mandelbaum has also recently refined his proposal. On Monday, he announced a hotel would be added to The Fifth, while a climbing gym and jazz club would be cut from the project.
Mandelbaum said he no plans to add additional floors. He applauded Blackbird's 33-story proposal.
"They've designed a beautiful building, and this will make it an even better addition to the downtown skyline," he said.
HUD loan requires experience
To finance the tower, Blackbird Investments is applying for a $75 million HUD-backed loan. The group hopes to close on the loan by early summer.
The HUD financing, known specifically as a 221(d)(4) loan, does not require income restrictions for renters.
HUD does limit construction costs per-unit, but in relatively cheap Midwestern markets such as Des Moines, developers usually stay well below the cap, said Adam Hendin, a vice president of Gershman Mortgage, a HUD-insured lender based in St. Louis with no ties to the Blackbird project.
Blackbird’s lender is Nashville-based Walker & Dunlop.
Several apartment developments around Des Moines have relied on HUD loans, including The Equitable and Nexus at Gray’s Landing.
Obtaining a HUD loan can allow a developer such as Blackbird to retain more equity in a project, Hendin said. But HUD loans come with more compliance paperwork and can take longer to obtain.
HUD also requires high-rise developers to be experienced — meaning Blackbird, which has never built a high-rise before, will need to find a partner who has previously built a residential tower.
“I would be surprised if they could get a HUD loan without a partner … someone in the deal who has experience with this type of product,” Hendin said.
Justin Doyle said Blackbird intends to hire an out-of-state development firm with tower construction experience to serve as a consultant.