The historic Kahl Building in downtown Davenport has been sold for $2 million to Jim Bergman of JNB Capitol Building, Bettendorf, who will turn it into 70 apartments, renovate the Capitol Theatre on the ground floor and add commercial space.
Eastern Iowa Community College District Downtown Campus Foundation sold the building at 326 W. 3rd St.; the college has owned the building since 1994, when it was received as a gift, and has used it for classrooms since the mid-1990s.
Announcement of the sale was made Wednesday afternoon by the college in a news release.
The Kahl Educational Center, as it was called, became available following Scott Community College's recent move into its newly opened SCC Urban Campus.
The college planned to renovate the Kahl itself, but Don Doucette, chancellor of Eastern Iowa Community Colleges, said recently that construction costs appear to have risen and the federal tax credits needed to help finance the project would have reduced in value if construction does not begin this month. The college is not in a position to do that, he said, but Bergman is.
"It's clear that the market conditions and the numbers that we originally based it (renovation) on changed substantially," Doucette said Wednesday, before the deal was closed.
Payments from the developer will be used toward paying down the debt on the new campus, consistent with the original intent to use the revenue from the Kahl to support the downtown campus projects, Doucette said in the news release.
When the Urban Campus project began, an independent consultant indicated the new campus would be self-sustaining without relying on income from the Kahl or other properties, the news release said. The sale and ability to buy down the debt of the new campus are essentially additional financial benefits to the development.
Bergman has done numerous development projects in the Midwest; in the Quad-Cities, he developed Thomas Place on Kimberly Road in Bettendorf where the former El Rancho restaurant was located and Pebble Creek Villas in LeClaire. Both are senior housing projects.
Renovation of the Kahl is pegged at about $20 million, with construction beginning “tomorrow,” Chris Ales, project manager, said Wednesday. Doucette said the college originally estimated renovation costs at $25 million.
Ales and Bergman want to get construction started before June 20 so they can take advantage of historic tax credit financing as it was structured before December 2017.
The new federal tax law passed in December restructured the payouts on historic tax credits, spreading them out over five years rather than a single year. This change makes the credits less valuable to investors and more difficult to sell, Ales said.
“First thing in the morning, I’m going to pick up the keys (to the Kahl) from the CFO and go to Davenport Public Works for a demolition permit,” he said. “I’ll have a crew of guys in there over the next couple of days taking down interior walls and getting it ready.”
Of the 70 apartments, some will be market-rate and some will be restricted-income, although Ales said the ratio has not been worked out.
The Kahl's Capitol Theatre will be renovated so it can be used for small concerts, plays and comedians, as well as for the showing of movies, Ales said. The theater currently holds 2,000 seats which is considered too many for today’s uses. Ales said he will negotiate with the National Park Service, which monitors projects receiving historic tax credits, about reducing the number of seats.
Renovation of the building is expected to be completed in late 2019, Ales said.