The Des Moines City Council has moved ahead with approval of a preliminary Urban Renewal Development Agreement for the redevelopment of the old Nichols & Shepherd agricultural equipment warehouse on Southeast Fourth Street.

Rypma Properties has proposed converting the warehouse, where agricultural threshing equipment was once made, into high end apartments. The estimated cost of the project is $13.7 million.

The council approved a resolution approving the preliminary terms of an agreement with Rypma Properties during its meeting on Monday. The vote came two weeks after the proposal was removed from the agenda because of uncertainty about a recently passed property tax reform bill in the Legislature.

City staff said the city needed to pause several projects that were underway to give them time to evaluate the effects of the bill and begin formulating new policy based on the legislation, which was signed into law this week by Gov. Kim Reynolds.

Carrie Kruse, economic development administrator with the city of Des Moines, said the redevelopment of the warehouse at 108 SE Fourth St., was allowed to move forward because it’s a historical rehabilitation that doesn’t require new city-funded public infrastructure, and because it is entirely commercial and is not eligible for a tax abatement.

One of the changes made in the new law is how new valuation is defined and not including those valuations that will be coming out of abatement as new valuation, making them subject to the 2% cap in revenue growth from property taxes that was included in the bill.

Kruse said communities can still capture limited long-term growth from projects that don’t have tax abatement compared to no growth if a project doesn’t materialize.

“We are still holding and working through policy recommendations for any projects that would be eligible for tax abatement and also seeking TIF incentives,” she said.

The 27,696-square-foot Nichols & Shepard warehouse was built in 1895 and is listed on the National Register of Historic Places.

Council documents indicate Rypma Properties’ plans to convert the building into office space is similar to what the developer did with the former Carpenter Paper building on Southwest Seventh Street. 

Tim Rypma, managing member of Rypma Properties, said earlier this month that his vision for the warehouse is high-end office space with timber and hardwood floors.

Council documents show that the city has negotiated preliminary terms of an Urban Renewal Development Agreement with Rypma Properties that would provide Tax Increment Financing to help fill a funding gap on the project.

According to documents, the TIF financing would not exceed $1.75 million over 20 years, or about 12.7% of total project costs. 

Council documents show the city would receive more than $4.3 million in net taxes from the project after 30 years, compared to about $728,000 if the project doesn’t happen.

Rypma Properties is also seeking state historic tax credits and is working with the State Historic Preservation Office on design requirements for the warehouse. The project will also use MidAmerican Energy’s Commercial New Construction Energy Efficiency Program, council documents show.

Rypma said he plans to close on the building in August, pending approval of the State Historic Preservation Office and the National Parks Service, which approves redevelopment plans of historic buildings on the national level.

According to the assessor’s website, the building’s current owners, Diane Kreutzer and Mark Klein, purchased the warehouse in 2019 for $275,000 from Air Filter Sales & Service Inc.

Rypma said he’s pleased with the support from the city to advance the project.

“We look forward to seeing this project come to fruition,” he said. “It’s going to offer great connectivity between the Market District and the East Village.”

The city’s Urban Design Review Board is scheduled to consider the proposal at its meeting scheduled for June 2.