A loan approved by the city of Des Moines earlier this month persuaded two tenants of a historic building to keep their offices downtown instead of moving to the suburbs.

On Dec. 4, the city approved an economic development forgivable loan of $50,000 to the owners of the Homestead Building, 303 Locust St., to assist with the retention and expansion of two of its tenants. A non-profit organization, Mosaic, and the Gourley, Rehkemper & Lindholm law firm had debated leaving the building because they thought the cost of expanding their offices downtown would be too expensive.

“There is a lot of commercial rental space in the suburbs, and we felt initially like we could have more bang for our buck by relocating,” said Jen Zajicek, associate director of Mosaic, which serves people with disabilities.

Zajicek said the cost of monthly parking fees for her organization’s 40 downtown workers took resources away from its budget to remodel its offices. Those factors pushed Mosaic to explore lease options outside downtown, even though a downtown location is ideal as a central site for serving its 35 group homes throughout Greater Des Moines.

Bruce Gerleman, general partner of the Homestead Building L.P., which owns the building, helped Zajicek and Mosaic employees secure more affordable parking. But what really persuaded the organization to keep its administrative offices downtown was the $50,000 economic development forgivable loan Gerleman secured from the city of Des Moines and additional money he plans to invest in updates to the building. Some of these improvements will directly benefit Mosaic and Gourley, Rehkemper & Lindholm by expanding their office space. Other improvements will make the building compliant with Americans With Disabilities Act codes.

Bobby Rehkemper, an attorney with the Gourley firm, is pleased with the arrangement. He said construction has started on his firm’s expansion and he expects the work to be complete early next year.

“Image goes a long way in what we do,” Rehkemper said.

Built in 1892, the Homestead Building is named for a magazine that was produced there under the original tenant, a publishing house. The building was being used as a hotel when Homestead Building L.P. bought it in 1983 and converted it into an office building. Gerleman’s company, Gerleman Management Inc., opened Splash in 1998. The building is listed on the National Register of Historic Places.

Gerleman said occupancy has been “fairly stable” since the building’s renovation. When he heard that two of the nine tenants were considering not renewing their leases and moving out of downtown, he asked the city to work with him on incentives that would make them want to stay.

The city loan is contingent on the Homestead Building LP investing about $73,000 for updates to the building. In addition, Mosaic and the Gourley firm must fulfill their five-year leases, collectively retain at least 42 full-time employees and hire at least eight new full-time employees during the term of the lease.

“The city is helping with some of their leasehold improvements, which makes their cost of occupancy lower than if they had to pay for these projects on their own,” Gerleman said.

According to the City Council’s Dec. 4 communications piece on the Homestead Building, increasing the occupancy of older downtown commercial buildings is a priority. Lowering tenants’ occupancy costs is one strategy to keep businesses from leaving downtown.

“I think it’s just real important to keep all the jobs downtown and to keep those people downtown,” Gerleman said. “It contributes to the vibrancy of the downtown restaurants and shopping and the whole economic vitality of the area.”