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Union House in downtown Charles City welcomes its first tenants

Union House in downtown Charles City welcomes its first tenants
Apartments in the Union House are finished in light gray walls with white trim, white ceilings, hard surface floors in common areas and carpet in bedrooms. Press photo by Bob Steenson
By Bob Steenson, bsteenson@charlescitypress.com

It has sat unfinished and unoccupied since construction started in 2013, stalled in 2017 and resumed last year under new ownership, but as of this week the Union House in downtown Charles City has tenants.

Renters moved into the first three apartments in the three-story mixed residential and commercial property on Main Street on Wednesday, said Kurt Herbrechtsmeyer, president and CEO of First Security Bank & Trust and manager of Four Keys LLC, the company formed by the First Security’s bank holding company to purchase and manage the assets of the former McQuillen Place project when they were sold through bankruptcy action.

Herbrechtsmeyer said the apartments in the building — 17 on the second floor, 16 on the third, a combination of one-, two- and three-bedroom units — are substantially complete. The major holdup is the lack of refrigerators.

The refrigerators have been ordered and they are “somewhere” in transit, he said, but currently only eight refrigerators are on site in the apartments.

“When we hit eight tenants if we have to run down to Home Depot (for refrigerators) to get somebody in the door then I guess we’ll do that,” he said. “Our preference is to get the ones we ordered so they match up with the other appliances in the apartment.”

The project has been the source of dozens of legal actions among the original developer and several companies he is associated with; the bank, which provided the primary construction mortgage; individual bank directors and officers; the state of Iowa over promised tax credits; the project architectural firm; and construction companies and subcontractors that have been involved before and after construction stalled and the project filed for bankruptcy.

Some of those legal actions have concluded, but others remain to be decided. Many of them have been reported on extensively in the Press.

Herbrechtsmeyer avoided specifics on those legal tangles in a talk he gave to the Charles City Rotary Club recently, where he updated the club members on the progress of the Union House since the bank took over the project. He also talked to the Press about the project during a tour of the building.

The good news is that they received a certificate of occupancy from the city for the residential units in August and they have begun to lease the apartments to tenants, Herbrechtsmeyer told the Rotary group.

Runde Real Estate & Property Management of Mason City has been hired to manage the property and is seeking tenants. The one-bedroom units start at a rent of about $600, and that includes all utilities, he said.

“They are all finished with floors, the appliances, everything is ready to go, We’ve got hardware on the cabinets, now. We’ve got hardware in the closets. We have microwaves, laundry in almost every apartment, stoves in almost every apartment,” Herbrechtsmeyer said.

“We are still sitting at eight refrigerators. That’s the limiting factor at the moment. The other is we’re putting in window coverings on all of those windows. I forgot to add up the bid to see how many windows that actually is, but it’s around 200,” he said.

He took a few minutes to step back and recap what had been done with the building since the bank took it over.

Dean Snyder Construction of Clear Lake was hired in the fall of 2020 and crews replaced the roof, put in all new flooring, many new ceilings and new walls.

“We removed a number of bathrooms,” he said. “There were a lot of apartments that had one bedroom and two bathrooms and very little closet space, so we took out the extra half bath which was just a sink and a stool and we converted those into extra closets.”

The heating and cooling system was completely redesigned and rewired, new countertops were installed, some walls were torn out, added or moved.

“We did a lot of work with a designer from Dean Snyder. We repainted. I’m sure most of you noticed we repainted the exterior. I’ll give credit to Emma Sheckler for helping us with that,” Herbrechtsmeyer said, referring to a Charles City resident.

“She works for Dean Snyder. She was involved in a little bit of this work, which was a little fun,” he said.

All the common areas of the residential space are finished. Hallways were recarpeted and stairwells completed, and a new elevator was installed.

“That was probably one of the biggest parts of the project was getting that elevator removed and a completely new elevator built in its place, because it hadn’t been completed,” Herbrechtsmeyer said. “It was mostly completed, but we couldn’t get anywhere with the elevator company that had been in there on a price. For the same price to finish the elevator we could have a brand new one and we’d know exactly what was going on.”

With the work on the second and third floors wrapping up, attention is turning to the ground floor, and Dean Snyder Construction will come back to start work on that area over the winter.

“We want to get that to what they call a vanilla envelope state, which is finished but not so completely finished that you have to undo work when you find a tenant that wants something a little different,” Herbrechtsmeyer said.

“We will proceed this winter to do all the concrete, the plumbing, the electrical work, the lighting work, everything that’s necessary,” he said. “We are talking to a number of potential tenants for that first floor, so if we can get a deal struck with them we’ll build it out the way they want to build it out and we’ll share that cost appropriately between what they should pay for and what we would pay for.”

He said interest in the retail space has been very good, especially in four smaller spaces that range from about 500 square feet to a little over 700 square feet.

“They’re small. There’s not a lot of room, but actually that’s where I’ve gotten the most interest, is in that real small footprint,” he said.

Two commercial tenants are almost ready to sign, he said.

“One is a service business. One would be a new retail business. I’ll just say it’s somebody who lives in the area who’s worked in an industry for years who wants to stay in Charles City and run a retail business in that industry, which I thought was kind of nice,” he said.

“I had a nice visit with her a few weeks ago and she said, ‘I’m ready to do something a little different, but I understand this business and I can do it in a small footprint.’ So that was exciting to hear that there’s somebody new, a new business,” he said.

One of the attractions of the building is an open arcade that runs through all three stories near the southern end of the building, and they have a change in mind for that.

“This might be a little controversial,” Herbrechtsmeyer said. “I think everybody really likes that arcade, but our experiences having power washed that arcade once, and having all the bugs come right back in and we see the little dark spots up there, we’re going to actually close the arcade with closing doors.”

The doors will help keep the bugs out in the summer, and will also make the space a lot warmer in cold weather, he said, which will hopefully make the space more usable by the residents or by the stores along the arcade on the ground floor.

They also added electrical outlets to the arcade, which will allow live music or receptions “or other fun things” to be held there, he said.

“Hopefully that will allow either the residents upstairs to make use of it, or the business owners on that arcade to put tables out or do other things,” he said.

“We do think it’s a good space. Last year during COVID a group of us used that occasionally as our Saturday morning coffee place because we could socially distance in there. It’s really very pleasant, especially on a sunny day when the weather’s mild and the wind’s not blowing,” he said.

Herbrechtsmeyer said the goal has never been for the bank to own and manage the property, but he realizes that potential buyers of the property now might be reluctant while legal issues still hang over it.

“We understand that we’re in this for a while. The plan is to get it filled and operate it and when the time is right … it’s always for sale, but we know that there are concerns about somebody wanting to get involved with that from a legal standpoint. Our feeling is we’re going to be landlords for a couple of years, until that gets worked out, and then we’ll move on,” he said.

He said they hope to be able to have an open house sometime soon.

“I’m thinking we wanted to get a couple of things finished up and tidied up. I’d like to do it with a glass of beer or a glass of wine and open up the arcade and have it open up into the building, but hopefully before it gets too cold,” he said.

Asked about the cost of the project, Herbrechtsmeyer said the bank has put almost $4 million into construction since it took over.

The bank originally provided almost $4 million in the construction loan, and purchased the assets of McQuillen Place Co. LLC for $1.1 million through the bankruptcy sale, but as the bankruptcy estate’s largest secured creditor it could get much of that back.

The bank filed to foreclose on the mortgage note, saying required payments had not been made, and that was one of the actions that prompted the bankruptcy.

Asked if the name Union House was catching on after having been known as the McQuillen Place for so many years, Herbrechtsmeyer said the thought had been that was a working title, and if some company buys the building and wants to put its own name on it, that will be fine. The name Union House does not appear on the building.

“If it’s been the Union House for a couple of years and somebody buys it, I think they might be more likely to keep it. I suppose if the thing is a disaster they may want a fresh name on it,” he joked. “We’ll see how it goes.”

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