The lottery’s headquarters may be moving to a new location in the Des Moines metro area later this year. Here’s the 411:
We’ve been studying the situation since late 2012, when our long-range planning uncovered some major maintenance issues at our current HQ building in Des Moines. Our sales average about $1 million a day, so if they’re disrupted by an emergency at our headquarters, the losses could add up quickly. We’ve been doing our best to manage the risks involved for our business and make the best financial decisions for the state and the lottery.
Over the past year, we consulted with a number of building and maintenance specialists and then ultimately conducted some detailed analysis with the state’s property experts -- the General Services Enterprise Real Estate Team at the Iowa Department of Administrative Services.
DAS and the lottery looked at three different options for our headquarters: rehabbing the current building at 2323 Grand Ave. in Des Moines; constructing a new building; and moving to an existing building in the Des Moines metro area. The option that appears to provide the lowest operational risk for the lottery and the best financial option for the state is for the lottery to move to a different existing building in the metro area.
The DAS team identified more than 20 potential properties and several of them were toured. Ultimately, an offer was made this month on the commercial building at 13001 University Ave. in Clive. The property had once been listed at more than $7 million, but after aggressive negotiations, we agreed to a purchase price of $5.35 million.
Sometimes even the lottery gets lucky. Several factors came together in this situation to bring a premier property into the realm of consideration for our HQ project.
The Clive office building currently is empty and it’s owned by a group of banks. It provides easy access to visitors from I-80/35 and I-235; it’s energy efficient with modern HVAC and lighting; and it’s practically turnkey in terms of our ability to relocate the lottery’s headquarters there quickly.
It's true that the Clive building is nice. The Iowa Lottery and the State of Iowa have a rare opportunity to buy a quality asset at a deeply discounted price that would provide long-lasting value.
UPDATE: The DAS Real Estate Team presented a proposal to purchase the property to the Iowa Lottery Board during its meeting today in Des Moines. The Board voted unanimously to approve the purchase, so the project next will go to the Iowa Executive Council (the governor, secretary of state, state treasurer, secretary of agriculture and state auditor). Executive Council approval also is required before the project can proceed. And if that approval is given, the lottery also will provide an official notification about the project to the legislative Government Oversight Committees.
The DAS Real Estate Team will present information about the property to the Iowa Lottery Board during its meeting today in Des Moines. The Board is expected to vote on the property purchase and if it’s approved, the project also would need to be approved by the Iowa Executive Council (the governor, secretary of state, state treasurer, secretary of agriculture and state auditor). The lottery also would provide an official notification about the project to the legislative Government Oversight Committees.
The proposal is for lottery to close on the property sometime around April 1, paying $3 million of the purchase price in the current fiscal year. We anticipate paying the remaining $2.35 million and short-term interest in FY 2015 within six months of the closing. But we do have the option to pay the entire purchase price in FY 2014 if our revenues allow for that.
So what would happen to our current HQ building if we move? The Lottery would work with the DAS Real Estate Team to sell it. The property is in a good location with access to Grand Avenue and Ingersoll Avenue – both major thoroughfares in the Des Moines area. A new owner could refurbish the property while it was unoccupied, avoiding the operational difficulties that the lottery has as the business currently operating there.
If the purchase of the Clive property is approved and the due diligence on the project is successfully completed, it appears that the proposal would allow the lottery to be under budget, have the lowest operational risk and provide an on-time execution. Those are big positives.
Our decision comes after a careful, open process. We wouldn’t consider this proposal if we didn’t think it was the best financial decision for Iowa.
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