The former Smulekoff’s building in downtown Cedar Rapids will have a new owner soon. And that new owner will pay just a fraction of the flood buyout price paid less than two years ago.

The former furniture store closed the doors in the fall of 2014 after 125 years of business. The city ended up owning the building after a $4.7-million dollar flood buyout using federal disaster relief dollars. Now the city council will sell the building to developer Steve Emerson for just $415,000.

After the council decision on Tuesday, some members defended the deal saying it was in the best long term interests of the city, and the core downtown, to go ahead with the development agreement.

Jennifer Pratt, Cedar Rapids community development director, said the $4.7-million dollars paid for Smulekoff’s was an above-appraisal price aimed at helping owners recover from the flooding disaster in 2008. The city used the same formula, 107% of pre-flood value, to determine values for hundreds of other flood-damaged properties purchased in buyout programs.

Pratt said a more recent valuation of the empty Smulekoff’s building put the price in the $2-million dollar range. However, that doesn’t account for the severe restrictions imposed by the city on redevelopment.

For instance, the developer can’t use the entire backside of the building because it will be part of a future city flood wall system. Likewise, the city plans to use a Smulekoff’s parking lot as a future plaza entrance.

Developer Steve Emerson said there are also serious costs to stabilize the building before any renovations start and that impacted the price.

“I’ve got about $3-million dollars’ worth of infrastructure work before I can even start working on the building essentially,” Emerson said.

The city and the developer agreed on two appraisals and both came back at about the $415,000 figure as a current value when the city-imposed restrictions were considered.

“When we’re looking at what the community got out of this deal, we’re looking long term. While the sale price is one item we’re also looking at what we got out of the development agreement,” Pratt said.

What the city got is a renovation expected to cost at least $15-million dollars. The developer is also required to place the property on the National Historic Register and follow strict federal historic guidelines for development.

He’s also agreed the office spaces envisioned as part of the mix of retail, offices and housing must attract at least 50 new workers to the core downtown area.

Scott Olson, a Cedar Rapids council members, said the housing plan for 32 one bedroom or studio “micro-units” is important because it fills a housing niche.

“I think it’s a good project and the type of housing provided is one that we don’t have in the micro apartments,” Olson said.

While developer Emerson is paying $415,000 for the property, the agreement also calls for him to pay property taxes as if the property were worth $2-million dollars now. He gets a 10-year tax break on any increased value he adds in the renovation. After the 10 years, the full amount of property tax will begin flowing back to the city.

While the city is selling the property, the dollars used originally for the flood-buyout price came from federal disaster relief funds through the state. The money goes back to the state, not the city, and state officials signed off on the $415,000 purchase price.