For the first time in four decades, Mayflower Residence Hall is back on the market, and it’s worth a pretty penny.

Iowa City real estate broker Jeff Edberg of Lepic-Kroeger Realtors, who has worked as a consultant for the University of Iowa since 2009 and has 46 years of experience in the commercial real estate business, was tasked with brokering the sale of Mayflower.

The decision to sell the dorm came in February when the UI announced its plans to sell the building and construct a new dorm on the east side of campus, indicating that it could be sold and closed by spring 2024. Edberg was then approached to assess the feasibility of putting the property on the market.

After seeking input from local and national developers, Edberg received a positive response, indicating there would be strong interest in the property. The dorm received a listing price of $45 million in June and an official listing on Realtor.com.

The building was originally constructed as a private dormitory in 1968. The UI the building in 1982 and renovated it in 1999, as well as in 2009 after repairing flood damage.

Rod Lehnertz is the senior vice president of Finance and Operations and university architect for the UI. In an email to *The Daily Iowan,* Lehnertz wrote that the UI elected to sell Mayflower, which primarily serves first-year undergraduates because it is the furthest residence hall from the heart of campus.

“The Vice President for Student Life, the leadership of UI Housing & Dining, and UI administration discussed the possibility of selling Mayflower over the past several years. Mayflower primarily serves first-year undergraduate students,” Lehnertz wrote. “First-year students have expressed a desire to live as close to the center of the undergraduate experience as possible.”

Edburg described the residence hall as boasting a unique configuration that sets it apart from traditional apartment buildings or hotels. The building provides various amenities on the first floor including a store, computer access, lounges, classrooms, and an exercise room. The building also previously housed an indoor pool, which was removed and repurposed in the 1990s.

Edberg believes Mayflower has the potential to serve multiple purposes, such as housing students, workforce housing, low-income housing, or elder housing. He noted that the UI is a steward of the state’s money, which is taxpayer money, so a fair price and the use of the building were important to consider.

“They’re not a private party looking necessarily for the top dollar,” Edberg said. “They’re looking for a fair value, but also a good use is very important to them.”

Edberg’s valuation process involved considering three different approaches: a comparison of similar properties, an estimation based on construction costs, and a capitalization cost method. Due to the dorm’s distinct characteristics, Edberg said it proved challenging to find a sufficient direct comparison. Additionally, the building’s construction costs would differ drastically if it were built today, making a purely cost-based estimate less reliable.

Through using the capitalization cost method, which assumes Mayflower would generate income like an apartment building or commercial property, Edberg was able to finalize the $45 million price. After deducting estimated costs like utilities and maintenance from the projected income — students’ room and board — a net operating income was calculated, indicating a return of over 13 percent.

“We took a look at economic models and searched our friend the internet for private dorm prices, and looked at many communities and came up with income values,” Edberg said. “I took an aggregate of good estimates of what all the costs would be to run it, deducted that from the income, and came up with a net operating income. And that’s the holy grail in a capitalized cost analysis.”

This capitalization rate makes Mayflower an attractive investment opportunity when compared to luxury apartments in downtown Iowa City, which have capitalization rates of only four to five percent, he said.

The price was also determined through a collaborative effort between the university and the state, considering factors such as the building’s reputation and its significance as a landmark when entering Iowa City.

“When you come off the freeway, this is the gateway to Iowa City,” Edberg said. “It just fills your windshield. And so, you’re seeing the Mayflower all the way down the street coming south and so you want this to be a landmark, and that’ll weigh into it too.”

Although no written offers have been received yet, Edberg said he has been engaging with credible investors and developers who have shown some interest in the property. The ultimate goal is to find a buyer whose use of the building aligns with the city’s objectives and the university’s reputation, Edberg said.

“This is not an adversarial, but a collaborative effort that it will sell,” Edberg said. “We don’t know what the final price will be, but it will work for both the university and the buyer. And move on to the next chapter of the Mayflower.”

Iowa City City Manager Geoff Fruin echoed Edberg’s sentiment that the selling of the Mayflower will be a community effort and also stated that the city has not considered purchasing the dorm.

“We trust that as parties start to consider their interests they’ll reach out for a discussion on any type of city requirements for the property,” Fruin said. “There hasn’t been any discussion of the city purchasing that. It was never debated.”

Regarding the building’s future, Edberg believes demolishing Mayflower would be economically unfeasible due to the building’s extensive use of concrete and steel. Furthermore, the city intends to maintain the building’s original purpose as a private dormitory because it adheres to the zoning requirements that were in effect when it was constructed.

Fruin confirmed that the city anticipates the retention of the Mayflower as a residential building. He also explained that the city expects buyers to rehabilitate, rather than demolish the Mayflower.

“Keeping that housing supply on the market will be important,” Fruin said. “If someone wanted to purchase it and tear the property down, whatever was built back would be much smaller in scale under today’s regulations.”

Lehnertz also noted that the City of Iowa City provided the university with guidance on how the city might view a third-party acquiring the site. He echoed Edberg and Fruin’s sentiment that the property would most likely not be demolished.

“The city would not permit a building of that size, scale, or height to be rebuilt on that site given the current city zoning code,” Lehnertz wrote. “The more likely outcome is for a third party to renovate the existing facility, which would allow the building to still fall under the zoning code for when it was originally built.”

Edberg said he envisions the building as continuing to serve as student housing on a private basis, or potentially accommodating workforce housing or elderly residents. Particularly in the case of senior housing, Mayflower presents opportunities for compatible uses with its elevators and adaptable floor plans, Edberg said.

Having known the building since its inception and being a UI alum himself, Edberg said he felt honored to be involved in the sale. He is optimistic about the building’s future and said he is confident that it will sell successfully.

“The challenge is to sell it and then have a use that we’re all going to be proud of that’ll be profitable for the buyer and healthy for the city,” Edberg said.