Lloyd Companies will begin its Sioux Steel redevelopment in downtown Sioux Falls later than originally planned, as pandemic-related market conditions have created a time of unprecedented challenges in multiple industries.
The nearly $200 million development is still planned to include a Canopy by Hilton, a seven-story hotel and conference center, a nine-story mixed-use building and a parking ramp surrounded by 100 apartments.
The project received approval earlier this year from the Sioux Falls City Council and had been moving toward an August groundbreaking.
“We’re anticipating this is a short-term delay, but we also can’t put a specific timeline to it yet. We’re constantly reevaluating what the landscape looks like and where we believe conditions are heading,” said Jake Quasney, Lloyd Companies’ executive vice president.
Earlier this spring, Lloyd Companies performed a review of the project, evaluating concepts in product-types with more stability – such as additional multifamily density. After reviewing pre-COVID-19 data and industry projections across many sectors, Lloyd Companies determined that the original concept remained the highest and best use for the site.
“We have cleared several of the hurdles that impact downtown development, including confirmation from the state of South Dakota that Sioux Steel has ownership of the property known as Seney Island. We still believe in the project. The Rysdon family and Sioux Steel still believe in the project. And we will see it through.”
The project will be driven by the hotel and adjacent office tenants – both markets that have been significantly affected by the COVID-19 pandemic and subsequent economic shutdown.
“We’re not putting the project on a shelf and forgetting about it,” Quasney said. “The team is balancing the significant value that can be created by contracting for the materials and services involved in the project during the pandemic against the timing of when banks will have confidence in the various components of the project.”
The office component of the project also could look different in a post-COVID-19 world, he added.
“The approach and the need for office space may change,” he said. “We believe this building will represent a blank slate for modern systems, first-class office space and an opportunity for businesses to build space at the size and layout they need.”
Canopy by Hilton continues to be fully supportive of the project, said Gary Steffen, vice president and global head of Canopy by Hilton.
“While there continues to be uncertainty in the current environment we are committed to working with our visionary local partners, Lloyd Companies, in creating something truly unique in Sioux Falls with the Sioux Steel project,” he said.
Construction will take at least two years from groundbreaking to opening. In the case of the hotel, that could be a good opportunity to time the market appropriately, Quasney added.
“We believe when you look at past recessions and other events that had a significant impact on travel that domestic and regional travel is the first to recover,” he said.
“We’re social by nature and we want to do things. So travel will recover, and we want to be part of the recovery. We’re working through that now to understand how to make this happen on a timeline even closely resembling what we had before and will continue to work with the city proactively until we can guarantee our timeline.”
Lloyd Companies appreciates the clarity from the state, support of the city and other partners and emphasizes the Sioux Steel project “is not in jeopardy of going away,” Quasney added.
“We need to get a full commitment from tenants, though, and understandably, everybody is waiting to see what the impact is on them. Our perspective is the timing to do it is pretty soon, and you can get significant value. We fully believe, in time, we will see this once-in-a-generation redevelopment become a reality and want to make sure we maximize the potential of this incredible opportunity.”