Why three longtime downtown Iowa City business owners decided to make a change in 2022

Yotopia has occupied — and transformed — the colorful building at 132 S Clinton St since 2011. Oct. 22, 2022.– Jordan Sellergren/Little Village

Yotopia marks its 11th anniversary this year at the Clinton Street entrance of the Iowa City Ped Mall. The locally owned shop serves frozen yogurt sourced from the Country View Dairy in Hawkeye, Iowa, non-dairy vegan desserts and full-fat options “for those who want a more decadent indulgence,” as Veronica Tessler, owner of Yotopia, told Little Village.

“I am an accidental entrepreneur,” Tessler said. “I came upon this idea to start a self-service frozen yogurt shop when I was traveling a lot for my old job at a nonprofit, then called the Stanley Foundation [now called the Stanley Center for Peace and Security] based in Muscatine. I saw more and more frozen yogurt shops popping up across the country and thought it was a good idea.”

Though Tessler was only 25 years old in 2011, her business proved a success with Iowa City’s families, students and tourists. She grossed $750,000 in her first year and was able to quickly pay off the $110,000 small business loan from MidwestOne Bank.

The downtown destination naturally faced an existential crisis during the COVID-19 lockdown, but Yotopia found new ways to increase revenues. They added delivery through CHOMP, DoorDash and Uber Eats, and launched a line of pre-mixed Froyo MashUps, made available for purchase from Field to Family’s online farmers market in the summer of 2020. Tessler said they hope to get the packaged treat into grocery stores this winter.

“Since the pandemic started, we tried to get more creative about how we get our frozen yogurt and desserts in the hands of customers, wherever they are,” Tessler said.

Amid inflation and supply-chain issues, Yotopia not only maintained its commitment to buying local ingredients, but benefited from it, she said.

“When you shrink your supply chain to a local level you can feel the resilience of the local economy, as we are getting things from a couple dozen miles away versus sourcing things from a Sysco truck from lord-knows-where across the country. I think our ability and relationships with our local purveyors have benefited us and the local economy in general.”

So it came as a shock to many Yotopia fans when Tessler announced this spring that she was looking to sell the business. Tessler said she wants to focus more on Nosh, the cafe she launched with her managing partner Lesley Rish in Des Moines’ East Village in December 2019, but told Little Village “exorbitant rent hikes and other cost increases” in Iowa City moved her hand as well.

“Our rent has more than doubled since last November from pre-pandemic levels. We’re currently paying roughly $54 a square foot,” she said.

East Washington Street in Downtown Iowa City, March 2020. — Zak Neumann/Little Village

Editor’s note: After this article’s publication, Tracy Barkalow and Veronica Tessler clarified that Yotopia pays $35 a square foot for their space; the $54 rate includes the rent and Triple Net (insurance and property taxes) expenses paid per square foot each month under the current agreement. Triple Net expenses were not included in her previous lease agreement, Tessler said.

According to the Iowa City Downtown District (ICDD), a nonprofit business association representing 150 property owners and organizations, typical commercial rent rates downtown are between $20 and $40. But ICDD Executive Director Nancy Bird acknowledged the market may have shifted a bit during the pandemic.

“One of the things that happened downtown that was less public was that properties were bought and sold, and you may not even notice it because the same business tenants stayed,” Bird said. “The change in ownership is different today than it was two years ago, and I think that different owners have different approaches to how they manage their properties.”

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Many property owners build rent increases into their contracts relative to the Consumer Price Index, Bird explained, or work with tenants to keep prices steady through economic upheaval. Others set a price and seek tenants who can afford it.

“It depends on the goals and values of the property owner and whether or not they’re trying to attract more national tenants versus whether or not they’re working to find local solutions that are long term.”

Tracy Barkalow, whose company Barkalow and Associates Realtors acquired the building Yotopia occupies earlier this year, along with several other retail and office spaces in the downtown district, said the lease agreement he presented to Tessler was fair.

“Real estate costs have gone up for acquiring the real estate, and when an investor comes in and spends more on a building today than it did 20 years ago, you can’t keep the same rates,” Barkalow told Little Village. “All of our investments are based on fair market rate rents. There’s nothing on our leases that is not in that price range.”

After a liquidation sale in February, Active Endeavors cleared their space of nearly 35 years at 138 S Clinton, retiring their painted wood sign and relocating to Coralville. — Jordan Sellergren/Little Village

It’s hard not to notice that three successful, locally owned downtown businesses — Yotopia, Beadology and Active Endeavors — decided to sell or relocate in the past year rather than sign new leases with Barkalow’s company. But the investor takes umbrage at the idea that he is trying to squeeze money from the tenants he inherited.

“Not all landlords are rich,” Barkalow said. “The rent is not free money to the landlord, there’s costs associated with it. For example, it was a large number to buy the building Beadology was in, which means the rent has to support the mortgage in order to pay the bank back.”

Beadology is a full-service bead and craft supplies store, offering repair services, custom designs and private parties. For 15 years under Karen and Laurel Kubby’s ownership (and three years before that under a different owner), Beadology leased the property on 220 E Washington, across the street from the Englert Theatre.

Beadology during its last days on Washington Street, November 2021. — Adria Carpenter/Little Village

It’s the only store of its kind in Iowa; other full-service bead stores in the Midwest are located in major cities like Chicago and Minneapolis. The Kubbys would also sublet space in their E Washington Street location to other women-owned arts businesses that otherwise could not have afforded space in the heart of the city. Over the years, the store became a fixture downtown and emblematic of the unique local businesses that help give Iowa City its character.

Karen Kubby said the biggest challenge for the business in recent years was speculative purchasing of property downtown by Barkalow, who bought the longtime Beadology space in June 2021.

“A new person, Tracy Barkalow, bought the property way above the assessed value, hoping to make a lot of money from it,” Kubby said. “In the meantime, he wanted what I consider to be a predatory lease.”

Under Barkalow’s ownership, Kubby said, the new lease charged $40 per square foot, burdened Beadology with the responsibility of replacing major infrastructure, and enforced a six-month development clause, which meant that Barkalow could come in at any moment and give the business six months’ notice to leave.

“He wanted us to pay 100 percent to replace an ancient, 30-year-old HVAC [Heating, Ventilation and Air Conditioning System]. The reason I feel that is predatory is that he wants us to go into debt to replace the HVAC system and then he comes in and says, ‘You’ve got six months to leave.’ I don’t feel that landlords should be asking for the six-month development clause and have tenants pay 100 percent for major system upgrades. You can’t have both of those things.”

Barkalow disputes Kubby’s version of events, saying he and the Kubbys “never discussed heating and air conditioning,” as they “never got past the discussion of fair market rent.”

Beadology Owner Karen Kubby poses for a portrait on top of her moving boxes on Tuesday, Nov. 24, 2021, in Iowa City. — Adria Carpenter/Little Village

As for the six-month contract, “There’s a redevelopment clause in all of our leases and it’s a very common clause in many of the downtown buildings and any other real estate everywhere,” he said. “It’s across the board. Ninety-nine percent of new commercial leases in any market have development clauses in there for any purpose whatsoever.”

In any case, Beadology decided not to do business with Barkalow and relocated just outside the downtown district at 355 S Clinton St in December 2021. Kubby said staff and customers have been happy with the new space.

“I respect Karen’s position,” Barkalow added, “but at the end of the day, Karen made a business decision. She couldn’t afford the space so she relocated to a space she could afford. You can’t expect someone to subsidize your business for you.”

As Bird suggested, property owners’ goals and values may indeed be at the heart of affordability issues downtown. Barkalow’s vision for the future of the district doesn’t place emphasis on retailers like Kubby.

“I just think that the city needs to compete with Iowa River Landing. I think Iowa City should be more restaurants, bars, entertainment and nightlife to pull in the younger generation,” Barkalow told Little Village. “Let’s face it, the older folks are not going to go downtown for drinks on Thursday or Friday or Saturday night. Most of them want parking and that’s why they’re going to Coralville … Downtown is getting rid of parking as they improve the street districts.”

“For example,” he continued, “Active Endeavors, the building I currently own, moved to Coralville because of the challenges from Iowa City’s lack of parking. The downtown homeless people were part of the issue.”

No one Little Village spoke to for this article mentioned unhoused people downtown as an “issue,” besides Barkalow. Housing and human rights advocates have long fought against the scapegoating of unhoused people for real and imagined problems in the community, often for merely existing in an area with storefronts and heavy foot traffic.

Active Endeavors manager Dave Nerad did say the relative lack of parking downtown was a contributing factor in their decision to relocate to Coralville’s Iowa River Landing this year. Plans to move were already in motion when Barklow took over ownership of their building this year, and Dave Nerad said their rent was already “high to start with.”

Active Endeavors in February 2017. — Alan Light/Flickr

Active Endeavors, an outdoor apparel and equipment store, opened in downtown Iowa City in 1986—within months of Prairie Lights Books’ debut on the same block. After a couple years, owner Mark Weaver decided to relocate to a Clinton Street storefront formerly occupied by Things, Things and Things; before long, he bought the building and expanded Active Endeavors across all five floors. He also opened locations in Des Moines in 1993 and Davenport in 1998.

The flagship Active Endeavors remained at 138 S Clinton St for more than three decades. Longtime employees Dave and Brian Nerad took over managing the store in 2018 after Weaver’s retirement. While their customers never stopped supporting them during the pandemic, Nerad said lower weekday sales, possibly as a result of remote work, made it harder to justify paying downtown rent prices.

“We found the weekdays never really rebounded downtown. The weekends rebounded immediately. I place it on the fact that almost everybody is still working at home — the University, the banks, everything like that — so it turns into, ‘Hey, let’s go downtown this weekend,’” Nerad said. “Our weekdays pre-pandemic, you could take lunches from 11:30 to 1:30 because the University was on lunch breaks, the banks were on lunch breaks, and there was so much foot traffic.”

After a soft opening period, Active Endeavors’ new spot in the Iowa River Landing celebrated its grand opening on Oct. 27. While it was bittersweet to leave the downtown district, Nerad said he hopes the move makes their store more accessible.

“We’re finding new customers,” he said. “It is very appealing out here. We get people from the Quad Cities up here all the time, Cedar Rapids, Dubuque, Southeast Iowa, everybody. We have rear access or back access to the parking garage, so that’s four hours of free parking right outside our back door.”
Meanwhile, the long-occupied space at 138 S Clinton St remains empty, with Barkalow’s contact information on the door. He remains confident in his investment.

“I think the downtown area has a lot of upswing and potential to do things,” he said. He doesn’t see the pandemic as an ongoing concern, adding, “I think everybody has bounced back in the downtown area. If they haven’t I’d be shocked, because I have not heard anybody that hasn’t recovered and is on a positive track from COVID, which is great.”

But Barkalow also noted that, “The city wants to be all retail downtown, and retail is less likely to be a thing in the area anymore.”

A two-story, small-format Target opens in downtown Iowa City, 113 East Washington St, in August 2020. — Izabela Zaluska/Little Village

While she awaits the right buyer or investing partner in Yotopia, Veronica Tessler continues to pay the rent to keep her beloved froyo shop open. Her Des Moines cafe Nosh has partnered with more than a dozen local suppliers, including Eastern Iowa’s Country View Dairy, The Local Crumb — a Mt. Vernon-based bread and bagel bakery — and Wild Culture Kombucha in Iowa City.

“Independent businesses make up the culture and the character of cities like Iowa City and communities like the East Village in Des Moines,” Tessler said. “I think Little Village readers are keenly aware of the differences between national chains and those of us like Yotopia and Nosh are offering. I think it is important to challenge readers on what they want their communities to look like and putting their money where their mouth is when it comes to the kinds of businesses they support.”

Mike Kuhlenbeck is a journalist based in Des Moines. Emma McClatchey contributed to this article, originally published in Little Village issue 312.