At a July 22 special meeting, Springfield City Council approved an amended Heer’s redevelopment agreement that eliminated a clause that allowed McGowan, president and CEO of Blue Urban LLC, to sell the dilapidated downtown building back to the city if square renovations didn’t start by Aug. 1.

“I think this is a good deal all around,” said Mayor Tom Carlson. “It dramatically reduces our financial liability.”

Construction work on the square was originally scheduled to begin June 1, but an ongoing review of its historical significance by the Missouri State Historic Preservation Office has left a council-approved redesign in limbo. That review process was set into motion by Councilman Dan Chiles, who contacted historic preservationists about the square’s current design after expressing concerns about the cost of the redesign project.

While McGowan has never publicly said he planned to sell the Heer’s building back to the city, he did tell Springfield Business Journal in mid-June that square-related hang-ups had pushed back the start date for Heer’s renovations by at least 60 days. McGowan plans to renovate the downtown landmark as 38 upscale condos above a Mike Shannon’s Steaks and Seafood Restaurant – at a cost of $26 million to $30 million.

‘Undue pressure’

According to a “put option” in the original agreement, McGowan reserved the right to sell the building back to the city for the $3 million purchase price plus direct and indirect developer costs as well as overhead and markup equal to 15 percent of direct and indirect costs.

“The reason we put that in is we did the city a favor early on in that we closed six to nine months earlier than we would have preferred,” McGowan said. “In doing that, it meant that we were closing ahead of having incentives in place and commitments finalized on behalf of the city. We had that as a safeguard.”

Pressure on the city to start work on the square by Aug. 1 was “undue pressure” in light of the project’s altered timetable, McGowan said.

“I have every faith in the world that the city will follow through on the commitments to make this deal happen,” he added. “It’s very risky on my part. I took the big stick away.”

In return, the city has dropped a personal guaranty of up to $250,000 that McGowan consented to in the original agreement, which would have assessed daily fines of $1,400 if the developer had missed the Sept. 1 deadline to start work on Heer’s.

Blue Urban is now required to start construction no later than Feb. 1, although McGowan said he’d like to secure financing and begin renovations on the former department store later this year.

“Surely, every day that goes on costs this project more money,” he said. “And where the financial markets are right now, this deal is getting thinner and thinner. … We’ll have to wait and see, but my gut tells me that maybe in a few more months or so, the markets could be a little easier to deal with than they are today.”

Going forward

A set of new deadlines laid out in the amended agreement requires the city to finalize its planned square improvements by Oct. 1. Streetscape work on the square’s outer perimeter also is expected to start that month, and low bidder Rensch Construction could start removing the last section of canopy in the square’s northeast corner some time this week, said Mary Lilly Smith, the city’s economic development director.

“We’re working diligently toward the next set of deadlines,” Smith added. “I don’t think anybody is playing any games here. Our mutual goal is to get the building renovated and back into service. … I think the change in the deadlines gives us some breathing room to sort things out.”

For its part, Blue Urban must submit a final list of requested incentives to the city no later than Sept. 30. Also of note is a Sept. 1 deadline for the developer to provide the city with a letter of intent from Mike Shannon’s – a contractual obligation that was supposed to have been met by Sept. 27, 2007.

McGowan said he’s had a letter of intent from Shannon’s owner Mike Shannon – his father-in-law – for some time, although he has yet to provide the city with a copy. Shannon and daughter Pat, the restaurant’s manager, have both publicly stated their commitment to the Heer’s project – most recently at a news conference on the square in late March.