Warren Davis didn’t do it. Vaughn Prost’s plans never took off. Kevin McGowan failed, too.
Jim Nichols is next in line holding redevelopment blueprints for downtown Springfield’s long-vacant, yet highly esteemed Heer’s building.
Nichols, the fourth owner in 19 years for the boarded up former downtown department store, is preparing to bet $15 million – with significant help from tax credits – that he’s the one who can turn plans into reality.
A Kansas City area apartment developer, Nichols co-owns the Heer’s with Ernie Straub of Shawnee, Kan.-based Straub Construction Co. Nichols said the pair established Heer’s Luxury Living LLC in April for the purpose of buying the eight-story structure from E and J HIDC LLC for an undisclosed amount following E and J’s $960,000 auction purchase on the south steps of the Greene County Courthouse.
Nichols is a partner with unnamed investors in real estate acquisition group E and J HIDC, which was organized in February. Before the April 22 auction, E and J purchased the loan on the building owned by Indian Wells, Calif.-based Chouteau Properties Inc. for an undisclosed amount before foreclosing on the property. Nichols said when no one bought the iconic property, E and J purchased it at the auction through a credit transaction, opening the door to Nichols’ development plans.
Facing the challenge A 25-year property developer and manager, Nichols is CEO of Lee’s Summit-based Dalmark Development Group, which was founded in 2003 and employs 85 managing 21 properties. Its development portfolio exceeds $100 million and includes the $7.7 million renovation of the Hyde Park Hotel in midtown Kansas City.
Nichols said the timing is right to turn the eight-story Heer’s into 80-90 market-rate apartments. His plans include setting aside roughly 10,000 square feet on the first floor for retail – space Nichols said would be fitting for a restaurant.
He said his redevelopment experience and improving market conditions give him confidence the plans will work.
“It starts with the acquisition. We were able to acquire the building at a very competitive price,” he said.
Dalmark is currently about 40 percent done with its $14 million renovation of Kansas City’s Bancroft School, which has garnered the financial support of Springfield-native Brad Pitt through the actor’s Make It Right Foundation that gained recognition for its efforts rebuilding areas of New Orleans after Hurricane Katrina. Nichols said the school renovation is comparable to the Heer’s project.
“People who know us know we don’t take on a challenge unless we can succeed,” Nichols said.
Walt Nelson, a licensed real estate broker who teaches real estate courses at Missouri State University, said Nichols would have several notable challenges with the Heer’s redevelopment. Chief among them are the comparatively high cost of renovating a historic property and a lack of available parking downtown.
“You have to have car spaces because cars carry wallets,” Nelson said. “Where is the parking? If you say it is out back, then I would just say that it is not covered and it is not secure.”
Nelson said the reality is that downtown has both parking and security issues, potential problems renters wouldn’t have to face in other parts of town.
“With the developer taking over that property, whichever way he configures it, he’s got price competition and quality competition within a very short distance,” he said.
Several loft projects underway including the Union Biscuit Warehouse on Market Street, The Frisco at the Landmark building and Sky Eleven at the Woodruff would put another 250-plus units on the center city market.
Hung up on Heer’s Dalmark is the fourth developer to lay out redevelopment plans for the building since Warren Davis Properties bought the vacant property for $415,000 in 1995.
Before Davis could get a loan to renovate the building constructed in 1915 into a mix of office and retail space, he became embroiled in a six-year insurance battle after water and vandalism damage occurred at the property.
In 2004, Davis walked away, selling the 156,000-square-foot property to Columbia-based historic renovation specialist Prost for $2.2 million.
Prost held the Heer’s for two years before shuttering his plans and relinquishing control of the property to the city of Springfield.
He had planned a mix of Heer’s luxury condos and Class A office space.
Ahead of a looming foreclosure, the city purchased Prost’s loan on the Heer’s for $3.1 million in fall 2006, according to Springfield Business Journal archives. Roughly a year later, the city sold the downtown landmark to McGowan for $3 million.
St. Louis developer McGowan came to town with lofty $29 million plans to convert the Heer’s into condos and extensive first-floor retail with the help of U.S. Housing and Urban Development funding. Following a credit crunch that killed much speculative development, McGowan later sold Heer’s to Chouteau Properties with an agreement that he would buy it back after completing the redevelopment. In 2010, he walked away from the project saying the risk outweighed the potential reward, which set the stage for E and J HIDC to acquire the loan this spring.
Nichols and dimes Nichols said he is prepared to cover the high costs of renovations with the help of historic tax credits but acknowledged the parking dilemma is only partially resolved. He is planning to create about 70 parking spaces in the Heer’s basement.
Nichols said Dalmark employs a historical consultant to help secure the nearly $5.6 million he expects to secure through the sale of state and federal tax credits.
“The building is already on the [national] historical registry,” he said. “We don’t see any problems securing both federal and state credits for this venture.”
He added the company is in discussions with Springfield officials to secure available spots at the adjacent city-owned parking garage immediately west of the building.
Also, unlike his Heer’s predecessors, Nichols said he is focused on developing apartments.
“We are looking at this more purely in terms of housing,” he said.
Property managers would seek a mix of empty nesters, college students and young professionals who want to be downtown.
“We are not singling out any particular market niche, which I think is another thing in our favor,” Nichols said.
Straub Construction, he said, is on board as project general contractor.
Nichols said the opportunity to redevelop the hulking downtown structure came about because others did not step up to purchase it at auction.
“Like anything else, this is an opportunity to make money,” Nichols said. “If we would have received a number that we felt was financially of interest, then (selling) was a possibility. But when there were no bidders, we were prepared to go forward with what we are doing.”
Construction is expected to begin in six months, he said, and should be complete within two years. At a June 3 meeting, City Council approved a plan to allow Heer’s Luxury to pay for an outside consultant to review available redevelopment incentives custom-fitted to the Heer’s plan on behalf of the city.
While the incentives plan is being structured, Nichols said he is speaking to financial institutions to secure funding.[[In-content Ad]]
