City buys Heer's loan from Great Southern

At its Oct. 16 meeting, Springfield City Council approved a resolution to enter into a short-term, $3.1 million low-interest loan with the Missouri Development Finance Board to purchase Heer’s owner Vaughn Prost’s loan with Great Southern Bank.

The state finance board loan is set at 5.09 percent, with principal and interest due June 30, 2007. The city closed on the loan Oct. 18.

The plan, according to city Economic Development Director Mary Lilly Smith, is for the city to either negotiate a purchase with Prost or foreclose on his loan, giving the city ownership of the building. Once the city owns the building, it would be free to pursue a development plan with any of the four developers, including Prost, that are in the running for the downtown project.

The city bought Prost’s Great Southern loan Oct. 18, Smith said, adding that the city will immediately begin negotiations with Prost to purchase the building. “We have an interest in getting it done pretty quickly.”

Prost objects to the move, saying it’s unnecessary. He said he has the financing ready to go: a $20 million loan commitment from Bank of America. But a lack of tenant commitments is keeping Bank of America from issuing the loan.

Prost appeared before council with Heer’s leasing agents Skip Liebman and Larry Grover of CJR Commercial and Galen Pellham of Pellham Commercial Realtors, made his feelings known at the meeting.

“Because I missed the city’s imposed Aug. 22 deadline by 42 days, I was not given the opportunity to continue,” Prost told council. “If I did not have the financing, I would not be here today.”

Mayor Tom Carlson, however, was not convinced.

“If we proceed, we have two or three months before we go forward with foreclosure,” Carlson responded. “If you can pay what you owe, you own the building. If you can’t pay what you owe, we’ll sell it to someone who can pay us. That’s all we want.”

Prost said he has a Plan B – which dedicates a larger portion to residential space – that Bank of America has committed to backing. Real estate agent Liebman added that in addition to commitments for the 23 lofts originally planned for the building, 18 people are on a waiting list.

Prost told council he could close on the loan for Plan B in 45 days.

Now that the city owns the loan on the historic building, it can either purchase the building from Prost or foreclose on the loan. City leaders are free to discuss the future of the building with other developers. Four groups made presentations to city staff Oct. 3: Prost Builders, Springfield-based Magers Management Co. LLC, and St. Louis firms McGowan & Walsh and Restoration St. Louis.

Economic Development Director Smith said the city is completing due diligence on the potential developers, adding that the city hopes to schedule a trip this week to see the work of the two St. Louis developers.