City goes after Heer's acquisition

City officials are exploring ways to legally pry the Heer’s Tower away from developer Vaughn Prost and transfer the downtown landmark to one of three competitors interested in completing the mammoth redevelopment project.

“We want to see the project done,” said Mary Lilly Smith, the city’s economic development director. “We’re not prepared to wait a long time, and (Prost) has not made significant progress.”

Last month, Prost missed a city-imposed deadline to secure financing for the $32 million renovation project and lost the exclusive rights to redevelop the former department store.

The city, in turn, sent a request for qualifications to 11 firms – a mix of development companies and investment groups – that had expressed even the slightest interest in the Heer’s project. Three more requests were sent out based on last-minute inquiries, Smith said.

One of those inquiries was made by St. Louis real estate brokers Phil and Sam Estep, who referred the project to Restoration St. Louis, a redevelopment firm owned by Amrit and Amy Gill.

Restoration St. Louis responded to the city’s request for qualifications as did St. Louis firm McGowan & Walsh and Magers Management Co. LLC of Springfield. Prost also resubmitted his Heer’s proposal, which included an alternate plan scrapping unleased office space for additional condos.

Smith said the city is pleased with the trio of developers interested in taking over the Heer’s project, which is effectively stalled until Prost secures a construction loan or the city wrests the seven-story building from him and hands it over to another firm.

In his resubmitted proposal, Prost indicated that he’s on the verge of landing a “potential major office tenant” and obtaining the $23 million construction loan needed to complete the project. Included with Prost’s proposal is a letter of support from Commercial Mortgage Brokers in Jefferson City.

“Today, our original vision of Heer’s redevelopment is truly close to its physical realization,” wrote Prost, who purchased the Heer’s building from Warren Davis Properties for $2.2 million in 2004.

Prost blamed project delays on a redesign of the building’s top three floors to include 23 luxury condos and a difference of opinion with lenders about the percentage of preleased commercial space necessary for financing.

His alternate plan calls for doubling the number of condos, which would replace Class A office space slated for the building’s third and fourth floors. The condos would accommodate several people placed on a waiting list for the original units, according to the proposal.

“We think it’s better for downtown to have as many office workers as possible downtown because they support the businesses,” Prost said of his preference for the current plan.

Prost’s backup plan closely mimics suggestions made by Kevin McGowan of McGowan & Walsh in a recent interview with Springfield Business Journal.

McGowan said the building’s top five floors should be strictly residential with retail/restaurant space on the first floor and commercial tenants on the second level.

“Those plans were not plans we felt were viable anywhere in the state of Missouri, but especially in Springfield,” he told SBJ. “The primary interest and the primary method to get these projects funded in the eyes of the lender … is this renaissance to residential movement downtown.”

Despite Prost’s stated commitment to the project, Smith said the city is moving forward with plans to protect its interests. The city pledged securities for a $2.8 million loan Prost obtained from Great Southern Bank to acquire the Heer’s building and pay for design work, she said.

City attorneys are working with Great Southern in an effort to determine if the city could take ownership of the building by paying off the loan and then resell it to one of the three interested developers, Smith said.

Under the Uniform Commercial Code, the city could purchase Prost’s promissory note from the bank, said Brian Fogle, vice president of community development at Great Southern. With the note, the city could also choose to foreclose on the property, which Smith said is another option being considered.

“The city has to do what’s in the best interest of the city,” Prost said about the city’s direction. “And I will also do what’s in our best interest. We have a major investment there, and it’s in our best interest to finish the project.”

Springfield City Council is considering a bill that authorizes the city to modify or terminate its redevelopment agreements with Prost; acquire or facilitate the acquisition of the building; and execute documents associated with the new course of action.

Prost has indicated his willingness to partner with another developer who can procure credit-rated commercial tenants with a stated interest in leasing larger spaces or provide strong financial backing to propel the project forward despite a lack of preleased commercial tenants.

But none of the developers who submitted their qualifications to the city expressed interest in partnering with Prost.

Smith said she hopes to arrange a daylong meeting with representatives from the three firms in the next two to three weeks.

The city is well acquainted with Magers Management Co., which is owned and operated by Bill Magers and sons Randy and Bryan, but neither of the St. Louis firms has redeveloped property in the Springfield area, Smith said.

Magers received the 2005 Developer of the Year Award from the Springfield Contractors Association for Battlefield Market Place, a 46,400-square-foot, $7.5 million commercial development near Battlefield Road and National Avenue.

The Magers family has been developing in Springfield for more than 30 years. The company’s projects include Old Town Shopping Center, Village Shopping Center, Town & Country Shopping Center and Deerfield developments, Battlefield Office Building and Regency Shopping Center.

If chosen by the city to complete the Heer’s project, Magers would partner with Morelock-Ross Builders, a Springfield construction firm owned by Kenny Ross and Wayne Morelock. However, Magers Management Co. has no experience with historic preservation tax credits.

Both McGowan & Walsh and Restoration St. Louis have completed numerous redevelopment projects with the assistance of historic tax credits.

Restoration St. Louis has completed more than $200 million in historic renovation projects since 2002, including the $41 million Coronado Place and the $25 million Lindell Towers Place in midtown St. Louis. The firm is in the final stages of its Loop Lofts project, which converted a historic building into 104 lofts above a 4,000-square-foot bar and restaurant.

McGowan & Walsh has completed – or is in the process of completing – historic renovation projects totaling more than 6.5 million square feet and $800 million.

The firm targets “historic high-rises” in central business districts that are between 50 and 100 years old and transforms them into high-end residential lofts. Its projects include the 482,000-square-foot Cupples Warehouse and 126,000-square-foot Windows Loft in St. Louis and the 200,000-square-foot Piper Lofts in Kansas City.

Magers Management Co. LLC, Springfield

Principals: Bill, Randy and Bryan Magers

Projects: Battlefield Marketplace, Old Town Shopping Center, Village Shopping Center, Town & Country Shopping Center and Deerfield developments, Battlefield Office Building and Regency Shopping Center

McGowan & Walsh, St. Louis

Principals: Kevin McGowan and Nat Walsh

Projects: More than 6.5 million square feet totaling more than $800 million, including Cupples Warehouse and Windows Lofts in St. Louis and Piper Lofts and Argyle Lofts in Kansas City

Restoration St. Louis, St. Louis

Principals: Amrit and Amy Gill

Projects: More than $200 million in historic renovations projects since 2002, including Coronado Place, Lindell Towers Place, Moolah Theatre and Lofts, Theresa School Apartments and Loop Lofts, all in St. Louis

Prost Builders Inc., Jefferson City

Principals: Vaughn X. Prost

Projects: Marquette Tower in Cape Girardeau, Boone County Courthouse in Columbia, Historic Ballantine Office Building in Boonville, Haas Office Building in Neosho and Jesse Hall at University of Missouri