Springfield City Council is scheduled to consider a term sheet and resolution Aug. 23 that could spark the long-awaited Heer’s Tower project.
The term sheet includes a $2 million loan from the city to Heer's Building LLC and Kevin McGowan, who owns the Heer’s building.
Redevelopment of Heer’s is the city’s “No. 1 redevelopment priority,” according to the term sheet.
If approved by council members, the loan would come from the city’s small business development loan program, established to lend money to small-business owners, nonprofit organizations and real estate developers.
“That will put together the final components of the financing package to make the deal possible,” Springfield City Manager Greg Burris said.
Following resolution approval, the project would be submitted to the U.S. Department of Housing and Urban Development, according to McGowan.
“This is a vital step toward the completion of the funding,” McGowan said. “Obviously, we need help from the city of Springfield.”
The term sheet lays out these funding sources and their terms for the $29.3 million project:
• $11.8 million HUD loan at 6.35 percent interest for 40 years;
• $5.2 million federal historic tax credit at 7.5 percent interest, not to exceed three years;
• $4.9 million state historic tax credit bridge loan at 7 percent interest for 18 months or until the project is complete;
• $4.4 million from the developer;
• $2 million city small business development loan at 5 percent for 23 years; and
• $1 million Missouri Development Finance Board loan through the city at 5 percent for 23 years.
If adopted, the city would work with the developer and the other financing entities to finalize financing. The project would then be brought back to council for approval.
If all funding is secured during first-quarter 2011, the project should be completed by April 30, 2012, the term sheet said.
Should McGowan default on the loan, the city has a protection plan in place, said Mary Lilly Smith, economic development director.
“There’s a provision in the term sheet for the city and finance board loans that those would be repaid from the tax increment finance district and the community improvement district proceeds.
And one of the protections that we’ve put in place is that there will be a fixed property tax payment,” Smith said. “TIF captures 100 percent of the incremental increase in property taxes and 50 percent of the incremental increase in sales taxes.”
Smith said a fixed payment schedule would be incorporated into the final development agreement from the property tax payments.
“Those payments will equal 70 percent of the required payment annually for the debt service on the $3 million loan,” Smith said. “The remaining 30 percent would be dependent on sales tax revenue.”
Repayment to the Missouri Development Finance Board has priority over the city’s loan payments, she added.
McGowan purchased the property from the city for $3 million in 2007. The city signed a development agreement with McGowan in August 2007 and amended the agreement in 2008.
McGowan intends to renovate the Heer’s Tower back to its 1950s design with 63 market-rate apartments, a rooftop pool, a fitness center, Mike Shannon’s Steak and Seafood restaurant, commercial and banquet space, and a bowling alley.
The economy and limited access to capital has stalled the plan, McGowan said.
“I’ve said it all along that Heer’s is really one of the most exciting projects that we’ve had the opportunity to develop, and we’re very much looking forward to developing it,” he said. “Our commitment remains very strong, but in this environment, it’s kind of like stealing the spots off a leopard; it’s really hard.”
St. Louis-based H.B.D. Construction Inc. is lined up as general contractor with 82 percent of subcontracting work coming from Springfield area companies. More than 40 area subcontracting businesses and more than 140 on-site construction jobs should be created, the term sheet states.Related links