Developer, city postpone Heer's closing

Under a redevelopment agreement approved Aug. 26 by City Council, St. Louis firm McGowan|Walsh was scheduled to close on the seven-story structure Oct. 27, which came and went with no word from the city.

Mary Lilly Smith, the city’s economic development director, said incomplete documentation of environmental remediation and demolition work by Prost delayed the closing, which has been rescheduled for no later than Nov. 8. Springfield-based Hogan Land Title Co. was slated to handle the closing, but McGowan requested that St. Louis Title Co. close the transaction, Smith said.

Prost acquired the building from Warren Davis Properties for $2.2 million in 2004, after the city selected his Jefferson City company, Prost Builders Inc., to renovate the former department store as Class A office space and luxury condominiums. But Prost missed a series of financing deadlines last year, prompting the city to buy his loan from Great Southern Bank and threaten foreclosure.

On Dec. 18, 2006, the day before the building was to be auctioned on the steps of the Greene County courthouse, Prost filed a deed in lieu of foreclosure that ceded ownership of Heer’s to the city. In August 2005, the Missouri Department of Economic Development approved up to $2.55 million in brownfield tax credits to offset costs Prost incurred to remove asbestos, lead paint and other contaminants from the abandoned building.

As city officials neared the closing date with McGowan|Walsh, they realized that a significant number of invoices for the remediation work were still in the state’s possession, Smith said. McGowan|Walsh principal Kevin McGowan, however, needed a complete record of “qualified rehabilitation expenditures” to obtain financing for the project and pursue state and federal historic tax credits, she said.

“(McGowan) is buying the building as a work in progress,” Smith said. “Part of the value of that building is the … work that Vaughn Prost had done. What really exemplifies the value of that are the invoices and lien waivers for the work that Vaughn did.”

The city received a 4-inch-thick file from DED containing the necessary documentation the last week in October, and both parties agreed to postpone the closing date. The sale was required to close by Oct. 27 or “on such other date mutually agreed to by the parties,” according to the redevelopment agreement.

“We needed a little bit more time,” said City Attorney Dan Wichmer. “We don’t view it as any big deal.”

Once the Heer’s transaction closes, Wichmer said the city will pay off the balance of a $3.1 million loan it borrowed from the Missouri Development Finance Board to purchase Prost’s loan from Great Southern.

“I’m not even sure it wouldn’t be a direct transfer from (McGowan|Walsh) to the MDFB,” he said. “It’s not going to linger.”

McGowan, who did not return calls for this story, has said he will redevelop Heer’s as either a boutique hotel or a block of condos above a Mike Shannon’s Steaks and Seafood Restaurant, depending on which incentives he receives from the city. McGowan missed his Nov. 1 deadline to finalize a list of requested incentives. In a letter to the city, McGowan’s attorney cited delays associated with the closing.

Mark Miles, director of the State Historic Preservation Office, said McGowan|Walsh has not yet submitted an application for state and federal historic tax credits on the Heer’s project. Those applications are typically submitted in two parts, with the second part including project plans and specifications, he said.

“I think we have talked to them, but they have not formally submitted anything to us,” he said.

John Sandor of the National Park Service in Washington, D.C., will evaluate the application once the state office completes its review. Sandor, who oversees the historic preservation tax credits program for Missouri, said he will decide whether the project is eligible for tax credits. The exact amount of those credits will be determined by DED, he said.