While Heer’s Luxury Living LLC founder Jim Nichols says the process to develop the long-vacant downtown building went smoothly, he took a financial risk to turn the project into a reality.
Speaking this morning for Springfield Business Journal’s monthly live interview series 12 People You Need to Know, the president of Lee’s Summit-based Dalmark Development Group LLC explained the path his team took to open the mixed-used apartment and commercial property.
In early 2013, Heer’s Luxury Living purchased the building from real estate investment group E and J HIDC LLC, which had bought the building that year at a foreclosure auction for $960,000. This morning, Nichols said his company bought the note from the bank since the financially troubled former owner wasn’t willing to deal. The negotiation process with lenders, he said, took 12 to 14 months.
“We didn’t realize at that point just how iconic the structure was, being new to Springfield,” Nichols said. “It really dealt with the economics of the time. Like real estate 101, you make your money the day you buy something.
“We bought it for the right price, and I think that began the process.”
Nichols next used his nearly 30-year housing industry history working with distressed properties to his advantage. He pointed to key financial moves that worked to his company’s benefit.
A March 2014 SBJ story titled, “
The Money Maze,” examined the financing structure of the Heer’s and other redevelopment properties. In the article, SBJ reported the $15.7 million Heer’s project was funded by tax abatements, a $750,000 small-business loan from the city and federal historic preservation tax credits to the tune of $11.7 million qualified expenses and $5.6 million in expected sale proceeds.
“We’re very good at layered financing,” Nichols said this morning, noting local lender Metropolitan National Bank took a risk other lenders weren’t willing to make. “There were lenders that did not want to participate in this transaction simply because of the historic failure of the building. Real estate is risk.
“It was probably no riskier than anything else we’ve done. We had done our homework and we felt we had a good solid group of people as far as our team. At that point, it’s just meeting the expectation of the community.”
After the former department store closed its doors over 20 years ago, three developers made a go at renovating the historic building: Local developer Warren Davis in 1995, Columbia developer Vaughn Prost in 2004 and St. Louisan Kevin McGowan in 2007.
“To be quite honest, what surprised us the most is why we’re here today: the iconic nature and the passion within the people of Springfield for the building,” Nichols said. “I’ve heard from the press more and given more statements and had my picture taken and had more comments about who, when and what based on this deal than I have in 30 years of what I’ve been doing. It’s been crazy.”
After an Aug. 11 public ribbon-cutting ceremony - when the crew announced IntrinsiQ LLC would lease all of the first-floor space - Nichols said the building now has around 50 units occupied, or 62.5 percent. His goal is to be 100 percent occupied by year’s end.
“We’re ahead of what our projections were,” he said, noting a resident mix of young professionals and those 55 and older who wanted a life change.
Springfield’s passion made an impact on Nichols.
“The Heer’s building is the epitome of iconic and catalytic,” he said while describing the building’s character. “It’s definitely a she. She’s a proud lady that has stood over Springfield for a very long time.”
Nichols said Dalmark has further plans for the Queen City, but was tight-lipped about the details.
“We see senior housing as a very positive market for us. We see migration into that,” he said. “We would like to look at trying to do something else downtown, but it would be more toward the 55 and older.”
