Lofts less risky for Heer's

McGowan, president and CEO of Blue Urban LLC, announced Dec. 17 that the newly formed company would renovate the former department store as 41 upscale condos above a Mike Shannon’s Steaks and Seafood Restaurant. The project’s price tag: $26 million and change.

(Click here to view a rendering of the Heer's project.)

McGowan said construction on the vacant seven-story structure would begin in early June and would last no longer than 14 months. St. Louis-based Mike Shannon’s will open its second restaurant on the building’s ground level in May 2009, McGowan said.

Restaurant manager Pat Shannon, daughter of former St. Louis Cardinals announcer Mike Shannon, said the Springfield location would have the same “sleek and chic urban feel” of the original St. Louis dining spot just blocks from Busch Stadium.

McGowan said the top four floors of Heer’s will be converted into a trio of three-bedroom units, 18 one-bedroom units and 20 two-bedroom units, one of which is a 3,000-square-foot penthouse in the former department store’s signature tower going for $750,000.

The other condos – about half of which will have outdoor balconies – will range in price from $165,000 to $280,000, McGowan said.

McGowan had hoped to renovate Heer’s as a boutique hotel, but he said the financial risk associated with the project was too great. He remains hopeful, however, that the hotel concept will work elsewhere in downtown Springfield, possibly in another large building near Park Central Square.

“We are working (on a deal) right now,” McGowan said, declining to discuss specifics. “I hope perhaps by late spring, we can make some sort of announcement.”

Another St. Louis developer who faced off with McGowan earlier this year for the rights to redevelop Heer’s wasn’t surprised by his decision. Amy Gill of Restoration St. Louis, which withdrew its proposal in April, predicted the hotel would be a hard sell to lenders when McGowan first pitched the idea in March.

“Hotels are very hard to finance,” Gill said last week. “And in the current market environment, it is hard to get bankers to do anything that looks remotely like a risk.”

McGowan said he doesn’t think he oversold the boutique hotel concept, an alternate plan he publicly championed as a better fit for downtown Springfield than the more conservative condo project.

In an attempt to make the hotel project work, McGowan asked for half of the revenue from the city’s 5 percent hotel-motel tax revenue generated by the redeveloped property – a request the Springfield Hotel & Motel Association vehemently opposed. McGowan scaled back the amount of hotel-motel tax revenue in his request, but the association’s position did not change.

McGowan, co-founder of St. Louis historic renovation firm McGowan|Walsh, purchased the 92-year-old Heer’s building from the city for $3 million. The sale closed Nov. 8.

McGowan recently split with longtime business partner Nat Walsh and formed Blue Urban, a company that hired all 15 employees from McGowan|Walsh.

The city had owned the abandoned landmark since December 2006, when previous developer Vaughn Prost ceded ownership and sidestepped the city’s plans to foreclose on his acquisition loan. Prost, of Jefferson City, purchased the building from Warren Davis Properties for $2.2 million in 2004 and had planned to redevelop the building as a mix of Class A office space and luxury condos before missing a series of construction financing deadlines last year.

Prost, who has followed the Heer’s project from afar, said the demand for luxury condos in downtown Springfield was significant when he owned the building, although he noted recent instability in the housing market.

Chris Woldum, Heer’s project manager for Blue Urban, said 117 people signed up for information about the condos on the company’s Web site, www.blueurban.com, within 24 hours of the Dec. 17 news conference.

Woldum said the company hopes to solicit bids from general contractors in April.

Woldum said McGowan also would submit a formal list of requested incentives to the city in coming weeks. Although he missed a Nov. 1 deadline to finalize the list, McGowan has indicated he will pursue special taxing districts, historic tax credits and tax abatement programs.

Under his agreement with the city, McGowan has until Sept. 1 to start construction work on Heer’s. He has agreed to pay the city $1,400 for each day of inactivity after the deadline, with a maximum penalty of $250,000.

Inside the Heer’s Incentives

St. Louis developer Kevin McGowan will utilize a variety of tax incentives to offset costs of the $26 million Heer’s renovation project. McGowan announced Dec. 17 he would convert the former department store into 41 for-sale condos above a Mike Shannon’s Steaks and Seafood Restaurant.

Tax Increment Financing: About $3 million worth of TIF bonds

Neighborhood Preservation Tax Credits: $741,300, or $18,532 per condo unit

Federal Historic Tax Credits: $2.5 million to $2.7 million

State Historic Tax Credits: Roughly $5 million[[In-content Ad]]