Though Kevin McGowan's loan company missed the Oct. 6 application deadline for insurance approval by HUD, it has been granted an extension. The $29.3 million Heer's project is contingent on HUD approval of the $11.8 million piece of the puzzle.
Springfield Economic Development Director Mary Lilly Smith said she was informed Oct. 5 that McGowan's private lender, Berkadia Commercial Mortgage LLC, would miss the Oct. 6 application deadline for HUD approval and would instead send the application by Oct. 15. The extension was approved by HUD.
The Oct. 6 deadline was the date HUD changed its underwriting requirements, tightening its standards. For the Heer's project, this means the debt service coverage ratio increases to 1.2 from 1.15, equating to an additional $300,000, McGowan told the Springfield Business Journal in late August
However, if Berkadia submits the application - considering the rate change - it still is subject to approval by HUD, said Dale Gray, HUD spokeswoman. McGowan and Berkadia originally were going to be grandfathered in under the old service ratio, she said, but will now be subject to HUD's new regulations after missing the deadline. Gray said basically what the HUD change means is that instead of a company having to come up front with about 97 percent of funding, it will instead have to present about 99 percent from the git-go; which McGowan and Berkadia will have to cover.
Once the application is received, HUD will determine whether to insure the loan based on the building's renderings, project funding specifications and the ability for the building to make money if built, Gray said. If Berkadia misses the self-imposed Oct. 15 deadline, it could potentially ask for another extension, but Gray was unclear how long HUD would keep the offer on the table.
McGowan could not be reached for comment before deadline.
Smith said the rest of the Heer's building funding - $5.2 million in federal historic tax credits; $4.9 million from a state historic tax credit bridge loan; $2 million from a Springfield small business development loan; and $1 million from a Missouri Development Finance Board loan through the city - will only come through if HUD decides to insure the $11.8 million Berkadia loan. McGowan, owner of St. Louis-based development firm Blue Urban, contributed $4.4 million to the total.
City Manager Greg Burris said the missed deadline will only be a minor snag if McGowan follows through.
"The deal was 'We're all in or none of us are in,'" he said.
Smith said it's now a waiting game.
"Council will make the $2 million loan provided all the other pieces are in place, and we close on it concurrently."
McGowan bought the eight-story, 150,000-square-foot building from the city for $3 million in November 2007.