Proposed Heer’s deal gives developer a year to start construction

Under the proposed agreement, McGowan|Walsh – doing business as Heer’s Building LLC – will buy the former department store for $3 million. The building sale must close within 60 days of signing the agreement, and the developer has agreed to pay the city $1,400 for each day of inactivity if construction isn’t under way by Sept. 1, 2008. The maximum penalty is $250,000. (Click here to read the agreement in full.)

The city also has reserved the right to buy back the building if McGowan|Walsh doesn’t start construction by March 1, 2009. Under a “put option,” the buyback price would be the purchase price plus direct and indirect developer costs as well as overhead and markup equal to 15 percent of direct and indirect costs.

McGowan|Walsh must provide a letter of intent from anchor tenant Mike Shannon’s Steak and Seafood restaurant – tapped to lease space on the building’s ground level – within 30 days of signing the agreement. The floors above the restaurant will be converted into condominiums or possibly a boutique hotel, if financially feasible.

Another 20,000 square feet would be leased to the city for its cable TV studio and traffic management center, with an option to purchase 15,000 square feet on the lower level. The city will receive sales tax revenue from the first $1.25 million in sales at first-floor retail establishments to pay down bond debt associated with a new parking deck west of Heer’s.

The city’s commitment to a $1 million renovation of Park Central Square also is spelled out in the agreement, with design work to be finalized by March 1 and construction under way no later than Aug. 1. McGowan|Walsh will be involved in the design process, according to the agreement.

Also in the term sheet is a list of potential tax incentives the developer can request during upcoming negotiations, including community improvement and transportation development districts, tax increment financing, property tax abatement and partial abatement of hotel-motel room taxes. Principal Kevin McGowan has until Nov. 1 to finalize his request for incentives, and the city must enact the perks by Jan. 1.

The city has owned the abandoned eyesore since December, when previous owner Vaughn Prost ceded ownership and sidestepped the city’s plans to foreclose on his acquisition loan days later. Prost, of Jefferson City, had planned to redevelop the building but missed a series of construction financing deadlines.

Council will hear a first reading on an ordinance approving the Heer’s agreement at an 11:30 a.m. luncheon today at the Busch Municipal Building, 840 Boonville Ave.