UPDATED: City plans to foreclose on Heer's

Assistant City Manager Evelyn Honea said the city would bid at least $3 million – the amount of debt it assumed after buying Jefferson City developer Vaughn Prost’s loan from Great Southern Bank.

“We think it’s in the city’s best interest to foreclose at this point,” she said. “Our goal is to satisfy the debt.”

Last month, City Council approved a resolution to enter into a short-term, low-interest loan for $3.1 million with the Missouri Development Finance Board to purchase Prost’s loan.

The city gave Prost until Nov. 3 to pay off the loan, but Honea said he did not meet the deadline.

In recent months, city officials have said they would either negotiate to purchase the downtown building from Prost or foreclose on his loan, thereby taking ownership. As the building’s owner, the city would be free to pursue a development plan with any of the four developers, including Prost, who have expressed interest in renovating the former department store.

In a statement issued Monday, Prost expressed surprise at the city’s move to foreclose.

Prost, who missed a series of deadlines to secure financing for the project, has said that he now has a $20 million commitment from Bank of America that’s contingent on the city’s continued partnership.

But city officials aren’t comfortable with alternate financing agreements proposed by Prost to salvage the partnership, said Honea, who wasn’t able to provide details.

“He probably isn’t the city’s first choice,” she said. “We can’t take on any more liabilities with this project than we already have.”

Prost has invested $3 million in the project beyond the outstanding loan and is examining options for protecting the investment, according to his statement.

“Certainly, the city is forcing my hand at this point,” he said. “Additionally, we don’t want to lose any momentum on sales and leasing of space, so we have to examine all our options.”

Earlier this month, hundreds of local businesses received a direct-mail piece from Prost promising six months free rent and a moving allowance of $3 per rentable square foot for tenants who sign up to lease space in Heer’s by Nov. 15.

Prost had planned to convert the Heer’s into a mixed-used development with class A office space and luxury condos on the upper floors and retail and restaurant space on the lower levels. He bought the dilapidated building for $2.2 million from Warren Davis Properties in 2004.

See SBJ's Nov. 27 issue for more on this story.