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INVESTMENTS IN PROGRESS
Make a Deal,
Make a Difference in the Urban Core
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BY KEVIN KIPP
There are flowers, said Henri Matisse, for those who wish
to see them.
And the local chapter of the Urban Land Institute—nationally a 17,000-member
organization intent on influencing land use and policy affecting
the built environment—wants developers to see the rich bouquet that
can spring forth from the fertile earth of the urban core.
To that end the local chapter of the ULI, in partnership with the
Regional Chamber and Growth Association (the publisher of this magazine),
and a number of other business and civic organizations in the region,
is sponsoring a half-day symposium called “Investments in Progress:
Make a Deal, Make a Difference in the Urban Core.”
Chairing the 140-some-member ULI-St. Louis is Lewis Levey. He is
the founder and former managing partner of Paragon Group, the St.
Louis-based national real estate firm that has since merged with
NYSE-listed REIT Camden Property Trust.
Levey says the symposium will introduce a study of development opportunities
in the center rings of St. Louis. Wearing the same name as the symposium,
the study was commissioned by Civic Progress. Development Strategies
conducted the research.
Levey says the ULI hopes to attract an audience that includes developers
and “anyone from the disciplines responsible for land use—financial
people, design professionals, municipal officials, preservationists”—who
would not otherwise be familiar with development opportunities in
the city of St. Louis, East St. Louis or inner-ring suburbs like
Maplewood, University City, Jennings.
“We want to demonstrate that deals are not nearly as complicated
as people think, and there is a lot of help available for developers
who are unfamiliar with urban development.”
The ULI Investments in Progress committee has developed three sessions
in the half-day program. Each of the first two will present case
studies of two projects. After the first session, participants switch.
Two times two is four. Those four projects are profiled later in
this article.
The final sitting will be for roundtable discussions of the opportunities
that exist for investment and profit in the urban core, and everyone
will be on his way by 12:30 p.m.
Richard Ward, senior principal at Development Strategies, says,
“These four projects demonstrate, ‘Yes, it can be done.’ They are
not necessarily the most grandiose, complex projects ever done.
But deals like the first retail development in East St. Louis in
50 years—these are opportunities that real estate people can identify
with.”
Reading this story from east to west, see what you think of these
developments.
STATE STREET SHOPPING CENTER, EAST ST. LOUIS
East St. Louis’ first retail development in 50 years didn’t happen
overnight.
But, says developer Jim Koman, president of Koman Properties, each
expansion of the shops at State Street and 25th Street was easier
than the one before.
Aerial
shot of State Street Shopping Center. |
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He began working the deal in 1995. Now he is looking to add 10,000
square feet to the 70,000 currently under roof at the intersection
that Koman says compares to a “mini-Lindbergh and Manchester.”
Phase one was a 15,000-square-foot Walgreens. “That took five years,”
Koman says. “But phase two [30,000 square feet of Save-A-Lot grocery,
Simply Fashion, State Farm offices and Blockbuster Video] took 18
months. And the last little 10,000 square feet only took eight months.
It’s basically finished. We added a Footlocker, Fashion Sense, and
hopefully a pizza place. Phase four is across the street.”
Some of the early difficulties can be attributed to opening new
frontiers. “Officials in East St. Louis are gaining more understanding
of how development gets done. They’re streamlining approvals, getting
a more pro-business attitude: ‘Cut the tape, get ’em going, get
’em what they need. Let’s not hold ’em up.’”
Sometimes retailers look at development in core areas as a frontier.
“They watch to see if the pioneers make it. Once you start to build
in the city, once they’ve seen others be successful, a lot of retailers
get very eager.”
JIM
KOMAN, president, Koman Properties
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Koman credits retired St. Louis County Executive H. Mildford for
his initiation to East St. Louis. “He was an advisor to former Mayor
Gordon Bush,” Koman says. “He got us involved with the Casino Queen.
Then he started talking about retail opportunities, showing me the
upside that exists in East St. Louis. We were fortunate to get national
retailers to share this dream and go into East St. Louis.”
Koman says the believing in the project “is the biggest part of
working in the urban core, believing that you’ll succeed and that
it will help the community you’re building in.” Then dismounting
his noble steed, he winks slyly, “It’s even more fun when people
tell you you’re crazy and then five years later you can say, ‘We’re
there and we’re making money.’”
The $1.8 million Tax Increment Financing for phase one was also
crucial in East St. Louis he says. “That’s not money in my pocket,”
but it helped make up for the real, additional expense of acquiring
contiguous properties to assemble a develop-able site.
Rendering
of State Street Shopping Center, East St. Louis,
Ill.
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A final and ongoing element that has made State Street succeed,
Koman says, “is that the people of East St. Louis demonstrated a
genuine eagerness to have the development, and they support it.
They shop there and they keep it safe. Sales have gone up every
year.”
Koman Properties—as distinct from office-oriented Koman Group owned
and run by brother William J. Koman Jr.—specializes in retail developments
throughout the metropolitan area. “We do a lot of Walgreens,” Jim
Koman says.
Which means Koman works everywhere. Among the larger developments—a
quarter-to-half-a-million square feet—are Lincoln Place and Crossroads
Shopping Center in Fairview Heights, Ill., and Grandview Plaza in
Florissant. In Missouri, Koman Properties has developed sites in
Creve Coeur, Wildwood, Chesterfield, and Maplewood. In Illinois,
they’ve worked in Swansea, Columbia and Granite City.
Koman says he’s also begun a $7 million development at Grand Avenue
and Martin Luther King Jr. Blvd. in the City of St. Louis that will
feature 43,000 square feet of retail, anchored by Save-A-Lot.
After taking a hard look at the possibilities, Koman is convinced.
“No question,” he says. “There’s a market in the inner core urban
areas. No question: You can make money in redevelopment.”
And no question, sometimes it’s difficult. “Any development can
have hurdles. The action is different in St. Louis County. It’s
different in East St. Louis. It’s different in St. Louis.”
And he plans to pursue redevelopment in the future. “We believe
this is the last frontier of retail, finishing off the marketplace.
It’s infill to capture the last of [retailers’] market share for
St. Louis. We’re looking at new ways to recognize that there are
400,000 people in the St. Louis and East St. Louis market who need
goods and services, who want to rent a video, buy shoes or get groceries
close to home.”
MERCHANDISE MART, ST. LOUIS, MO.
Ron Silverman is senior vice president and regional manager for
Historic Restoration Inc., a New Orleans-based full-service real
estate development company specializing in adaptive reuse of historic
structures.
They worked hard with Kimberly-Clark Corporation throughout 2002
to complete the $270 million Marriott Renaissance Grand convention
hotel in mid-February of this year.
Hardwood
flooring and brick add to the historic charm of
this “Mart” apartment.
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Oh, and in their spare time, HRI converted seven stories
and 340,000 square feet of a late nineteenth century landmark into
212 one- and two-bedroom apartments, one three-bedroom apartment
and an additional 10,000 square feet of street-level retail.
The most imposing building on Washington Ave., as Silverman called
the Merchandise Mart, has a footprint of nearly an acre. Its redevelopment
represents a $47 million investment.
So why bite off two enormous projects simultaneously? Silverman
explains, “Our CEO Pres Kabacoff didn’t understand why so much space
around the convention center hotel was vacant and rundown. He wondered
what’s the sense of having a shining jewel like the convention hotel
if there wasn’t a neighborhood around it?”
RON
SILVERMAN, senior vice president and
regional manger for Historic Restoration Inc. situated
in a newly renovated Merchandise Mart model apartment.
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What the heck, let’s make one. After all HRI’s mission statement
is “Revitalizing cities by creating diverse, vibrant sustainable
communities.”
Built in 1889 for tobacco magnates John Liggett and George Myers,
the Merchandise Mart had made its way onto the National Register
of Historic Places. And it’s location on Washington Avenue placed
it in one of the city’s high profile and highly promising districts.
“It was a huge empty building owned by the City, acquired from a
speculator,” Silverman says. “It didn’t help that the building had
been vacant for so long, but our company has experience in arriving
at solutions for situations like the Merchandise Mart.”
(Left)
“The Mart” as it looked around 1900. (right) “The
Mart” as it looks today.
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(HRI, Silverman reports, owns 1,700 units of residential development,
1,000 hotel rooms and one million square feet of commercial space
around the country: Fort Worth, Omaha, Cleveland, Milwaukee and
New Orleans.)
Silverman says HRI closed on the property in October 2001, finished
the renovation in December 2002, and the first resident moved in
in January.
Rents range from $630 for an “affordable alternative” option one
bedroom to $2,825 for some of the market-rate two-bedroom apartments.
Forty percent of Merchandise Mart units—identical to market rate
digs—are reserved as an affordable alternative.
And Merchandise Mart rents parking. Other amenities in-clude dry
cleaning, concierge and maid service.
There were challenges to completing a high-class renovation as quickly
as they did. “If it were easy, everyone would do it,” Silverman
reminds.
It began with the architectural work. Sometimes federal, state and
local requirements—worth observing for the sake of tax credits and
other financial incentives—were contradictory. “But Barbara Geisman
in Mayor Slay’s office helped resolve many of those issues,” he
says.
Silverman also threw roses to a dozen other St. Louis officials
and offices, including Otis Williams and Dale Ruthsatz in the St.
Louis Development Corporation.
He also singled out the Business Assistance Center, calling it “a
great tool. They did yeomen’s work steering us through the permitting
process. They provided a one-stop shop for our people and helped
us with other departments as an advocate.”
Silverman also praises Clayco Construction for adapting to difficult
conditions, working along what The New York Times said is
one of the few streets in St. Louis to qualify as an urban canyon.
With 450 construction workers at the Mart and 900 at the hotel,
conditions got cramped. Think about parking. “Working downtown,
construction workers have no—what’s-called—‘laydown space,’” Silverman
says.
Moreover, the apartment project was undertaken adjacent to a completely
occupied 10th Street Loft. “We were there early in the morning,
late at night, loud, tearing up streets, putting them back together,”
Silverman says. “We couldn’t have done this if the neighbors hadn’t
been generous in their attitude.
“They could see what we were doing is enhancing the neighborhood,”
Silverman says. “The rebirth process is painful, but it was gratifying
to have the support of neighbors.”
Their patience and municipal cooperation is emblematic of the community’s
commitment as a whole, Silverman says, “to a cause-celebre for renovation
projects along Washington Avenue from 21st Street to 6th Street.
There’s huge attention to the loft district,” including the city’s
$17.5 million streetscape renovation project that is just about
wrapped up.
The development would also not have taken place without the invaluable
Missouri Historic Preservation Tax Credits. "Credits are fundamental
to putting these complicated deals together," Silverman notes.
“We’re thrilled that we made true on our promise to the city,” Silverman
says. “We’ll start on two additional buildings in 2003 in the Cupples
Complex. Hopefully we’ve earned credibility as a mainstream developer
here in the City.”
ST. LOUIS COMMERCE CENTER, ST. LOUIS
Steve Brown, president of Balke Brown Associates, like most St.
Louisans misses The Arena, and not Pruitt Igoe. But in neither instance
is he crying over spilled milk.
He’s building.
Where the Old Barn once hosted Stanley Cup Finals games, Balke Brown
plans to break ground in June for 200 apartments. They’ll be called
the Highlands Lofts.
(left
to right): STEVE BROWN,
president of Balke Brown Associates with DON
LAND, senior vice president, lead project
executive and St. Louis Commerce Center LLC principal,
in front of St. Louis Commerce Center II.
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On 20 acres, just south of where failed public housing misery once
sprawled, are Balke Brown’s St. Louis Commerce Center I & II. Balke
Brown closed on the real estate in late 1998. They completed the
first building—150,000 square feet of office/industrial space—in
February 2000. They completed St. Louis Commerce Center II in March
2002, by which time it was fully leased.
GPX, a worldwide manufacturer and marketer of value-oriented consumer
electronics, anchors the second building. Its 190,000 square feet
is also the site of 300 jobs. Sigma-Aldrich occupies 140,000 square
feet used for storage and distribution. And Bryan Cave uses 20,000
square feet just for storage.
Commerce Center I is home to Gateway CDI, Killark Electrical Products,
Swank Motion Pictures and McLeod USA Telecommunications.
Balke Brown has historically been a developer of commercial and
office/industrial buildings, Brown says. The firm, which he and
Gary Balke (see profile story on page 76) own in 50-50 symmetry,
has built more than five million square feet of such space, and
currently manages a three million-square-foot portfolio of it.
About half of their efforts are in Illinois, and half in Missouri.
With the office and warehouse glut of the last two years, the company
has begun to develop multi-family housing for sale and for rent,
he says.
Besides the Highland Lofts, Brown’s company is working with Taylor
Morley Inc. to bring 500 residential units to market in O’Fallon,
Ill.
Even with three buildings in the Fountain Lakes development along
Highway 370 in St. Charles, Brown says the Missouri half of his
company’s work is concentrated in St. Louis.
There, they also built a 150,000-square-foot office building at
the 26-acre Highlands site. They are scheduled eventually to add
850,000 more. And Balke Brown is the developer of the 415,000 square
feet at Union Station Office Center, completed in 1985: four office
buildings—including their own quarters—and a theatre.
St. Louis Commerce Center’s site, part of the city’s Martin Luther
King Jr. Industrial Park vision, was a mixed blessing. “The nice
thing was that it was owned by one owner: the city,” Brown says.
Lammert
Pharmacol building implosion. Site of St. Louis
Commerce Center II.
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Current
site of St. Louis Commerce Center II, GPX Distribution
Center.
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And the bad news? “The site was an environmentally contaminated
combat zone,” he chuckles in sad remembrance. “Burned-out buildings
with environmental issues, six blocks crisscrossed with utilities
and old alleys, and we had to pay for remediation and utility relocation.
It was a mess!”
Among the site’s ecological joys were the corpses of junkyards,
dry cleaners, plating companies, a nine-story Lammert Pharmacol
building and gas stations. And in their wreckage was asbestos, lead
and corroding underground tanks.
Even the residential cadavers presented problems. “We uncovered
basements filled with trash,” Brown says. “We had to relocate 100-year-old
garbage.”
Altogether, remediation cost $2.5 million. But a state Department
of Economic Development brownfields remediation tax credit of about
$1 million and “a similar contribution from the city through purchase
price considerations,” helped take the sting out of the extraordinary
site preparation costs.
“At the end of it, the city was able to present us with a 20-acre
buildable site,” Brown says.
He credits the St. Louis Commerce Center’s speedy completion to
“the commitment to the project by Mike Jones, then in the mayor’s
office, and Phil Hoge, then interim director at the St. Louis Development
Corporation.”
He also credits the SLDC staff. “They were easy to work with, friendly
and eager to do business. And the project managers, guys like George
Kerry, are really a qualified bunch of professionals.”
Along those same lines, Brown offered kudos to his colleague—senior
vice president, lead project executive and St. Louis Commerce Center
LLC principal—Don Land for stellar work.
More generally, Brown says, “The redevelopment process could use
a little streamlining in the approval phases. But the rewards far
outweigh those minor inconveniences.”
Brown says he likes the new guy at SLDC, Rodney Crim. “We’ve already
developed a close professional relationship with him working on
the Highlands. And Mayor Slay’s office has also demonstrated a pro-development
attitude. They’re helping us identify future development sites for
both commercial and residential projects.”
ALEXANDRIA PLACE AND RIVER ROADS, JENNINGS, MO.
Some redevelopments are easier than others. Mark Morley, president
and COO at homebuilder Taylor Morley Inc., has both kinds on his
hands.
Taylor
Morley will build attached town homes on 44 acres
that was once the North Twin Drive-in.
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He’ll build 137 attached town homes and 81 single-family homes on
44 acres that was once the North Twin Drive-in.
“It’s a little unusual to call it redevelopment,” he says. “It’s
simple. We’re going to knock down the screen and the popcorn stand,
and the site is ready to go.”
Just across Halls Ferry, on the site of the old River Roads Shopping
Mall, Taylor Morley plans to develop a different 44 acres for homes,
plus 12 acres of commercial. Preparation will be considerably more
complicated.
“The TIF was absolutely necessary to help with demolition and environmental
abatement,” Morley says. “We’ll have asbestos, mercury, Freon. Then
we have utilities above and below ground: gas, phone, sewers, storm
water. We’ll have to reconfigure everything.”
In both instances, however, Morley says “Having the large tracts
of contiguous land means we can ‘appreciate’ the neighborhood.”
Appreciate? “Values can go up,” he clarifies.
Simple or TIF-reliant, Morley praises both the City of Jennings
and St. Louis County for cooperating with him, as well as one another.
“The County and City both ran out the red carpet for us. I’ve never
seen a project before where there was so much cooperation to make
a redevelopment happen.
“The Jennings TIF commission and the Jennings City Council approved
the River Roads TIF,” Morley says. “And we’re fine tuning the redevelopment
plan.”
Morley expects to develop 59 50-foot lots for single family homes;
55 60-foot lots for single family homes; 62 villa products, attached
or detached; and 40 town homes on the old mall site.
He was also delighted to report that several civic-minded, publicly
traded St. Louis corporations—not all of them banks—have expressed
interest in purchasing the $1 million of environmental-abatement
TIF bonds.
(According to Morley, finances were also a little simpler at Alexandria
Place: “Wehrenberg had the property up for sale. The price was right.”)
After dispatching details of the plan and the bonds, Morley expects
to begin demolishing the retail center in August or September.
Morley says, “We had been analyzing River Roads for redevelopment.
It had been one of the area’s first regional malls, and when I-70
cut off a lot of traffic from Halls Ferry and Jennings Station Rd.,
it began to decline. Malls are normally right at the highway for
a reason. This one had been closed for about 10 years.”
Morley continues: “The city master plan calls for this to be residential
to recover some of the population they lost in the last census.
As a ‘pool city,’ their population affects the revenues they receive
from other malls in St. Louis County.”
Morley made prominent mention of the fact that “not one resident
will be displaced by the River Roads redevelopment.”
He cites another bonus. “By bringing back rooftops,” he says, “commercial
will follow.”
He says what will emerge on the remaining 12 acres that are earmarked
for commercial will be more neighborhood-friendly than regional
malls: perhaps a day care, cleaners, or a dentist and—in accordance
with city wishes—“a sit-down restaurant rather than a drive-through,
perhaps an Applebee’s or a TGI Friday.”
Towards the end of the project, Morley expects to build 100 market-rate
units for seniors. “There is an assisted-living facility across
Halls Ferry Road. We don’t know yet if ours will serve the go-go,
the slow-go and no-go, but it will be for the elderly.”
MARK
MORLEY, president and COO at homebuilder
Taylor Morley Inc.
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Morley says the 137 attached town homes in Alexandria Place will
have three stories: a garage and unfinished basement, a living area,
and upstairs bedrooms. The homes will be priced between $90,000
to $115,000, he says, affordable to those whose incomes range from
$35,000 to $40,000.
The 81 single-family homes will range from $140,000 to $160,000.
All the homes will be market rate.
“If you can build a value-oriented home and keep it price sensitive,
people will move into the area,” Morley says. “We studied it, and
saw that it worked in Alexandria, Va.—which is where we got our
name for our project—and Atlanta.”
CDC Corporation, Taylor Morley’s minority partner, will build 20
homes in Alexandria Place, and a similar, though yet to be determined,
proportion of the units in River Roads.
Alexandria Place will also feature five acres of commercial redevelopment,
and River Roads will boast a two-acre park.
“We have three schools within walking distance,” Morley says, citing
for example a Microsoft grant that provided “Northview Elementary
School with more computers than students.”
Several hundred Taylor Morley homes will help rebalance that.
Kevin Kipp runs Bubble Communications, a creative services and
community relations firm in St. Charles.
The entire Investments
in Progress inventory of completed projects and available sites
throughout the region’s inner ring, is posted on the RCGA website,
stlrcga.org/investments_in_progress,
and will be kept up-to-date by the RCGA Economic Development staff
and their local economic development partners in the City, St. Louis
County, St. Charles County, Madison County and St. Clair County.
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