$200 million in new development: McCormack Baron, SLU plan on Grand

St. Louis Business Journal - June 29, 2007

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Richard Baron's plan for the 4.3 acres calls for condos, retail and office space.
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Saint Louis University and developer McCormack Baron Salazar are partnering on a $100 million plan to transform the intersection of Grand and Lindell, which is a main entry into the Grand Center arts and entertainment district. McCormack Baron's proposal for a 400,000-square-foot mixed-use development on 4.3 acres owned by the university calls for 100 condos, 155,000 square feet of retail space and 100,000 square feet of office space. McCormack Baron plans to move its corporate headquarters and 300 employees from 1415 Olive St. downtown to about half the new office space upon completion in 2009. Part of the retail component includes plans for a multiscreen movie theater.

 

 

"Our hope is this will be a transformative project that will finally bring people to this area of the city," said Richard Baron, co-founder, chairman and chief executive of the real estate development firm. "We think the housing component is an important ingredient to provide more energy to the district." The property, zoned for commercial use, is located in an $80 million tax increment finance district created in 2002. The university has sought for several years to develop the site, which includes a vacant parcel at the northeast corner of Grand and Lindell and a vacant lot north of the corner parcel at Olive and Theresa. The property is next to Pyramid Cos.' $30 million redevelopment of the Metropolitan building into a Hyatt Place hotel and is the gateway into Grand Center, which includes the Fox Theatre and Powell Symphony Hall. Kathleen Brady, SLU's vice president for facilities management and civic affairs, said McCormack Baron's proposal was selected by the university because of the density it will bring and the services it will provide students, staff and faculty. Much of the new development around SLU's campus in recent years has been the addition of apartments. "As a result, the area is pretty one-dimensional," said SLU's real estate manager, Peter Pierotti. Adding for-sale housing will allow grad students and faculty to live within a stone's throw of the main campus, he said. There are also few retail options nearby. "Right now, Lindell is a barrier," Brady said. SLU's campus is south of Lindell. "This is a critical corner in getting people over to Grand Center, and hopefully it will help spur further development," Brady said. SLU put out a request for proposals Feb. 28 with an April 16 deadline. The school also issued an RFP two years ago when it owned only one acre at the corner. It halted those plans upon learning the state of Missouri was contemplating selling an office building it owned on several acres adjacent to SLU's property. State employees moved out in January, and SLU bought the property from the state this year for $6.15 million. No decision has been made on whether SLU will retain ownership of the property, Brady said. Whether the former state office building will be razed or included in the development also is still undetermined. The school is in the process of sending out a survey to students, parents and alumni to ask their input on what the project should include. "We're assessing what the price range should be for the residential units," Brady said. "We know that there are people who would like to live close to Saint Louis University." She said the condos would qualify for a forgivable loan program the school has for staff to encourage homeownership near campus. Loans in the amount of $5,000 are available, with $1,000 forgiven each year for five years. "We've had the program for eight to 10 years, but there hasn't been much for-sale housing available in the area," Brady said. The Grand and Lindell project will be McCormack Baron's third major project in the North Grand Boulevard area. In recent years, the company has completed work on the multiphase Blumeyer Housing Complex redevelopment, renamed the Renaissance at Grand, which totaled more than $100 million in development. McCormack Baron also is redeveloping the former Woolworth building at 501 N. Grand Blvd. into a new home for Big Brothers Big Sisters of Eastern Missouri. That project totals more than $10 million.

The development team

McCormack Baron is interviewing two architectural firms, TEN Arquitectos and Ehrenkrantz, Eckstut & Kuhn Architects (EE&K), for the project at Grand and Lindell. EE&K is based in New York City, and TEN Arquitectos has offices in New York and Mexico City. Both firms have experience designing facilities in academic settings. A general contractor has not yet been selected for the project, which is set to get under way in spring 2008.

 

 

McCormack Baron is partnering on the project with Philadelphia-based U3 Ventures, led by principal Omar Blaik. Before forming U3 Ventures in 2006, Blaik was senior vice president of facilities and real estate services at the University of Pennsylvania and oversaw similar mixed-use developments on and near its Philadelphia campus. Blaik oversaw construction and real estate development totaling more than $2 billion during his nine years at Penn, according to the university, including the opening of a six-screen cinema owned by the school, a new grocery store and restaurants near the campus. Richard Baron's connection to Penn began when he attended a fellowhip program there in the summer of 1968. In recent years, he again visited Penn when his daughter was an undergraduate student there. "I saw what had happened there, with the mixed-use development on the edge of the campus -- a Barnes & Noble, retail and all the rest. It was extraordinary." Baron ultimately led the formation of Penn's Center for Urban Redevelopment Excellence, a training and career growth program for urban redevelopment professionals and students, in 2003. Since McCormack Baron's founding in 1973, the privately held firm has developed 113 projects in 26 cities. lrbrown@bizjournals.com

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Bottled-up projects in Grand Center get green light

By Emily Umbright
Posted Wednesday, July 25, 2007

Bottled-up projects in Grand Center get green light

McCormack Baron Salazar plans to turn the Woolworth Building into the future home of Big Brothers Big Sisters and the Kranzberg Cultural Arts Center.

We’ve heard it was coming, and with the promise of multimillion-dollar plans announced this month, it appears Grand Center is slated for another round of development activity.

Long-awaited plans for the redevelopment of the Woolworth Building took a lunge forward July 17, when McCormack Baron Salazar and Big Brothers Big Sisters of Eastern Missouri announced they had finished closing on the property. The sale of the building previously owned by Grand Center Inc. was subject to an unusually complex financial arrangement.

A few weeks earlier, St. Louis University announced it had chosen the developer to explore concepts for its corner piece of real estate occupying the southern entrance to Grand Center at Lindell and Grand boulevards.

A rescue from faded glory

In its heyday, Midtown was served by streetcars and its streets bustled with people on their way to offices, restaurants and entertainment venues. From the late 1800s through the 1950s, the area grew to become the city’s cultural Shangri La, featuring a number of vaudeville and traditional theaters and, later on, movie theaters.

But when the population started moving west, Grand Center emptied out.

In 1987, Grand Center Inc. was formed to revitalize the area and reassert Midtown’s primacy as a cultural zone. But, as anyone who drives down Grand Boulevard knows, progress has taken its time.

The anchor for the neighborhood could be said to be the Fox Theatre, which was reopened in 1982 after a major restoration. Once Grand Center Inc. was established, other entertainment venues, such as the Sheldon Concert Hall in 1991 and the Grandel Theater in 1992, also experienced facelifts.

Momentum has increased in the last five years, with redevelopments of the Continental Life Building, the University Plaza Apartments, the Coronado and Centene Center for the Arts, and the Moolah Temple. The area has also seen new construction, such as the Contemporary Art Museum St. Louis and the Pulitzer Foundation for the Arts.

But at the corner of Olive Street and Grand Boulevard — a once-lively transportation hub —the old Woolworth Building has sat vacant for years.

All that could be changing, however.

‘Complex financing’

On July 12, Grand Center Inc. transferred the Woolworth Building to a legal subsidiary of developer McCormack Baron, clearing the way for the redevelopment of the long-empty building.

McCormack Baron has already begun construction on the $13 million project that will feature office space and a full-service restaurant.

Big Brothers Big Sisters of Eastern Missouri plans to move its headquarters into the space by next summer, along with the Kranzberg Cultural Arts Center, a satellite location of University City-based Craft Alliance.

Becky James-Hatter, president and chief executive officer of Big Brothers Big Sisters, said the new location would bolster visibility while providing extra room for staff, interns and volunteers. Its office space is currently in the Bank of America building on Lindell Boulevard.

The move will also enable the organization to serve more children, James-Hatter said. BBBS currently serves 2,300 youths and has set a goal of increasing that number to 10,000. The new center will feature a training and education center, new meeting rooms and open space where kids can mingle with staff and volunteers.

While plans to rehab the Woolworth Building had been in the works for several years, the project stalled when Owen Development dropped out of the project. Funding for the redevelopment also had to be devised.

“These projects are very complicated,” said Grand Center spokeswoman Susan Wedemeyer, adding that there are “hundreds of items” that need to be settled upon.

Time also has to be given to finding the right tenant combination and developing the right designs, she said.

McCormack Baron spokeswoman Julie DeGraaf-Velazques attributed the delay to “complex financing.” The project is being financed through a combination of private lenders and public tax incentives, including $9.5 million in historic and new-market tax credits.

The building sits in Grand Center’s $80 million tax-increment financing district, portions of which had been the subject of a lawsuit resolved this spring by the Missouri Supreme Court. DeGraaf-Velazques said the Woolworth redevelopment would be a recipient of TIF money.

Under TIF, increases in property, sales and other taxes collected in the area are diverted into a fund that reimburses some of the upfront costs of a project. Usually TIFs are confined to a single project, but by grouping a number of projects together, Grand Center’s TIF has become the largest in the state.

Prime land

While still in early planning stages, SLU’s proposed project for the northeastern corner of Lindell and Grand boulevards is expected to cost around $100 million, DeGraaf-Velazques said. Philadelphia-based U3 Ventures was selected to join McCormack Baron in developing a concept.

Wedemeyer said Grand Center “enthusiastically supports” the project. SLU’s project is located in the TIF district and once plans are closer to being finalized, Grand Center would work out the specific amounts of TIF to be incorporated into the development, Wedemeyer said.

Preliminary plans for SLU’s prime piece of real estate call for office space and residential units, as well as retail and entertainment spots, including a grocery store and a multi-screen theater.

“Right now, the area’s dominated with SLU students,” said Peter Pierotti, university real estate manager in the Facilities Management and Civic Affairs Department. “[We want to] gear it towards the general public and make it more of a destination.”

Currently, the university and its developer are collecting feedback from individuals who took part in a development survey.

“People are positive about it,” DeGraaf-Velazques said.

The goal is to create amenities that attract both university students and staff, as well as new residents and people interested in the community, she said. The developer has set a goal of getting the first phase of development under construction by the end of 2008, she said.

SLU has put the project on the fast track, Pierotti said. The university’s letter of intent signed with McCormack Baron gives the developer 90 days to submit a firm concept for the site, he said, and provides SLU with an out if the university opts for something different.

The university’s 4.3 acres of property comprises a vacant parcel that sits at the corner of the intersection and an adjacent site of the former Midtown State Office Building, located at 3545 Lindell Blvd.

“It’s not a very attractive building,” said Pierotti, explaining that the university is evaluating whether to tear it down or not.

Discussion about developing the busy corner had been in the works for a few years, after SLU initially solicited proposals to develop the vacant parcel of land. Not long after it received proposals, however, the university discovered the state of Missouri would be selling the office building next door. The university then put its plans for the corner on hold until it acquired the property from the state last year.

Having both properties would “make for a better development,” Pierotti said.

Both the SLU project and the rehabbing of the Woolworth Building are key projects for the redevelopment of Grand Center, and the timing of both projects coincides with Pyramid Properties’ $30 million renovation of the Metropolitan Building, which sits across Grand Boulevard from the Woolworth Building.

DeGraaf-Velaszques said that having these projects go up simultaneously “makes a huge difference” to people wanting to invest in the area.

“Both are good signs of things to come,” she said.

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May 4, 2007 Grand Center is getting a new tenant that will bring a new look to the entrance to the arts and entertainment district in Midtown.

Craft Alliance, a nonprofit that supports fine arts, is opening a 6,000-square-foot satellite office in the former Woolworth building at Grand and Olive. When it opens next summer, the ground level windows will offer a glimpse into a new gallery, education studios and resident artist studios. Craft Alliance's headquarters will remain in the Delmar Loop, where it has been located since 1972. Boo McLoughlin is executive director.

Craft Alliance at Grand Center will be located in the Kranzberg Cultural Arts Center, named after Nancy and Ken Kranzberg, who are longtime supporters of Craft Alliance. Craft Alliance will be in the same building as Big Brothers Big Sisters, which is moving this year.

Craft Alliance has raised $540,000 toward an $840,000 goal to fund the satellite office from donors, including $350,000 from Larry Cohn; $125,000 from Emerson Electric; $30,000 from the Whitaker Foundation; $25,000 from Mont and Karen Levy; and $10,000 from Emily Pulitzer.

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Rebuilt to Suit

SLU won't say what it has in store for the Locust Business District.

Starwood, Hyatt to expand in St. Louis

St. Louis Business Journal - April 6, 2007

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Grand Center

John Steffen and Mike Mullenix are partnering on a $30 million conversion of the century-old Metropolitan Building in Grand Center into a Hyatt Place hotel and working on a plan to bring a Starwood 'aloft' brand hotel to the Arcade building downtown.

The Grand Center Hyatt Place will be the first historic rehab hotel for Chicago-based Hyatt's Hyatt Place flag, It also will be Steffen's first hotel development and Mullenix's first historic rehab project.Steffen also is negotiating with Mullenix's Equis Hospitality Management to bring an aloft hotel to the Arcade building downtown at 810 Olive St. Mullenix said he's in discussions with Starwood Hotels & Resorts Worldwide Inc. to open an aloft Hotel under its W Hotels division, but an agreement has not yet been reached.

Pyramid Cos., led by Steffen, closed March 22 on the purchase of the Metropolitan Building in Midtown from the Dubinsky Education Trust, represented by partner Alan Pervil, for $2 million. Pyramid will serve as general contractor and architect. Centrue Bank and The Business Bank are lenders. St. Louis-based Environmental Operations Inc. already has begun interior demolition and remediation.

Pyramid had planned to convert the 100,000-square-foot, eight-story Metropolitan Building at 500 N. Grand Blvd., on the northeast corner of Grand and Olive Street in Midtown, into condos. That plan, announced in September 2005, was slated to be the first for-sale condo development in the arts district, which is home to Powell Symphony Hall and the Fox Theatre.

"We changed the plan because it was an opportunity that could not be passed up, to bring much-desired hospitality services to Grand Center," Steffen said. "We had always had our feelers out for this kind of an opportunity. We were amazed at the extent of the interest by several flags and several owner/operators."

Steffen said the Hyatt Place hotel will have at least 125 rooms and up to 15,000 square feet of ground-floor retail space, including shops that will be located on the perimeter of a surface parking lot immediately east of the hotel.

Construction is set to begin by August and span 18 months. Upon completion, Pyramid plans to sell the property to St. Louis-based Equis, which will own and manage the hotel. Equis is buying a majority interest in the building only, not the retail component, for an estimated $14 million.

Equis, which owns and operates five hotels in the St. Louis area, is in a growth mode. It is building a Westin and a Homewood Suites across from the Saint Louis Galleria and is considering building two other hotels near Lambert-St. Louis International Airport at undisclosed locations, Mullenix said. In total, Equis has $120 million in its development pipeline.

In January 2006, Equis opened its first hotel in the city of St. Louis, the $26 million, 188-room Residence Inn at Highway 40 and Jefferson. "We've been in business for 40 years and never did a project in the city of St. Louis," Mullenix said. "We're excited about doing a second one and possibly a third."

Mullenix said Equis is talking with Hyatt about building two additional Hyatt Place hotels in St. Louis, one near downtown and one in either Clayton or West County, within the next 18 months.

Hyatt has 215 hotels worldwide, including the Hyatt Regency at Union Station downtown.

Grand Center has seen several stops and starts in commercial development in recent years, including the closure of the Tuxedo Room restaurant, which opened in late 2006. But there are signs the district is making a comeback.

Saint Louis University has issued a request for proposals to developers for a 4.2-acre site it owns at the northeast corner of Grand and Lindell boulevards, at the entrance to the university and Grand Center. SLU owned 1 acre at the corner for several years but added more than 3 acres in March when it purchased property from the state of Missouri for $6.15 million. The university said several uses for the site will be considered, including senior housing, condos, a hotel and commercial space. Pyramid also is converting the Beaux Arts Building at 711 N. Grand Ave. into condos, and McCormack Baron Salazar is moving forward with a $10 million plan to convert the former Woolworth building at 501 N. Grand Ave. into office space.

Gary Andreas, a hotel analyst with H&H Consulting in St. Louis, said demand in Grand Center for hotel rooms is strong. "Between the university and the different theaters down there, for both the performing groups and visitors coming in to the city, it could use more hotel rooms than any other area of the city."

Conversions of existing properties in urban areas for hotel use is a nationwide trend, Andreas said. "It usually happens when there is no vacant land or land costs are prohibitive (for new construction)." Andreas said older buildings are better than newer ones for hotel conversions because of their high ceilings, large floor plates and large windows designed to admit natural light.

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Mo. Supreme Court decision gives SLU $8 million TIF win

St. Louis Business Journal - April 20, 2007

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Rendering of Chaifetz Arena, under construction at Compton and Laclede avenues
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The Missouri Supreme Court upheld three St. Louis city ordinances that will provide Saint Louis University with $8 million in tax increment financing (TIF) for construction of its $80.5 million multi-use arena.

The court opinion, issued April 17, settles a lawsuit brought against the Jesuit university, the city and Grand Center Inc. in October 2004 by The Masonic Temple Association of St. Louis and nearby property owners. The Masonic Temple argued that the TIF ordinances, enacted in 2002 and 2003, violated both Missouri and federal constitutional provisions for the separation of church and state. The government is prohibited from appropriating public funds in aid of any religious creed, church or sectarian purpose or to support any educational institution controlled by any religious creed, church or sectarian denomination.

TIF is a financing method whereby municipalities use future increases in taxes generated by a completed development to pay for a portion of development costs, such as land acquisition and site improvements. Including the arena, this TIF will provide up to $80 million to support some $150 million in development projects in the Midtown district known as Grand Center, according to Vince Schoemehl Jr., president and chief executive of Grand Center Inc., a not-for-profit organization charged with revitalizing the district. Grand Center previously settled as a party to the suit.

"We're glad this is over," Schoemehl said. "It wasted a lot of valuable time and a lot of money."

The Supreme Court affirmed a summary judgment handed down July 14, 2005, in St. Louis City Circuit Court by Judge Steven Ohmer. It concluded SLU is not owned or controlled by a religious creed even though its president, Lawrence Biondi, is a Jesuit priest and the university's bylaws support Jesuit and Catholic ideals and beliefs.

SLU is not owned or controlled by the Roman Catholic Church or the Archdiocese of St. Louis, Biondi testified. He and other SLU officers serve at the pleasure of the university's independent, lay board of trustees. SLU does not require employees or students to aspire to Jesuit philosophies or have any specific religious affiliation. Of SLU's 1,275 faculty and staff members, fewer than 35 are Jesuits. Less than half of SLU students identify themselves as Catholics, according to the court.

"The university is not a religious institution simply because it is affiliated with the Jesuits or the Roman Catholic Church," the Supreme Court stated in its opinion. "A university's motivation or aspiration to follow certain teachings does not indicate that it is 'controlled by a religious creed' such that religion dictates the corporate management of the university. ... There was no allegation that SLU's Jesuit roots and appreciation for Jesuit philosophies demonstrably control campus life, and SLU respects academic freedom and inquiry that runs counter to Catholic teachings."

The court went on to say, "SLU's mission is education, not indoctrination, and its focus is on development of students, not on the propagation of the Jesuits' faith."

"The university is pleased with the outcome," said SLU General Counsel Bill Kauffman. "The university has proceeded with its arena construction predicated on the assumption its attorneys would prevail. We were counting on the result the Supreme Court handed us."

James Stemmler, an attorney representing the Masonic Temple, said he was disappointed with the court's decision and will review the case with his client "to see if we go anywhere from here."

"There might be some reasonable grounds for an appeal to the U.S. Supreme Court," he said.

The recently named Chaifetz Arena is under construction at Compton and Laclede avenues on SLU's campus and is scheduled to open in March 2008. The 10,600-seat venue will serve as a home court for SLU's Billikens basketball teams. The men's team currently plays in the Scottrade Center and faces scheduling conflicts with the St. Louis Blues, and the women's team plays in the old West Pine gym on campus.

ctritto@bizjournals.com