SBJ.net (Springfield Business Journal Online)

Council approves next step in Heer's plan

After an Aug. 23 public hearing and discussion that lasted two and a half hours, Heer's developer Kevin McGowan received City Council's approval of the term sheet and financing plan for the renovation of the historic landmark.

The unanimous vote gives the city the go-ahead to issue a letter of commitment to the U.S. Department of Housing and Urban Development, agreeing to issue a $2 million small business development loan to the project's developers. It also allows the city to request a $1 million loan from the Missouri Development Finance Board, which will be funneled through the city. The $3 million is expected to fill the final gap of an elaborate financing package for the Heer's redevelopment and will give McGowan the opportunity to apply for a HUD-backed loan for the largest, $11.8-million-piece of the puzzle.

"The fact that we have an opportunity to move this forward - and I do want to stress opportunity, because there's still a lot of work to go here - is remarkable," McGowan said, noting development projects across the state have stalled because of the economy.

McGowan's next step is to submit an application and related paperwork to HUD before an Oct. 6 deadline.

"That's a hard deadline," said Mary Lilly Smith, economic development director for the city, adding that it would be difficult for McGowan to obtain HUD's backing after that date.

Once the HUD application has been filed, Smith said, concurrent closings on financing should be complete by March 1, which is when construction can begin. That would put Heer's on schedule to open in spring 2012, she said.

Read more about the Heer's project and the Aug. 23 City Council meeting in Springfield Business Journal's Aug. 30 print edition.

Springfield Business Jounal (SBJ.net)

Council considers $2 million loan for Heer's

Springfield City Council is scheduled to consider a term sheet and resolution Aug. 23 that could spark the long-awaited Heer's Tower project.

The term sheet includes a $2 million loan from the city to St. Louis-based development company Blue Urban LLC and its president, Kevin McGowan, who owns the Heer's building.

Redevelopment of Heer's is the city's "No. 1 redevelopment priority," according to the term sheet.

If approved by council members, the loan would come from the city's small business development loan program, established to lend money to small-business owners, nonprofit organizations and real estate developers.

"That will put together the final components of the financing package to make the deal possible," Springfield City Manager Greg Burris said.

Following resolution approval, the project would be submitted to the U.S. Department of Housing and Urban Development, according to McGowan.

"This is a vital step toward the completion of the funding," McGowan said. "Obviously, we need help from the city of Springfield."

The term sheet lays out these funding sources and their terms for the $29.3 million project:

• $11.8 million HUD loan at 6.35 percent interest for 40 years;
• $5.2 million federal historic tax credit at 7.5 percent interest, not to exceed three years;
• $4.9 million state historic tax credit bridge loan at 7 percent interest for 18 months or until the project is complete;
• $4.4 million from the developer;
• $2 million city small business development loan at 5 percent for 23 years; and
• $1 million Missouri Development Finance Board loan through the city at 5 percent for 23 years.

If adopted, the city would work with the developer and the other financing entities to finalize financing. The project would then be brought back to council for approval.

If all funding is secured during first-quarter 2011, the project should be completed by April 30, 2012, the term sheet said.

Should McGowan default on the loan, the city has a protection plan in place, said Mary Lilly Smith, economic development director.

"There's a provision in the term sheet for the city and finance board loans that those would be repaid from the tax increment finance district and the community improvement district proceeds.
And one of the protections that we've put in place is that there will be a fixed property tax payment," Smith said. "TIF captures 100 percent of the incremental increase in property taxes and 50 percent of the incremental increase in sales taxes."

Smith said a fixed payment schedule would be incorporated into the final development agreement from the property tax payments.

"Those payments will equal 70 percent of the required payment annually for the debt service on the $3 million loan," Smith said. "The remaining 30 percent would be dependent on sales tax revenue."

Repayment to the Missouri Development Finance Board has priority over the city's loan payments, she added.

McGowan purchased the property from the city for $3 million in 2007. The city signed a development agreement with McGowan in August 2007 and amended the agreement in 2008.
McGowan intends to renovate the Heer's Tower back to its 1950s design with 63 market-rate apartments, a rooftop pool, a fitness center, Mike Shannon's Steak and Seafood restaurant, commercial and banquet space, and a bowling alley.

The economy and limited access to capital has stalled the plan, McGowan said.

"I've said it all along that Heer's is really one of the most exciting projects that we've had the opportunity to develop, and we're very much looking forward to developing it," he said. "Our commitment remains very strong, but in this environment, it's kind of like stealing the spots off a leopard; it's really hard."

St. Louis-based H.B.D. Construction Inc. is lined up as general contractor with 82 percent of subcontracting work coming from Springfield area companies. More than 40 area subcontracting businesses and more than 140 on-site construction jobs should be created, the term sheet states.

Springfield Business Journal

City offering $2M loan to seal Heer's deal in Springfield, MO!!!

The city of Springfield is stepping in to offer a resolution to the Heer's Tower project.


City Manager Greg Burris said yesterday a resolution and term sheet would be considered at Monday's City Council meeting that includes a $2 million loan to St. Louis-based development company Blue Urban LLC.

The money would come from the city's small business development loan program, established to lend money to small-business owners, nonprofit organizations and real estate developers.

If the resolution is approved, the project would be submitted to the U.S. Department of Housing and Urban Development, according to Kevin McGowan, Heer's owner and president of Blue Urban.

"If council agrees to do that Monday, that will put together the final components of the financing package to make the deal possible," Burris said.

McGowan is seeking $12 million in HUD funding, a $3 million bridge loan from a St. Louis bank and the $2 million loan from the city, with the balance of the $27 million project funded by historic preservation tax credits and local incentives.

If approved by HUD, McGowan said, closing on the deal could come shortly after the first of the year, with construction to follow. Current Heer's Tower plans call for 63 market-rate apartments and amenities including a weight room, pool, library and atrium with open-air patio.

"This is a vital step toward the completion of the funding," McGowan said yesterday via cell phone. "Obviously, we need help from the city of Springfield. We'll find out what happens on Monday."

One of the roles of the city's small business development program, which has been in place for more than 30 years, is to eliminate slum and blight, according to Mary Lilly Smith, the city's economic development director.

McGowan bought the iconic eight-story, 150,000-square-foot Heer's building from the city for $3 million in November 2007. A year later, he revealed renovation plans for a Mike Shannon's Steak & Seafood restaurant and condos.

The economy and limited access to capital has stalled the plan, he said.

"I've said it all along that Heer's is really one of the most exciting projects that we've had the opportunity to develop, and we're very much looking forward to developing it," McGowan said. "Our commitment remains very strong, but in this environment, it's kind of like stealing the spots off a leopard; it's really hard."

St. Louis Business Journal

McGowan gets last $3M for Heer's project

Kevin McGowan, president and CEO of St. Louis development firm Blue Urban, said the final $3 million needed for his Heer's project in Springfield will come from a St. Louis bank, the Springfield Business Journal reports.

Read more: McGowan gets last $3M for Heer's project - St. Louis Business Journal

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