Cupples 7: Vertical Realty Is Last Interested Developer As City Begins Demolition Prep

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Cupples 7. - VIA STLOUIS-MO.GOV

One of the last two remaining developers hoping to save the historic Cupples 7 building in downtown St. Louis has decided not to purchase the historic property given the high cost of fixing the structure and the immediate threat of collapse.

That leaves one interested party: Vertical Realty Advisors, a St. Louis firm whose plan to rehab Cupples 7 we outlined in detail last week.

The city announced yesterday that Reed Realty Advisors, a firm that "expressed serious interest," will officially not be purchasing the building, which means the city is immediately starting preliminary demolition work this week. City officials and Vertical Realty both say they still want to work out a plan to save the site -- but, at this point, it appears they are not on the same page. And time is running out.

See also: - City Says Historic Cupples 7 Will Be Demolished Unless a Developer Steps Up - Demolition To Begin Next Week On Cupples 7, Advocates Push For Rehab - Cupples 7: Vertical Realty Says It Can Save The Historic Site In Downtown

The city formally announced last month that Cupples 7 is in very poor condition, posing a serious safety risk to the public, and thus needs to be stabilized -- or demolished -- immediately.

Cupples 7. - VIA GOOGLE MAPS

The property is a seven-story brick building and the only structure in the historic Cupples Station complex that has not been fixed up. Eames and Young constructed the site for Samuel Cupples between 1894 and 1917. Cupples 7 on 11th and Spruce streets was condemned by the city in 2008. Efforts to rehab the site by Ballpark Lofts III, headed by developer Kevin McGowan, have failed.

On Friday, Treasurer Tishaura Jones -- as per an agreement arranged by her predecessor -- officially bought Cupples 7 from Montgomery Bank for $850,000 with plans for demolition unless a developer can purchase the building outright and immediately stabilize it.

"City engineers and others who have inspected the building are afraid that it will collapse and hurt someone," the mayor's office says in a news release.

And now, a demolition company has begun the preliminary work on the process, which will take about three months. Reed Realty Advisors, after twice touring Cupples 7, decided costs to stabilize the property are just too steep, the city says.

Site map from city's request for proposals. - VIA STLOUIS-MO.GOV

Meanwhile, the Vertical Realty developers say are trying to hammer out a deal with the city and are confident that they have the financing and plan to save the property, stabilize it now and develop it without putting taxpayers at risk.

"Our plan, from the beginning, has always been to acquire the property from the treasurer and assume full responsibility," Hasan Adelani, senior associate with the company, tells Daily RFT in an e-mail. "We will purchase, develop, and own the building; the city will not own it. There seems to be a misinterpretation of the terms. We hope to clarify these terms and move in the proper direction to get a deal done and to save the building from demolition. We would plan to purchase and begin the stabilization within 30 days of an agreement being made."

Sounds like what the city is looking for?

It appears, however, that the city and Vertical Realty have not been able to agree upon terms surrounding a potential "lease agreement."

Continue for more commentary from city officials and for the full statements.

City officials have repeatedly emphasized to us that they can only allow a development plan in which the city is not assuming financial risk. (Some preservationists argue that the money the city is spending on demolition should be used as an incentive for development).

St. Louis Treasurer Tishaura Jones. - VIA KMOV.COM
  • via kmov.com
  • St. Louis Treasurer Tishaura Jones.

Quotes from the latest press release reiterate this stance from the city. From Treasurer Tishaura Jones:

As long as the City is not included in the financial structure, which would put taxpayers at risk for this development proposal, we are very happy to negotiate a deal.

And Mayor Francis Slay:

The City will offer every incentive and available tool to make this deal happen, including tax increment financing. But, we will not put the taxpayers at risk by guaranteeing the project's debt. I would not do that for Ballpark Village, and I will not do that for this project. I hate to see any historic building razed, but the overwhelming concern for public safety has to take precedence.

Adelani, who tells us he is tired of debating this matter on Twitter -- offers this explanation of his proposal:

At this point, we want to clarify our terms on our term sheet and address any concerns the City may have. We understand that the city does not want any risks. And we are not asking the city to guarantee the debt. This is a new type of Public Private Partnership that the city is not familiar with - there's a learning curve here and we're happy to educate. We are asking the city to participate in a lease agreement, but with this lease agreement, the city doesn't have the same responsibility as one would with a traditional lease. Their role as 'master lessee' is purely technical as a requisite to access this type of financing.

Adelani says he hopes to meet with the city this week and work through terms to avoid demolition.

"It almost feels like the bottom of the 9th in Game 6 of the 2011 World Series," he writes to us. "We're hoping for extra innings."

Here is the city's full press release, followed by Adelani's full statement to Daily RFT:

Cupples 7 is Slated for Demolition

City Continues on Dual Path to Find Developer

SAINT LOUIS-- One of the last two remaining developers with interest in saving the Cupples 7 building has decided against buying it because of the high cost of stabilizing the structure and the imminent threat of collapse.

Cupples 7 is slated to be torn down to protect public safety unless a developer can both purchase the building outright and immediately stabilize it. Given the building's weakened condition and threat to public safety, time is running out.

The City Treasurer purchased the promissory note for the building on Friday, June 7, 2013, from Montgomery Bank for $850,000 in order to fulfill a contract negotiated by the previous treasurer. The treasurer's office is now liable for the property. According to the City Building Commissioner and an independent engineering report, Cupples 7 is an imminent threat to public safety. City engineers and others who have inspected the building are afraid that it will collapse and hurt someone.

Spiritas Wrecking Company, which was awarded the $482,500 demolition contract through an open bidding process, has begun preliminary work on the site. It will take roughly three months to complete demolition.

The City and the City Treasurer's Office, along with the St. Louis Development Corporation (SLDC), continue to work on a dual path to identify a developer with the ready cash to buy and stabilize Cupples 7.

Reed Realty Advisors, based in Little Rock, Arkansas, expressed serious interest and showed the ability to finance and finish the project on its own. However, when Reed Realty Advisors twice brought its team to St. Louis to tour Cupples 7 and the nearby Westin Hotel - also a Cupples Station building - it discovered that initial estimates to stabilize the building were underestimated.

"We estimate that it would take $2 million just to stabilize the foundation, plus an additional $1 million to secure the brick walls," said Scott L. Reed, managing director of Reed Realty Advisors. "We are not going to make an offer on the property because of the high cost of stabilizing it. Secondarily, the property is in an advanced state of disrepair and appears to pose an immediate risk to public safety and neighboring properties."

That leaves one last interested party. The City still hopes the development group Vertical Realty can finance and build the project with available incentives, but without government guarantees.

"As long as the City is not included in the financial structure, which would put taxpayers at risk for this development proposal, we are very happy to negotiate a deal," said Treasurer Tishaura Jones.

"The City will offer every incentive and available tool to make this deal happen, including tax increment financing," said St. Louis Mayor Francis Slay. "But, we will not put the taxpayers at risk by guaranteeing the project's debt. I would not do that for Ballpark Village, and I will not do that for this project. I hate to see any historic building razed, but the overwhelming concern for public safety has to take precedence."

As publicly stated several times, the City will continue to diligently work through any and all proposals until the demolition date has arrived to restore public safety to the immediate area.

From Hasan Adelani:

Our plan, from the beginning, has always to been to acquire the property from the treasurer and assume full responsibility. We will purchase, develop, and own the building; the city will not own it. There seems to be a misinterpretation of the terms. We hope to clarify these terms and move in the proper direction to get a deal done and to save the building from demolition. We would plan to purchase and begin the stabilization within 30 days of an agreement being made.

At this point, we want to clarify our terms on our term sheet and address any concerns the City may have. We understand that the city does not want any risks. And we are not asking the city to guarantee the debt. This is a new type of Public Private Partnership that the city is not familiar with - there's a learning curve here and we're happy to educate. We are asking the city to participate in a lease agreement, but with this lease agreement, the city doesn't have the same responsibility as one would with a traditional lease. Their role as 'master lessee' is purely technical as a requisite to access this type of financing.

Later this week we will meet with City officials to collaboratively work through the terms to reach an agreement to avoid demo. It almost feels like the bottom of the 9th in Game 6 of the 2011 World Series..we're hoping for extra innings.

Send feedback and tips to the author. Follow Sam Levin on Twitter at @SamTLevin.

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