In a deal that closed Tuesday, a new partnership led byChapman, CEO of Seneca Commercial Real Estate, andClark, CEO of construction firm Clayco and developer CRG, took ownership of U City LLC, the limited-liability company that owns the Markets at Olive project and the 31-acre property surrounding the future Costco. The project is expected to transform the area on the north and south sides of Olive Boulevard from I-170 to Woodson/McKnight into a commercial corridor.
The deal does not include the 16 acres for the Costco, property that theIssaquah, Washington-based retailer purchased in March.
U City LLC previously had been owned by Webster Groves-based commercial real estate firm Novus Development, which steered the project through the approval of $70.5 million in tax-increment financing from the University City council.
Rather than affixing a dollar value to the transaction,Chapman said he and Clark took over Novus President Jonathan Browne’s interest in the project “in exchange for a bunch of agreements that we made to allow the project to go forward.”
Browne did not immediately respond to a request for comment.
Chapman didn’t provide details of the exchange, other than to note that he and Clark in March provided $19 million in financing to Novus for the project’s first phase. He said a $36 million loan from Bank of Washington is being used to finance infrastructure and the costs for assembling all the necessary parcels.
In addition to Chapman and Clark, the new partnership also includes David Hutkin of real estate firm Hutkin Properties and Caroline Saunders, former general counsel of CRG, whois serving as a partner and counsel.
The sale isn’t expected to affect the project’s timeline, with construction currently underway to get the site ready forCostco to begin building by February or March, with the new store opening in September 2022.
Chapman said Seneca will play a leading role in the project’s day-to-day development.
“It’s going to be a great project. We’re excited for UniversityCity, and Costco’s going to be a game changer,” Chapman said. “What we do here will help improve the Olive corridor throughout all of University City. It’s a big step forward and an important project for the community and for the region.”
The new developers are still bound to the terms of the redevelopment agreement and the TIF granted for the property, City Manager Gregory Rose said.
“For the average person, a sale does not impact our redevelopment agreement that we have for the project,” Rose said.
Mayor Terry Crow said in a statement that city officials are”excited” about the new ownership group taking over the site.
“The development team has many years of success in land development and bringing projects to fruition that enhance communities,” said Crow. “The willingness of this group to invest in University City confirms we are a hot market. On behalf of the City Council we welcome the new owner ship and look forward to working with them in building a development that adds value to our University City community.”
To make way for the development, Novus acquired a mix of homes and businesses in the city’s 3rd Ward, a historically low-income neighborhood. Under the redevelopment agreement, the city will receive $10 million from the project to improve the 3rd Ward, including $3 million that Novus already paid to the city when Costco closed on the site.Another $5 million will go toward improving the busy Olive corridor. The city is developing plans on how to spend the money in the 3rd Ward, with Rose recommending that theCity Council set up a task force to identify the top needs.
The city is still in the process of assembling the full site, with a few properties that still need to be purchased, including two commercial sites where the occupants are seeking alternate locations. Chapman declined to disclose any more details of those negotiations, which are being conducted by the city.
Since grading began in September, construction crews switched from working at night to working only during the day after a complaint from a neighbor, which calls for crews to cross Olive Boulevard by stopping traffic multiple times throughout the day.
But the cars that drive by the site, and the many more that will come to visit Costco, are at the center of Chapman’s strategy for landing new tenants. He said he’s focusing on traffic-oriented businesses that would generate enough sales to pay back the TIF. So far, no tenants have signed leases.
“We’re still focusing on other retail users, but right now our plan is to go forward with mostly smaller fast-food restaurants,” Chapman said. “There’s going to be lots of visitors to Costco, and that’s the kind of thing that they will
be attracted to.”
Previous proposals also called for an apartment complex at the site, along with offices and a possible hotel. A hotel seems unlikely given the current economic realities for hospitality, Chapman said. But the developers still plan an apartment complex, and offices are a possibility, but not the focus of any development.
The idea of evolving University City, traditionally a bedroom community that doesn’t generate much in sales taxes, to one that generates more revenue from commercial uses has been a goal of city officials, including Rose. The city will be implementing an economic development strategy along the Olive corridor to bring in retail besides Costco. Under the redevelopment agreement, funds will be directed to upgrade the Olive corridor and to benefit residents of the 3rd Ward.
“It really is a transformational development for the city, the way that our taxes are structured here in U City,” Rose said of the Markets at Olive. “We must have businesses that generate sales tax in order to remain sustainable, so that really has driven the need to diversify our local economy.”