Home » Economy » Recent Articles:

For Rent: Downtown St Louis

In the past two months we’ve seen the collapse of John Steffen’s over-extended Pyramid Companies and now we have changes to a few high profile downtown projects by other developers. Blue Urban’s stunningly orange GEW project at Washington And Jefferson has switched from for sale units to rental units. The Lawrence Group’s Park Pacific remake of the former Union Pacific building has also gone rental with buyers getting their deposits returned. These adjustments are a good thing in the long term.

A number of downtown projects have been rentals for years such as the Merchandise Mart and more recently several floors of the Marquette, among many others. However the developers usually figure out the mix well in advance of announcing their project. Still the demand for rental units appears strong and by going rental it allows these buildings to get done. I think we’ll see some of Pyramid’s foreclosed projects go rental so the investors can complete the projects and recoup their investments.

By switching all these units to rentals it takes that many potential condos off the market, a very good thing.  By going rental we’ll still get these buildings renovated and occupied.  People are people whether they own or rent.  They still have to buy groceries & other goods.   With fewer new condos coming online we’ll see a renewed interest in existing units that are on the market.  Many renters eventually become buyers.

As long as we continue to renovate old buildings  and add new residents we’ll be fine downtown.


The Future Outlook on Downtown St Louis

It is probably easy to think the good times are over downtown: Nearly a month ago I brought the city the news of the closure of prominent developer, John Steffen’s Pyramid Companies. The new modern high rise SkyHouse planned for 14th and Washington has been abandoned and Centene is no longer moving their HQ from Clayton to St Louis and Ballpark Village. Big deal.

Generations of all ages are seeking something besides typical suburbia — houses hidden behind garages, strip malls, big box centers, the indoor mall, the office/industrial park , etc… This doesn’t mean everyone wants to live in downtown St Louis because that is not the case. However the perception of downtown has changed considerably over the last decade or so. This is not to say the current mayor or the current crop of downtown civic boosters deserve all the credit. They deserve some but much of it is simply a shift in demographics and taste. Just as decades ago many people fled to the suburbs in large part because everyone else was too. Times have changed and in smaller and bigger towns all over the country inner city areas are seeing renewed interest while the edge suburbs are not the sure thing they once were. People want to be in real cities be that strolling down a downtown street or having your choice to walk over to a restaurant on Hampton or to a great urban park such as Francis Park.

Downtown St Louis will survive the latest setbacks if we allow it to. Over-hyping projects that are not yet sure things is certainly a good way to set up the public to be disappointed and perceive downtown as having failed again. The current financial market conditions will not allow the rate of growth we’ve seen in the last decade but we will move forward.

Many storefronts remain to be leased. Many. It will take some time for the market to absorb these spaces. Eventually something will open. The more we patronize our local commercial districts the better they will do. This includes locally owned and chain places — such as the new Sprint store at Tucker & Washington Ave.

So many factors are in the right spots for a good next 10-20 years.  The trick now is to not screw it up with bad decision making.  We should now be looking at form-based zoning to guide new construction downtown and the rest of the city.  Now is the perfect time to envision how we’d like to see our city develop over the next few decades.  We should take advantage of this financial break to plan for the future.


Gas Tax Holiday a Vacation from Market Realities

May 8, 2008 Economy 15 Comments

Presidential hopefuls McCain and Clinton are both suggesting we take a summer vacation from collecting the federal tax on gasoline. Obama is coming the closest of all the major candidates to just putting it out there — China & India are now crazy about cars, just as we are, the world only has so much oil and the refineries can only convert oil to gas so fast.

We’ve spent nearly a century investing in infrastructure that only works when oil is cheap. Now that most Americans live in auto-dependent suburbia the world market rules have shifted. This is our new reality. There is no good short term solution. The long term solution is invest in different transit systems that move people more efficiently. Of course we are so spread out now that becomes increasingly costly.

Government is going to have to make some tough decisions. In the St. Louis region, for example, we need to rethink the idea of MetroLink being a regional system. I don’t think we can afford to build enough lines to encompass our region. We need to think at the local street level — how can mass transit get the average Joe to work, to the store and so on.  We also need to think about goods — where do they come from, can we ship them more efficiently and better yet can we produce that same good locally for less?

We are in the midst of the reality we created for ourselves.  No summer vacation from the gas tax is going to change that.


St Louis Centre; Different Owners, Different Standards

In 2005 the failed downtown mall, St. Louis Centre, was at the center of Mayor Slay’s priorities. At the time the Mayor and others were busy pushing Centre owner Barry Cohen to tear down the sky bridge that crosses over Washington Ave and move forward with redevelopment.

From the Mayor’s blog on Sept 25, 2005:

Stories in the business pages last week confirm the obvious. Barry Cohen, the owner of St. Louis Centre, is stalled. After a summer of fumbling, Mr. Cohen lost the funding proferred by Downtown Now’s Tom Reeves to demolish the skybridge.

Since purchasing the downtown mall more than a year ago, Mr. Cohen has promised, announced, floated, and projected some plans – none of which has come to anything. It is not clear to me whether he is hapless or canny, hoping for a profit on the $5.4 million the Biz Journal says he paid for the property.


As Tom Reeves told us, there’s plenty else to do Downtown. Meanwhile, we’ll keep sending Mr. Cohen those tax bills.

Wow, he had the mall for a whole year and the mayor calls him out. Slay supporter, now former developer John Steffen, was treated differently from day one:

Friday, February 17, 2006

This is a note to every developer hoping to be able to make a deal in the City and to every citizen hoping for redevelopment: John Steffen has announced ambitious plans to turn St. Louis Centre and the One City Centre office building into a mixed-use development.

These plans are possible because a public/private team, including Barb Geisman, Rodney Crim, Rollin Stanley, and Tom Reeves, kept their eyes on the goal line — not the headlines.

Not every real estate transaction can be negotiated in a blog.

I congratulate Barb, Rodney, Rollin, and Tom for their discipline — and I wish John good luck in getting this done.

This was well over two years ago and today the mall is totally vacant and the bridge still hovers over the street. Pyramid is out as developer with their equity partner Spinnaker taking over the now very stalled project. In fact, as reported here a week ago, Steffen and his company are out of the development business completely. Does this mean that Geisman and company dropped the ball? Were they all too cozy with Steffen?

Oh wait they did manage to give Steffen a sweetheart deal — a TIF backed by the city’s general revenues. That was also in 2006.

In the year and a half since then we’ve seen only slick marketing — drawing a line around a few blocks and calling it a district, The Mercantile Exchange or MX for short. That is almost as clever as the cards calling Ballpark Village a six block area (Broadway/5th to 8th and Clark to Walnut is 3 blocks no matter how many times they say otherwise).

So my question is this —does the city-backed TIF deal run with the property regardless of who takes over? If so, how long does Spinnaker have to complete the project? A year? Five years? A decade?

I think Steffen wanted this project so the city put up roadblocks for Cohen so he’d be forced to sell to Steffen.

Finally on Wednesday KMOX reported Pyramid’s story with greater detail and certainty than I had last Friday:

The developer of major St. Louis projects…St. Louis Centre and the former Dillard’s building, in the Mercantile exchange project…is getting out of the development business. Pyramid Construction’s John Steffen made the announcement through Steffen’s attorney Attorney Steven Goldstein… Problems in the real estate lending market are the main reason. Goldstein says Pyramid is currently working with other developers, investors, lenders and the city to make a transition for its development projects…but will continue to operate it’s property management division…which oversees a thousand apartment units in the city and surrounding area.

For someone with $609 million in development on his plate, Steffen has gone on a crash diet. Two years ago Steffen had this to say;

“We literally have more people offering to finance us than we have projects to finance,” Steffen said. “I need more projects because I have banks wanting to do business with me.”

Our city’s leaders bought Steffen’s hype. Or did Steffen buy off their better judgment with generous campaign contributions and illusions of success? Regardless our leadership has once again failed us. They claim Steffen was a victim of the current crisis but the roots of this go way back (see my post from June 2006) .
Perhaps we would have been better off giving Cohen a chance to prove himself? Of course then many of us wouldn’t have been able to enjoy the fancy parties thrown by Steffen for each project he announced. We sold out for some sushi.

I do hope all their projects are assumed by others and that they perform well. I also hope the next time we’ve got a developer bragging about his ability to get financing that we recognize the red flags.


Just North of $3/gallon

As I am sure everyone has noticed, gas prices have risen sharply. World demand for crude oil continues to increase while the supply remains maxed out. Many blame the oil companies, who are making record profits, for the high prices. I don’t fault then for making a profit but we need to end the tax subsidies they receive — they can invest their profits as most companies must do to stay ahead.

Back in December I suggested that Dubya might try to get gas prices reduced to keep a Republican in the White House. A few of the comments went like this:

“Can someone explain how the President has any effect on gas prices?”
He doesn´t. Only an idiot would suggest that he does. Oil prices, and by extension gas prices, are set on a world market. It´s that pesky supply and demand thing.
The sad part is, these idiots are allowed to vote, which is why we get the “leaders” that we do.

The answer was the President controls the strategic oil reserve. Yesterday truckers staged protests of high fuel prices — diesel now costing far more than regular. From an AP article yesterday:

Using CB radios and trucking Web sites, some truckers called for a strike Tuesday to protest the high cost of diesel fuel, hoping the action might pressure President Bush to stabilize prices by using the nation’s oil reserves.

Just as with the Federal Reserve putting new cash onto the market, manipulating the nearly 700 million barrels kept for emergencies can have an impact on the supply/demand equation and thus the price we pay.

I personally like the higher prices as I think they are more likely to curb our drive everywhere mentality … I’d still raise the Missouri gas tax. Yes, poor individuals that drive and businesses are impacted by the rising costs. Items that are shipped will begin to have price increases where the market allows. It will be harder and harder for companies to offer “free shipping.” The trucking industry will shrink — not all will make it. Rail will take over more transport duties. Hopefully we will source more of our food and goods locally.

The question becomes at what price do people take transit or buy the more efficient vehicle?  How expensive must gas be for someone to decide to buy a house in St. Louis Hills or Kirkwood rather than way out in St. Peters and drive to work in Clayton or downtown?  Those with kids are going to claim the need for the 7-passenger minivan or suv and I can understand although many families were raised without such vehicles.  Plus our demographics are heading to more single person households.  Most of you reading this probably drive your own car to work by yourself each day.  Do you need that much car to get yourself from A to B?  Hopefully gas prices will have a long term impact on people’s buying choices from vehicles to homes to food and other goods,