Two Sign 57,000 SF of Office in $159M MXD

Kevin McGowan, chief executive for the developer, says he thinks the leases are a sign that companies are starting to take the city seriously. The two tenants are moving in from the suburban city of Clayton. "These are the first two tenants that I've seen that want to be downtown," he tells GlobeSt.com. "In the 20 years I've been doing this, I've seen companies put downtown on their short-lists, but not as the number-one choice, with the exception of US Bank. It used to be we had to pull teeth to get someone interested to come down here." The commercial space will be completed by Jan. 15, 2009. "We're going to run two shifts to get them in on time," McGowan says. "The remainder of the building will be done by June 2009."

Also, since the buildings will have a multifamily component, he's seeing interest on that front as well. "Building Eight is supposed to have 68 lofts on its upper floors. When we started selling these, we had an NFL-style draft put on our Web site, we didn't put floor plans or pricing. We asked all folks if they were interested to send us a refundable $2,500 check, and within six weeks we had 71 checks. We sent out the plans and the pricing and called people in, and 61 people showed up, and we sold them within an hour and a half." He says it's a prime time for condos downtown, for college-age students and empty nesters. "They both want to get into the game of life in a big city," McGowan says.

Building Eight will have 118,000 sf for the lofts and 44,000 sf of office and retail space on the first two floors. Building Nine will have another 54 lofts and 80,000 sf of office and retail space. "There's about 8,000 sf left to lease up," McGowan says. The lofts are for sale at Nine for $150,000 to $400,000, and the company has 35 of the 54 reserved, he says. The two 10-year office leases are for about $22 per sf, McGowan tells GlobeSt.com, slightly less than the average $26.50 rate for the CBD, according to a Grubb & Ellis market report.

Building Seven, which will be the furthest west, is supposed to have a large amount of commercial space. "We're in negotiations with a university that wants to move some classrooms downtown, and also with some larger commercial users, but so far nothing has been signed," McGowan said. "We've been focusing all this attention on Eight and Nine, and now that Nine is about to kick off, we can focus on Seven. In all likelihood, it will be mixed-use as well, though it's possible it could go completely commercial. We'd like to get started on it by June 2009."

The property was at one time a large railway center, surrounded by a group of warehouses. "There was a series of 15 buildings at one time, and about eight have survived," McGowan says. "The three that were in the roughest shape have been redeveloped into these buildings Seven through Nine. Of the others, three were turned into hotels, two became commercial offices and one is now an apartment building." McGowan bought the property for its three buildings for $6.7 million from Bank of America in 2005. He's also gaining state and federal tax incentives, both historic and brownfield, as well as New Market Tax Credits and TIF funds.