Insatiable appetite for commercial real estate continues

The St. Louis-area CRE market is still hungry for more, according to Commercial Real Estate Women (CREW)-St. Louis’ “Industrial Outlook” panelists.

Christie Brinkman, director, design build, Castle Contracting, LLC, moderated the March session as panelists, Cara Weber, Wakeel Rahman and Christy Campbell discussed recent pandemic-related challenges and predictions going forward.

Cara Weber, vice president, business recruitment, Missouri Partnership, said the Partnership is a public/private entity funded by the State of Missouri’s Department of Economic Development and the Hawthorn Foundation to focus on attracting new businesses to the state by functioning as a sales tunnel that includes marketing, business development and project management.

“Our Raise the Bar program is identifying sites for development so the region can control its own destiny,” Weber said. 

In the past five years, the Partnership has opened 615 projects and lost 142. Wins by industry include advanced manufacturing, energy solutions, food solutions, logistics and distribution, and office-based space.

“Expansion is incredibly important — about 80 percent of new jobs are coming from expansion,” she said. “I’m excited about the level of project flow so far this year, which has been mostly industrial. We’re seeing a lot of searches for existing buildings, but don’t have a lot available.”

“Retention (of businesses) is the key component. Attraction is our wheelhouse,” Weber said. “We’re getting more opportunities from big OEM businesses.”

Available CRE space is a factor in lost projects, along with whether a business has an existing presence in the area and concerns about logistics, incentives, available workforce, business costs and infrastructure, according to Weber. 

“What’s great about Missouri is our transportation resources: rail and river,” she said.

The CRE profession is faced with “trying to meet an almost insatiable demand for commercial real estate,” said Wakeel Rahman, vice president, NorthPoint Development. “The market is very healthy. Retail stepped up to take a lot of space to compete with Amazon.”

E-commerce is driving the market from “just in time” (JIT) to “just in case” (JIC), and the ratio of inventory to sales in the supply chain should increase. 

Rahman warned that national headwinds to watch include continued supply chain delays and cost increases for materials and construction, NIMBYism (Not In My Back Yard) attitudes toward industrial properties, entitlement and permitting, and warehouse fatigue. 

“St. Louis is still one of the tightest markets,” he said. “Looking forward, we will see an increase in automation and more-affordable systems; new geographies where companies can build; and spending more on infrastructure, which means good things for our industry because it creates improved access.”

The preliminary 2022 first-quarter numbers are encouraging, said Christy Campbell, brokerage associate, Cushman & Wakefield: “2.2 MSF of positive net absorption and a 2.9 percent vacancy rate — the lowest ever.” Asking rates are increasing in response, she said. “While St. Louis has always been a stable market, 2021 was a record year and we’re already halfway there in 2022, with 8.3 MSF under construction among 26 buildings with only one that’s tax-abated.”

Royal Canin, Ryder and Imperial Dade are leading the field; Duke Realty has completely left the market. 

The largest Q1 investment sales have been Duke to Exeter Property Group, Inc., TriStar Properties to Apollo Global Management and Duke to Pontegadea Inversiones as cap rates continue to compress.

“Trends are an upward pressure on rental rates and annual increases, changes in marketing strategies with less and less advertised rates, increased emphasis on e-commerce, and the move from JIT to JIC,” Campbell said.

In terms of some of the issues that Rahman noted, “The most common misconception about the industrial sector is negative environmental impact of large facilities on a community; but in reality, there’s no stress on schools, there are new jobs, and LEED buildings with high-tech electronics-driven systems are environmentally friendly,” she said.

“Industrial tenants are looking for buildings with 30- to 40-foot clear heights because of racking and are making heavy trailer parking demands,” Campbell said. “Land prices are increasing across the country, although St. Louis is lagging behind the coasts.” 

Upcoming CREW-STL events include Coffee with CREW, April 1; Membership Hike, April 6; Bar K & Green Street Real Estate Ventures Happy Hour and tour, April 12; and Dine Around, April 19. To register or for more event details, visit https://crewstl.org/events.

Grain terminal addition strengthens STL inland port

The St. Louis region’s position as the most efficient inland port in the United States has been strengthened following the recent addition of a new grain handling terminal on the banks of the Mississippi River in Cahokia, Ill., adding capacity in the area known as the Ag Coast of America.

The region garnered the title due to a 15-mile stretch of the Mississippi River featuring 15 barge-transfer facilities that, at total capacity, can handle 150 barges a day – the highest level of capacity anywhere along the Mississippi River.

The addition of the 16th terminal, which was built by American Milling and purchased in December 2020 by Oakley St. Louis, LLC, a subsidiary of Arkansas-based Bruce Oakley, Inc., further expands the existing capacity with the ability to handle at least 1,000 more truckloads of grain daily. 

Bruce Oakley entered the market in 2019 with its purchase of Lange-Stegmann Company, its second terminal in the area. The acquisition gave Bruce Oakley control of Lange-Stegmann’s 60-acre site at Mile 182.7 on the Upper Mississippi River, which includes a barge dock, a rail yard with 23,000 feet of track, three locomotives, a truck and rail scale, and more than 153,000 tons of storage capacity.

“Bruce Oakley, Inc. is very excited to have a presence in the St. Louis area,” said Justin Oakley, vice president of Bruce Oakley, Inc. “For a commodity transportation and distribution company like Oakley, St. Louis is one of the most strategic locations on the river system. No other city connects river, rail, and road quite like the Ag Coast of America. Deep barge drafts, the lock-free and ice-free river to New Orleans, connection to the Class-1 railroads, and proximity to many industrial accounts that Oakley also services, make the Ag Coast a perfect location for us. Having the largest and most efficient fertilizer terminal in the area, complemented by a high-speed grain loading terminal, makes Oakley uniquely suited to add value to customers throughout the region.”

Other facilities on the Ag Coast include the Cargill Grain Elevator, which is one of the busiest grain elevators in the nation; the Bunge-SCF River Grain Terminal in Fairmont City, Ill., which is designed for more than a million bushels of permanent storage and can handle high volumes of multiple commodities simultaneously; and four facilities in Cahokia, Ill., operated by Consolidated Grain and Barge Company (CGB), Louis Dreyfus and COFCO International Growmark, which are the four highest capacity facilities in the entire inland waterway. Facilities operated by ADM, Gavilon Fertilizer, SCF, and Italgrani Elevator Company, along with America’s Central Port and the Municipal River Terminal in St. Louis, round out the 16 barge transfer facilities currently handling the tremendous volumes of agriculture and fertilizer products flowing through the Ag Coast.  

Growth on the Ag Coast is also supported by the recently completed reconstruction of Cargill Elevator Road, a vital link to the terminals in Cahokia, Ill. Trucks represent 87 percent of the vehicles traversing the narrow roadway, and prior to the reconstruction, traffic had been limited to one lane in each direction. Federal funding of  $800,000 through the IDOT Competitive Freight Program was key to advancing the $3.3 million project, which also received state and private funds.

“IDOT is proud to be working closely with our local stakeholders and businesses to improve the efficient transport of freight through our region,” said Keith Roberts, the acting Region Five engineer for the Illinois Department of Transportation. “The recent Cargill Elevator Road improvements complement future planned work by the department, including the extension of relocated IL Route 3 south into Sauget and additional projects to improve reliability of the freight and commuter network along this vital regional corridor.”

One additional project, now partially funded, will help to address heavy traffic volumes on Illinois Route 3 at the A&S Railroad crossing in Sauget, which result in more than 55,000 hours of through-traffic delays annually. Calculating the cost of delay, a proposed grade separation project would provide annual cost savings of $1.5 million for passenger and commercial vehicle drivers traveling this area and improve truck traffic reliability, safety and efficiency benefiting barge and rail rates. The overall project has multiple benefits to the region in terms of improving access to the growing business community and encouraging future business development. 

Mary Lamie, vice president of Multi Modal Enterprises for Bi-State Development and head of the St. Louis Regional Freightway enterprise, is excited about the continued investment in the Ag Coast and the infrastructure surrounding it.

“Handling nearly 450,000 tons per mile, the St. Louis region’s port system is almost two and a half times more efficient on its river usage than its closest competitor, according to the most recent rankings by the U.S. Army Corps of Engineers,” said Lamie. “The added capacity and enhanced access provided by the newest terminal and infrastructure investments will come in handy given projections that 2021 will be a record year for corn and soybean exports from the United States.”

Holland Construction completes O'Fallon senior living development

Holland Construction Services has completed work ahead of schedule on the new Keystone Place at Richland Creek Senior Living Development in O’Fallon, Ill.

The $39 million development, located at the northwest corner of Frank Scott Parkway and Fountain Lakes Drive, offers independent living, assisted living and memory care services in one location.

The four-story building has 149 apartments; including 64 independent-living, 66 assisted-living and 19 memory care, plus one guest suite. The five-acre development also features a memory garden, a courtyard and a formal entrance lobby facing Fountain Lakes Drive.

“This development offers a much-needed, new rental housing option for older adults seeking a safe, secure, maintenance-free, service-rich lifestyle and we’re very excited that it was completed ahead of schedule,’ said Timothy Eldredge, president of NASCON Senior, LLC and co-founder of Keystone Senior Management Services, Inc.

The 170,000-SF development was constructed adjacent to Parkway Lakeside Apartments, which Holland completed several years ago.

“Our team has an incredible amount of experience handling multifamily and senior living projects that require different care levels and because of that background, we were able to ensure this development met the intended use for the building and the project ran smoothly,” said Holland project manager, Rob Ruehl.

“Keystone Place at Richland Creek’s ultra-inclusive service package provides meals, housekeeping, transportation, and life enrichment opportunities that allow residents to engage, explore and maximize their personal wellness, even in a time of social distancing,” said Jan Brenner, Keystone Place at Richland Creek’s Senior Living counselor.

“With residents and staff vaccinated at this point, people are really seeking opportunities to socialize and connect with others again, and that’s the idea behind the Keystone Place lifestyle,”

The community is hosting open house events on April 17 and 18 by appointment.  For more information about Keystone Place at Richland Creek or to schedule an open house visit, call (618) 576-6178.

Lofts at the HUPP redevelopment begins on historic west downtown site

Construction began last month on the $21.5 million redevelopment of a former TireMart property - originally a Huppmobile dealership - on the downtown west historic automobile row, located at 1815 Locust Street in St. Louis, Mo.

When complete in August 2021, the new, three-story multifamily property will house 70 units consisting of one- and two-bedroom apartments. 

The 115,317-SF historic rehab project will include interior and exterior parking, solar panels on the roof, a clubroom and a fitness center.

Ebersoldt + Associates, the architect on the project, has given a nod to the original building design elements by incorporating sealed concrete floors, exposed concrete ceilings and exterior masonry walls, and large, historic aluminum windows that will allow for plenty of natural light.  

The project developer, Screaming Eagle Development, LLC, was issued approval by the Land Clearance for Redevelopment Authority of St. Louis County (LCRA) for two, five-year tax abatements.

"We are very excited to redevelop this property in the downtown west neighborhood. We identified this property two and a half years ago. It has been a long process to get here; but given what the building has shown us so far, the final product will be a beautiful asset to the community," said Matthew Masiel, principal with Screaming Eagle Development.

The project is slated to receive a five-year tax abatement based on 90 percent of the assessed value of incremental improvements; followed by another five-year tax abatement based on 70 percent of the assessed value of incremental improvements.

Other partners on the project include general contractor, Pinnacle Contracting, Inc. and lenders Gershman Investment Corp. and Midwest Regional Bank.

At the time of acquisition, the property was appraised at $1.1 million by the City of St. Louis.

Forsyth Pointe construction kicks off in Clayton

Construction of Forsyth Pointe, a mixed-use development in the central business district of Clayton, Mo., is underway.

The US Capital Development project includes two Class-A office towers, street-level retail and connected parking and will add nearly 1 million SF of prime space in the heart of Clayton, Mo.

As construction manager, McCarthy Building Companies is overseeing all construction work, including the delivery of self-perform concrete services on the cast-in-place building foundations, elevator cores and parking structure. The steel-framed glass structures will rest atop a post-tensioned concrete-framed parking structure.

“Forsyth Pointe will be a wonderful addition to the Clayton skyline and community,” said Michelle Harris, Mayor of the City of Clayton.

The 10-story, 265,000-SF east tower will occupy the corner of Forsyth Blvd. and Meramec Ave. And the 8-story, 210,000-SF west tower will reside at Brentwood Blvd. and Forsyth Blvd. More than 20,000 SF of street-level retail space will enliven the development’s street presence.

“The development will add prime office space and innovative retail space, increasing street vitality and the pedestrian experience on a prominent corner across from Shaw Park—one of our city’s crown jewels," Mayor Harris said.

A 7-level parking structure will connect both buildings and extend 2.5 levels underground. At the top level of the parking structure, a 45,000-SF open-air garden terrace will serve as a signature amenity and be available for public events.

Other planned amenities include a 10,000-SF fitness center and a ground-floor arts and entertainment venue.

“We’re honored to partner with US Capital Development and the design team to bring this incredible new development to life in one of the most desirable locations in St. Louis County,” said Jared Hites, vice president of operations at McCarthy.

From the project’s early design phase, McCarthy initiated an integrated virtual design and construction (VDC) process with the owner, designer and trade partners to drive efficiencies throughout the project. This includes the use of cloud-based building information modeling (BIM) collaboration platforms accessible by all team members.

Specific VDC applications include model-based design review, model-based field layout, 3D building systems coordination, laser scanning of as-built conditions and aerial drone photogrammetry to monitor and survey construction progress.

Forsythe Pointe is designed by Christner Architects (design architect, architect of record and landscape architect) and CEDERGREEN, LLC (design architect).

Other team members include Alper Audi (structural engineering), Stock & Associates (civil engineering), G&W Engineering (mechanical, electrical and plumbing engineering) and Randy Burkett Lighting Design (lighting design).

The project is expected to be complete in summer 2022.  

Fashion retailers enter COVID-19 tailspin

Fashion retailer J. Crew Group Inc., along with subsidiary, Madewell, filed for Chapter 11 bankruptcy protection this week in the midst of the COVID-19 crisis.

In an agreement with its lenders, J. Crew will restructure its debt to convert $1.65 billion of debt into equity and will receive $400 million in debtor-in-possession financing from lenders including Anchorage Capital Group L.L.C., GSO Capital Partners and Davidson Kempner Capital Management LP.

“The significant deleveraging contemplated by this agreement, coupled with J. Crew Group’s strategy to strengthen its robust e-commerce platforms to drive continued growth in its direct-to-consumer segment, will position the company for future success,” said Kevin Ulrich, CEO of Anchorage Capital Group.

The preppy clothing retailer has four St. Louis-area locations, including Saint Louis Galleria, Plaza Frontenac, and two outlet stores in Chesterfield.

Neiman Marcus is also battling against the effects of COVID-19. The debt-laden, Dallas-based company shut all 43 of its sites, including the Plaza Frontenac location, roughly two dozen Last Call stores and its two Bergdorf Goodman stores in New York.

The luxury retailer is in the final stages of negotiating a loan with its creditors totaling hundreds of millions of dollars, which would sustain some of its operations during bankruptcy proceedings, according to Reuters, and has furloughed many of its roughly 14,000 employees.

“I think the Neiman situation is an example of what’s really going on in retail right now. These companies first were facing major liquidity issues, now they’re facing what it’s going to look like to open and then what are (their) sales going to be like,” said former Saks Fifth Avenue CEO, Steve Sadove.

Other retail stores with St. Louis locations that are struggling under the weight of the COVID-19 crisis include:

-Pier 1 – Filed for Chapter 11 in February 2020

-Art Van Furniture – Filed for Chapter 11 in March 2020

-Macy’s – Closing stores and cutting corporate staff

-Forever 21- Filed for Chapter 11 in 2019

-JC Penney- Contemplating a bankruptcy filing -Reuters

-Nordstrom – Borrowing against some of its real estate to stay afloat

-Sears – Filed Bankruptcy in 2018; Has lost $12 billion since its last profitable year in 2010.

“These stores are looking at reopening with issues like buyers not wanting to buy inventory that’s been sitting for three months. I think we could see 23% of mall stores not reopen. There could be 400-500 US malls fail over the next year, post-corona virus,” said retail expert, Jan Kniffen, CEO of J Rogers Kniffen WWE, LLC.

The retail graveyard is filled with companies that emerged from bankruptcy with plans to continue to operate but soon went out of business. These include Payless Shoes, Gymboree, American Apparel and RadioShack.