Wrecking Crew

Slay and his Old Post Office plan allies knock down two rivals with hardball and humiliation

Mar 20, 2002 at 4:00 am
It's hard to miss the telltale signs that things are getting much uglier in downtown St. Louis.

There are the bigger-than-life posters, plastered on the front of the Century Building, that feature the face of Steve Stogel, the flinty president of DFC Group Inc. and a major player in series of big-ticket projects that are supposed to rescue the city's hollow core.

This is the in-your-face work of a loose-knit group known in some quarters as the 10th Street Loft Taliban, a hardcore faction of downtown residents fighting Mayor Francis Slay's plan to revitalize the Old Post Office and raze the Century, a 103-year-old marble edifice, to clear space for a parking garage.

Stogel is the target of their guerrilla banner campaign because the mayor's plan relies on his financial wizardry at putting together complicated deals that mix public and private money. And that makes him a prime target of increasingly rancorous rhetoric from downtown loft dwellers and others who want the Century saved and fear that the city's high-dollar blueprint for the Old Post Office may hurt the smaller-scale residential and retail development they see as the true salvation for a dead downtown.

A massive dose of heavy-handed retaliation from Slay's aides and his development allies has added a nasty tone to the conflict. This show of force was directed against two rival downtown developers, Craig Heller and Kevin McGowan, who went public about three weeks ago with an alternative plan for rehabilitating the Old Post Office area that gave heart to the loft-dwellers and caused state legislators who are being asked to help fund the mayor's renovation plan to sharply question the city's proposal.

The multifront assault against Heller and McGowan, featuring an ominous warning that they'd be out of business in a year unless they knuckled under, won their silence, got them to pull their proposal less than two weeks after they aired it and forced them to sign a press release of support for Slay's plan that is startling in its degree of public humiliation.

Clearly Slay's answer for a blighted city core -- a $73 million deal that features Stogel's outfit and DFC Group -- has turned into a Scud war. A lot is at stake -- a big-money deal, the future of downtown and the image of decisive action the mayor wants to portray on this project and the proposed new stadium for the Cardinals.

So it shouldn't be too surprising that the city used all its weapons of permits, persuasion and raw power against Heller and McGowan. This is what a big-city mayor is supposed to do when a pet project is challenged.

What is surprising, sources say, is the breadth and scope of the retaliation and the fact that its target is Heller, the poster boy for downtown residential development and a darling of a key component of the coalition of voters who put Slay in office.

Jeff Rainford, Slay's chief of staff, says his boss didn't order a strong-arm campaign against the two maverick developers. He also blasts Heller and his allies for starting a "whispering campaign" against City Hall to cover up the shaky financials of their own plan and save face with their vocal loft-dwelling supporters.

"Neither city government nor the mayor threatened or coerced Craig Heller -- either directly or indirectly," says Rainford. "Did not happen -- just flat-out did not happen.... Craig Heller ought to take it like a man instead of blaming the big bad wolf or saying the sun got in his eyes or the dog ate his homework."

But sources familiar with the conflict tell a different story.

Before the two developers even unveiled their plan at a legislative hearing in Jefferson City, permit applications and hearings for other Heller and McGowan projects were pulled from the agendas of several city agencies and placed on indefinite hold, sources say.

This includes a Feb. 27 hearing before the St. Louis Development Corp. on a routine request for an extension of Heller and McGowan's claim on the city-owned abandoned property nominally sold to them for their Mississippi Loft project in Lafayette Square.

Deals such as this one contain what are know as "reverter clauses," which automatically transfer a property back to city ownership if a developer fails to move forward by a certain deadline. Extensions are routinely granted, but Heller and McGowan's application was abruptly pulled from the agenda under the orders of deputy mayor Barb Geisman, sources say.

When first asked about the postponement, Gee Stuart, SLDC's director of real estate, says: "I obviously report to Barb Geisman, but the entire staff was in agreement."

This action placed Heller and McGowan's project in financial jeopardy and scared their partners and financial backers on other projects in the city, sources say, causing them to put pressure on the two developers to withdraw their rival plan on the Century.

Geisman also labeled Heller an 11th-hour opportunist more interested in playing to the crowd that wants to save the Century Building than putting forward a comprehensive plan that will bring revive one of the biggest hunks of abandoned office and retail space in the city.

Heller says he first approached Geisman in January with his alternative, which focuses only on the Century and Syndicate buildings, not the Old Post Office itself. He says his plan is an attempt to address at least one neighborhood concern -- a bus-transfer station in the proposed garage for the Century site that some believed would kill foot traffic in the area and discourage the development of stores and shops.

But Geisman says Heller was making both a power play and a pitch to bypass the city's normal channels, including the request-for-proposal process: "They [Heller and McGowan] promised to make the opposition go away if we would let them develop the Syndicate. Their proposal clearly showed them taking advantage of the benefits of the Century garage. To me, it appeared they wanted the Syndicate without going through an RFP process, and at a bargain price."

The city's assault against Heller and McGowan crossed state lines and involved players who are no longer part of the St. Louis establishment, sources say.

The former president of the St. Louis Convention and Visitors Commission, Bob Bedell, recently took a similar post in Indianapolis, which happens to be the headquarters of Mansur Real Estate Services Inc., a partner with Heller and McGowan in their plan for the Century.

Sources say Bedell, who couldn't be reached for comment and didn't start his new job until last week, was busy playing St. Louis politics from two states away. They say he was asked to go over the head of Bob Bates, Mansur's director of historic development, and deliver this message to his corporate superiors: Your company's name is being sullied by this deal, and it would be in your best interest to back off.

Heller and McGowan also got hit with a media blitz.

In a March 1 St. Louis Business Journal story, Geisman questioned Heller's ability to redevelop the old City Hospital site. Heller was selected as developer of the site in 1999, but the city has been slow to sign an agreement on this plan. The deal includes lots of residential and retail space, and Mansur was supposed to be a key player.

In the Business Journal article, Geisman says: "We're taking a real hard look at that situation. When somebody wants to take on a major development, we want to look at what else they've got on their plate and how they're doing with it."

This thinly veiled public threat coincided with two events: Heller and McGowan's release of the preliminary financial numbers for their alternative plan and the pitch of that plan to a legislative committee. Stogel and Gwen Knight, president of DESCO, the other development outfit working on the mayor's preferred plan, also attended this hearing.

Geisman says the city can't turn back. Stogel's and Knight's companies have already spent $750,000 in architectural studies, parking assessments and renderings of what has been described as a "really beautiful garage." Plus, the mayor's reputation is at stake.

"How credible would the city be if we shifted gears and courted every developer with an 11th-hour plan?" Geisman asks. "A plan was on the table, and we were keeping our word and going with that."

Although no one expected the developers to have a big group hug and start working toward the betterment of downtown, McGowan and Heller's abrupt capitulation came as a shock. In a March 9 press release, the two developers announced that they were spiking their plan, citing four economic reasons for doing so, including the high cost of removing asbestos from the Century and a failure to meet the requirements for federal and state tax credits.

But a shovelful of humble pie was also served up in the release:

"It is our conclusion that our proposal is not consistent with the wider public purpose articulated by Mayor Francis Slay of revitalizing all of the Old Post Office Square.... We have always supported, without reservation, the plan for the Old Post Office proposed by DESCO and DFC."

The last line reads like a confession secured at gunpoint: "We make these endorsements without asking for, or being offered, any concessions from DESCO/DFC, the City of St. Louis, or any other entity or person on any other project."

A payoff to make Heller and McGowan go away was never discussed, sources say, and the point of the press release was total capitulation, not concession.

Truth is, sources say, Heller and McGowan didn't even write the press release that bears their names -- it was a collaborative work by Stogel, Geisman, Tom Reeves of Downtown Now! and Richard Callow, a public-relations consultant who swims in all sorts of political ponds.

Callow, who is Geisman's live-in boyfriend, says he was merely keeping an eye on the interests of his client Downtown Now! But sources say it was Callow who insisted on the most humiliating language of the release signed by Heller and McGowan.

Stogel seems anxious to put distance between himself and the public flogging.

"Richard Callow did do a draft a version of the press release," Stogel says. "DESCO/DFC then released our own press release."

Sources say the joint release by Stogel's and Knight's companies was meant to ease the sting of the document Heller and McGowan were forced to sign.

"Nobody had any desire to make this a humiliating experience," says Marie Casey, the public-relations spokeswoman for DESCO/DFC.

Conciliation and cooperation was hardly the tone of Slay's own press release on the matter. It was another public whack: "I now expect Mr. Heller and Mr. McGowan to put at least as much energy into supporting the City's program of downtown revitalization as they have put into delaying it."

The mystery of how a developer can force a rival to sign a humiliating press release is revealed in conversations that took place among Knight, Stogel and Zack Boyers, the director of the Community Development Corp. wing of Firstar Bank.

Firstar, recently renamed U.S. Bank, was in a unique position. All of the players in this downtown firefight are customers, including DESCO, which is owned by the Schnuck family, the folks with all those grocery stores.

These talks started soon after the Missouri Development Finance Board reviewed Heller and McGowan's proposal and sent a March 6 memo asking some hard questions about their funding.

Bob Miserez, executive director of MDFB, says the state agency was merely doing its job and never got a response from Heller and McGowan.

Boyers stresses that Firstar would never choose one customer over another. He says he only got involved because he wanted to see a quick resolution to the conflict:

"We thought it would be best for the development community to work together. Given our relationship with all the parties, we hoped we could be of some help."

But sources say Boyers is sugarcoating the truth. They say he was strong-armed by the city and its development allies into delivering an economic death threat to Heller and McGowan: Sign a press release killing your plan, or you will be out of business in less than a year.

Stogel scoffs at this notion: "I don't have that much power. I can't tell the banks what to do."

And Boyers says he was acting out of kindness, not malice. He denies that Firstar loans on other projects were used as leverage to get Heller and McGowan to back off. But he also adds this harsh note of reality: A downtown developer can quickly go under without city support.

After whacking Heller and McGowan with a big stick, they dangled a carrot.

On March 8, the day before the two men signed the press release killing their plan for the Century building, the extension on their tax-increment-financing application for the Mississippi Lofts project was passed during a special meeting of the St. Louis Development Corp.

SLDC chief Stuart says: "The developers were in a hurry, so we accommodated them."

If Stuart believes that, perhaps she'd be interested in a really nice parking garage.