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Butler Brothers developers reach deal with City Hall on tax incentives for massive downtown rehab

Butler Brothers developers reach deal with City Hall on tax incentives for massive downtown rehab

Butler Brothers Building

The Butler Brothers Building on Feb. 17, 2021. The building occupies the 1700 block of Olive Street and features a banner highlighting it as the site of the first official World Chess Championship. The building has been vacant for several years, and was recently sold. Photo by Sara Diggins,

ST. LOUIS — A Tennessee developer proposing a rehab of one of downtown’s largest vacant buildings has reached a deal with City Hall on tax incentives for the massive project.

The plan from Memphis-based Development Services Group, led by Gary Prosterman, calls for rehabbing the 2-acre Butler Brothers building at 1717 Olive Street into 385 apartments, an equal number of parking spaces and 16,000 square feet of commercial space.

Staff for the St. Louis Development Corp., the city’s redevelopment arm, recommends 15 years of property tax abatement for the $119 million project, reducing the property tax burden on building improvements by 95% for the first five years. The tax break would ratchet down to 75% for the next five years and 50% for the last five years.

Prosterman said Tuesday that the project will also designate about a quarter of the new apartment units as “workforce housing,” charging below market rents. For the area, that equates to rents starting at about $950 per month to $1,400 or so a month for a one-bedroom, he said. He hopes to begin construction in January and wrap up in about two years.

Covering an entire city block between 17th and 18th streets, the 1906 Butler Brothers building in Downtown West has sat mostly unused for more than a decade, making it among the most daunting projects remaining in the area’s redevelopment. But with a new Major League Soccer stadium under construction and set for a 2023 opening just a couple blocks to the west, Prosterman and his firm were willing to take on the difficult project.

A real estate finance arm of local business and civic group Greater St. Louis Inc. extended a $1.5 million loan to help Prosterman’s firm buy the building at the beginning of the year. The total acquisition cost was $6 million, according to a city report. Greater St. Louis is chaired by Andy Taylor, of Enterprise Holdings, whose family is building the new soccer stadium and will own the team.

The developer, who purchased the building in January, said earlier this year his firm has tackled similar historic rehabs in other markets as they were on the beginning of an upswing. Though Development Services Group is rarely the “pioneer” in a neighborhood, Prosterman said his team likes to follow and tackle “the bigger, dirtier project.”

The Memphis group planning the Butler Brothers building rehab had been in negotiations with the mayor’s office for weeks on the incentives. Mayor Tishaura O. Jones’ administration has taken a harder line on development incentives than her predecessors, pushing some developers to renegotiate their incentive packages or include contributions to affordable housing.

The St. Louis Land Clearance for Redevelopment Authority voted to advance the deal Tuesday. The Board of Aldermen will still have to vote on final approval of the deal.

LCRA board member Sean Spencer applauded the project and said the deal on incentives shows developers and the city can find “compromises” to get projects done.

David Richardson, an attorney for the developer, said the Butler Brothers building is one of five large, vacant downtown structures identified by the Design Downtown STL plan released last year. The plan identified residential use for the Butler Brothers building.

“This fits nicely into what the Design Downtown STL plan contemplates,” Richardson said.

In addition to the abatement, worth an estimated $9.8 million over 15 years, the developer is asking for a sales tax exemption on construction materials, $24 million in state historic tax credits and $18 million in federal historic tax credits.

Prosterman said the federal credits are secured. And, even though the state has tightened its criteria for issuing historic tax credits, he said the building was “grandfathered” into the program because of an allocation of the state credits secured but never used by the private owner. The state’s Department of Economic Development has confirmed that the state credits can be used.

“Without them we couldn’t take this on nor could any other developer,” he said.

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