The downtown Macy’s took a leap forward in its planned overhaul, as city officials set a public hearing for $27.8 million in subsidies for the Railway Exchange building’s new owners, developers Rick Yackey and Bill and Brian Bruce.
Yackey and Bill and Brian Bruce, father and son principals of Clayton-based Bruce Development, have the Railway Exchange building at 611 Olive St. under contract for $18.5 million from its owner, Cincinnati-based Macy’s Inc., with a closing date set for January 2010. Yackey and Bruce Development are partnering on a $122 million redevelopment plan for the 21-story Railway Exchange, the second-largest building downtown at nearly 1.2 million square feet of space.
Yackey and Bruce Development received unanimous approval Wednesday from the city’s Tax Increment Finance commission to hold a public hearing on Dec. 18 for their request for $27.8 million in subsidies, which includes $23.8 million in tax increment financing, the creation of a $1.4 million Community Improvement District, a $1.6 million transportation development district, and a $1 million city sales tax rebate for Macy’s.
Yackey said he’s negotiating with Macy’s on a five-year lease of 186,000 square feet of space with three five-year renewal options. Macy’s currently occupies about 400,000 square feet in the building. If the TIF is approved, Yackey said Macy’s will consolidate its current seven-floor layout to the bottom three floors in January 2010. Macy’s also will have two floors of office space on the 9th and 10th floors.
The remaining 900,000 square feet of space in the building will be marketed to office or possibly retail tenants, and residential is not currently being contemplated, Yackey said. The redevelopment also includes the renovation of a 950-space parking garage south of the Railway Exchange building. Dallas-based Parking Systems of America will manage the garage.
“Our main focus is keeping Macy’s,” Yackey said. “Secondly, we’ll be working on filling up the upper floors.”
Yackey said he’s already in talks with potential tenants interested in locating in the building. St. Louis-based Wiegmann Associates is conducting an analysis of the building, and general contracting firm Paric is performing pre-construction work.
Deputy Barb Geisman said city officials have had numerous conversations with Macy’s in recent months about keeping the store open, and reconfiguring it to a smaller size is critical. “Getting it shrunk down to a size that is comparable to its other new stores is important to them,” Geisman said.
This summer, the city of St. Louis allocated $7 million in federal New Markets Tax Credits to help pay for the store’s overhaul. The tax credits, which are sold to investors to offset federal taxes, would translate into an estimated $1.47 million in equity for the project. Yackey said he’s still evaluating whether to use the New Markets Tax Credits.
The Railway Exchange Building, which stretches a city block in the heart of downtown’s central business district, housed a Famous-Barr store in the building dating back to 1924. It also housed executive offices for railway companies, leading to its name. Macy’s inherited the building when Federated Department Stores Inc. acquired St. Louis-based May Department Stores Co. in 2005. Federated later changed its corporate name to Macy’s Inc. and converted more than 400 May stores nationwide to Macy’s.
In February 2008, May announced plan to close its Macy’s Midwest divisional headquarters, formerly based at the Railway Exchange building, resulting in the loss of 850 jobs. The job cuts nearly emptied the office space at the Railway Exchange building.
Macy’s put the building up for sale in September 2008, and Colliers Turley Martin Tucker is marketing the property. Macy's spokeswoman Sharon Bateman said if the sale of the building is finalized, Macy's has decided to keep 80 corporate employees based at the Railway Exchange building. The store has 135 employees.
"We're in the process of evaluating all of the merchandise that will be offered as part of the remodel," Bateman said.
She said it was too soon to know if any of the departments will be eliminated as part of the reconfiguration.
Bruce Development has been in buy mode in recent years, expanding its portfolio of owning and managing apartment buildings to office investments. In January 2008, Bruce Development paid $34 million for the 185,000-square-foot Old Town Executive Center, an office property in Clayton. Bruce Development owns and manages more than 3,000 apartments and 250,000 square feet of commercial space in St. Louis.
Bruce Development has partnered with Yackey before, most recently on the $8.2 million renovation of the Locust Street Lofts downtown, which has 96 loft apartments and 4,000 square feet of ground floor retail space, and the $35 million West End Lofts at 4100 Forest Park Ave., which has 120 lofts and 20,000 square feet of retail.
The Railway Exchange building will be Yackey’s largest redevelopment to date. Combined, Yackey and Bruce Development are contributing $5 million in equity for the Railway Exchange project.