Crestwood board to consider new agreement for retail center

Proposed new pact contains an eminent domain provision.


The Crestwood Board of Aldermen voted unanimously last week to consider at its next meeting a new development agreement for the Sappington Square retail center on Watson Road.

A new development agreement between the city, Pulaski Bank, the Sappington Square Community Improvement District — or CID — and Priority Property Holdings LLC will be presented to the board for consideration at its regular meeting on Tuesday, Sept. 28.

The original Sappington Square development agreement, which was approved in 2007, fell through late last year when the center’s previous developer, Sappington Square LLC, defaulted on a loan it obtained from Pulaski Bank for construction of the roughly $13 million redevelopment project.

The bank foreclosed on the 5.7-acre property and bought it at public auction in December. The bank filed suit shortly thereafter against Sappington Square LLC seeking repayment of the loan. The case is pending in St. Louis County Circuit Court.

Meanwhile, the CID on the property, which took effect in 2008, remains in place.

A one-cent sales tax continues to be collected on purchases made at Sappington Square stores, and the proceeds are placed in a special account. A five-member Board of Directors governs the district.

The original development agreement allowed Sappington Square LLC to request up to $2.5 million in CID proceeds to reimburse certain project costs.

But while the developer completed some construction on the property, it missed a July 2008 deadline to request reimbursement, and no CID proceeds have been spent, according to the district’s attorney, Shannon Creighton of Gilmore & Bell.

The CID so far has collected roughly $59,000, Bell told aldermen last week.

Minus about $12,000 in administrative costs, the account currently contains roughly $47,000, she said.

Under the new agreement, Priority Property Holdings, a wholly owned subsidiary of Pulaski Bank, would complete the redevelopment project.

The maximum CID reimbursement would remain at $2.5 million.

Pulaski Bank attorney Kevin King told the board his client wants to “lease up” Sappington Square as quickly as possible and eventually sell it to a “real developer.”

A new development agreement would help that effort because the bank could use CID proceeds to “incentivize” prospective Sappington Square tenants with lower rent, King said.

But Ward 3 Alderman Jerry Miguel said the $2.5 million maximum reimbursement is “just not a viable number” and questioned whether the CID was even necessary anymore.

The district was established because the city believed the area was blighted, Miguel said. While there is still work to be done at Sappington Square, “the essence of blight is gone,” he said.

On the other hand, the city has lost hundreds of thousands of dollars in annual revenue because the redevelopment wasn’t completed, Miguel contended.

“There are no winners in this situation,” he said at last week’s board meeting. “The developers lost their property. Based on original estimates, that tax was going to generate $200,000 a year. If it were to do that then the city would’ve realized revenues of $500,000 a year. So the city has been out substantial moneys since completion of the project did not occur.”

Yet Crestwood has still been “very cooperative” with Pulaski Bank regarding Sappington Square, Miguel said. He noted the board in July approved a conditional-use permit to construct a Fifth-Third Bank at the center.

Miguel voted in favor of the CUP but noted at the time the new bank would not generate any sales tax revenue.

Miguel asked King what “kind of value” Pulaski Bank placed on the CID. King replied that while he couldn’t provide a dollar amount, the bank believes the district is still “extraordinarily valuable.”

“Any way you cut it it’s going to get the property leased up in our opinion,” King said. “The bank’s not going to make any money on this project. It’s just a question of how little do we lose … This is not an instance of a bank coming in here to ask for tax incentives. We didn’t ask to be here. We don’t want to be here. We just want to see the CID do what it was intended to do, get (the property) leased up in a fashion that will eventually please everyone …

“We’ve already lost,” he added. “We’re just trying to lose less. Hopefully the city will benefit in the long run. We do believe this will actually help. It certainly can’t hurt … As the foreclosing party on this property, we don’t want the rug pulled out from under us on it.”

Miguel also expressed concern last week, along with Ward 2 Alderman Jeff Schlink, about a provision in the new development agreement that could lead to the city’s use of eminent domain to acquire property for a cross-access route between Sappington Square and the Schnucks grocery store to the east.

City Attorney Rob Golterman said the developer could request the use of eminent domain from the city only after all reasonable efforts to obtain the property from its current owner failed. The decision to begin eminent domain proceedings ultimately would rest with the Board of Aldermen, he said.

The provision was not included in the previous development agreement, and Golterman said it probably could be removed from the new document if the board so desired.