After Massive Loan Loss, Shift to Mixed-Use Envisioned for One of St. Louis’ Tallest Buildings
In Sign of Reduced US Office Demand, New Owner of Former One AT&T Center May Add Apartments, Hotel
By: Ryan Ori
The former One AT&T Center is the third-tallest structure in St. Louis. (Dusty Walker/CoStar)
One of the tallest structures in St. Louis could be transformed into a mix of uses after the office building sustained, under a previous owner, the nation's second-biggest loan loss of its kind on record.
In a move that reflects a decline in office demand across the country, SomeraRoad Holdings has drawn up big changes for the 44-story former One AT&T Center in downtown St. Louis. Plans call for dividing up the long-vacant office building to include 318 apartments, a 150-room hotel and amenities including a restaurant, pool and garden on the top two floors.
Just 300,000 of the tower’s nearly 1.5 million square feet would remain as offices, in the low-rise portion of the tower, according to new marketing materials from brokers at Colliers International who are representing New York-based SomeraRoad.
The firm is billing the project as more than just another mixed-use building, going as far as calling it a "vertical city" because it would be the only St. Louis high-rise with office, residential and hotel space. That mix of different uses is more common in larger, more densely populated areas found in cities including New York and Chicago.
By breaking up the tower into multiple uses, SomeraRoad would reduce the challenge of filling office space in a soft market, while creating multiple sources of revenue. That could make the project easier to finance.
It also shows how cities across the country are looking for ways to diversify commercial real estate away from offices after demand has fallen during COVID-19. Office use nationally is at 49%, building security firm Kastle Systems says based on keycard data compared with a pre-pandemic baseline. Kastle’s back-to-work barometer data comes from 10 major U.S. markets, and it doesn't include St. Louis.
Colliers’ marketing materials, which offer a lighted sign atop the tower for an anchor office tenant, pull back the cover on SomeraRoad’s vision for the tower at 909 Chestnut St. The building overlooks the Citygarden Sculpture Park just blocks from the St. Louis Cardinals’ Busch Stadium and adjacent Ballpark Village development.
If it succeeds, SomeraRoad would be a victory for city officials, who have seen one of the most visible buildings sit empty for years.
It also would mark a major turnaround for a tower that became an unwelcome sign of a lack of property demand in the city center, even before the health crisis. At 588 feet, the former One AT&T Center is taller than all but the 630-foot Gateway Arch monument and the 593-foot One Metropolitan Square office building. The Beacon on Chestnut, as the tower is now branded, was bought earlier this year by SomeraRoad. It sold for $4.5 million, according to CoStar data, which is a small fraction of the almost $205 million it last sold for in 2006 in an 11-year sale-leaseback deal by AT&T. The tenant moved workers to adjacent buildings starting in 2013, and Highlands REIT defaulted on its commercial mortgage-backed securities loan on the property about four years later. The loan had about $109 million remaining on the balance when the Chicago-based real estate investment trust handed back the property to its owners, bondholders who invested in the securitized debt. Factoring in interest, fees and other expenses, the eventual sale of the building resulted in the $123 million loan loss, the second-highest ever for a U.S. office property, according to CoStar data. SomeraRoad founder and Managing Principal Ian Ross and Colliers brokers representing the firm in office leasing did not respond to requests to comment from CoStar News. Further clouding the plan, another developer, St. Louis-based Advantes Group, is listed in documents submitted to the city’s Land Clearance for Redevelopment Authority as a “prospective redeveloper” of the building. The documents, first reported by the St. Louis Post-Dispatch, indicate that Advantes Group is seeking a 15-year tax abatement on the tower as part of a $300 million redevelopment plan. Specifics of its plan differ from the one described in Colliers materials, with the Advantes plan including 300 hotel rooms, 306 apartments, 288,000 square feet of offices and 37,000 square feet of retail space, according to the LCRA documents. The hotel would be a “flag similar to JWMarriott,” according to the documents. It’s unclear whether Advantes plans to buy the tower from SomeraRoad or if its plan would be a joint venture with the property’s current owner. Brian Minges, owner and president of Advantes, did not immediately respond to a request to comment. Historic Status Hints of SomeraRoad’s plans have slowly emerged, including the firm’s successful effort to recently have the HOK-designed, 36-year-old building added to the National Register of Historic Places. That could unlock millions of dollars in tax credits toward a redevelopment of the tower. SomeraRoad previously told the St. Louis County Board of Equalization that it was planning a mixed-use development including apartments in a project expected to cost about $200 million, the Post-Dispatch reported. Newly revealed details by Colliers show the plan includes a hotel on the second through fifth floors and offices on the eighth through 13th floors, with standard apartments on floors 19 through 29 and penthouse units on floors 31 through 42. Other floors will be used for amenities including a spa,a fitness center, bike storage, dog grooming and a pool. One of the biggest challenges is the relatively small number of connected parking spaces, according to people familiar with the tower. SomeraRoad’s plan includes below-ground parking for penthouse residents, with valet and electric vehicle parking also offered, according to the Colliers materials. For the Record
SomeraRoad is represented in office leasing by Colliers brokers Tony Kennedy and Rocky Stenger.