Curtain goes up on Kiel Opera House's financing
This article first appeared in the St. Louis Beacon, June 30, 2010 - Now that stacks of bond and financing documents, leases and subleases for the Kiel Opera House finally are signed, the curtain could go up once again by late next year. The official confirmation that the financing work is finished, and a $78.7 million renovation is about to begin, came today from City Hall.
Jeff Rainford, chief of staff for Mayor Francis Slay, said groundbreaking will come in several weeks. But in the meantime, he said, "the deal is done, the construction fence is going up, and they are ready to go."
"The Opera House," he added, "is an amazing building. It was sad to walk by and look at it in disrepair. It is a shame when you have an amazing building like that not being used. It was a sign of a city in decline.
"But now that we are refurbishing it, it is a symbol of a city on its way back," he said. Taken together with the St. Louis Library renovation, a new bridge across the Mississippi and other downtown projects, "it is amazing, to a point of being miraculous, given the state of the economy."
Years in the making, the plan is to revive the Opera House's main stage with concerts, touring Broadway shows, family and comedy shows and other entertainment. For its inaugural year, the 3,200-seat theater would stage 93 events -- with more each year after that. Four smaller adjoining assembly rooms, each built with a stage and its own entrance, would be revived for community theater productions, wedding receptions, business conferences, banquets and the like. The developers also would build a new stage house, production facility and loading dock.
If the curtain does go up in 2011, that would be exactly 20 years after the Art Deco-style gem went dark after the demolition of the adjoining Kiel Auditorium. The auditorium was replaced with what's now Scottrade Center, a venue for Blues hockey, concerts and other entertainments. The Opera House was to be renovated and reopened years ago by the group that built Scottrade -- but that didn't happen.
The main players in the upcoming renovation are New York-based SCP Worldwide, which acquired the Blues and long-term leases for Scottrade and the Opera House in 2006, and brothers Christopher McKee and Paul Joseph McKee lll. Christopher McKee, a principal at Optimus Development, was formerly president of McEagle Properties. Paul Joseph McKee is president and CEO of Paric Corp., which will be the general contractor for the Opera House's rehab.
Eric Gelfand, a spokesman for SCP, and others involved with the project declined this week to talk specifics until after the financing and other matters are signed and sealed. But details of the Opera House financing and revival can be gleaned by reading through the hundreds of pages of bond issue and related documents.
The financing consists of:
- Nearly $32.6 million in bonds, underwritten by Stifel Nicolaus & Co. and issued by the Land Clearance for Redevelopment Authority. Some, but not all, have tax exemptions; yields for buyers range from about 5.6 percent to 7 percent.
- Just over $28 million in state and federal historic, New Markets, and Brownfield tax credit equity and proceeds.
- $10 million in first leasehold mortgage financing from Midland States Bank in Chesterfield.
- $6.9 million from the McKee brothers as a deferred developers fee that they will get back after certain private debt is repaid.
HC Mezzanine Investors LLC, an affiliate of St. Louis-based Holekamp Capital investment fund, is providing a $15.5 million bridge loan for some of the tax credits. U.S. Bancorp is investing in some credits, and St. Louis abated real estate taxes.
The bonds, the last of them maturing in 2036, would be repaid with proceeds from a 5 percent amusement tax the city collects on tickets to Blues games and other events at Scottrade. The tax generated $1.55 million in 2009 and is projected to generate $1.63 million this year. Yearly principal and interest payments on the bonds, detailed in the bond documents, go from a low of $968,625 in 2011 up to $1.70 million. The city approved a special tax district encompassing Scottrade and the Opera House that could provide additional repayment money for some bonds if needed. The city also pledged up to $250,000 a year from sales tax money generated at Scottrade that could be used for certain bond payments, if needed.
The city-owned Opera House, designed by the St. Louis firm LaBeaume & Klein, opened in 1934. It's still in good but faded condition, and much of the original ornamentation and fixtures remains, including the chandeliers in the two-story lobby. The Martinez + Johnson Architecture firm in Washington, D.C., designed the renovation plan. The intent, according to the bond documents, is to restore the building inside and out and "return the Opera House to a magnificent splendor."
An affiliate of SCP will operate, program and manage the renovated landmark, and staff at Scottrade will help out at the Opera House. David Checketts, the founder of SCP, was involved in running Madison Square Garden for years and in the acquisition and renovation of Radio City Music Hall. His SCP also is an owner of Running Subway, a New York-based production company, with shows such as "Peter Pan" and "Sinatra." SCP would bring shows to the restored Opera House.
The developers project a total of 264 events during 2012, generating revenue of $16.6 million. They increase that to 292 events in 2014 and revenue of $19.7 million. After deducting expenses, they estimate pre-tax earnings at about $2.7 million in 2012 and $4.1 million by 2014.
None of the documents seem to deal with parking. The developers had talked with the treasurer's office about building more parking. So far, that's not on the program.
"The treasurer's office is fully supportive of the project and is willing to cooperate with them on providing parking," said attorney William Kuehling, a spokesman for that office. "The treasurer's office is constantly reviewing the parking situation in that area, but due to present market conditions, any new parking structure has been deferred."
The redevelopment documents do contain schedules and a "completion guaranty" from Paric and the McKees that the $43 million-plus construction part of the project will be finished in 16 months. If problems and delays arise, the city redevelopment authority can take charge, move the project along and charge the developer for the costs and an administration fee. The documents also contain a commitment from the Blues hockey club that if the team should leave Scottrade for a new home before the bonds are paid off with ticket sales tax money, the club would pay off the bonds.
After owners of the Fox Theatre complained bitterly about what they called tax-supported competition from a renovated Opera House, the St. Louis Board of Aldermen stepped in. It put limits on the number of Broadway shows that can be staged at the Opera House during the first five years after it is reopened. But the board's attempt to keep the peace between the Fox owners and Opera House developers apparently didn't work.
Richard Baker, president of Fox Associates, said this week that the limits don't resolve the problem. With two groups bidding against one another to bring Broadway shows to St. Louis, he said, they will bid up the cost of the shows "and the ultimate end is that ticket prices will go up."
"The only good thing I can say" about the Opera House renovation," he said, "is that for a very short term, it will bring much-needed construction jobs."
Charlene Prost, a freelance writer in St. Louis, has long covered issues of urban development.