Economic Development

KDG Nixes Clayton Developments, Doubles Down on City

Real Estate Developer KDG, known for its luxury apartment buildings including Clayton on the Park and The Euclid, appears to be doubling down on their St. Louis City investment. Surprisingly, those plans seem to include some distancing from Clayton, one of St. Louis’ most desirable and expensive suburbs.

Although KDG’s portfolio still includes multiple St. Louis County assets, including Centene Plaza and the under-development Olive Crossing, their recent investment decisions are skewing quickly toward the City itself. KDG just sold its long-held Clayton residential tower, Clayton on the Park, after managing the property for over a decade. KDG had, years ago, converted the building to luxury apartments during the Great Recession. It had previously been home to senior living facilities and even a hotel.

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The disinvestment from Clayton appears to go a bit further, as selling one property alone does not signify a meaningful trend. Rather, KDG has long had its eyes set on the vacant land just next-door to its Clayton on the Park tower at 121 S. Meramec. Some might be familiar with this address, as it used to be home to one of the two mid-rise 7-Up towers that were a part of the beverage company’s former headquarters. The building at this address had been demolished, while the other midrise still stands and would be converted to residential apartments under this plan. Chris Stritzel at CityScene STL details this incredibly well.

KDG’s plans as rendered above would have completely rehabilitated the structure still standing today and would have included new infill on the vacant lot to its side. Both would be connected to their former property, Clayton on the Park, via the parking garage. The development would have cost upwards of $70 million and included amenities like a rooftop pool deck, fitness center, and individual work spaces for tenants to use. However, KDG just recently scrapped these plans, shortly before they announced the sale of their neighboring asset, Clayton on the Park.

While some may suggest or feel that Clayton is losing steam, this move appears to be an individual investment decision rather than a growing trend. It is indicative of a market that has more strongly embraced the City of St. Louis in addition to but not instead of Clayton. Although KDG is shifting its set of priorities, there are multiple other developments currently reshaping the Clayton skyline, adding new residents, hotel guests, and Class A office space.

Rendering above attributed to U.S. Capital Development of the under-construction Forsyth Pointe office buildings

Clayton’s continued strength aside, it is evident that development has been heating up in the City of St. Louis. In 2020, over $1 billion in building permits were awarded, and there are currently thousands of residential apartment units under construction and in development. The Central West End saw the rise and completion of the new 100 on the Park high-rise apartments. Similarly, Downtown saw a new residential tower, One Cardinal Way, open by Busch Stadium amid major announcements by developers for hundreds of other units within Downtown limits.

The momentum clearly has not gone unnoticed by KDG. In the hot Central West End neighborhood, KDG is currently well into the construction of a residential apartment building on Laclede Ave. 4545 Laclede will host 200 units between its 7 stories, adding considerable density to an already vibrant corridor. Demand in the CWE is striking, and KDG is looking to offer new options for residents looking to enter the neighborhood with its many nightlife, shopping, and restaurant options. The building will feature “micro-units”, studios, 1, and 2-bedroom units. The average size of the micro-units will be 386 square feet, with larger units available for those who need additional space.

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KSDK reports that other amenities like a fitness center, golfing green, pool, and yoga studio will be available for residents. Moreover, while some locals might be shocked at the size and inclusion of the smaller units, they are an excellent way to maintain some modicum of affordability for residents looking to live in certain areas. Common in bigger cities with higher rent prices, micro-units also have considerably higher occupancy rates than traditional units, while also promoting sustainability and more efficient land use according to the Urban Land Institute.

KDG is also doubling down on the neighboring Forest Park Southeast neighborhood, more commonly known as The Grove. The company partnered with another developer, Green Street, on two large mixed-use buildings at the corner of Sarah and Chouteau. The two buildings, Chroma and Hue, share amenities and wrap hundreds of units, a coffee shop, hair salon, and other restaurants – significantly densifying and activating the East end of The Grove. KDG is responsible for the onsite property management at the two properties. Hue just recently wrapped up construction, and we were able to meet Green Street VP of Marketing, Liz Austin, for a construction tour covered here.

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In the neighboring Cortex neighborhood, an emerging innovation hub bolstered by Washington University and SLU, KDG is at the forefront of the efforts to bring 24/7 vibrancy through a residential component. The Cortex master plan envisions offices, hotels, entertainment, and apartments to activate the community throughout the day. To date, there has been significant progress. With a new Aloft hotel that opened its doors during the pandemic, a new MetroLink station, and tons of investment into labs and offices like the soon-to-be world’s largest neuroscience facility, the area is booming.

KDG hopes to add the key missing link: apartments. The whole plan, dubbed “Cortex K” will host a variety of uses from apartments to office and retail, but apartments are the piece that could truly stitch the community into a neighborhood, while also helping connect it to the vibrancy of The Grove.

Aerial Overview Rendering – St. Louis April 7 TIF Agenda

There will be three structures built in two separate phases. The first is a 7-story mixed-use building with 160 apartments, 18,500 square feet of office space, and 2,150 square feet of retail space. As KDG is quick to point out, this building will contribute to a neighborhood of over 500 residential units combined with the Chroma and Hue developments when complete. The TIF agenda notes that the apartments will include amenities like a fitness center, club room, outdoor deck, and more. Recent KDG apartment buildings have generally also included flexible workspaces for residents, pools, coffee, etc. Phase 1 is expected to cost $37 million according to the TIF packet.

Phase 2 will include an office building and garage, which will be part of the same complex as imaged in the renderings from KDG above. The Cortex K office building will bring 125,000 square feet of Class A office space to the City of St. Louis, in addition to 7,000 more square feet of retail space. For construction to proceed, KDG is looking to prelease at least 50,000 square feet of the usable space. The budgeted cost for the office building is an estimated $40 million.

The garage is expected to hold approximately 610 spaces and is still in a preliminary design phase. Although the garage is fairly large for a district that features a MetroLink station, it is not street-facing and will likely be shared by residents and workers alike. The project is certainly a decent example of transit-oriented development (TOD) still with the combined density and access to nearby transit options. This portion of Phase 2 will be an additional $17.9 million.

KDG is also promising to make various public improvements to the surrounding infrastructure – something common for developers when requesting tax-incremented financing from municipalities. Although the plans are still “very preliminary”, KDG expects to spend up to $3.5 million on streetscape improvements, lighting, utilities, sidewalks, and bike lanes. The improvements will be carried out for KDG on behalf of the Cortex.

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In the April 7 TIF agenda, KDG is requesting $14 million in assistance from the City of St. Louis for this development – 14.25% of the total development costs. TIFs have been under increasingly intense scrutiny by St. Louis residents for a variety of reasons. Many suggest it is a form of corporate welfare that takes necessary funds away from the city, and others a necessity to attract and retain beneficial developments.

Historically, the City of St. Louis lacked a transparent, thoughtful, and consistent plan on how it would award TIFs to developers. State Auditor Galloway released an audit of the program and called for increased oversight and transparency to ensure a level playing field just under a year ago. Much of the controversy from residents stems from the fact that the TIFs are often awarded to developers in the most economically successful districts, predominantly in the Central Corridor. The Cortex K TIF request is likely to face similar scrutiny from residents.

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Cortex Master Plan

The project itself, however, will certainly contribute to a fast-growing region in St. Louis City. Additional apartments, office, and retail will go a long way toward connecting The Grove and Cortex. Vibrant, 24/7 neighborhoods with transit access are more sustainable, enjoyable, and attractive to residents and are crucial to developing a strong, urban corridor.

As an investment decision, choosing to double down on the City of St. Louis instead of the very strong Clayton market also represents a growing source of demand that residents might not yet have noticed. There are thousands of units under construction in the city, and new home construction is off the charts. While the city is still seeing depopulation on its North Side, stemming from decades of disinvestment, redlining, racial covenants, and a 1970s plan that essentially would cut off efforts to sustain the North side (though not officially enacted, it was essentially still practiced for years), its Central Corridor and many South Side neighborhoods are booming.

The tricky act for St. Louis, however, is to find a way to extend this success, without displacement, to other neighborhoods that see little investment. With any luck, including the emerging “North Central Corridor” and a Mayor dedicated to racial equity, the City of St. Louis may yet see that day come sooner rather than later.

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