Schnucks to spend $3.4 million on downtown St. Louis
store
BRIAN CASSIDY
CEO Scott Schnuck said the store’s success will be tied to
continued momentum downtown.
View Larger It will cost $7.56 million for Schnuck
Markets Inc. to build out, stock and open downtown St. Louis' first
full-service grocery store. But the family-owned supermarket chain is getting
help.
Schnucks will pay $3.42 million necessary for tenant improvements, inventory
and other opening expenses at the downtown location, at Ninth and Olive streets,
according to state finance board documents. The remaining money will come from a
combination of state, federal and city subsidies.
"If we didn't have the public support, it wouldn't be a viable project," said
Scott Schnuck, chief executive of Schnuck Markets. "We're starting with a space
that wasn't designed for a grocery store." The location will require a leveled
floor, extensive wiring and other improvements, he said.
The grocery chain will receive $1.1 million in state funds from the Missouri
Development Finance Board (MDFB), $1.29 million in proceeds through the
federal New Markets Tax Credits program and $1.75 million from the city of St.
Louis through a development agreement that will operate like a tax increment
finance (TIF) plan, according to a resolution approved March 18 by the state
finance board. The city's Board of Aldermen approved the development agreement
March 14 and has sent its bill to Mayor Francis Slay for his signature.
The planned 20,800-square-foot urban concept store, a first for Schnucks,
will be smaller than the chain's typical stores, which are about 55,000 square
feet. The store will feature all of the services of a traditional store,
including a pharmacy, floral department, bakery and meat department. But it also
will feature a Kaldi's Coffee bar and a 6,306-square-foot mezzanine with a wine
department, tapas bar and seating space to cater to daytime workers in the area
and to downtown residents who eat out often. The store is slated to open in late
2008 or early 2009.
"This is a store specifically designed for this market," Schnuck said. "It is
unlike anything else we have today."
The state owns the 1,065-space Ninth Street Garage, where Schnucks will lease
ground floor retail space for the store. The initial term of the lease will be
10 years at a rate of $9 per square foot. After that, Schnucks can extend its
lease for one or more of six consecutive five-year terms at slightly increased
rental rates, according to the lease summary.
Gary McElyea, spokesman for MDFB Chairman Lt. Gov. Peter Kinder, said state
funding for the store will help drive economic development downtown and get a
project off the ground that would not otherwise be feasible.
"Having a full-service grocery store has been perceived as critical to
raising the downtown residential market to the next level," said Barbara
Geisman, deputy mayor for development. "When (Schnucks) wanted a TIF to be able
to do it, we were happy to entertain the idea. It does considerably enhance the
credibility of the downtown residential market that an established name-brand
store is confident there is enough of a market to invest there."
TIF provides support for economic development projects by returning a portion
of new taxes generated by the project back to the developer. In this case,
Schnucks will get to keep 50 percent of any payroll, earnings, sales and
restaurant taxes generated by the store while the city will keep the other 50
percent. The city is not on the hook if the business does not meet it economic
projections.
Schnuck said he and his team considered other downtown locations, including
properties along Washington Avenue and potential sites at the long-delayed
Ballpark Village development. But they concluded the Ninth Street Garage offered
the best proximity to residents and office workers along with convenient
parking. The DESCO
Group, led by Scott Schnuck's brother Mark Schnuck, developed the
garage and maintains the leasing rights for the building's retail space. Scott
Schnuck said his company determined the location was the best available for a
grocery, regardless of its association with DESCO, and demonstrated to the
subsidizing public bodies that the deal was made at arm's length.
Schnucks owns eight stores in the city of St. Louis, but this will be the
grocery chain's first downtown since it closed a store at Seventh and Olive in
the 1980s.
"We realize we're probably early in opening here, and we have been watching
downtown very closely," Schnuck said. "But we feel strongly that the first
person who comes downtown with a full-service grocery will really stake out the
market. We're counting on the continued momentum downtown."
ctritto@bizjournals.com
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