The developers of Centene’s proposed expansion defended their request for public assistance Thursday, arguing the project meets the area’s long-term development goals by adding residents and retail near public transit and drawing thousands of high-paying jobs to the region’s central corridor.
It’s hardly in dispute that, if fully developed, the expansion of the Medicaid managed-care company’s campus would transform Clayton. As many as three high-rise office buildings could sprout on a downtown corner that has yet to fully develop, bringing as many as 5,000 more employees to the booming seat of St. Louis County.
Robert Clark, chairman and CEO of Clayco, which is developing the project for Centene, fleshed out details of the project during an interview in the company’s 6-year-old Clayton office tower at Hanley Road and Forsyth Boulevard.
The first two phases of the project would add a 28-story office tower and a 34-story office tower to downtown Clayton as well as a parking structure with attached apartments or condos, a total investment estimated at $788 million.
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The company hopes to start construction on the first office tower and a detached parking garage and residential structure this year, both of which are slated to open by 2018.
A second phase would build by 2020 a 34-story office tower, a plaza area, a hotel and an auditorium for concerts and events that Clark described as a “very high-end civic center.†All three of the structures would include ground-floor retail and parking.
In addition, a third phase could add a $250 million, 25-story office tower with parking. Documents submitted to the city said the final phase could open as soon as 2021, but Clark said there’s not yet a hard timeline for that building and details are still being worked out.
In all, the first two phases would make room for about 5,000 office employees and include 124 condo and residential units, which Clark noted would be near the Forsyth MetroLink station.
“When you read the (Clayton) master plan, it really calls for a mixed-use project,†Clark said. “Part of what the community is trying to do overall with MetroLink is to create more transit housing near the stations.â€
Centene anticipates bringing about 2,000 jobs with an average salary of $73,000 to Clayton by the time the second office building opens in 2020. But it’s building room for 2,800, and that’s only roughly half of the building. The company will follow the model it found successful when it built its current headquarters: It will lease out about half of the office space to other tenants.
Centene’s existing building, for instance, eventually landed law firm Armstrong Teasdale as a tenant after the large firm left its longtime home in downtown St. Louis. Centene itself employs about 1,000 in its existing headquarters.
Without public help, however, the project won’t get built, at least not at the scale that Centene is now proposing, said Larry Chapman, principal of Clayco’s CRG Real Estate Solutions. The economics won’t work even though the Clayton area has the highest office rents in the region.
“The reality is that rent won’t support the cost of construction of a new building today,†he said. “It just won’t. You can’t underwrite it financially. So until that changes, until the rents get high enough to cover costs, you’re not going to see any buildings being built except in certain very special and particular circumstances and if they’re helped.â€
Clark said the project would provide a similar, or even greater economic boost, than the National Geospatial-Intelligence Agency’s western headquarters being built in north St. Louis. Centene will be paying property taxes, unlike the federal government, and its jobs are higher-paying, he said.
The NGA’s 3,000 employees will be located in a blighted area that has seen little to no investment, yes, but Clark said only three office buildings have been built in Clayton in the last 20 years. And he argued the overall benefit of the development will stimulate a more walkable, urban landscape in Clayton.
“Is it going to develop someday?†he asked of the land Centene is eyeing. “It might, but when you have an employer who’s going to add 2,000 high-paying jobs, that drives a lot of other things.â€
Centene’s request for incentives drew some consternation because of the large figure drawn from a state application: $147 million in combined state tax credits and local property tax abatement.
But Clark disputed those numbers. The true amount won’t be known until final salaries and property values are calculated. He said the total value of public incentives, which would be in the form of tax savings over decades rather than up-front money, is likely between $88 million and $135 million.
While Centene’s request to the state included a $95.6 million local property tax abatement figure, Centene is still finalizing a development agreement with Clayton. Chapman said the company is asking for the same local package it got on its current building: 50 percent property tax abatement over 20 years. The cap is what will be negotiated in its agreement with the city, which he hoped could be finished by next month and possibly ready for a vote by September.
Clayco estimates Clayton schools would reap $105 million in additional revenue over 30 years, while Centene would save about $49 million in that time. The city of Clayton would receive $44 million in new taxes over three decades, while Centene saves about $9.7 million in local city taxes.
Centene has also asked for about $35.7 million in state “Megaworks†incentives and $10 million in Missouri BUILD bonds for the project.
“We don’t know what the city is going to say,†Clark said. “We don’t know what their report is going to say. We believe our ask is for under $100 million in total.â€
Clayton Mayor Harold Sanger said in a phone interview if the city can meet Clayco’s timeline to reach an agreement fine, but it won’t be driven by it, and it’s too early to know if September is reasonable.
“This is a big project and we’re going to do it right,†Sanger said.
He declined to comment on the latest local tax abatement cap negotiations.