The Transformer

Kevin McGowan fondly recounts his first taste of living it large in downtown St. Louis. In 1996, he and two of his brothers moved into a penthouse unit on Washington Avenue, the city's main thoroughfare. You'd expect McGowan to reminisce about the breathtaking views and gorgeous interior finishes. Instead, he affectionately describes living like a vagabond—roughing it, without heat or air conditioning; trekking down a flight of stairs to use a working bathroom; taking cold showers under a makeshift shower constructed of a hose duct-taped to a one-piece tub and shower unit. And the view? Apocalyptic. Block after block of abandoned and derelict buildings.

Not exactly your typical penthouse. But McGowan and his brothers couldn't have been happier, despite the tenuous living conditions. McGowan, who moved to St. Louis in 1996, spotted the building as he drove down Washington Avenue to check out the city's downtown. “I was fascinated to see all of these buildings that looked so beautiful to me but were empty,” he says. “And the fact that the entire street could be that way for at least 10 solid blocks was amazing to me.”

Without hesitation, McGowan and his brothers bought a dilapidated seven-story, 60,000-square-foot building on Washington Avenue and promptly moved into the top floor—a.k.a. “the penthouse.” The former warehouse, built in 1903, had sat vacant for more than 10 years and needed a healthy dose of TLC. “I had a penthouse in a slum,” McGowan says rather proudly. “We wanted to live on the top floor because that is always where all the rich people live. We felt like we were it, because we bought this big building downtown.”

Little did he know that the building would be the start of his career as a multifamily developer. Initially, McGowan had no intentions of turning the building into condos or rentals for the public. After all, he wasn't a developer; he sold property insurance and fixed up single-family properties on the side. He planned to rehab the building with the help of his brothers, who would each live on a floor. But McGowan's plans changed after he discovered the financial incentives tied to state and federal historic tax credits. Using these credits, McGowan redeveloped the warehouse into market-rate apartments. When it opened in 2000, McGowan Lofts was the first loft rental mixed-use project to grace the otherwise derelict downtown.

McGowan and his brothers didn't stop there. They formed McGowan Brothers Development and in a five-year period pioneered the transformation of the city's down town with a half-million square feet of development along Washington Avenue.

“Truly I believe that Kevin, more than any individual, has led the resurgence of the city of St. Louis,” says Dennis Woldum, an investor in a handful of McGowan's projects and vice president of the St. Louis-based insurance and financial services agency Welsch, Flatness & Lutz. “The man has unbelievable energy and his enthusiasm is infectious. He is truly selling St. Louis 24 hours a day.” And his strategy works. In 2006, St. Louis had its first population increase in more than 50 years. Today, McGowan continues to fearlessly trailblaze with his work as president and CEO of Blue Urban (formerly McGowan Walsh), a firm he launched in October 2007 to take his vision to the next level. Armed with a deep understanding of the region's underpinnings, Blue Urban is redeveloping 17 historic properties throughout Missouri and Ohio and eyeing opportunities in Pennsylvania. Clearly, where there is broken glass and crumbling brick, McGowan sees energetic, livable communities capable of transforming the Midwest.

SETTING THE STAGE Friends, colleagues, and city officials alike affectionately call McGowan the “mayor of Washington Avenue.” It's a fitting nickname. McGowan was a driving force behind the street's renaissance. Stroll down Washington Avenue today, and block after block are examples of McGowan's work, from the 33-unit condo property Window Lofts to the 60-unit apartment building Fashion Square.

“It's pretty amazing what's going on,” says Chris Woldum, a project manager at Blue Urban. “People always say, ‘I don't know,' when Kevin talks about his plans, but Kevin has been right every time. He's got another dozen crazy ideas he's springing on us.”

Washington Avenue—now sparkling with colorful storefronts and gleaming building façades—was a ghost town just a decade ago. For about 15 blocks, abandoned, boarded-up buildings (mostly shoe warehouses) lined the street, which had once flourished as part of the garment district back in the 1930s and 1940s. Developers were afraid to touch Washington Avenue until McGowan came to town and revealed the neighborhood's hidden potential for residential lofts. But the potential was so deeply buried that it took McGowan months to persuade others of the redevelopment opportunities. His toughest roadblock: convincing the bank to loan him $1 million to get that first loft project off the ground.

“The first time Kevin approached us, we all said, ‘Who are these people? Are they nuts?'” recalls Kathryn Bader, chairman and CEO of St. Louis-based U.S. Bancorp Community Development Corp., who at the time worked at U.S. Bancorp's predecessor, Mark Twain Bank. “Nobody had put any money into this market in ages. What did these guys know that the rest of us didn't?”

McGowan, of course, was relentless. “I can't tell you how many times we turned down the deal, and they just kept coming back with new ways and new structures—and Krispy Kreme donuts,” Bader says with a laugh. About six months later, the bank decided to give McGowan and his brothers a shot and financed the deal using both state and historic tax credits—a tool McGowan continues to use to make his projects financially feasible.

The bank's gamble paid off —big time. McGowan Lofts opened in 2000 , and the building jump-started development all along Washington Avenue. Before long, McGowan Brothers Development included five brothers. “They had a lot of incentive to join the company,” McGowan says: “a free loft and equal share in the company.” They built three buildings from 2001 to 2006, typically developing apartments above first- and second-floor commercial and retail space. As the McGowans purchased buildings left and right, the city and federal government committed $17.5 million for street improvements such as new street lights, brick pavers, and landscaping. Further spurring development, one of the major hotels on Washington Avenue announced a multimillion-dollar facelift. These initiatives helped the street “go from the apocalypse to what it is now—the most exciting street in all of St. Louis,” McGowan says.

From October 2004 to October 2007, the nearly 20-person McGowan Walsh firm had under development or completed approximately 2.2 million square feet of projects in St. Louis and Kansas City, Mo. McGowan credits much of the success to buying at the right time; he purchased a number of his buildings at very low prices back in the late '90s. “Let's just say I am in $20 a square foot less [than other developers],” he explains. “I can sell for $180,000 where someone else can sell for $200,000. flat is what has afforded me the ability to expand.”

By 2007, McGowan was itching to explore deals beyond Missouri. Walsh, however, didn't share the vision, so this past October, the ambitious McGowan started Blue Urban—his third multifamily development firm in less than 10 years. The company, which includes most of the McGowan Walsh employees, is completing all of the development projects started under the McGowan Walsh moniker while diving headfirst into new opportunities. Blue Urban currently has more than 2 million square feet of development in the works throughout Missouri and Ohio, representing $400 million in assets.

Not surprisingly, all of the employees have a passion for urban revitalization and the majority live downtown. “Working here is something bigger than your 9-to-5 job,” says Gregory Trost, Blue Urban's director of design. “There is a huge buzz about the work we do and our presence.”

BRAVE NEW WORLD McGowan is always on the prowl for the next great building—ideally sized 100,000 square feet or larger. “It's a disease,” he says. “I can't drive down a street without looking at all of the buildings and seeing if there is an opportunity. It's been that way my whole life.”

True to its word, Blue Urban has expanded beyond Missouri to Cleveland and Cincinnati, Ohio, and it recently entered uncharted territory more than 200 miles away from St. Louis in Springfield, Mo. In June, the firm will break ground on one of its most challenging historic rehabs to date—the $25 million renovation of the roughly 155,000-square-foot Heer's Department Store, which sat vacant for nearly 20 years on the town square in downtown Springfield. When completed in 2009, the mixed-use project will include 41 condo loft units; office space; a hip bowling alley; and a Mike Shannon's Steak and Seafood Restaurant—a Missouri chain owned and operated by McGowan's family and named after his father-in-law Mike Shannon, a beloved Cardinals baseball announcer.

Emblematic of Blue Urban's development philosophy, the company agreed to redevelop the building only if the city committed to renovating the town square. “To capitalize on the subsidies and credits and walk away with a couple-million-dollar developer fee is one thing,” McGowan says, as he glances at sketches of the redevelopment plans hanging on his office wall, right next to his children's artwork. “But that is not the Blue Urban thing, so to speak. We are now going to make a difference in Springfield in a huge way.”

As Blue Urban expands geographically, it certainly hasn't forgotten about St. Louis. The firm continues to make a huge difference in its home playing field, moving beyond Washington Avenue to other areas in need of revival. In late 2006, the company opened Packard Lofts, a 1913 auto dealership that helped set the tone for the revitalization of the city's west Washington Avenue Loft District—to date, the westernmost expansion of St. Louis' loft district. In the early to mid-1900s, the area housed car dealerships and manufacturing warehouses that had become vacant or under-utilized over the years.

“Anything west of 18th Street downtown is a brave new world. You are out of the traditional loft district,” says David Richardson, a partner at the St. Louis-based law firm Husch Blackwell Sanders, which advises Blue Urban on its deals. “Kevin is pushing the envelope and always putting himself out there to improve downtowns.” McGowan's portfolio in the west loft district—just a few blocks from downtown—includes Motor Lofts, GEW Lofts, and the MW Club, an urban country club under construction to serve all of the company's loft buyers.

Blue Urban also is leading the redevelopment efforts across from the newly built Cardinals Busch Stadium. The firm is converting three Cupples Station warehouses—part of a series of more than a dozen turn-of-the-century buildings—into condos that will be completed by 2010. “The area was just deserted, empty, and rundown, and now, with Kevin's efforts, it's coming back,” says Brian Kowert, chief operating officer of HBD Construction, a St. Louis-based general contractor that has helped build a number of McGowan's properties.

Certainly not. Blue Urban isn't having any trouble attracting residents—typically empty nesters and first-time home-buyers—despite the for-sale housing slowdown. In fact, its condo sales were 30 percent higher in 2007 than 2006 and the firm expects the numbers to be even higher in 2008, though McGowan notes that sales are sometimes delayed because buyers have a tough time selling their homes in the ‘burbs. McGowan, who originally started out developing rental product, later switched to condos to meet market demand. And while he does expect to add rental properties to the firm's mix in the near future, he has confidence in the strength of the downtown condo market. “The interest is at a higher peak than ever for downtown loft living, certainly in the Midwest,” McGowan says.

Need proof? In an hour and a half, his firm sold 61 of 68 units at Ballpark Lofts at Cupples Station via an NFL-style draft where each prospect had five minutes to select a unit. The units sold from $140,000 to $710,000, a typical range for Blue Urban product. “It will probably go down as my greatest sales success in life,” McGowan jokes.

Some might argue, though, that McGowan's greatest sales success was convincing the bank to loan him $1 million to renovate that very first building on Washington Avenue, which has since gone condo. McGowan still lives in the building's penthouse. But now he can brag about those amazing views and gorgeous interior finishes.

ABOUT BLUE URBAN

• Founded: 2007
• Employees: 19
• 2007 Revenue: Undisclosed
• Condo units developed in 2007: 407
• Multifamily units in the pipeline for 2008: 321
• Geographic coverage: Missouri, Ohio, Pennsylvania
• Cool fact: Each weekend, the Blue Urban sales team gets a break from selling units. All of the other employees, from the company accountant to the project managers, man the sales center.

LEADERSHIP LESSONS: KEVIN MCGOWAN

• Age: 49
• First job: Construction framing
• Favorite quote: “Don't judge a man until you've walked in his shoes.”
• Favorite book: How to Win Friends and Influence People by Dale Carnegie
• Best business decision: Selling a perfectly good home to buy a roofless warehouse
• Ideal leader: A benevolent dictator
• Greatest challenge as a leader: Establishing trusting relationships
• Best advice someone gave you: Life isn't fair, so quit thinking it is.
• Person you most admire: Ronald Reagan
• Community involvement: Board president of Heat-Up St. Louis; founder of Urban Roots; board member of Gateway Greening
• Number of children: 4 and one on the way
• Cool fact: Coached now-Olympic swimmers as a swim coach at Yale University

Strong Roots Kevin McGowan greens downtown St. Louis one flower at a time.

Kevin McGowan couldn't be more passionate about St. Louis, yet he can't stop talking about Chicago—and Mayor Richard Daley.

He credits Daley for turning Chicago into one of the most beautiful cities in the country via landscaping. Sounds simple, but getting cities to invest money in plantings and gardening is anything but easy.

McGowan met with Daley to get some pointers and left with some valuable lessons. “I made the mistake of calling urban greening beautification,” he says. “Mayor Daley stopped me and said it's not about beautification; it's all about economic development.” Well-landscaped streets and medians do more than make a city look pretty—these upgrades attract new businesses and residents to downtown neighborhoods. Yet it's hard to attach a dollar value to street improvements, and cities are hesitant to fund such investments.

So McGowan is taking matters into his own hands. He's involved in a number of nonprofit organizations committed to greening downtown St. Louis. As a founder of Urban Roots, he helps raise $150,000 to $250,000 every spring to plant all the downtown medians and put flower boxes around City Hall. “Before, there was none of this,” McGowan says. “You might see a dried up marigold every 4 feet in a weed bed.”

At Gateway Greening, another nonprofit, McGowan is helping to turn vacant land into community gardens. “Kevin helps with the planting,” says Dennis Woldum, an investor in a handful of McGowan's projects. “Our board members get their hands dirty.” McGowan secured approximately 4 acres of land on the edge of downtown from the Missouri Department of Transportation for an urban farm, which is run by the homeless and recently released prisoners. The farm yielded 6,000 pounds of vegetables last year, which were distributed to food pantries. “Kevin was instrumental in getting us the land,” Woldum says. “We were trying to get land from the city, and it was in areas we didn't want to be.”

These efforts just might get St. Louis on the list of America's most beautiful cities, right alongside Chicago.