Once Upon a Parking Garage: The Developer Too Shady Even for the Trump Brand

(but it still got TIF, lol)

In the coming weeks, Team TIF will be posting a couple of articles that focus on the financial underpinnings and rationales given for some recently approved development deals.

This article gathers scattered local and national reporting on Alterra International, the developer of the Jefferson Arms building, and its owner Mukemmel Sarimsakci, a person with a questionable business history and bizarre ties to Donald Trump – ties that extend to his chosen nickname: “Turkish Trump”. Below we highlight questions swirling around the financing packages of the Jefferson Arms and the related 1220 St. Charles parking lot development project.

Of all the city-subsidized deals Team TIF has analyzed, this deal is head and shoulders above the rest in terms of both complexity and absurd connection to world events. We hope this aids readers in their understanding of the whole picture surrounding the city’s newest hot shot developer, with whom elected officials and local firms are so eager to do business.

And it all started with a parking garage…

Jefferson Arms developer Mukemmel Sarimsakci (Photo credit: Cristina M. Fletes from the Post-Dispatch)

The Curious Case of the Jefferson Arms TIF

While reviewing the Jefferson Arm’s TIF application, a question came up: why were only the Tucker addresses included in the application, and not the related 1220 St. Charles garage? The application lists the full acquisition cost of the Tucker addresses as $7MM; however, records and testimony at subsequent aldermanic hearings indicate that this $7MM purchase price was for both the vacant Jefferson Arms building and the adjacent garage. The TIF application does not mention the 1220 St. Charles parking garage or the separate abatement being sought for the parking garage.

This is despite the buildings’ links in ownership and financing history. In recent years, the McGowans, notable downtown real estate developers, owned both of the buildings involved in the deal.  The Jefferson Arms and the garage are unquestionably a package deal, judging by the developers’ legal counsel’s (Husch-Blackwell’s David Richardson) testimony. In addition to that testimony, real estate records show to be a $10MM mortgage taken out through Great Southern Bank (11/17/2016) against 1220 St. Charles building. This mortgage (or other loan secured by 1220 St. Charles) was very likely used to make the McGowans the anonymous equity investors mentioned in the Jefferson Arms TIF application.

Unlike the applications for other multi-building deals (such as City Foundry), neither the TIF application or the redevelopment plan submitted to the city mention the garage property as part of the Jefferson Arms deal. By not mentioning their purchase of the parking garage, or the abatement being sought when making their presentation to the city’s TIF Commission, the developers and their legal team broke with standard practice. Additionally, they misrepresented the price paid for the Jefferson Arms building (saying it was purchased for $7 million, rather than $4 million as shown in subsequent hearings around the garage’s abatement), in the presentation given to the commissioners. While treating the Jefferson Arms’ subsidy application and the acquisition of Jefferson Arms and the parking garage as separate deals may be legal, it is ethically questionable because of the manner in which the package’s total financing and incentive structure wasn’t made plain to the TIF Commissioners.

Dig deeper into this transaction and we find a Jacob Barker’s Post-Dispatch article that mentions a $1.5MM loan to the McGowans, for the 1220 St. Charles parking garage’s rehabilitation. This debt is pretty close to post-rehab expected value and will mature in only two years. This is the beginning of a chain of loans that allow for the total deal. While the loan had a two year term, it is possibly already paid off, as Alterra already purchased the building, by taking out a $3MM mortgage on the garage. Keep in mind, the garage’s $3MM purchase price was included in the $7MM figure presented to the TIF Commission as the price of the Jefferson Arms. Also this $3MM figure is close to twice St. Louis Development Corporation’s estimated post-rehab valuation, which is $1.6MM. Essentially, the McGowans are probably making a quick $1MM on the sale of the garage to Alterra. The total debt load on the parking garage is actually much higher, as real estate records show that it includes an addition recent $10MM lien/mortgage, taken out by the McGowans, placed against the title of the garage. This appears to fund the anonymous “investor equity stake” mentioned in the Jefferson Arms’ TIF application. It should be noted that this $10MM dollar mortgage is many times the market value of the garage. If you include the additional $3MM in mortgage debt taken out by Alterra on the garage, should be $13MM in debt that is potentially leveraged against a building that SLDC’s staff says will only be worth around $1.6MM after renovations. Even if the city’s estimated appraisal value was wildly inaccurate, and this lot ended up being valued at $2.5MM, it could still be leveraged at ~5x value.

The only readily available explanation for this financing structure is that the McGowans took signed parking space rental commitments from Lockerdome, US Bank and Alterra to Great Southern Bank, who issued the $10MM loan, likely on strength of these projected future profits. It is also possible that the bank simply extended the $10MM credit and placed a lien on this (and possibly other) properties. The McGowans then took that cash and bought their equity stake in the Jefferson Arms deal, while recouping garage rehab costs, during the sale of the garage to Alterra. This $10MM is a little more than the $7MM sale price that was recorded for the Jefferson Arms. This means that Alterra could have virtually zero “skin in the game” up until this point. Purchase of the hotel and garage appear to have been paid for by the equity stake that the McGowans took in the project. This means that if the project goes south, Great Southern Bank will inherit a parking garage that was largely leveraged against a now non-existent major client’s rental payments. Some would call this financing innovative. Others would call it terribly dangerous. It is really great that such a historic building may be saved, but the underlying deal has seriously questionable fundamentals. With this shaky foundation, the hotel’s complete renovation is not a sure thing.

Too Dirty for Trump?

If nothing else, public pressure stopped Alterra from branding the Jefferson Arms hotel with the Trump name. Months after former Mayor Slay and other city officials claimed that the plan for a Trump hotel was dead, Alterra announced to Dallas media their plan to build the first in a new line of “Trump Scion”-branded hotels in that city. They also told the Dallas Business Journal that the St. Louis development’s Trump branding was dropped due to protestors. Mirroring St. Louis, the Dallas plans were eventually dropped. During the time of the Dallas proposal, St. Louis activists expressed solidarity with activists in Texas, and the news of the Dallas hotel not being a Trump-branded venture was met with happiness.  Notably, during the time of the Dallas proposal being active, their media did a great jobs of examining Mr. Sarimsakci’s long history of leaving unpaid bills, including property tax bills. The Dallas Morning News covers past financial problems and debts.

(credit: Staff photo by St. Louis Post-Dispatch)

One interesting detail to the collapse of the Dallas Scion: the failed hotel in Dallas was cancelled by the Trump Organization, not local officials or Alterra.

The reason: Alterra’s funding was too closely tied to Russian funding that the Trump Organization considered it too controversial to involve in deals, while Trump is in office. To be clear, Trump’s own folks have decided that he is likely using questionable funding that is potentially connected to the Russian mafia and oligarchy. Why? Well, it turns out that Alterra’s owner,  a man named Mukemmel Sarimsakci (who goes by the nickname “Turkish Trump”), happens to have a brother named Yusuf that developed the new Ritz-Carlton Moscow (located near the Kremlin), which is mentioned in the story on the Trump Organization’s decision not to work with Mr. Sarimsakci. Not mentioned in that story is that this is the hotel where Trump allegedly paid Russian prostitutes to urinate on by hotel bed that had been used by then President Obama and the former First Lady. This is supposedly a piece of intelligence that Russian state actors gathered, in order to potentially blackmail Trump, sometime in the future. While parts of the Steele Dossier have been shown to be false, other sections appear to be quite accurate. The veracity of this part of the dossier has been bolstered by information that has come to light, in the month’s since it was made public. His brother would have likely been aware of, or even actively participated in, helping Russian spies gather material for potential future use as blackmail. As numerous media accounts have discussed, the Russian kleptocracy is built on strong connections between the country’s government, “oligarch” business leaders, and the Russian mafia. The Trump organization is quite famous for using questionable Russian financing, after major US banks stopped lending to him. From media reports, it seems that the Trump organization’s legal team obviously knows that they can’t continue an active business relationship with a family that is so tied to shadowy Russian funding, now that he is president.

We should also mention that some floors of the Jefferson Arms will be luxury apartments. Hopefully most of them will be rented to folks that will actually be longterm downtown residents, and not folks coming for short stays in St. Louis to take advantage of the high quality medical care provided in our city. Why do I say that ? Because apartments in Russian financed (with a premium for Trump-branded) apartment buildings are being rented by Russian companies that sell packages of lavish trips to pregnant Russian elites, who wish their children to have dual citizenship. As much as we may wish we were making that up, this whole deal is pushing the limits of even 2017’s amazing surreality. Add in Mr. Sarimsakci’s reluctance to disclose his investors, and it is totally reasonable to believe the speculation that Mr. Sarimsakci’s funding is essentially money laundering for the Russian mob, ala the shady financial dealings of which his chosen namesake has been repeatedly accused. If anything, somebody being dependant on questionable Russian financing going, who goes by a nickname that actually includes Trump’s name is refreshingly transparent. While this story is all very weird, it is even weirder how little folks are talking about it, here in St. Louis.

The Disappearance of Much of 1220 St. Charles’ Assessed Value

Another thing that is odd is that 1220 St. Charles saw a clear decline in assessed value, down to the bizarrely even $500,000 in appraised value and $160,000 in assessed value. This is noted at the 1220 St. Charles tax abatement hearing, when the alders say they will do the abatement, but only at the pre-special assessment value. That’s a good catch on the part of the alders, and addition of PILOTs was smart.

But still, how can the assessor’s office justify the drop on the parcel’s value from $239,000 in improvements (improvements refers to the garage) down to $3,800? Who authorized such a massive drop in assessed value, leaving it at an even $160,000 assessed, $500,000 appraisal? Was there an appeal to an assessment that got it dropped? If an appeal was requested, how is such a giant drop possible? On what are they basing such an incredible drop in valuation? There were no reports of massive structural failures, in the previous year. It is hard to understand how the city would determine that the garage lost 98% of its value, absent some kind of large collapse of important structural features, which neither appears in the news or is mentioned by the developers. They just say it needs to be rehabbed, due to lack of use. That is hardly a reasonable explanation for deciding that the structure is only worth $3,800. It’s almost like somebody needed the structure to only be taxed at $500,000, in order to make financing deals based off an artificially lowered valuation recorded by the assessor’s office. Funny that.

Were there any other kinds of communications between the assessor’s office and the McGowans, their agents (attorneys, etc) and/or SLDC, pertaining to 1220 St. Charles’ assessment? It would be very interesting to see someone file a Sunshine Act (aka FOIA) request, in an attempt to seek any communications (internal or with external parties) involving these parties that the Assessor’s office has been a part of, from 2015 to present. It should also be noted that the Payments in Lieu of Taxes (PILOT) payments agreed to by the developer’s counsel were not included in the resolution language that approved the abatement. As it stands, it could well be that there is nothing actually binding Alterra to payment of the PILOTs, despite the agreement made in the committee hearing. Absent a secondary, legally binding contract having been signed, there appears to be nothing actually compelling the payment of PILOTs. At least nothing approved by the Board of Aldermen. As of writing, the city still lists the mysteriously low (and even) property value assessment, and the abatement resolution has set the taxation level at that extremely low valuation.

Turkish Trump Moves Base of Operation to the Mound City

In contrast to Mr. Sarimsakci’s jet-setting lifestyle, which included adding St. Louis to an exciting portfolio of global business interests, his recent projects have focused in on St. Louis. Having been spurned in Dallas, Mr. Sarimsakci moved to St. Louis and into a downtown loft located in a building under McGowan ownership. Mr. Sarimsakci is aggressively seeking other development opportunities, and it is reported that he has signed a contract for a building on North Broadway. All-in-all, he has talked about investing $400MM in St. Louis, and has reportedly shown interest in at least half a dozen other projects. One of these has been his vision for a 50 story luxury skyscraper, just to the north of the Lumiere Casino and Laclede’s Landing. Adding to the mystery around his actual plans, the Post-Dispatch’s Jacob Barker reported that Mr. Sarimsakci has become increasingly difficult to reach. He also reports that Alterra has stopped listing a phone number on their website. Alterra has made lofty promises about hundreds of millions of dollars in investment in our town, but with the promise of investment comes  Sarimsakci’s shadowy private capital.

Since Alterra has a history of leaving large projects unfinished, we will all have to wait and see if Mr. Sarimsakci (and his highly questionable money) will actually finish what would be a massive undertaking of the Jefferson Arms’ revival. To his credit, he has already announced his first step: Mr. Sarimsakci is focused on getting the first floor renovated to be the flagship US store for his new furniture store that will feature a high end Turkish furniture brand called Koleksiyon. The Dallas Morning News reported on Sarimsakci’s history with one furniture chain that bankrupt and folded. That business’ failure left a trail of unpaid bills and lawsuits, trailing over many states.

In Closing

Unless this highly irregular story comes to an equally irregular happy ending, this will just be the latest in a long, sad line of failed redevelopment plans for the Jefferson Arms, one of downtown’s grandest structures. In the case of project failure, the only people to profit off this bizarre situation will be the McGowans and their attorneys at Husch Blackwell. The city, on the other hand, will be left with another failed deal to further drag down our bond rating.

Still, let’s take one final moment to appreciate the 2017-ness of this deal:

  • Potential Russian mafia connections, check.
  • Developer that is too toxic for the Trump Organization, check.
  • Tie to the infamous Steele Dossier, check.
  • Shady local developers, check.
  • Plans for a new furniture store chain (after his previous furniture business left a trail of lawsuits and debts across the country), check.
  • Something really funny happening with the assessment, check.
  • Massive loans taken out on a building worth a fraction of the debts’ total face values, check.
  • Hiding the total value of the project’s subsidy being sought via breaking the Jefferson Arms and 1220 St. Charles deal into two separate subsidy requests, check…

This tale really does have it all!

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