After nearly 25 years redeveloping and later managing residential loft buildings in downtown St. Louis, the McGowan brothers are mostly closing out that chapter and turning their attention to salsa and guacamole instead.
Over the past two years, the family-owned development firm, McGowan Brothers Development, has sold most of its residential holdings along Washington Avenue, where the brothers’ initial investments in the late 1990s and early 2000s helped create a loft district with new apartments converted out of abandoned warehouses.
The equity from those sales is funding the expansion of the brothers’ Tex-Mex chain of restaurants, Rosalita’s Cantina, which has grown from a single downtown location in 2010 to a second location in Des Peres in 2017 and, as of April, the first location in Florida. More restaurants are in development, in addition to a push for Rosalita’s retail products to appear in more grocery stores.
Coming from a large Irish family of six brothers and three sisters with no real estate backgrounds, the brothers have collaborated on projects over the years with various siblings and sometimes separately, but today, McGowan Brothers Development primarily consists of four of the brothers as partners: Tim, 58; Bill, 52; Sean, 51; and Seamus, 48.
The switch to Tex-Mex makes sense, they contend, though they acknowledge it may seem like an unexpected turn. A group of developers who once saw vast potential in vacant warehouses on Washington Avenue when few others did, they now see the pivot to Rosalita’s as a similar venture in some ways.
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“We’re not a normal story,” Seamus McGowan said, starting with the 1990s-era decision to move from Houston, Texas, to St. Louis to build lofts out of historic buildings in a warehouse district. “Irish guys making a Mexican restaurant is something new as well."
Lofty ambition
At the peak of the McGowans’ investment downtown, they held more than 1 million square feet of residential loft space spread over several buildings within blocks of one another. It represented a total investment, from 1997 to 2018, of about $80 million in 12 properties, Tim McGowan said.
Of the six residential buildings currently listed on the company’s website, four have recently been sold for at least $28.78 million. The brothers still own some of the residential buildings along with commercial holdings, including the building that houses the first location of Rosalita’s, Warehouse 7 Lofts; the St. Louis Fitness Factory building and the Jefferson Arms parking garage at 1220 St. Charles St.; and several surface parking lots along Washington Avenue, Tim McGowan said. They also hold lofts by Saint Louis University and other commercial properties in Richmond Heights and the Metro East. But they've collectively made the decision not to invest in anything new downtown, in favor of expanding the restaurant chain.
Before the recent sales, they had been shopping the buildings on and off since 2018, but market forces lined up within the past two years.
Buyers have included Rialto Capital Advisors of Miami, which in April purchased the Fashion Square loft building, at 1306 Lucas Ave., for $10 million, and Parkside Lofts of Santa Barbara, California, which in April 2022 purchased Grace Lofts, at 1320 Washington Ave., for $5.25 million. The pandemic led to some financial issues with tenants leaving buildings, and when a lender, Starwood Property Trust/LNR Partners, offered to take back the Rudman on the Park building, 500 N. 13th St., and sell it, the brothers saw that as the best solution for everyone, Seamus McGowan said. The property in February was purchased by 5ive Capital LLC of Glendale, California, for $4.6 million, following a November auction.
"When we put them up for sale, we knew there was a lot of money on the sidelines and people were looking to spend it on property," Seamus McGowan said.
When the brothers first began their projects along Washington Avenue, there was no loft district. At the time, the area was comparable to a “war zone” that “no lender would touch,” Tim McGowan told the Business Journal in 2002.
The brothers’ venture into loft development began with older brother Kevin McGowan, who convinced Tim and Sean to invest in a vacant warehouse at 1222 Lucas and turn it into housing. They worked their office jobs during the day — Tim McGowan was in the insurance business — and did construction at night.
Another downtown developer who had started rehabbing buildings around Washington Avenue into apartments in the 1990s, Amos Harris, said that the McGowans’ investments in the neighborhood helped spur the neighborhood’s turnaround, alongside about $14 million in federally funded improvements to the streetscape.
“I was living on Washington Avenue at the time. I loved it,” Harris said of the McGowans' redevelopments. Building on the federal investments, “the McGowans came in and because of what had gone before, they were able to create great places for people to live.”
The brothers take pride in what they accomplished downtown and said they’re excited for its future and the next life cycle of the Washington Avenue district, but feel that Rosalita’s is where they want to turn their attention.
The brothers had long hoped to expand the Rosalita’s concept even while actively redeveloping lofts downtown, Tim McGowan said. The loft venture cooled after 2008's Great Recession, which dried up some real estate lending and for years had a chilling effect on the company’s ability to line up financing for projects. Feeling the full long-term effects of the recession by 2012, the brothers decided to “hit the pause button on future loft conversions” and instead look toward expanding Rosalita’s, Tim said.
“We were somewhat naive to the challenge of downtown St. Louis when we arrived in 1997, so we didn't have any pent-up negative energy when it came to choosing to developing downtown. We just saw it as, ‘What a great opportunity,’” Tim McGowan said. “I believe today there are still lots and lots of opportunities and an equal amount of challenges, just like most other downtowns face. There are definitely easier places to develop than in urban areas. As we’ve matured in our business, we’ve discovered other opportunities, and other ways to develop projects that aren’t quite as challenging.”
Searching for Tex-Mex
Although the brothers mostly live in St. Louis, their business turn and potential future locations were inspired by their time elsewhere.
Before the brothers moved to St. Louis to redevelop lofts, they lived in Houston, where Tex-Mex restaurants dot the landscape. In St. Louis, they searched for that same type of restaurant, but never quite found it. Opening their own Tex-Mex eatery in 2010 filled a retail spot in their building, created a new line of revenue and satisfied any lingering Tex-Mex cravings.
The McGowans opened the second Rosalita’s in Des Peres in 2017, followed by the third location on Sanibel Island, Florida, in April. Along the way, the brothers opened other restaurant concepts downtown, Flannery’s Irish Pub and the popular bar and restaurant Lucas Park Grille, which both closed around the time of the pandemic. They still own Blondie’s Coffee and Wine Bar, a downtown venture on which they partnered with their sister, Kathleen McGowan.
But Rosalita's is their focus. Eyeing locations beyond St. Louis, southwest Florida had always been the obvious choice since the region had long been the family’s favored spot for vacations. As far back as 2005, the brothers had identified Sanibel Island and Captiva Island, barrier islands in the Gulf of Mexico, as particularly good spots for a restaurant.
The brothers, Tim in particular, have always made their own side deals in addition to the real estate company. Tim and his wife, Julie McGowan, individually purchased the oceanside The Green Flash restaurant on Captiva in January 2021, and The Sandbar restaurant on Sanibel in April 2022, just months before Hurricane Ian devastated both islands in September. Both restaurants shuttered due to the hurricane, and The Green Flash will reopen in September, Tim said. The Sandbar building had to be torn down due to damage, but the McGowans plan to rebuild the restaurant.
In the wake of the damage, Sean Niesel, owner of a shopping center at 975 Rabbit Road on Sanibel, the Rabbit Road Center, began marketing the plaza for sale to help finance a rebuild of his hotel on the island, according to Gulf Shore Business. The McGowans purchased the center for $6 million, in the largest shopping center deal posted on Sanibel in nearly two decades, according to the report.
In the months since the Rosalita’s opened on Sanibel, the restaurant has outperformed the brothers’ expectations for the amount of business it could capture while the island is undergoing reconstruction, Tim said. Tourists haven’t yet returned, so the restaurant mostly serves contractors rebuilding the island. Although the McGowans expect tourist traffic to pick up next year, they don’t foresee a return to normal numbers until January 2026. That is when they forecast that the restaurant will hit the brothers’ typical expectation for each restaurant of $7 million to $8 million in annual sales. So far, the Sanibel restaurant is on track to post $3 million in sales over its first year in operation, they said.
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Like their downtown holdings, the brothers intentionally own the land and buildings on which they locate each Rosalita’s Cantina. They credit the company’s ability to expand in Des Peres in 2017 to the longstanding relationships the brothers built with lenders, who funded the $1 million purchase of the former Casa Gallardo restaurant at 12796 Manchester Road, along with a gut rehab of the building.
The land buys and costs to open each Rosalita’s location, between $8 million and $9 million for each new location, are funded by the brothers’ private equity, which typically makes up around a quarter of the total financing, Tim McGowan said. For the rest, the brothers work with a series of lenders, including the ones they’ve worked with the most, American Bank of Missouri, Busey Bank and Great Southern Bank, he said. U.S. Bank has historically been another key longtime lender for the brothers’ lofts downtown.
The McGowans’ umbrella company employed nearly 200 workers as of last year, with annual revenues above $25 million, they said.
Beyond the downtown and Des Peres locations, the McGowans have bought land and are working to develop another pair of St. Louis cantinas over the next few years in south St. Louis County and O’Fallon, Missouri. Ahead of the pandemic, the company was working on site approvals for what would be ground-up construction of the South County location at 4325 Butler Hill Road, in an area that has been popular for development in recent years, with newly opened hotels, restaurants, hospitals and a Starbucks.
But the pandemic and a total redesign required to meet stormwater retention requirements of the Metropolitan St. Louis Sewer District slowed that project, paving the way for the quicker opening of the Rosalita’s on Sanibel Island, Tim said.
In O’Fallon, the brothers plan to eventually open a Rosalita’s at a former Shop 'n Save grocery store site they purchased in May for $6.5 million at Highway K and Mexico Road. Things are projected to start rolling on that project by January 2025, although it's possible it could get started sooner, Tim said. After those two planned locations are up and running, the firm might consider other St. Louis sites, as it has at various times over the years, he said.
A 'measured' investment
Why Rosalita's? Comfort food, a patio and 'first class' atmosphere
The brothers’ expansion into the restaurant business has been “intentional, measured and very calculated,” Tim said.
Diners see Rosalita’s as “comfort food” in a “first-class environment,” Tim said. Prices for entrees are intentionally set in a medium range with generous portions and free chips and salsa to appeal to a broad range of diners, while the surroundings are upscale and expansive. At up to 10,000 square feet as seen in the Des Peres footprint, few restaurants rival a Rosalita’s for size, he said. It’s about the same size as a Cheesecake Factory. The downtown and Sanibel locations are about 8,000 square feet.
Even before the pandemic, the restaurants were set up with extensive patios, which has remained a key component in the expansion. The Des Peres location has a 3,000-square-foot patio with an outdoor kitchen. The family works with Brentwood-based TR,i Architects for design and construction and designer Lori Olsen of RDG Planning & Design in Maplewood for interior design, furniture and fixtures.
The brothers said they will continue to expand only as long as each new location can carry over the same culture and mantras as the original locations.
“The goal is not to get to a certain size, but to maintain our consistency and culture as we grow,” Tim said. “If we are successful at that, everything else should fall into place just fine.”
Ideally, the restaurant’s expansion will follow the “pod” model, with three to four locations in each geographic area, in both St. Louis and southwest Florida, Tim said. By opening several locations while not oversaturating the customer base, each geographic pod can share key employees, support services and purchasing priority with vendors, he said.
Even while opening a new restaurant, Rosalita’s has been somewhat insulated from some of the most significant challenges facing the restaurant industry, including staffing and inflation concerns, Tim said.
The restaurant’s prices are viewed as accessible to families even as budgets get tighter, he said. At the same time, more affluent customers might choose Rosalita’s over more expensive options.
“Staffing is much easier when your waiters, waitresses and bartenders are all making excellent tips,” Tim said. “Even during Covid, Rosalita’s servers made more working than they would have taking the government funds and staying home.”
