by Rob Roberts // Kansas City Business Journal
Indianapolis-based Flaherty & Collins Properties on Thursday was granted a 25-year property tax abatement to help finance its third project in the Kansas City area — the $45 million-plus Stockyards District Apartments in the West Bottoms.
Not surprisingly, the public support approved during a meeting of the Planned Industrial Expansion Authority board didn’t come without a debate.
Ryan Cronk, a vice president of development for Flaherty & Collins Properties, told the PIEA board that the four-story project will include 230 market-rate apartments over 8,000 square feet of retail. It will be developed on an underused surface parking area immediately south of the Livestock Exchange Building, 1600 Genessee St., and just north of Kemper Arena.
Cronk said his firm was negotiating with Kansas City for the use of 250 parking spaces for the apartments’ residents in the city-owned West Bottoms Garage, which is immediately west of the project. The developer’s 20-year cost for the parking spaces is expected to be around $1.6 million, Cronk said.
To support the project, the PIEA board approved, with two no votes, a 10-year, 100 percent property tax abatement for the improvements, followed by a 15-year, 50 percent abatement. In an effort to appease taxing jurisdictions that will forgo revenue as a result of the abatement, the developers agreed to make annual payments in lieu of taxes of $19,650 to be split among the jurisdictions for the first 10 years.
Currently, the property nets all taxing jurisdictions a total of only $5,925 a year. Cronk said that during the 25-year abatement term, the jurisdictions will net a total of $3.9 million.
But that did not satisfy representatives of Jackson County, which was represented at the meeting by Tax Incentive Specialist Jack Feldman, or Kansas City Public Schools, which was represented by Kevin Masters, the district’s director of government relations.
Masters said the non-city taxing jurisdictions asked the developers to reduce the tax revenue the jurisdictions are being asked to forgo by agreeing to a five-year, 100 percent abatement followed by 20-year, 50 percent abatement.
Flaherty & Collins rejected that during negotiations, but Masters asked the PIEA board to approve it or another alternative on Thursday. The other alternative called for the board to approve industrial revenue bond financing for the project. That would have allowed the developers to receive a sales tax exemption on building materials worth about $1.2 million, which could have been used to reduce the the amount of tax revenue most districts were being asked to forgo.
Under the sales tax exemption plan, Masters said, the abatement’s $3.28 million net present value to the developers would not have changed. But the school district’s portion of the forgone tax revenue would have been reduced from 61.6 percent ($2.02 million) to 39 percent ($1.28 million). Conversely, the city’s share would have increased from 19.9 percent ($653,178) to 25.2 percent ($827,258).
Masters said KCPS supports the new apartment project and generally favors public support for it. The district’s concern, he said, is the inequity between “what we receive (in tax revenue from the project) compared to what the city receives.”
PIEA Executive Director David Macoubrie said the city did not support the alternative involving the sales tax exemption because it would mean less revenue for the city, which plans to make a big contribution through the discounted garage rent it is negotiating with the developers.
The other alternative, which would have decreased the value of the abatement, was not feasible, Macoubrie added, because “this is a risky proposal.” The developers “need full abatement or they walk away,” he said.
PIEA board member Bonnie Sue Cooper said she strongly supported the abatement because it would continue the growth taking place on the south side of the West Bottoms by adding about 250 residents.
The project is expected to be only the second multifamily development completed in the West Bottoms in recent history — hence, the risk. Developer Wayne Reeder’s View II at WB, a 250-unit historic conversion project on the north side of the West Bottoms, won a PIEA abatement last year but has stalled due to an inability to attract private debt financing, Cooper said.
Bill Haw Sr., whose family has invested $20 million in the Livestock Exchange Building and other properties on the south side of the West Bottoms, recently completed the area’s first multifamily project, the 11-unit Stockyards Place luxury apartments east of the Livestock Exchange Building.
Haw, who is selling the parking-lot site to Flaherty & Collins, spoke in favor of the abatement Thursday, saying it would boost adjacent eating and drinking establishments that lease space from him. They include the Gennessee Royale and Stockyards Brewing Co., which leased half of the space on the ground floor of the Livestock Exchange Building that was vacated when the Golden Ox restaurant closed. The other half of the space has been leased to a company that will open a new Golden Ox, Haw said.
The project also will benefit KEM Studio, an architecture firm that leases space in the Drover’s Daily Telegram Building, 1505 Genessee St., which Haw owns and renovated. KEM has been selected to design Flaherty & Collins’ new project.
In addition, Haw said the apartments will be “a perfect fit” with Foutch Brothers LLC’s plan to take possession of Kemper Arena from the city and repurpose it as a youth and amateur sports hub. The city’s recent request for Kemper repurposing proposals has attracted one other proposal, from a Wichita group that wants to use the arena as a minor-league hockey venue, with the city retaining ownership.
But Haw said “I really think (Foutch’s plan) is going to happen.”
Cronk said the new apartments next to Kemper Arena should start going up sometime next year. Flaherty & Collins Properties recently completed The Heights Linden Square, a $26 million apartment-over-retail project in Gladstone, and is looking to do a second phase there, he said.
In addition, the firm is preparing to start work on its second Kansas City-area project: The Union Berkley Riverfront Park. That $65 million project will include 410 luxury apartments and 12,500 square feet of retail space.