A glitzy and yet mostly empty office building in the River Market may land a new owner who hopes to bring the property back to its past glory.
Ian Ross, owner of real estate private equity firm Somera Road Inc., announced Tuesday that he is under contract to buy the stylish office building at 300 Wyandotte St. in the River Market. Ross, who said closing on the sale is approaching, did not disclose a purchase price.
The building opened in 2005 and became home to sports architecture firm HOK Sport of Kansas City, which now goes by the name Populous. Populous in 2015 moved to a building just off the Country Club Plaza, leaving the River Market building mostly vacant. The property subsequently went into foreclosure.
Ross plans to call the 94,846-square-foot building 3Y as part of a rebranding effort. He hired real estate firm Cushman & Wakefield to lease the property to prospective tenants. The building would be Somera Road’s first venture in the Kansas City market.
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“Somera Road is extremely excited about entering this market,” Ross said in an interview. “We believe in Kansas City and we believe in the positive trajectory of this market. We’re looking to be a partner to the city and all the relevant stakeholders.”
The 300 Wyandotte building in many ways was a symbol of the River Market and downtown Kansas City’s emergence from its gritty past.
The Old Chelsea Theatre, a bawdy adult entertainment house, once occupied the site. In its place, Opus Northwest built the $26 million, four-story structure whose opening coincided with some of the earliest tangible stages of downtown Kansas City’s revitalization. The project benefitted from $9 million in public industrial bonds. Those proceeds were used to build a public parking garage.
Orix Real Estate Capital bought the building in 2007 for $19.1 million.
Orix represented a tenant-in-common ownership group that owned the River Market building. Tenant-in-common structures, or TICs, are real estate ownership groups comprising several separate owners. They have generally fallen out of fashion since the recession.
Ross said the previous owner was “hamstrung” by its overleveraged and undercapitalized structure.
Last year, the 27 ownership entities that made up the TIC group that owned 300 Wyandotte filed a lawsuit against the Planned Industrial Expansion Authority, a public agency that awards tax abatements for redevelopment projects. The expansion authority owns the parking garage underneath the 300 Wyandotte building.
The TIC claimed in a federal lawsuit filed on Sept. 9, 2015, that the expansion authority leased out 155 of the garage’s 396 parking spaces to tenants of the River Market West Apartments a block away from 300 Wyandotte. That lease agreement, which was struck in 2013 and lasts for 10 years, with options to renew for up to 70 years, went into effect without notice to or consent of the building’s owners, the lawsuit says.
The former owners of the office building claimed that it had rights to 296 of the parking spaces and that the expansion authority’s deal with River Market West Apartments infringed on those rights. The lawsuit claims that the office building was under contract to sell to an affiiate of Mission Peak Capital, a Kansas City real estate firm, in March 2015. But Mission Peak Capital backed out of the deal because of the disagreement over the parking space issue, according to the lawsuit.
David Macoubrie, executive director of the Planned Industrial Expansion Authority, said in an email that he could not comment on the lawsuit. In court filings, the expansion authority has denied wrongdoing and requested that the lawsuit be dismissed.
A month after the lawsuit was filed last year, Populous moved out of the building and into a building near the Plaza once occupied by the Kansas City Board of Trade. Somewhat ironically, the Port Authority of Kansas City, or Port KC, administered a tax exemption on the old Board of Trade building to facilitate Populous’ move there. Port KC is one of the few tenants remaining at 300 Wyandotte.
On June 1, a New York firm called Taconic Capital Advisors bought the building out of foreclosure for $13.8 million. Now Taconic is under contract with Ross and Somera Road.
Ross said Tuesday that he doesn’t believe the parking dispute will be an issue for him as he prepares to close on the building.
“From our perspective, it’s a non-issue,” Ross said.