Highwoods Properties on Monday announced an agreement to sell one of Kansas City’s most famous assets, the Country Club Plaza, for $660 million.
Glenn Stephenson, vice president and division manager of Highwoods Properties in Kansas City, said the company “received tremendous interest from an eclectic group of credible prospective buyers.” In the end, it accepted the offer from a joint venture between Taubman Centers and the Macerich Co.
The sale to two experienced shopping center owners will mark only the second time the Plaza, opened in 1923 by Kansas City real estate magnate J.C. Nichols, has changed ownership. The sale is expected to be completed Feb. 1.
Taubman and Macerich will be 50-50 owners of the Plaza and will jointly manage it. The joint-venture buyers, operating as Country Club Plaza KC Partners LLC, intend to acquire “substantially all” of the famous shopping district, including 18 properties with 804,000 square feet of retail space and 468,000 square feet of office space.
Robert Taubman, chief executive of Taubman Centers, said the Plaza purchase is “consistent with our strategy to own high quality, dominant assets in great markets.”
The Taubman company, based in Bloomfield Hills, Michigan, specializes in owning and managing 23 shopping centers in the United States and Asia. Taubman’s properties nearest to Kansas City are Taubman Prestige Outlets Chesterfield in a St. Louis suburb, the Cherry Creek Shopping Center in Denver and The Mall at Green Hills in Nashville, Tenn.
Arthur Coppola, chief executive of Macerich, said the Plaza acquisition is “the latest example of Macerich’s continuing strategy of recycling capital out of slower-growth assets.”
Macerich is a real estate investment trust with interests in 50 shopping centers and malls throughout the United States. The company, founded in 1994, has retail properties in New York, Virginia, California, Arizona, Illinois and Colorado, among other states. A notable expansion announced in 2014 was its co-development of Fashion Outlets of San Francisco on the site of the former Candlestick Park.
“We are confident that this partnership between two heralded companies will carry the torch for the Country Club Plaza, and will continue to serve this great community wholeheartedly as stewards of our city’s crown jewel,” Stephenson said.
“It is a mind-blowing price, but if there is a property in Kansas City that could achieve this level of price this was the one,” said Michael Berenbom, vice president of investments for Lane4 Property Group. “Macerich operates some of the best retail properties in the United States.”
Berenbom said Macerich has “unparallelled” relationships in the retail industry and could bring some first-to-market tenants to the Plaza. Still, he said shopping centers need a balance between national and local retailers, and some of the Plaza’s locally owned tenants — like Gram & Dun, Tivol and Baldwin — are among the center’s most popular.
Highwoods said the buyers have posted earnest money deposits of $25 million “that are non-refundable except in limited circumstances.”
The companies’ announcement said that “concurrent with or shortly after closing, a long-term, fixed-rate loan for 50-60 percent of the purchase price is expected to be placed on the asset.”
The contract gives Highwoods the option to extend the sale closing date up to 30 days beyond Feb. 1.
The center, known for its architecture reminiscent of Seville, Spain, and its annual Christmas light display, lays claim to being the nation’s first “suburban” shopping center designed for shoppers arriving by car.
The sale announcement came just as the Kansas City Council prepares to vote Thursday on building height and use restrictions intended to preserve the ambiance and vibrancy of the Plaza.
Building heights generally would be limited to what they are now, with a maximum of three stories along 47th Street from Pennsylvania Avenue to J.C. Nichols Parkway, and between three and 10 stories north of 46th Terrace and west of Jefferson Street.
The release said the 55-acre shopping district, which Highwoods said is “95 percent leased in the aggregate,” generated cash and net operating income of $31 million in 2015.
Highwoods has been in talks with several retailers to fill its few empty spaces.
Frank Westermajer, an area franchisee for Corner Bakery Cafe, said he was in negotiations to take over the 4,000-square-foot former California Pizza Kitchen space at 4743 Pennsylvania Ave.
“We are putting our plans on hold until the new ownership group settles in,” he said.
Meanwhile, the former Halls Plaza department store building is being converted to Plaza 211, which could have six to eight retailers — mostly upscale, exclusive tenants to the Plaza — as well as one or two restaurants.
Real estate sources said Highwoods has been in talks with such possible tenants as Nike and Apple, a current Plaza tenant that could relocate to a larger space.
Highwoods declined to comment, and Apple has not returned phone calls seeking comment on a possible relocation. Nike officials couldn’t be reached for comment on Monday.
Ralph Liebetrau, co-owner of Decori, a locally owned home accents, gifts and holiday decor store, said he would like the new owners to sign more mom-and-pop operations.
“Unique shops, something that is not in every shopping center,” he said. “If you have something at the mall down the street, why come to the Plaza? But I know the money is in the big-box retailers.”
Highwoods, a real estate investment trust based in Raleigh, N.C., said last year that it put the Plaza on the block to help finance its acquisitions of office towers in Georgia and Florida, properties that were more consistent with its overall business plan.
It has owned the Plaza since 1998, when the shopping district was acquired as part of a merger of Highwoods and the J.C. Nichols Co. The merger, then valued at $544 million, included Highwoods’ assumption of $231 million in Nichols Co. debt.
According to Jackson County property tax records in 2015, the appraised market value of Highwoods properties in Kansas City was about $166 million. That in itself was no indication of the market-rate value of the Plaza.
Highwoods said it intends to close its Kansas City division office upon completion of the sale.
Highwoods will continue to own two office buildings in Kansas City totaling 149,000 square feet, plus a 50 percent interest in Plaza Colonnade LLC, owner of a 292,000-square-foot office building; a 12.5 percent interest in 4600 Madison Associates LP, a 262,000-square-foot office building; and a 26.5 percent interest in Kessinger/Hunter LLC, a brokerage services firm.
In a statement filed with the Securities and Exchange Commission, Highwoods said the companies reached the Plaza sale agreements on Dec. 21.