Years of ownership changes and thwarted redevelopment plans appear to be in the rear view mirror for the Brookfield Building in downtown Kansas City.
A plan to convert the historic 12-story office tower at 11th Street and Baltimore Avenue to a combination Hotel Indigo and high-end apartments is moving forward with the aid of a new financing mechanism.
The plan by Brookfield Hotel Investment LLC of Madison, Wis., calls for a January 2018 opening of the 118-room Indigo, a boutique hotel that’s part of the Intercontinental chain, and 27 apartments on the top three floors.
The apartments will be marketed under the name Fairfax Lofts, a nod to a name of the building that predated the Brookfield title.
The project sewed up its financing package on Dec. 29. For just the second time in Kansas City, funding obtained through the Property Assessed Clean Energy program has closed a financing gap. PACE investments will provide nearly $2.5 million for the $36 million redevelopment.
The PACE program, authorized by the state of Missouri, allows building improvements that produce energy savings to be funded by private investors who are repaid over time by the property owners/redevelopers — who can pass along some or all of their repayment costs to tenants.
A hotel operator, for example, could add a surcharge to the daily rate paid by guests through an “energy efficiency” or “energy district” surcharge.
“This is our first PACE project in the metro area,” said Rob Shear, CEO of PaceSage, a business that helps construct PACE deals. “It’s a great financing tool that can be combined with historic tax credits, new markets tax credits, owner equity, and construction loans to fill the financing gap.”
The first Kansas City area PACE project was announced in December by Rahill Capital to assist Linden Street Partners, redevelopers of a former warehouse at 1721 Walnut St.
Both PACE projects lined up investor funding from Clean Fund, a group in California that focuses on energy-efficient or sustainable redevelopment investments.
The 86-year-old Brookfield tower has been mostly vacant since 1997 and completely empty since 2007. Classified by the city as a dangerous building, its exterior ornamentation was falling on the sidewalk and its interior was caked with pigeon guano and marred by vandalism and a fire.
“We’ve done the environmental remediation, the removal of asbestos and lead,” said Kevin Page, managing member of Brookfield Hotel Investment. “We’ve gutted the interior, pretty much everything except the first floor’s historic finishes.”
The financing package for the redevelopment included about $14 million in state and federal historic tax credits, brownfield tax credits and new market tax credits. It also includes a Missouri Chapter 353 property tax abatement that waives 100 percent of the project’s new real estate taxes for 10 years, and a 50 percent abatement for the next 15 years.
Equity Bank is the senior lender on the project, with a $17 million loan.
The project team includes Kothe Real Estate Partners, developer; Rau Construction, general contractor; Rosemann & Associates and GBA Architects Engineers, architects; and New Horizons, environmental abatement contractor.