Redevelopment plan for Commerce Tower includes 265 apartments
09/23/2013 6:18 PM
09/23/2013 6:18 PM
Commerce Tower, a 30-story fixture on the downtown Kansas City skyline for a half-century, may find new life as a $71 million apartment and office project.
A redevelopment proposal is scheduled to be considered Wednesday by a city development agency that calls for converting the office building at 911 Main St., now 60 percent vacant, into 265 apartments while continuing to use 160,000 square feet as office space.
“We are excited at the opportunity, and we think its a great project for downtown and the city as a whole,” said E.F. “Chip” Walsh, a member of Kansas City Sustainable Development Partners, the group pursuing the plan.
When it opened in 1965, Commerce Tower was considered the first modern skyscraper downtown. It was headquarters for Commerce Bank until it moved into its current building at 1000 Walnut St. in 1985. It was sold to a California investor for $21 million in 2006.
The building has steadily lost tenants in recent years. KeyBank Real Estate Capital vacated five floors in 2010, and the Greater Kansas City Chamber of Commerce and Kansas City Area Development Council moved the same year to Union Station.
The California owner, Hertz Investment Group, defaulted on its loan last year, and the building is now controlled by a special servicer, C-III Capital Partners of New York.
The county’s appraised value of Commerce Tower and its accompanying 249-space garage was $12.2 million last year, and the development group is offering $7.5 million for the properties, according to documentation submitted to the Land Clearance for Redevelopment Authority.
The ambitious plan being pitched by Kansas City Development Partners would acknowledge the reality of the current weak downtown office market by reusing almost half the tower as apartments. The current office tenants would be invited to remain.
“Our No. 1 priority is to retain all tenants that want to stay in the building, understanding some may need to be relocated,” Walsh said.
The redevelopment plan calls for floors 10 through 24 to be renovated as market-rate apartments. The second through ninth floors and 25th through 30th floors would remain offices. The first floor lobby and basement levels also would be available for commercial use.
The developers are seeking a 10-year, 100 percent property tax abatement from the Land Clearance for Redevelopment Authority to help make the project financially viable. They also are seeking historic designation for the building to make it eligible for federal and state historic tax credits.
There is local precedent for relatively modern office buildings to be listed on the National Register of Historic Places. The BMA Tower, which was completed in 1964, is on the register as well as the TWA Building, which was completed in 1956.
“We’re very confident,” Walsh said. “A survey was done along the streetcar line of eligible buildings and this was among them.”
And Jonathan Kemper, president and CEO of Commerce Bank and a former board president of the National Trust for Historic Preservation, has written a letter to the developers in support of their proposal.
“We believe this mixed-use approach is undoubtedly the highest and best use for this particular property,” Kemper wrote.
“Commerce Tower was among the first high-rise skyscrapers built in Kansas City since the 1930s and remains one of its most recognizable landmarks. We are excited with the prospect of seeing it restored and adapted to serve our community into the next half century.”
In addition to Walsh, the other members of the development group are architect Bob Berkebile; David M. Brain, president and CEO of EPR Properties; developer Michael W. Knight; developer Butch Rigby; and Louis D. Steele, a veteran local real estate professional.
The group also is partnering with FDP Acquisitions LLC of Davenport, Iowa, on the venture.
The project budget submitted to the redevelopment authority calls for the project to be financed by a $40.8 million loan, $23 million in historic tax credits, $2.8 million in brownfield tax credits, $623,000 in demolition tax credits and $3.8 million in developer equity.
According to the schedule submitted, the developers would like to complete acquisition of the office tower and garage by next month, prepare drawings and begin construction next spring. The initial apartments would be available by late 2014 and the entire project completed by spring 2015.
The proposed redevelopment has the support of the Downtown Council because it will add apartments to the high-demand downtown market and take advantage of the new streetcar route which is planned go by Commerce Tower on Main Street.
“We think it’s a good use of that building,” said Sean O’Byrne, vice president of business development for the organization. “It’s a good mixed use of that building that reflects trends we’re seeing in other markets.
“It’s also a good example of development in the transportation district. The streetcar will be at its front door.”