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Lenexa development languishes amid harsh realities

If you want an update on Lenexa’s dream of building a new walkable downtown, just take a look at the four-story parking garage standing alongside Interstate 435.

Soon it will be torn down.

The building — once planned for seven stories with 500 parking spots plus other space — has sat unfinished for four years, too long now to complete.

Lenexa’s visionary plan a decade ago to create the New Urbanism-style downtown appears to be foundering.

But city officials say they still have confidence in the proposal, called Lenexa City Center, for a retail-office-residential project covering 200 acres at the intersection of 87th Street Parkway and Renner Boulevard.

In fact, they hope to have some pieces of good news to announce soon.

They concede, though, that no one should expect City Center to be complete for at least 25 to 40 years.

“When you try to do something on a scale like what we are trying to do at City Center, it is not a project,” said Eric Wade, Lenexa city administrator. “It is a place where multiple projects are going to be done over time.”

Still, City Center has endured some recent setbacks. Apartments have gone into the area, and the parking garage was considered a big component of the plan — an easy place for workers and shoppers to park. With its impending demolition, City Center lost one of its first major tenants. And city officials have discovered that a huge truss that was to go up over the entryway is broken.

The city still doesn’t have an anchor store or corporate partner to give City Center a big boost, and the dozens of thriving retail stores and offices that the area needs to be financially robust are missing.

At the same time the project is costing taxpayers millions of dollars for roads and infrastructure and the tab will continue to grow until businesses do come.

At least one expert says the 2008 financial crash will make it tough for Lenexa to follow through with its dream.

Lenexa needs a special partner with deep pockets and the development skills to pull in new money for such a project, said Christopher B. Leinberger, an author, senior fellow at the Brookings Institution and national expert on New Urbanism, the concept of walkable mixed-use neighborhoods.

But, he said, there are only about 20 such developers in the country who have the necessary skill set, and since the recession, most are following a major trend to build those walkable neighborhoods in inner cities.

Projects such as City Center are “unbelievably expensive to build,” Leinberger said.

Although Lenexa’s progress has been bleak, Leinberger said there is hope.

“This is right in the heart of the favored corridor coming out of Kansas City,” he said. “This is where all the rich folk live. They want a walkable urban place.”

In the meantime, thousands of people drive every day down a redesigned 87th Street, seeing streetlights, sidewalks and a lot of empty ground.

“Every time you get off (I-435 at 87th Street Parkway), it makes you angry,” said Marc Lassalle, who is on the board of the Lenexa Historical Society. “What the hell is going on over there?”

Curse of Renner

Lenexa first eyed 87th Street Parkway and Renner Boulevard, then a two-lane country road, for commercial development in the 1980s. Officials wanted it to be lined with office towers, like College Boulevard in Overland Park.

But very public protests erupted when city officials condemned the acreage of Philomene Bennett, a local artist. She and her husband had their home, a studio with artwork in a barn and several animals on the west side of Renner in what is now City Center.

Despite the uproar, Bennett was forced to move, and the property remains vacant today.

“It’s still very painful,” Bennett, now 77, said last week. “It was the most beautiful spot. They took our business and our house. They tore down all the trees.”

But businesses didn’t come to the intersection in the 1990s, causing some people to dub the area the “curse of Renner.”

By 2000, the real estate market was booming and Lenexa officials decided on the City Center plan. They estimated the project at $300 million to $500 million and hired Haile Group of Florida to design and develop it.

In 2002, the city bought 62 acres of land for about $11 million at the southwest corner of the intersection. Plans called for 2.4 million square feet of offices, restaurants and retail shops; 1,100 hotel rooms; and 19 multistory parking garages.

But the Haile Group and the city split after a disagreement that cost the city $607,000 in legal bills.

Lenexa hired a new developer, now known as Copaken Brooks, in 2005.

Meanwhile Lenexa City Center East, a portion of the project on the southeast side of Renner and 87th Street, was being developed by Shawnee Village Associates, owned by Ralph Varnum, a Johnson County developer.

A four-story office building was built and city officials were encouraged when a tenant, Generali USA Life Assurance, moved in.

Lenexa provided Varnum with $5.3 million in tax increment financing money, which was used mostly to purchase the precast concrete blocks to build the first four floors of the garage. (The TIF money would be paid back by owners through taxes.)

Then the financial crash of 2008 shut down the credit markets.

Construction “came to a screeching halt” on the garage, according to records in a bankruptcy case.

Crossroads

With the financial crash, city officials faced a major problem. Without an anchor or moneyed partner yet and with construction projects going belly up all over the country, should they continue with the City Center project, spending millions of dollars to build infrastructure and roads?

At that point, it wasn’t too late to put the project on hold.

But after much discussion, the city decided it had three good reasons to move ahead, said Wade, the city administrator.

First, construction prices went down. “If there is a silver lining to a downturn, construction costs went down,” Wade said.

Second, there were more federal grant dollars available for development.

Finally, Wade said, he and the council believed that eventually the economy would turn around, bringing in businesses.

“Things aren’t going to stay bad forever,” he said.

So the city moved on to spend $55 million on roads, infrastructure, stormwater systems and a greenbelt park.

The city expects some of that money to come back when new business comes in and pays for land and infrastructure. For example, Lifetime Fitness purchased land from the city for $2 million a couple of years ago to build a facility at City Center.

In addition, the city has received $1.8 million from a Johnson County road fund and several hundred thousand dollars in federal grants.

Meanwhile other bills totaling millions of dollars are adding up.

The city is accruing about $500,000 a year in debt from the bankrupt developer of several lots in City Center East. Over four years that has added up to $2 million.

In addition, about $3 million in property taxes that would go to schools and libraries haven’t been paid on the bankrupt lots.

Across the street in City Center, the city-owned property, which it hopes to sell someday to developers, now is valued at $7.3 million. Because the city doesn’t have to pay property taxes on land it owns, schools and libraries and other services are missing out on about $100,000 a year.

Next month the city expects to sell about $10 million in bonds to cover some of the current road bills at a cost to the city of about $190,000 a year.

Some residents are afraid officials are gambling with the city’s future — what happens if developers don’t show up?

“This is like somebody with four cards to a straight, betting everything he’s got for the one card he needs,” said Howard Penny, owner of Old Town Hair and Nail Company and a leader in the old downtown who once supported the City Center concept. “You are betting on what’s coming, and that isn’t even smart when you play cards.”

Still waiting

Recently, the City Council agreed that the parking garage needed to be torn down after sitting unfinished for four years.

A 2010 bankruptcy lawsuit said at least $11 million was needed to finish it. The vast majority of the precast components remained in storage in the facilities of the Iowa manufacturer, IPC, after the company developing the garage filed for bankruptcy.

Matt McAllister, IPC’s president, said in an interview that he has the parts but workers would have a hard time finishing the building now.

“It is not designed to be a quarter built or half built and left that way for a substantial period of time,” he said.

The city agreed, and the area will now be made into a flat surface parking lot.

Last year, the city was dealt another blow.

Generali, the City Center East business, moved its 125 employees to Leawood because its contract had promised parking in the garage.

City officials say the loss isn’t fatal.

“You never like to lose a corporate citizen,” said Councilman Andy Huckaba. “You lose some and you gain some and you kind of have to go with the flow. I’m certainly not in a panic mode.”

Indeed, B.E. Smith, a medical executive search firm, plans to move into the Generali space with 75 employees.

But the city recently got more bad news about a huge brown truss with a price tag of $875,000 that has been on the ground for several months on the southwest corner of 87th and Renner.

The city had hoped the truss would cross over the intersection, traffic lights dangling from it, at the entrance to City Center.

But just as workers were installing it a month ago, they discovered the steel contraption was cracked.

Now the manufacturer and the installer are arguing over who is responsible, said Beccy Yocham, director of community development.

“We were certainly disappointed,” Yocham said.

Leinberger, the New Urbanism expert, said many projects such as City Center have failed since the crash.

The National Harbor Project in Washington D.C. is one that is making it. But that’s only because the owner, Milton V. Peterson, a suburban developer for 40 years, sold all his inventory in 2006 and put it into the project. The first phase was almost all private money, $3.5 billion, Leinberger said.

“It is a very expensive deal,” he said.

Leinberger said a project like the Lenexa one cannot be done in bits and pieces but needs a robust first phase development.

“If your market brochure says, ‘Just wait five years, things will be great,’ that’s probably not going to happen,” he said.

It’s been difficult for the public to follow the progress of City Center because much of the discussion has taken place behind closed doors because of real estate transactions, one councilman said.

But Thomas Nolte said the city has been wise with its money, and some promising announcements may be coming soon.

“I feel that the project was meant to be a 25- to 40-year project,” Nolte said. “We are still in the first stages of it.”

City officials point out that even though businesses have not moved in, apartment complexes built on the north end have filled up.

Councilman Lou Serrone acknowledged that City Center has gone more slowly than anyone would have liked, but the city made the right call a few years ago.

“You can either jump in and move everything forward or you can fold your tent and get out,” said Serrone, who is in the real estate business. “The city elected to stay the course. I think you will see in a very short time it is really going to come to fruition.”

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