The exploding market for apartments in downtown Kansas City further brightened Thursday when the Cordish Companies said it intends to build a second luxury apartment tower on the south edge of the Power & Light District.
The developer, together with the city, said a proposal was moving ahead for a $105 million, 24-story apartment tower with 300 residential units on 18 of the floors above six stories of parking and commercial space.
The Two Light Luxury Apartments, to be on a current parking lot on Truman Road between Grand Avenue and Walnut Street, would include a 499-space parking garage that will involve public subsidies and provide public parking.
The proposal goes to City Hall for consideration of incentives that Cordish said it needs to make the deal work. The City Council Planning, Zoning and Economic Development Committee is expected to discuss them Wednesday.
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Cordish officials said the company intends to privately invest more than $88 million in Two Light, with the balance covered by city incentives including tax abatements for 25 years and other subsidies associated with both the parking and residential development.
Cordish, developer of the adjacent entertainment district, already is building One Light, a 25-story, 315-unit apartment tower at 13th and Walnut streets. Completion of One Light is scheduled for this fall, becoming the first high-rise new construction in downtown since the 17-story H&R Block headquarters opened in 2006.
“In a sign of the improving economic picture downtown, while substantially more expensive than its sister project One Light, Two Light is seeking substantially lesser incentives,” the Cordish announcement said.
City Manager Troy Schulte said the plan was a good deal for both Cordish and the city, partly because it resolved all lingering obligations from a 2004 master development plan agreed to by Cordish and the city.
Kansas City Mayor Sly James said Two Light’s announcement also indicated the economic development stimulus expected from construction of the 2.2-mile streetcar line now underway between the River Market and Crown Center.
The resurgence of downtown, dating to the opening of the Power & Light District and the Sprint Center arena in 2007, also is characterized by an outpouring of historic rehabilitation projects. Dozens of old commercial buildings have been or are being converted to residential use. Several new apartment projects also are completed, underway or announced in the River Market and Quality Hill neighborhoods.
The residential surge has elevated the downtown population from 10,000 a few years ago to about 21,000 now, with an additional 5,000 expected to move into apartments under construction.
Bill Dietrich, president and CEO of the Downtown Council, said downtown apartments were running at 98 percent occupancy, with only normal turnover representing the vacancies.
“We can’t emphasize enough the importance of the continued residential push,” Dietrich said. “High rise, especially, adds much-needed density that leverages prior investments and puts more 24/7 users downtown.”
As proposed, Two Light is expected to house about 450 tenants in a combination of studio, one-bedroom, two-bedroom and penthouse apartments.
Nick Benjamin, executive director of the Power & Light District, said Cordish hopes to begin construction on Two Light in early 2016 with occupancy planned for 2018, assuming the necessary city approvals.
Even with market demand for downtown housing, Benjamin said both One Light and Two Light needed public subsidies to be cost feasible.
“High-rise residential construction is 80 percent more expensive than a stick-built, three-story apartment building,” Benjamin said. “It costs about $110 per square foot for low rise versus $220 per square foot high rise. … But high rise proves to be a bigger catalyst for more development.”
Benjamin said it’s too early to specify expected rental rates for Two Light, but a sample bedroom may rent in the monthly range of $1,450 to $1,500. A comparable One Light unit is expected to rent for about $1,375 a month this fall.
Several authorization steps are necessary before Two Light gets a final go from the city.
Under the 2004 master development agreement, the city agreed to provide $27,260 per parking space for up to 1.5 parking spaces per apartment unit. For Two Light, Cordish is reducing that city obligation to 1.3 parking spaces per unit.
An ordinance filed with the city seeks approval of the parking space agreement and approval of a $17.5 million bond issue. Schulte said the garage cost to the city, depending on the eventual garage configuration, would be between $8 million and $12 million. Cordish will maintain and operate the garage going forward, according to the plan.
“So we save a long-term obligation by not having to operate and maintain the facility,” Schulte said.
Benjamin said the plan requires 15,000 square feet of office space to be provided, which Two Light will include, along with 3,100 square feet of retail space on the ground floor.
In addition, the agreement calls for the city to provide Cordish $16,666 per apartment unit, an incentive capped at 300 units. That incentive, totaling $5 million, is to be paid by the city to Cordish to defray costs during construction.
Benjamin said the per-unit payment for Two Light is $10,000 less than the city is paying for One Light. Schulte said the city contributed about $8 million in cash for One Light plus $12 million to $14 million for the One Light garage.
Cordish said it will pay annual real estate payments in lieu of taxes equal to $350,000 in year one for Two Light, with payments scheduled to rise 4.5 percent every other year. Similar payments for One Light start at $224,000, Benjamin said.
Cordish said the payments in lieu of taxes for Two Light will amount to a $5 million increase in tax payments over the standard tax abatement for downtown residential projects. Those abatements generally are 100 percent for 10 years and 50 percent for the next 15 years.
The company has a 25-year, 50 percent property tax abatement on the $79.2 million One Light tower.
Like One Light, the Two Light tower is designed to have floor-to-ceiling windows in every living room and bedroom. Cordish said all appliances will be state-of-the-art, and countertops, flooring and cabinetry will be luxury quality. An activity deck, infinity pool, bar, demonstration kitchen and theater room also are planned for residents.
Residential towers have been intended by Cordish since initial plans for the Power & Light District were suggested in 2004. Only in the last few years has the economy and market demand made new construction cost effective.
Meanwhile, several existing downtown office towers have been converted or are under redevelopment as residences. Cordish at one time was part of a proposal to redevelop the former Power & Light office tower, but that now is a project of NorthPoint Redevelopment.
Another ordinance filed with the city clerk would settle claims with Kansas City Live, a Cordish organization, involving disbursement of disputed tax credits connected to a previous development agreement and appropriate $2.07 million from the city’s general fund for the new project.