Occidental Management buys Sprint campus
Sprint sold its Overland Park campus for $250.9 million — tens of millions of dollars below Johnson County’s appraised value of $342.5 million, according to research compiled by the investment research firm Moody’s.
In exchange for what Moody’s characterized as a “modest” sale price, Sprint secured a 10-year lease of office space well below market rent.
Wichita-based Occidental Management announced on July 9 that it had closed on its purchase of the 190-acre campus. Occidental Management, which also owns the Overland Park XChange, the former Overland Park International Trade building, declined to disclose what it paid for the Sprint campus at the time.
Sprint also declined to discuss financial terms and the transaction has not appeared in filings with the Securities and Exchange Commission.
Moody’s recently evaluated a $202 million loan Occidental borrowed from JP Morgan Chase. That transaction used the Sprint campus as collateral.
Moody’s said the Sprint campus had “significant upside potential,” owing to the unusual terms of Sprint’s sale-leaseback arrangement with Occidental Management.
Sprint’s rental rate is well below average asking price for office space in the area.
While Sprint’s $3.67 per-square-foot rental rate is well below market rate, Moody’s research shows that it is not a full-service rate. That means it likely excludes the added costs of things like taxes, utilities, building maintenance and campus amenities. Other rental rates on the campus range from $9.75 to $20. 37 per square foot.
In the second quarter of this year, landlords sought an average of $26.81 per square foot for Class A office space in southern Johnson County, according to commercial real estate firm Cushman & Wakefield.
Moody’s report listed the various companies leasing space at the Sprint campus, including a 187,772-square-foot lease by office co-sharing company WeWork. The WeWork lease has not been signed. Occidental Management has placed $18.6 million in an escrow account, which it will use to reduce the sale price in case the WeWork lease doesn’t go through.
WeWork has space in the Corrigan Station building in the Crossroads Arts District and is planning new space in Lightwell, or the former City Center Square building, in downtown Kansas City.
Japan’s SoftBank Group, the majority owner of Sprint, also owns a stake in WeWork.
WeWork officials declined to comment for this story. Officials with Occidental Management could not be immediately reached.
When asked about the transaction Tuesday, Sprint officials declined to discuss the terms of the sale, calling them confidential.
“Sprint is leasing back the space we need, and the Sprint headquarters will remain on the Overland Park campus,” Sprint spokeswoman Andrea Shores wrote in an email. “This sale enables us to use proceeds from the sale to reinvest in the buildings we plan to use in order to create a collaborative environment for Sprint partners — along with an innovative workspace to attract top talent.”
Earlier this month, Occidental officials said that they had received ample attention from parties interested in leasing space as well as developing about 60 acres of bare ground on the campus.
Occidental chairman and chief executive Gary Oborny earlier this month acknowledged that the Sprint campus is in the running to house two U.S. Department of Agriculture research agencies that are relocating from Washington, D.C., to the Kansas City region.
“USDA toured the property and yes, we are in discussions with them,” Oborny told The Star.
USDA is also considering locations in downtown Kansas City and in Lenexa.
Oborny also said in an earlier interview that Occidental plans a significant investment to update and redesign the campus.
Occidental officials said there was about 220,000 square feet available to lease on the Sprint campus.
The sale of the Sprint campus represented a key chapter in Sprint’s history in Kansas City. Sprint consolidated its operations located throughout Kansas City on the Sprint campus when it opened in 2001. The campus was designed to house about 13,000 employees.
But as Sprint’s fortunes changed, particularly after its 2005 merger with Nextel, the headcount in Overland Park dropped. There are about 7,500 Sprint employees and contractors there today. As the company downsized, it leased significant portions of the campus to other companies like KeyBank, UnitedLex and Great-West Financial Retirement Plan Services.
Sprint sold the campus just ahead of the Justice Department’s final determination of whether its $26.5 billion merger with T-Mobile presents any antitrust concerns. That decision is expected any day.
Both companies have said the combined company would keep a secondary headquarters in Overland Park with its main operations at T-Mobile’s headquarters in suburban Seattle.
Johnson County property records show the campus had an appraised value of $342,451,000 in 2019.
Moody’s said Sprint has also pledged to spend $25 million of its proceeds from the campus sale to upgrade its work spaces.
The wireless provider recently unveiled a top-to-bottom rehabilitation of its central campus building. That project, completed by an am of WeWork, removed office walls and consolidated larger numbers of employees into airy, modern work space. A spokesperson said the company will now turn its attention to other buildings that house Sprint workers.