Merchants, residents concerned about what's next for Country Club Plaza

The Country Club Plaza.
The Country Club Plaza.

One of Kansas City’s brightest gems is for sale.

Highwoods Properties, owner of the Country Club Plaza, said Wednesday afternoon it intends to sell the historic Country Club Plaza that was built as the nation’s first “suburban” shopping district, designed to accommodate shoppers arriving by car.

It’s nationally famous for its architecture, which draws on that of Seville, Spain, the statues that dot its corners and courtyards, and its Thankgiving celebration turning on the Plaza Christmas lights.

But Highwoods, which has owned the district since 1998, wants to sell it no later than early 2016 to help pay for office buildings it’s acquired elsewhere.

It needs the money from a sale repay debts from investing $303 million in the Monarch Centre in Buckhead Atlanta and $124 million in the Sun Trust Financial Centre in Tampa.

Ed Fritsch, Highwoods president and CEO, said the two acqusitions “strengthen our franchise of owning high-quality, trophy office buildings.”

But doing that called for the company to put the famed Plaza on the block.

The Plaza, the brainchild of Kansas City real estate magnate J.C. Nichols, was developed in 1922 and opened in 1923. Nichols built the district for the upscale residential neighborhoods he was constructing to the south and west.

The district includes stores, restaurants and offices. Its retail blend once had local department and specialty stores, such as Halls, Swanson's, Harzfeld's and Woolf Bros., and national middle-class names such as Sears and Woolworth. A grocery, barber shop and bowling alley were part of the mix.

The 55-acre district started to change in the 1980s as national upscale retailers including Gucci, Polo Ralph Lauren and Bally replaced local shops, a trend that Highwoods continued.

Highwoods said Wednesday it selected Eastdil Secured to serve as the listing agent for the Plaza. It intends to list for sale “all or substantially all of its wholly owned Country Club Plaza portfolio in Kansas City.”

Those assets consist of 804,000 square feet of retail space and 617,000 square feet of office space. The office space includes 205,000 square feet of second-floor, above-retail offices as well as 263,000 square feet of office space in the Valencia Place office tower.

According to Jackson County property tax records, the appraised market value of Highwoods properties in Kansas City in 2015 was about $166 million.

“This is an opportune time for us to monetize our retail-dominated assets in Kansas City and redeploy those proceeds into more strategically focused, higher-yielding office investments,” Highwoods said in a company release.

Owen Buckley, president of Lane4 Property Group and a tenant on the Plaza, said he was not surprised by the Highwoods announcement.

“They are predominantly office people and, in the industry, not really known for retail,” Buckley said. He noted that Highwoods sold two other retail properties — the Prairie Village Shopping Center and Corinth Square — to Lane4 in 2009.

“People in the industry wondered how long it would be before they sold the Plaza. Office is their core, their specialty that they understand well.”

Highwoods said in its announcement that the Plaza has been a “solid and improving performer” and called it “the Midwest’s premier shopping destination and the ‘Crown Jewel’ of Kansas City.”

Glenn Stephenson, vice president for Highwoods in Kansas City, said he was proud of what Highwoods has accomplished in its 17 years as the Plaza owner.

“We remain focused on being excellent stewards of the Plaza throughout the sales process,” Stephenson said. “We just wrapped up the Plaza Art Fair and are already focused on the Plaza Lighting Ceremony and the magic of the holiday season on the Plaza.”

The 84th Plaza Art Fair last weekend, which was expected to draw a quarter of a million people, and the 86th Plaza Lighting ceremony, coming this Thanksgiving, are part of the district’s heritage.

Residents and tenants alike had questions Wednesday about how the district might change under new ownership.

“I just heard about the sale, and I don't know what to expect — if it will be good or bad for me, being one of the little guys,” said Ralph Liebetrau, co-owner of Decori, a locally owned home accents, gifts and holiday decor store that has been a Plaza tenant for four years.

“I get a lot of visitors, tourists, who are a little bit disappointed at the Plaza, that it doesn't have more unique shops but the same things they have at home.”

But several civic and neighborhood leaders said they believe Highwoods has been a good owner, and they are concerned about who the new owner might be.

“I think they've done a good job of improving the Plaza and putting a significant investment into the Plaza,” said Vicki Noteis, former Kansas City Planning Department Director and now a local planning consultant.

Noteis said many Kansas Citians would prefer that the Plaza have local ownership.

“But knowing that may not be possible, any new owner should be aware when they purchase it that the Plaza comes with some civic obligation to protect this incredible gem that exists nowhere else in the country,” she said.

The sale announcement comes just as the Kansas City Council is poised to consider a new Midtown/Plaza area plan that updates a 1989 Plaza plan.

Noteis said that area plan would be a key planning document to protect the Plaza from a buyer trying to bring in development that ruins the district’s unique character and charm.

“We are concerned if any new owner gets overzealous in new development that puts the wrong thing in the wrong place at the wrong height,” Noteis said.

Preservationists in recent years successfully battled plans for a large office building on the Plaza’s north rim.

Keith Spare, president of the South Plaza Neighborhood Association, also said that, in general, he thinks Highwoods has been a good owner, keeping the area clean and attractive.

“We’d be really concerned about what comes in next,” Spare said, adding that the city needs to require the new Plaza owner and other developers to involve the neighborhoods earlier in the process with any new projects.

Plaza merchants expressed a range of thoughts when they heard about the announcement.

Curt Diebel, owner of Diebel’s Sportsmens Gallery which has been on the Plaza since 1954 and recently signed a new 15-year lease, said, “People reminisce about the days of local merchants, but I think they are a little bit behind us. It is a business to be a landlord, too…What the Plaza brings is the retail component, restaurant component and the bars, which brings the people. Whoever the new owner is I hope they understand that business model.”

Diebel said Highwoods has been “very aggressive on capital expenditures, the parking lots, the sidewalks, all the little things they do to the landscaping upkeep, the old lights, the Spanish tiles that J.C. Nichols put on at the beginning — tremendous assets that they have maintained and made look good.”

He said he hoped the next owner has the wherewithal to maintain that pace.

Ursula Terrasi, owner of the Terrasi Living & Scandia Home shop, agreed that Highwood “has been a solid steward of our unique and historical Plaza as the retail landscape continues to change all over the country.”

She added that “any landlord has a challenge of keeping the space that they own leased — and to the best retailers they can find.”

Kansas City Mayor Sly James took a philosophical point of view.

“Highwoods Properties has been a partner with the city in many respects,” James said. “As a former business owner myself, I understand the need to make decisions that account for developing business opportunities and trends. As mayor, I believe the Plaza always has been a focal point of civic pride, and I don't expect that to change with ownership.”

Lynn Horsley, Joyce Smith, Dave Helling and Greg Hack contributed to this report.

The Plaza through the years

1907 J.C. Nichols starts buying land in the Brush Creek Valley, which will become the shopping center.

1923 The Spanish-style Country Club Plaza opens.

1925 Its first Christmas lights, a string of 16 bulbs, are hung.

1930 The first Plaza Lighting ceremony.

1932 The first Plaza Art Fair.

1965 Halls opens during a Plaza era dominated by local department and specialty stores.

1980s A shift to upscale national stores moves out local names and neighborhood amenities.

1998 The Nichols Co. is bought by Highwoods Properties.

2010-2011 A seven-story office building is proposed, opposed and scuttled.

2015 Highwoods puts the Plaza on the market.

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