Prairiefire, a sprawling mixed-use development in south Overland Park, once again could not generate enough sales to make interest payments on its bond debt without tapping a reserve fund.
Fred Merrill Jr., the developer of the 60-acre development at 135th Street between Nall and Lamar avenues, said Friday that Prairiefire “is in the best condition and position since its opening in May 2014.”
Even so, it sought withdrawals from a fund set aside for when the project doesn’t generate enough tax revenue to make interest payments.
Prairiefire, a $350 million development, includes several restaurant and retail locations unique to Kansas City, including Pinstripes, Rock & Brews and Cinetopia. It’s also home to the Museum at Prairiefire, which hosts traveling exhibits from the American Museum of Natural History.
On Tuesday, bondholders were notified that on Dec. 15, $402,406 was taken from a reserve fund, similar to a savings account, to cover an interest-only payment on sales tax revenue (STAR) bonds. Similarly, $142,986 was drawn from a reserve fund for community improvement bonds on Dec. 15, also to make an interest payment.
Reserve funds are normally only used if the project itself does not generate enough sales to make the payments on its own.
In 2012, Overland Park issued nearly $65 million in STAR bonds to investors to help finance construction of Prairiefire. Buyers of these bonds would be repaid by local and state sales taxes coming from people who make retail purchases at the development. At the same time, Overland Park issued $14.1 million in community improvement district bonds. That debt would be retired over time by an additional 1.5 percent sales tax on purchases at Prairiefire.
Overland Park and Kansas taxpayers are not on the hook for Prairiefire’s performance.
Last month marked the fourth time in the last two years that a bond reserve was used to make semiannual payments on interest.
A reserve fund of $6,499,000 was established for the STAR bonds when they were sold in 2012. A total of $1,210,283 has been withdrawn from that account to make bond payments.
Merrill offered two explanations when asked what accounted for the latest bond draw. One was last year’s closure of a Fresh Market grocery store at Prairiefire.
Merrill said he was in contact with several potential tenants to take the former Fresh Market space.
The other was a concept called “movie clearance.” Merrill has said in the past that AMC Entertainment Inc. made arrangements with movie studios to get the first run on new films at their locations, which the developer said had affected Cinetopia, the theater at Prairiefire. AMC has a theater in Leawood less than 3 miles away.
Merrill said AMC ended the practice of movie clearance last year.
“Clearance is now over,” Merrill said. “We are already seeing the positive impact of clearance ending because sales are already increasing.”
On June 29, a public filing with bondholders indicated that Cinetopia at Prairiefire was put on notice for underpayment of rent. Merrill would not say if the movie theater was still behind on rent.
“As a matter of policy, we do not disclose private tenant information apart from regular bond disclosures,” Merrill said in an email. “We are confident that the end of clearance will resolve any past issues with this matter.”
Merrill expects to break ground on an expansion of Prairiefire early this summer. That second phase, scaled back from original plans, would include 135,000 square feet of retail space, 70,000 square feet of office space and a 110-room hotel.