Unexpected costs totaling near $20 million drove developers back to a tax incentive-granting agency Thursday to ask for a break on labor costs in exchange for more affordable housing in the planned redevelopment of downtown’s iconic “flashcube building.”
The Executive Plaza Office Building, at 710-720 Main St., has been vacant for years. Kansas City-based Worcester Investments plans to spend nearly $70 million to convert it into 184 apartments, amenities and office space for the company.
“I think everybody knows the building when they drive by it, and I think that’s part of the allure for us,” said Matt McCauley, chief operating officer for Worcester.
Because of rapidly rising construction costs and the loss of anticipated financing from the federal Department of Housing and Urban Development, Worcester sought an amendment to its development contract easing a prevailing wage requirement to bring down labor costs. In exchange, the company offered more apartments the developer said are intended to meet the Kansas City Council’s new definition of affordable housing.
“As we get further into it, we find more deterioration in the building,” said Jim Calvert, director of development and construction for Worcester.
At the same time, materials costs have risen, which Calvert attributed to trade tensions and President Donald Trump’s steel and aluminum tariffs.
The Planned Industrial Expansion Authority Board approved the request Thursday on a voice vote. Worcester Investments COO Matt McCauley said the company hopes to start construction early next year and complete the development in the third quarter of 2020.
McCauley said the company was bound by the PIEA and would have been bound by HUD to comply with prevailing wage requirements, which sets a minimum wage for construction projects based on the prevailing cost for labor in the area. Under the new agreement, only 20 percent of the labor costs on the project would be subject to prevailing wage requirements.
McCauley said he expected that the company would pay prevailing wage on more than 20 percent of the project, but he asked for that level to avoid having to come back to PIEA for another contract amendment.
The board approved the change, but Kevin O’Neill, assistant treasurer of the board and publisher of the KC Labor Beacon, said he would like to see a larger portion of the project subject to prevailing wage requirements.
“It kind of bothers me that when costs go up, the first thing we cut is labor,” O’Neill said. “... You’re getting a full 100 percent abatement, which is in our world a little bit unusual now. So I guess my issue is that you want all this, but you’re only willing to give this much to get it.”
McCauley said that over the two years working on the project, labor has been the “last thing” the company wants to cut.
“But it’s really that marginal reduction in costs that’s really going to put this as a viable project,” McCauley said.
The flashcube development will have more 184 apartments with amenities, including fitness rooms, a lounge, bike-and dog-wash stations, pickleball and basketball courts, and rock climbing. The flashcube also is next to a streetcar stop. In an interview, McCauley said Worcester didn’t want to overload on amenities.
“It’s really clean amenities,” McCauley said. “It’s what people want to have close by.”
In an interview Wednesday, he said rental rates were still under negotiation.
“We think we’re offering luxury-style apartments at market rates,” McCauley said.
For the 40 affordable units — an increase from Worcester’s original offer of 25 — rents will be just under $1,200, said Charles Renner, an attorney with Husch Blackwell representing the developer.