Lender buys back old KC Federal Reserve Bank building for $12.8M at auction

The historic Federal Reserve Bank of Kansas City building at 925 Grand Blvd. was bought for $12.8 million by the lender holding its promissory note at an auction Monday on the front steps of the Jackson County Courthouse.

The lender, Great Western Bank of Sioux Falls, S.D., had been owed $14.3 million on the property and was the sole bidder at the auction, which lasted only a few minutes. The 21-story vacant building, which opened in 1921, had been owned by an entity established by developer Jason Townsend.

Townsend bought the building in 2005 from the Federal Reserve Bank. The Kansas City Fed then leased its space for three years before moving into new headquarters on Main Street near Penn Valley Park.

Efforts by Townsend to renovate the structure into condominiums and later a hotel fell through.

Bank officials say they plan to dispose of the property as soon as possible.

“We are now getting ready to market and sell the building,” said Kate LeBrun, a spokeswoman for Great Western.

The building is considered a prime downtown redevelopment opportunity, in excellent condition with an attached, secure 480-space garage.

Chuck Connealy, a broker with Waterford Property Co., had been marketing the building on behalf of Townsend for about a month. The asking price had been $16 million.

Connealy was one of about a half-dozen people who attended the courthouse auction Monday.

“We had three or four quality showings,” he said. “I think everybody that looked at it knew it was going to be auctioned. With the bank owning it, they know they’ll sell right away.”

Who will be chosen by the bank as its local sales broker is not known, but Connealy said he’d be glad to continue to market the property.

“We’re high on downtown,” he said. “I think it’s going to be a nice residential conversion.”

Townsend could not be reached for comment, but Connealy said the former owner got stuck when the real estate market went awry a few years ago, particularly for condos.

“Jason told me he bought the building and when they got the building back after the Feds leased it for three years the condo market had completely vanished,” he said.

Townsend later switched his plan and proposed converting the building into a 306-room hotel. The Land Clearance Redevelopment Authority agreed to extend its redevelopment agreement, which included a 10-year property tax abatement, until Jan. 31, 2014.

The hotel redevelopment agreement would remain in effect for a new owner, said Joe Egan, executive director of the city development agency. Should the development plan change, the agreement would have to be amended.

Besides a potential hotel, there have been some suggestions it would be a good candidate as a site for the planned relocation of 1,000 federal workers from the Bannister Federal Complex. The federal General Services Administration wants to have the employees in leased downtown office space by December 2014.