A financial analysis says Foutch Brothers has the qualifications and financial capacity to take over Kemper Arena from Kansas City and repurpose it as a sports training and events center.
The financial vetting is one of the last pieces of information the city needs to transfer the aging West Bottoms arena to the private developer, which hopes to start construction later this spring.
“The developer appears to be qualified and capable, and has sufficient organizational and financial capacity to execute the project,” said the report from SB Friedman Development Advisors, obtained by The Kansas City Star. “The developer has proven capable of securing and structuring complicated financing.”
The report recommended that, due to the project’s unique characteristics, the city should have contingencies with its transfer to private control.
“We also recommend that the transfer of the Kemper Arena include a recapture provision if construction has not commenced within 12-18 months of the property transfer,” the report said.
Steve Foutch, CEO of Foutch Brothers, said Friday that his company was encouraged by the positive report and hopes to start construction soon, possibly by late April.
“Everything’s falling in place,” he said, adding that the facility is already 60 percent pre-leased, although he wouldn’t reveal details.
Foutch’s vision is for a multi-purpose venue that would add a second floor and more than double the arena’s capacity for indoor soccer, basketball, volleyball, gymnastics, dance, fitness, running and biking tracks and sundry other athletics. It would also have community and even entertainment events that don’t compete with Kansas City’s downtown Sprint Center. The project is now estimated to cost about $32 million and is expected to open sometime in 2018.
The only tenant announced so far is Mosaic Life Care, which will be the naming rights sponsor. Once the transfer agreement is finalized, Kemper Arena will become Mosaic Arena.
Councilman Scott Taylor, chairman of the council’s Planning, Zoning and Economic Development Committee, said the report reassures the city that the long-awaited project can become a reality.
“That was an important step. It was a pretty thorough analysis by SB Freedman, which is an independent party,” Taylor said Friday. “It’s exactly what we needed to see, for this to move forward.”
Taylor said the city is eager to complete the transfer not just because the Foutch project is so positive for the community, but also because it will save the city about $1 million in maintenance costs on an arena that has languished ever since the Sprint Center opened in 2007.
Several more things have to happen before the final transfer can occur. The City Council still needs to approve a purchase and sale agreement, which Taylor said should be introduced soon. That would help the developer complete financing.
Foutch will also seek a tax abatement on the arena building, at a Planned Industrial Expansion Authority meeting expected to occur on Feb. 2. The developer is seeking a 10-year property tax abatement just on the building, but would start to pay taxes on the land.
That’s still a net benefit to Kansas City taxing jurisdictions, because while Kemper Arena was a city facility it generated no taxes from either building or land.
Kevin Masters, director of government relations for the Kansas City public schools, said Friday the district needs more information before it can sign off on any tax incentive for the project. He said a meeting is scheduled with the developer next week to provide more specifics on how the finances would work for the project.
A key ingredient to Foutch’s financing plan came last September, when the National Park Service agreed to list the West Bottoms arena on the National Register of Historic Places. That designation was crucial to the project winning historic tax credits, which are expected to provide more than 35 percent of the total sources of financing.
In its report, SB Friedman noted that Foutch has substantial experience with historic renovation projects, primarily focusing on conversion of historic warehouses and schools into residential units.
The company has undertaken 25 development projects of various sizes in its 11-year history. While most were smaller and less complex than the Kemper plan, Foutch has completed four recent projects in excess of $25 million, “demonstrating capacity to manage development at a scale similar to the proposed project,” the report said.
According to the report, the developer typically does four to five projects a year and expects a similar workload in 2017.