Mission Gateway owes over $449K in unpaid taxes. The city might back out of the deal
The city of Mission could terminate its development agreement and yank its offer of tax incentives with the long-cursed Mission Gateway project — unless the developers pay up on late property taxes within the next 60 days.
Losing public financing, coupled with a bank seeking to foreclose on the property, could deal a death blow to the project.
The city sent a default notice to the developers on Monday after they failed to pay more than $449,000 in property taxes due last week. The city’s agreement — the fifth iteration, approved by the council in January after nearly 20 years of false starts — requires the developers to pay taxes on time. If Aryeh Realty LLC, which owns the property, doesn’t pay in the next couple of months, the city could throw out the deal.
Developers have argued that they need the city’s package of tax incentives so they’ll have enough money to finish the project.
Mayor Sollie Flora asked the developers to come to a City Council work session scheduled for 6:30 p.m. May 24 at Mission City Hall, City Administrator Laura Smith told The Star.
It’s far from the first time the Mission Gateway team has failed to pay property taxes on time. But the latest warning of default comes as developers are already walking a tightrope. Last month, New York’s Metropolitan Commercial Bank filed a lawsuit in Johnson County Court seeking foreclosure of the property, saying developers missed several mortgage payments.
The possible foreclosure is perhaps the biggest threat the project has faced, even after years of setbacks and broken promises. The bank says Aryeh owes more than $25 million in principal and interest, plus other late fees, court costs and appraisal costs. Those debts far exceed the likely value of the property if the bank forced a sale.
That could leave the city empty-handed, and developers, bankers, vendors and contractors holding the bag.
Mission Gateway is being developed by the Cameron Group, a New York firm run by Tom Valenti, and GFI Capital Resources Group, a New York City real estate finance and management firm run by Allen Gross. Valenti purchased the Mission Gateway property, the highly visible former Mission Mall site at Shawnee Mission Parkway and Johnson Drive, in 2005.
Andy Ashwal, a GFI vice president, told The Star in an email on Wednesday that questions should be addressed to the city since the default notice “seems to be something they would have issued.”
Matt Valenti with the Cameron Group did not immediately return The Star’s request for comment on Wednesday.
The city’s previous development agreement expired at the end of 2021 after the developer failed to meet its construction deadline. Developers, who say they have poured more than $60 million into the project so far, have blamed the years of delays on a series of misfortunes, most recently COVID-19 and limitations on the bond market, which caused construction to halt shortly after it began in 2020.
Before the risk of foreclosure, city officials hoped the project was finally on track. Developers in January told city leaders they had secured the financing to finish the job, though they still needed to secure more than $29 million to fund the first phase of work.
Plans for the first phase of the $268 million project include a 90,000-square-foot Cinergy Entertainment complex, as well as 50,000 square feet of commercial or restaurant space, 370 apartment units and a parking garage. The second phase would include a 200-room hotel and 100,000 square feet of office space or a medical facility.
With added safeguards for the city baked into the deal, all but one City Council member voted in favor of a fifth agreement in January. It revised the terms of a 20-year tax increment financing deal and raised the special sales tax collected as part of a 22-year community improvement district from 1% to 2%.
The agreement required the first phase of work to be completed within 46 months after bonds are issued, or else the deal dies. It also required satisfaction of all liens at bond closing.
The city has yet to issue the $22.5 million in bonds, which would be repaid with property and sales tax generated on the site. And officials have emphasized that the developers have not yet received any incentives.
In an effort to better protect the city, the developer agreed to place $3 million in escrow once the bonds are issued. Of that, $2 million would be used to ensure taxes are paid and $1 million would ensure deadlines are met. If not, the funds would be forfeited to the city.
If the developer remains in default under the agreement, the city could refuse to hand out any funding or reimbursements, it could terminate the deal or it could pursue “any remedy at law or in equity.”
Smith said until the period to pay the taxes is over, “it is not appropriate to speculate on what that means for the redevelopment agreement.”
Includes reporting by The Star’s Kevin Hardy.
This story was originally published May 17, 2023 at 3:02 PM.
