One Light - 13th & Walnut

[kboish]

I wonder if they have an equity partner lined up? Typically at this stage the developer (Cordish) is seeking equity financing from a limited partner (in this case it will need to be an opportunistic investor, generally in the form of a private equity real estate fund). In a typical 90/10 JV structure, the developer puts up 10% of the equity requirement with the LP responsible for the balance. In this case, lets assume 70% of the $70m cost will be financed with debt/tax credit etc., leaving $21m of equity required. If Cordish puts up 10% ($2.1m) that leaves approximately $19m yet to be funded. That's a large equity "ticket" for any deal, much less a speculative apartment development in a slow growth Midwestern metro.

I work for one such fund in NYC, and I can tell you the biggest hangups, or drawbacks, will be the lack of comps in the market, reluctance to fund a development that sets the "high water" mark in rents for a sub-market, and the general perception of Kansas City being a slow growth, secondary, or even tertiary market. Also, many investors would be concerned about the "exit" strategy once the asset is operating i.e. what institutional buyer will come into the KC market and buy a $75m high-rise apartment asset? Only a select few in the real estate world have the capacity to invest in those deal sizes.

That said, being from KC, and therefore biased, I would be a huge proponent of investing in this type of product - urban, high-rise, soon to be transit-oriented, etc. The trick is convincing the investment committees! Hopefully that fills you in on what is likely going on behind the scenes. Of course, Cordish could be funding the entire equity themselves. If that's the case then ignore everything I just said! Or take it as a brief lesson in private equity real estate joint venture investing...

Don't forget the city is giving the development $8million in cash as an upfront incentive to help overcome some of the financing barriers you mention. This is in addition to the tax abatements they are working on now. Hopefully this will be enough to get the project off the ground because as you point out there are no similar projects in the area and it will be a firm showcase for other developers to use as a measuring stick for what is plausible (or not) in the area and hopefully follow up with some additional DT residential construction (high rise or not).

[FangKC]

The Morgan Group developed Market Station in the River Market and one it was built, sold it to MMA Communities, a real estate investment trust based in Memphis.

http://www.bizjournals.com/kansascity/n ... ansas.html

Market Station was a $35 million development.

http://www.bizjournals.com/kansascity/s ... ocus7.html

[ChilipepKC]

Yup- I believe Market Station sold for $52.5m or ~$160k/unit- a high for the area. That comparable as well as the recent Library Lofts sale are important indicators of increasing investor interest in Kansas City, especially from the REIT world. But this is also reflective of increased capital allocation to apartments over the past 1.5 - 2 years. It has been the "sexy" choice of many real estate investors given its strong performance out of the downturn. As core markets become increasingly expensive (see DC, NYC, SF), investors will begin to push into the secondary markets in search of higher yields. KC should benefit from this wave of capital.

[taxi]

According to the Jackson Co. website, Market Station sold for $48,804,538

[loftguy]

Ok, I have heard both numbers applied to the sale of Mkt Station, and attributed cap rates on the sale, that reflect the difference in numbers.

The numbers reported to Jackson County, do they come from the title companies? And, are reported numbers the gross sales price, or are there costs which are allowed to be shaved off the reported sale price, allowing for a reduced property tax treatment?

[loftguy]

Yup- I believe Market Station sold for $52.5m or ~$160k/unit- a high for the area. That comparable as well as the recent Library Lofts sale are important indicators of increasing investor interest in Kansas City, especially from the REIT world. But this is also reflective of increased capital allocation to apartments over the past 1.5 - 2 years. It has been the "sexy" choice of many real estate investors given its strong performance out of the downturn. As core markets become increasingly expensive (see DC, NYC, SF), investors will begin to push into the secondary markets in search of higher yields. KC should benefit from this wave of capital.

What's your view on the relaxation of construction loan requirements?
When is the flow of capital going to more fully address this segment. 35-50% equity requirements are backing up the supply line.

[ChilipepKC]

We typically get our information on sales from a few "bloomberg" type companies in the real estate world: real capital analytics and property & portfolio research. In this particular case, a public REIT purchased the asset, so the sale information is also listed in their SEC filing. It looks like they attributed ~$52.06m to the sale. But you're right, depending upon what basis you use, a sales price can mean a multitude of things (including closing costs, capitalizing upfront expenses, acquisition fees, etc). In any event- a positive indicator for KC!

http://ir.maac.com/Cache/16141827.PDF?Y ... IID=103123

With regard to construction financing, we are seeing anywhere from 65% non recourse LTC to 75% for well located, primary market development sites at rates somewhere in the 3.5-4.5% range (propped up by Fannie/Freddie Mae). My guess would be a lot of the local banks still have a bitter taste from real estate lending in the last cycle and are reluctant to place capital in the development arena.

[taxi]

Ok, I have heard both numbers applied to the sale of Mkt Station, and attributed cap rates on the sale, that reflect the difference in numbers.

The numbers reported to Jackson County, do they come from the title companies? And, are reported numbers the gross sales price, or are there costs which are allowed to be shaved off the reported sale price, allowing for a reduced property tax treatment?

The way I understand it, when a buyer files a new deed with the County, they must fill out a Certificate of Value, which is assumed to be the sale price. I recently filed a Quit Claim Deed and asked if I could put a negative number for the value. They laughed but told me they thought that would be OK. Being the non-risk-taker that I am, I decided on $10 instead.

[flyingember]

This year is going to be a big deal for downtown.

It's the first property assessment in two years, and the housing market is very different from two years ago.

Some parts of JoCo saw a 3% increase already. I'd be intrigued to see if downtown beats that. If it does that it's obviously a plus for a real estate developer looking at the area and a vindication for the work put in.

[DaveKCMO]

i've heard cranes will be up by october.

[flyingember]

i've heard cranes will be up by october.

how much overlap with streetcar construction? (utilities or otherwise)

because cranes on Walnut and work on Main = a mess

[smh]

i've heard cranes will be up by october.

how much overlap with streetcar construction? (utilities or otherwise)

because cranes on Walnut and work on Main = a mess

This is a city. We can handle it. In fact, we look forward to it.

[Pork Chop]

i've heard cranes will be up by october.

how much overlap with streetcar construction? (utilities or otherwise)

because cranes on Walnut and work on Main = a mess

This is a city. We can handle it. In fact, we look forward to it.

+1

[pash]

.

[smh]

This is a city.

Let's just repeat this apropos everything.

No doubt. It seems to need constant reinforcing.

[bobbyhawks]

i've heard cranes will be up by october.

how much overlap with streetcar construction? (utilities or otherwise)

because cranes on Walnut and work on Main = a mess

Honestly, I think all of this work is one of the best things to happen to downtown traffic for a long time. Most people who work downtown have no clue about most of the things that surround them, sometimes even a few blocks away. Judging by the 20th Street/W. Pennway on-ramp closure to Southbound I-35, you'd think people had no other way to get on the highway, when there are probably over a dozen ways to get on the highway from anywhere within the loop.

The first few days of the closure, people were heading South on Summit and getting clogged up at the stop sign just South of SW BLVD. In recent days, I've noticed traffic move to other parts of downtown, but in places that were normally pretty dead. Overall, there still aren't huge problem areas that I am aware of, and people are seeing things they may have never seen before. Some of the best eye-openers for me personally, when I lived and commuted from out South, were the times I took a different route home and got a little lost on the way.

[DaveKCMO]

this scenario has played out in almost every "carmaggeddon" scenario in recent years. not at all surprising, since we've left massive urban road networks fester in the pursuit of speedy freeways that simply duplicate existing infrastructure. so instead, we've put the festering urban roads on diets, added bike lanes, on-street parking, etc. and there STILL is enough capacity for everyone to get around.

[flyingember]

i've heard cranes will be up by october.

how much overlap with streetcar construction? (utilities or otherwise)

because cranes on Walnut and work on Main = a mess

This is a city. We can handle it. In fact, we look forward to it.

understood. but dishonesty was involved in the situation.

a publicized reason to convert walnut to 2-way was to provide a good alternative to Main during streetcar construction.

knowing this was going to mess with it the city also gave in on finishing the Baltimore convert to 9th.

[smh]

understood. but dishonesty was involved in the situation.

a publicized reason to convert walnut to 2-way was to provide a good alternative to Main during streetcar construction.

knowing this was going to mess with it the city also gave in on finishing the Baltimore convert to 9th.

I think you have some facts crossed. Walnut will still provide an alternative to Main during the rolling streetcar closures--even if Walnut is partially closed, it will only be for a block. The Walnut construction has nothing to do with the 900 block of Baltimore.

I see no dishonesty at all. Perhaps a bit of lack of will on the City's part in failing to force conversion of the Baltimore block--but nothing dishonest.

[scooterj]

Because Summit, Broadway, Central, Wyandotte, Baltimore, Grand, Oak, Locust, Holmes, and Charlotte don't provide enough lanes across 670 to absorb a minor disruption to Walnut?