Here we go! This could either be one of the greatest things to happen to downtown Kansas City in my lifetime, or it could be a gigantic heart break if they choose a location in JOCO.
Source: KC's plan for Block worth $300M
Jim Davis
Staff Writer
Kansas City leaders are completing a $300 million plan to bring H&R Block Inc.'s headquarters Downtown and build an adjacent entertainment complex, a person familiar with the preparations said.
The source, who asked not to be identified, said the plan will go to the Kansas City Council the week of Dec. 15.
Linda McDougall, a spokeswoman for Block (NYSE: HRB), said the company is confident of announcing a decision before winter starts on Dec. 22 but declined to provide details.
To meet this deadline, plans would need to be presented to the Kansas City Council during the week of Dec. 15; the council's last meeting of the year is Dec. 18.
Although the proposal is far from done, the source said, it anticipates more than 60 percent of financing coming from the public. This rate of subsidy is almost twice what was pledged to a previous $97.5 million plan to renovate the Power & Light Building and build a new office building and parking garage.
Kansas City Mayor Kay Barnes declined to comment on the prospects for landing what would be the greatest triumph of her downtown revitalization campaign. Barnes said she's following Block's timetable.
Block's 1,000-person headquarters would become the economic engine for the ambitious plan. Block expects to develop its new headquarters building, valued at $120 million, and will request about $35 million in tax increment financing and other public reimbursement, the source said.
Taxes generated by Block also would help support the entertainment complex. Parking garages, for instance, would be shared by headquarters employees and complex visitors. This linkage not only would boost the garages' use, it also would blunt criticism about diverting taxes to subsidize stores and restaurants that would compete with existing Kansas City businesses.
John Parker, president of Triad Capital Advisors in Kansas City, said Block's new headquarters would be financed easily. Block, No. 2 on The Business Journal's list of the Top 25 area public companies, has blue-chip credit.
Parker said this standing provides leverage to attract institutional money on favorable terms.
"There's a tremendous amount of capital available," he said. "The consequence of that has been to drive spreads down on competitive transactions of a quality that institutions have a high degree of interest in doing."
Less certain, he said, are prospects for the proposed entertainment district that has been envisioned for the area from 13th Street to Truman Road between Grand Boulevard and Baltimore Avenue.
The district would require a more risk-tolerant financing source, Parker said, "at least until there's a track record."
Banks would be more likely to bear construction and leasing risks, he said.
Mitigating these uncertainties is the involvement of The Cordish Co., a nationally renowned urban entertainment developer. Cordish has offered to invest about $30 million in Kansas City, the source said, leaving about $150 million for the public to finance. Assembling the public money would require TIF to capture local taxes generated by the project and the new Missouri Downtown Economic Stimulus Act to capture state taxes.
Steve Brettell of Grubb & Ellis/The Winbury Group said this steep price could be worth paying to bring one of Kansas City's glamour companies Downtown. Cordish's national relationships would help attract a suitable clientele to surround Block's headquarters, Brettell said.
"If (city government officials) can get H&R Block to come Downtown, they'd be crazy not to do it," he said.
Cordish officials did not respond to inquiries from The Business Journal.
Officials in other cities where Cordish has worked called the Baltimore-based company a unique specialist.
"They do what they say they're going to do," said Jack Berry, executive director of Richmond Renaissance Inc. in Richmond, Va., where Cordish is building an $82 million mixed-use downtown development. "They're tough negotiators, but they deliver what they promise."
Cordish opened The Power Plant in Baltimore in 1998. The project includes an ESPN Zone and Hard Rock Cafe.
Andrew Frank, executive vice president of the Baltimore Development Corp., said Cordish can get large public subsidies for high-risk ventures that others won't touch. The company's 99-year lease on The Power Plant, for instance, requires payments of just $1 a year for its first 10 years.
Economic development officials must set their own objectives, Frank said.
"We can only move forward when a project meets our internal rates of return," he said. "We don't use the same measures as Cordish. Our returns are measured by jobs and taxes."
Reach Jim Davis at 816-421-5900 or jdavis@bizjournals.com
