The sale of Wyandotte Plaza, a bond refinancing and subsequent changes to the redevelopment agreement are advancing through the Unified Government.
The UG’s Economic Development and Finance Standing Committee on Monday night heard some of the details of the refinance. The topic is expected to come back to the full UG Commission at a later date, perhaps Dec. 17.
According to UG information, Wyandotte Plaza, at 78th and State in Kansas City, Kan., is being sold to Phillips Edison, a real estate investment trust that owns more than 270 properties, including many shopping centers with grocery store anchors. Bellemore Homes Inc. is a former owner of the Wyandotte Plaza Shopping Center.
The developer, Legacy Development, has a contract to sell most of the shopping center to Phillips Edison, and the sale is hoped to close before Dec. 31, according to UG documents.
As part of the recent $28 million redevelopment effort, a new Price Chopper was constructed at the shopping center, and new tenants such as Marshalls, PetSmart, Krispy Kreme, CommunityAmerica Credit Union, Advanced Auto Parts and others were added.
Dave Claflin, representing Legacy Development, formerly Red Legacy, the developer for the Wyandotte Plaza redevelopment project, told the UG committee on Monday night that Phillips Edison has some very nice quality shopping centers in the Kansas City area, including Quivira Crossings at 135th and Quivira in Overland Park, and Falcon Valley at 101st Street in Lenexa.
“The way we became familiar with this whole project was through Phillips Edison,” Claflin said. “They originally had this project under contract in 2011.”
When they learned Price Chopper wanted not just renovations, but a new store, Phillips Edison contacted Red Legacy for redevelopment, he said.
“They assigned the contract to us in 2011, and we pulled it across the finish line, and we feel like it is a successful project today,” Claflin said.
Lew Levin, UG chief financial officer, said in July 2012, the UG financed $8.1 million in initial financing to support land acquisition for the Wyandotte Plaza project.
The goal of the project initially was to provide bond backing, but the UG wanted to proceed with refinancing of the project after three years, once the project was completed, he said. The project now is essentially completed, for the most part, although there may be an additional pad development, he said.
After the refinancing, he said the UG will not be providing bond backing, which the UG staff regards as positive for the local government.
The project then will be supported by three revenue sources: incremental sales tax revenues, property tax rebates associated with the Neighborhood Revitalization Act program, and a 1 percent community improvement district, he said.
Todd LaSala, attorney, said the original development agreement has a 1 percent CID sales tax on it, raising sales taxes at Wyandotte Plaza by 1 percent. The UG allowed the developer to pledge that 1 percent CID to its lender as collateral, LaSala said.
At the time the property sells to a developer, that lender will be paid in full and at that point, the 1 percent CID could be pledged to the bonds that will be used to do the UG refinancing, LaSala said.
LaSala said the developer requested some other conditions Dec. 7. Among those other conditions are that the refinancing take place on or before April 1, 2016, and LaSala said the UG would prefer it to take place in February.
The second condition requested is that if there are excess revenues available from the refinancing, the developer would like access to a portion of them, LaSala said.
“We haven’t discussed that yet; we haven’t agreed to that yet,” he added.
He asked if he could negotiate with the developer about the conditions and come back to the full commission meeting having agreed to those conditions.
According to UG officials, as part of the original agreement, the developer was allowed to come back and claim excess revenues. The excess revenues could be available at closing, LaSala said.
Levin said in the original redevelopment agreement, the public funding part of the total project cost was about 50 percent, and the developer had the ability to capture slightly under $13 million in total revenues if that is available. Today, the UG has funded the developer $7 million, and the developers are looking to capture an amount based on the refinancing to that project cap, he said. The current projection is that the developer could receive about $5 million of that remaining amount, he said, but that has been contemplated since the start of the development agreement.
While the number is about $5 million now, a month from now it could turn out to be $4.8 million, Levin said. Currently the developer wants a guarantee that they would get that $5 million, and the UG isn’t ready to say with absolute certainty that they would be able to receive that $5 million, he added.
LaSala said, in answer to a question from Commissioner Gayle Townsend, that the buyer, Phillips Edison, would take on all the obligations about owning, operating and maintaining the shopping center. However, the financing commitments, bonds, repayment of money advanced, and the financial deal would remain with Legacy, not transferring to the new buyer, he said. The UG backing would go away with the refinancing, he added.
Commissioner Brian McKiernan asked if there was any risk to the UG from this refinancing. Levin said it was the UG’s intention all along to remove itself from the backing of the project.
“Our risk is if we don’t proceed, we’re responsible for that debt,” Levin said. “We do not have access to the CID revenues, and we’ll have to back the project by other revenue sources, other than the incremental property and sales tax revenues” (if the refinancing doesn’t take place).
Most of Wyandotte Plaza is in this amended redevelopment agreement. A separate sale and transfer for Advanced Auto Parts was approved in September of 2015. Also separate from the main shopping center agreement is Krispy Kreme Doughnuts, which is proposed to be sold to LAG Investments Kansas City.
UG Commissioner Ann Murguia said she was concerned that because the proposed changes to the redevelopment agreement were not released until Monday, the commissioners didn’t have a chance to read them before tonight’s meeting. While she said she knows and trusts the UG staff and attorney, she added this information needs to be released before the day of the vote for reasons of openness and transparency.