CCIM

Sunflower Development: Preserving the past, creating a new future

MARCIA CHARNEY

Sunflower Development Group, founded 13 years ago, has established a niche in redeveloping historic properties. Principal Jason Swords shared with attendees at the Kansas City CCIM Chapter Breakfast on Friday, May 17, 2019, the details of some of its recently completed and current redevelopment projects. Swords showcased The Grand, a transformation by Sunflower Development Group and its project partner, Block Real Estate Services, of the Traders on Grand building, located in downtown Kansas City, Missouri. The property, purchased in April, 2016 from Van Trust Real Estate, now features 201 luxury apartment units with high end amenities.

The Grand also features 12,000 square feet of office and retail space. Sunflower Development Group recently relocated its offices to The Grand. Sunflower Development Group worked with the National Parks Service to designate the Traders on Grand building a historic building, making the project eligible for historic tax credits on both the state and federal levels.

Swords said that without the historic tax credits, the project would not work. With a total investment of $69 million, the quality of the amenities and The Grand’s prime location, Swords said he believes the building has another 40 to 50 years of life, “so we believe we’re positioned really, really well.”

Another recently completed historic renovation project is the Blenheim School Apartments, located at 2411 E. 70TH Terrace, Kansas City, Missouri.  Sunflower Development Group acquired the closed Blenheim School through the Kansas City Missouri Public Schools’ repurposing program and transformed the building into 52 affordable/restricted income apartments for seniors 55 years and older. 

After signing the purchase contract, Swords said it took Sunflower Development Group three years to get the federal and state historic tax credits, the federal and state affordable housing credits and other financing in place.   During those three years, the gymnasium filled up with four feet of water creating a mold issue, recounted Swords, “so the building got less expensive the longer we were under contract.” 

The completed project opened in December, 2018 and is approximately 75% leased.   Swords noted that most of the tenants are from the neighborhood.  This is the second  Kansas City, Missouri school building that Sunflower Development Group has repurposed.  It completed a 48 unit affordable senior living project in 2017, the Faxon School Apartments, which is fully leased.

Within the next two months, Sunflower Development Group plans to begin the transformation of the former Valentine Shopping Center, located across the street from the Uptown Theater, into the Uptown Lofts, a 226 apartment unit project.  The project also will contain a retail component.  In addition, Swords noted, Sunflower Development Group is working with Sky Real Estate to convert the historic American Electric Building located in downtown  St. Joseph, Missouri into the American Electric Lofts, which will contain 137 market rate apartments.

Swords wanted to dispel the myth that it’s cheaper to buy an older building and convert it than undertaking new construction.  “Renovating an older property, you’re going to spend more per foot than you would building a new construction,” he said.

EPC's McKeen sees stability in KC multifamily market

By Marcia Charney | MWM Contributing Writer

Stable. Steady. Cautious. Opportunity.

Those are the words Mike McKeen is using these days to describe the state of Kansas City’s apartment market. The principal and president of EPC Real Estate Group, LLC spoke to a record-breaking crowd of more than 150 brokers and real estate professionals at the April meeting of the Kansas City chapter of CCIM

Areas that will continue to succeed in the multifamily market will have “charm, character and are walkable, with jobs in good proximity,” McKeen said, noting that strong players currently include Lenexa City Center, downtown Overland Park, Olathe, Mission; and downtown Kansas City, Missouri, which leads the area in multifamily development. 

The living preferences of Millennials are driving the market. Some of EPC’s current products are Millennial-based, including Avenue 80 in downtown Overland Park, where Millennials comprise 70 percent of the tenant base. Empty nesters, who no longer want to maintain their homes and are seeking to live life a little differently, are another growing tenant segment.  

McKeen discussed how e-commerce is changing multifamily development. With the explosion of package delivery, developers are installing electronic parcel delivery systems, which allow tenants to retrieve packages by entering a security code. McKeen said that without these delivery systems, the buildings would need a massive storage room for delivered packages and staff to monitor receipt and storage.

McKeen said that developers now have to consider for the first time the amenities and unit size that Generation Z wants. He stated that studio apartments are the “quickest thing to fly off our lists right now because they hit a certain price point of affordability but they also cater to that lifestyle of people who spend most of their time playing video games.” McKeen added that the amenity most requested by Gen Z is blackout shades for better game screen visibility. 

McKeen discussed the challenges currently facing multifamily developers which include a decline in the number of skilled craftsmen; the threat of tariffs, causing suppliers to raise prices to offset the impact of possible future tariffs on costs; future tax treatment; the passage of city ordinances which impact the use of development incentives; aging infrastructure; low supply and high demand, particularly for precast concrete products; and rising operating costs.

McKeen also recognized new opportunities for multifamily developers such as the creation of new inventory to meet the demands of Millennials and empty nesters, affordable housing, and opportunity zones. In addition, new product types like micro-units, which range in size from 350 to 500 square feet, are in high demand with rising rents.  

Noting that “site selection is everything now,” McKeen said the average occupancy of multifamily properties in the Kansas City area has remained steady, staying between 93 and 95 percent.  

 

Insight: KC CRE pros use tech tools to improve outcomes

By Erik Dolan-Del Vecchio | Content Contributor

On the way to becoming an investment sales broker at CBRE, Holly Mills was a commercial appraiser for over a decade, which explains a lot.

Mills’ analytical background is integral to her approach to commercial property sales and leasing. Clients say her data-driven insights inform and equip them to understand the benefits of different alternatives, be it for an investment property to purchase, a corporate location to occupy or a space to lease.

State-of-the-art technology helps Mills, a CBRE vice president, collect, sift, sort and track voluminous amounts of data and information. She uses the firm’s proprietary commercial real estate relationship management software to track spaces, tenants, properties, owners, buyers and milestone dates of opportunities coming up… “things I need to track to make me more productive,” she says.

Mills also makes frequent use of mapping tools to help clients visualize data points. She tells the story of helping a physical therapy medical practice plan an expansion involving as many as 10 locations in three years. Mapping tools with demographic information overlaying locations and radius maps helped her provide points of comparison for the client to determine the locations that would be accretive to their market.

Accessing Information from Anywhere on the Fly

Bob Galamba, senior vice president of Colliers in Kansas City, agrees that technology propels his business every day, accelerating transactions and reducing friction along the way.

Galamba’s focus primarily is multifamily, including existing assets and land with a multifamily component.

He and his team track people and prospects in Apto, the leading commercial real estate software for brokers, and use Smartsheet collaboration software to share information and facilitate communication so everyone’s on the same wavelength and has the benefit of the intelligence. Historical data on people, and shared documents such as letters of intent, can be accessed from anywhere on the fly.

For deal management with clients, Galamba uses Real Capital Market’s Deal Rooms, in which he can maintain property marketing pieces, confidentiality agreements, offering memorandums and more.

 “As a property remains on the market or a deal progresses, you’re still updating financials each month and rent rolls, and able to share that information with buyers who have expressed interest. It also provides a reason to reach out and contact prospects, and a seamless way to keep all the [transaction] information updated and together.”

Notably, Apto and Real Capital Markets are software integration partners, which facilitates information sharing and reduces redundant data entry between the two services.

Blockchain and Predictive Analytics are Game-Changers for Real Estate

Laird Goldsborough is no stranger to information and technology either. Information is the chief currency of his business, which is determining the value of real estate and advising clients on all manner of real estate and investment decisions as senior managing director of the regional office of Valbridge Property Advisors.

Goldsborough relies on a variety of technology tools and services, including demographic information from CCIM’s Site to do Business. He sees technology as helping to make real estate information more transparent and properties faster to transact.

Goldsborough describes blockchain technology, fast evolving, as a game-changer for real estate. He calls blockchain “distributed ledger technology” that allows all participants in the chain (versus one person) to have access to information. With blockchain, Goldsborough says, everyone owns the information, which removes opacity and thus risk.

If information on real estate assets becomes more transparent, not only will sales happen faster, but more buyers will become attracted to the asset class, which would expand the market for investors.

The commercial real estate sales cycle is too long, Goldsborough says. If you want to accelerate the sales cycle, unmask the information, which would speed up and standardize the process of trading assets, akin to trading Apple shares in the stock market.

The other technology Goldsborough sees as on the verge of benefitting real estate professionals is predictive analytics, a form of artificial intelligence. 

“You have a huge pool of data on real estate and sales and markets — a lake with minnows and trout and sharks. If we allow a machine to go out and fish out what we need, we could make better predictions based on historic data and cycles,” he says.

The result: “As an appraiser I’ll be able to give you a value today and look back and with a much higher degree of accuracy suggest what the building may be worth three years from now.”