Developers face post-pandemic challenges

a MWM CRE event recap

Roxsen Koch, shareholder with Polsinelli PC, and Jason Swords, principal with Sunflower Development Group, joined moderator Christine Johnston, CPA, CGMA, CMA, partner with MarksNelson LLC, for a live webinar discussion hosted by CREW KC this Tuesday.

The panelists discussed tax increment financing (TIF) in Kansas City, Mo., economic development incentives and future challenges facing developers in a post-pandemic world.  

Koch began with explaining that TIF is an economic tool enabled through the State of Missouri which allows developers to capture the tax increment that a real estate project generates in order to finance a project which otherwise might not be financially feasible. 

Although TIF has been used by developers on many prominent projects in Kansas City, Mo., its future use may be more limited, especially to finance any hospitality and retail project in the immediate future, according to Swords.

“I think that’s the tool for keeping jobs,” Swords said.

Koch, who was involved with the financing of the Loews Kansas City Hotel project, said TIF financing along with several other economic development tools, were incorporated into the hotel project.  Although its opening was delayed, the hotel recently opened amid the pandemic.

“Obviously, timing is everything. We were very fortunate to obtain the financing when we did. In today’s market, I don’t think you would see the project come forward. Any project of this nature in Kansas City, Missouri really would be substantially on hold until we knew more about what the world in the future would be,” said Koch. 

According to Koch, there are a lot of challenges amongst successfully financing a project today. 

“You need to have investors who want to have a certain return on their investment to be committed to the project. You have to show you have a team that’s knowledgeable in the construction of that particular project and the operation of that particular project,” said Koch. 

Swords predicts that getting a deal financed in the next few years is going to be tough.

“We’re only seeing the beginning of the triage that is out there. Fifty percent of our small business tenants aren’t going to make it. I think there’s a lot of money on the sidelines waiting for distressed assets,” said Swords. 

Both Koch and Swords agreed that TIF will always be a tool for developers in Kansas City. 

“If policymakers do not embrace the use of TIF on projects that the city wants to see developed, then investors will simply take their money someplace else and they won’t invest in Kansas City,” said Koch.

Swords acknowledged that although obtaining incentive tools from Kansas City, Mo. is not an easy process, the city has been a leader in spurring redevelopment. 

The duo agreed that the one market segment where consumer demand remains strong is housing. 

“I think that everything else is too spec, too tough, too difficult. Housing is the only kind of project we’re working on today,” said Swords. 

Koch added that developers still need economic development tools to make housing projects happen. Although TIF is not typically used to finance housing, Koch noted that there are other economic development tools available to developers such as tax abatement.

“I think that the important thing is to sit back and be prepared for what’s to come. None of us really knows what that looks like right now,” Koch said. 

Ryan Companies opens new KC office

Ryan Companies has officially moved into its new Kansas City office on a second-floor suite of the Interstate Securities Building/Topsy Building at 215 E 18th St. in downtown Kansas City, Mo.

The construction and real estate development firm has been working in the KC market for 15 years, but it wasn’t until 2018 that they established a physical presence in the city.

The 3,213 SF office is designed to seat 16 employees, with room to expand up to 24. The building was built in 1950 and is listed on the National Register of Historic Places.

The decision to further invest in the Kansas City market was ultimately made because of their success that has come out of the last decade and a half paired with a great outlook for decades to come, according to Ryan's marketing team.

“We’re stoked to be in another one of 3D Development’s and Lankford Fendler’s projects. True to fashion, they continue to outdo themselves and we can’t wait to pour an Irish pint (or two) when we have our official open house. In the meantime, give us a ring, bring a mask and come check out our new digs! You’ll love our Northwoods fireplace (in the winter) and the view from the rooftop the next time the temperature drops,” said Aaron Schlagel, vice president – real estate development, midwest region for Ryan Companies.

Ryan Companies also announced the relocation of  Craig Thompson, vice president of construction, from its Des Moines, Iowa offices to its new office in Kansas City.

“I want to help build something in Kansas City that will continue for years to come. In Des Moines, we were able to grow the office by four times what it was when we began. With Kansas City being a bigger market, the sky is the limit for what we can do here,” said Thompson.

Thompson, who just celebrated his 20-year anniversary with Ryan Companies, will help lead the growth of Ryan’s rapidly expanding team and presence in Kansas City.

Ryan Companies’ noteworthy local projects include Commerce Tower, St. Luke’s Community Hospital in Shawnee, Kan.) and multiple projects for Target and Amazon. The company will focus on real estate development while continuing to provide construction services.