Kansas City Developments
Revitalizing a Once Forgotten Area
By: Ben Riehle, CEO/Co-Founder Apex Real Estate Network
Now that my team is actively investing in two markets, Tucson (for 10 years) and Kansas City (for 1 year), I have been surprised by the similarities in Kansas City (KCMO) that we saw 10 years ago when we started investing in Tucson. Underlying economic resemblances and entry cost is what initially attracted us to KCMO, however after active involvement for the past 12 months we believe KCMO has many of the same market signals that Tucson demonstrated 10 years ago. For example, there is a substantial inventory of rundown/distressed properties, an appetite for growth by local leaders, the potential of rapid appreciation, strong rental demand and much more.
KCMO has a lot of development that has started to bring growth to once undesirable neighborhoods. I wrote an article outlining the growth we have seen in Tucson (click here to read). Now I want to discuss the major projects that are going on in KCMO. I’m going focus mainly on development that is happening on or near Troost Ave. If you are familiar with KCMO, you know the history of this street, and how at one point it served as a dividing line between desirable and undesirable neighborhoods within the city. (If you aren’t a KCMO native and aren’t familiar with Troost Ave., click here to read).
The first major project that is having an impact on KCMO is the expansion of the Streetcar System. Although it is still being voted on for approval, the preliminary polls suggest that the sales tax increase will pass, allowing the Streetcar to be expanded from Union Station to the University of Missouri Kansas City. The Streetcar system has contributed to the growth in downtown KCMO and the city government is hopeful the expansion can bring the same growth to other parts of the city (click here to read more about the development). KCMO Streetcar Authority Executive Director Tom Gerend says, “If the vote is successful, that gives us a local revenue stream to really take the next step and to pursue federal funding. We then have to move to utility relocation, design, construction and testing and operation so it’s still about a 5-year effort. We’re looking at about 2023 before the project is completed.”
KCMO plans to request $100 million from the federal government in September. That money would be combined with an estimated $25 million a year generated from the TDD to cover the project. Early estimates for construction costs are from $250 to $275 million. Grand believes the return on investment for the existing streetcar route — around $2 billion so far — makes a case for the expansion. “With what we’ve seen downtown, we’re optimistic we can extend the benefits through Midtown and down to the University of Missouri-Kansas City and really reconnect our city in a new and exciting way,” he said.
The next project is the creation of “Scholar Row”. Historically, an apartment complex like this would not be built anywhere near Troost, but because of the expansion of the Streetcar, businesses have started to increase the devolvement of this area (click here to read). “Troost Ave. in central Kansas City, an area known for its history of neglect, continued on a run of new investment when a $4 million apartment project won early approval at City Hall. UC-B Properties, a prolific real estate firm in Kansas City, proposed what it is >calling ‘Scholar Row’ at 55th and Troost. The project is a 50-unit apartment project located on the west side of Troost Ave. between 55th and 56th streets. The City Plan Commission recommended approval of the project and moved it along for consideration by the Kansas City Council. If UC-B Properties gets a successful result before the city’s elected leadership, the firm expects to begin construction in July or August.”
Amazingly, “Scholar Row” is not the only apartment being built near Troost Ave. A development that started in the fall of 2017 is replacing a run-down and vacant block with 182 apartments, costing $24 million (click here to read). This Troost and Forest development is next to the Beacon Hill neighborhood and will target employees and students at the nearby Hospital Hill district of downtown. It’s being developed by Indianapolis-based Milhaus and locally-based UC-B Properties. “This is an exciting project, and we see the potential for pushing market-rate development east of Troost. It’s a risk for investors and lenders because there’s nothing else to compare it to.” Brad Vogelsmeier, Milhaus director of development, told the board of the Planned Industrial Expansion Authority. As a strategy to increase development, KCMO has started an incentive program for building in this area by granting tax abetments. This particular building will have an unheard of 100% abetment for 10 years, and 50% abetment for the next 15.
There is also commercial growth near Troost in the form of a mixed-use development project valued at $78 million. The development will bring 450 apartments and 28,000 square feet of retail space (click here to read). This project has been explained as “a bold redevelopment plan that would transform the forlorn intersection of Armour and Troost into a small businesses vibrant hub with hundreds of new apartments.” The $78 million Armour Corners Project will feature five new buildings, holding 450 apartments and 28,000 square-feet of retail. The buildings are planned for the four corners of the intersection and a site at 520 E. Armour.
While it may be east of Troost, another exciting development that will cause rapid appreciation is the grand opening of a new grocery store. This 13-million-dollar store is close to a neighborhood my team has targeted and is actively investing. While it might not seem as big as the other projects mentioned above, this area is currently within a “starvation zone” because of the distance of the closest grocery store. The store will bring about 75 jobs and is the first grocery store to open in this area in nearly decade (click here to read).
There are several companies that already call KCMO home, such as Hallmark, Cerner, Sprint, and XPO Logistics. The steady inflow of renters between the two universities and the medical school make KCMO an ideal market for a buy and hold strategy. Historically, developments like those I outlined in this post have generated higher appreciation rates. That is why it is important to be able to identify neighborhoods where growth is expected. Having localized knowledge of the growth from on the ground partners allowed my team to become very comfortably invest in KCMO.
As I said, these are only a few of the significant projects leading to the growth of KCMO. If you know of any that I missed or anything that you think will increase the property values, please post it in the comments. In the near future I will go into more detail about the KCMO economy, current market statistics and why I believe KCMO real estate investment will produce alpha returns.
(Riehle is the Founder and CEO of the Apex Real Estate Network.)
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