COVER STORY, FEBRUARY 2005

MIXING IT UP IN THE MIDWEST
A glimpse at four projects that are raising the bar on mixed-use development.
Lindsey Walker

Kansas City, Missouri-based Pathway Development Company is developing the $86 million West Edge next to the Country Club Plaza in Kansas City.

Mixed-use has become the new “it” phrase in commercial real estate development as developers are increasingly realizing that the more property types a single site has to offer, the more people — and revenue — it attracts. From revitalizing depressed downtowns to creating suburban destinations, mixed-use developments are quickly finding their niche in the Midwest’s commercial real estate market.

One of the most anticipated new mixed-use projects is Baltimore-based The Cordish Company’s Kansas City LIVE! entertainment district, which is being developed in downtown Kansas City, Missouri. In recent months, the Kansas City market has seen an unprecedented surge in development, and, according to Blake Cordish, vice president of Cordish, Kansas City LIVE! will anchor an even broader revitalization of the entire downtown.

The much-anticipated Kansas City LIVE! entertainment district (above and below) will cover nine blocks in the heart of downtown Kansas City, Missouri. Photo courtesy of Arnold Imaging

“Kansas City has one of the most dynamic markets of its size in the United States and is dramatically underserved in the retail/entertainment genre,” Cordish says. “The District will fulfill a tremendous market demand for a downtown entertainment and residential district. The city enjoys a metropolitan population of 1.8 million and is the regional entertainment destination for more than 8 million people in the surrounding area. Frankly, it is a market anomaly that this type of district does not presently exist in the city.”

The District, which is currently under construction, covers nine blocks in the heart of downtown Kansas City. Located directly in between the new 22,000-seat Sprint Center Arena and the expanded convention center, the District is bounded by 14th Street to the east and west and Main Street to the south and north. The $850 million mixed-use development — one of the largest in the Midwest — will include 450,000 square feet of retail/entertainment space, 1.2 million square feet of office space, 7,200 parking spaces and 1,200 residential units. The District also will include the new 750,000-square-foot worldwide headquarters for H&R Block and a new 200-room Hilton Hotel. The development, which is set to be complete by fall 2006 or spring 2007, is more than 70 percent leased.

Kansas City LIVE!’s design architects include Beyer Blinder Belle, 360 Architecture and Selbert Perkins. “The vision and impetus for the revitalization was that of the city of Kansas City, the state of Missouri and its public leaders,” Cordish says. “This development is an incredible example of how meaningful and powerful public-private partnerships can be in redefining a community. It would not have been possible without uniquely sophisticated, visionary and determined public officials. In particular, Mayor Kay Barnes and City Manager Wayne Cauthen deserve tremendous credit.” Commercial real estate development firm Copaken, White & Blitt also has been a consistent corporate leader in the revitalization of downtown Kansas City, according to Cordish.

“Although grounded in the historical context of Kansas City, the District will be unique in terms of the architecture, tenancy and downtown energy that it evokes,” Cordish says. “The stars and moons have aligned for the revitalization of downtown Kansas City. It is an amazing honor for our company to be playing a role in this historical development.”

The West Edge will feature 205,000 square feet of office space, a 103-room hotel and 30,000 square feet of retail and restaurant space on 2.43 acres.

Another exciting project underway in Kansas City is the West Edge — an approximately $86 million mixed-use development going up on the west side of the Country Club Plaza, one of Kansas City’s premier shopping, dining and entertainment districts.

Although the project was first conceptualized 6 years ago, the property’s previous owner faced resistance from the area’s neighborhoods and was forced to bring the entire project to a halt. However, several years later, Ray Braswell, director of real estate development for Pathway Development Company LLC, took over the project, and by redesigning it, rallying neighborhood support and obtaining $32 million in tax-increment financing (TIF), he was able to put the development back in motion. And with West Edge, Pathway Development plans to bring mixed-use center development to a whole new level.

“This project is completely raising the bar on mixed-use developments,” Braswell says. “Instead of just a stand-alone speculative office building, in which not a lot of thinking goes into it because it’s just a bottom-line financial deal, this is a long-term play for us. It’s not a short-term ‘buy it, flip it’ deal.”

Even without the developer’s invested, long-term interest in the project, West Edge’s high-profile location and unique amenities virtually guarantee success. Featuring 205,000 square feet of office space, a 103-room high-end boutique hotel, 30,000 square feet of retail and signature restaurant space and a 940-space underground parking garage on 2.43 acres adjacent to the Country Club Plaza, the development is being created not only as a world-class project — with international architect Moshe Safdie on board as lead architect — but also as a legacy for Kansas City. Bob Bernstein, the project’s owner and president of the development’s anchor tenant, Bernstein-Rein Advertising, is developing an Advertising Icon Museum in the 10-story office building. The office building also features a large atrium and a 300-seat auditorium. Three existing historic residential buildings — two of which Pathway owns and is renting out — also are being integrated into the development.

Pathway is currently talking with contractors, leasing agents and property management for West Edge, which is set for completion in the second quarter of 2007.

Another area in the Midwest that is seeing a lot of mixed-use development is Ohio (see Mixed-Use in Ohio, Heartland Real Estate Business, October 2004). In Van Wert, Ohio, Equity’s Van Wert Towne Center — which will include retail, residential, hotel, office and possibly senior housing space — is finally underway after 2 years of involvement with the city and county of Van Wert, which, along with Equity, arranged a TIF to help pay for the infrastructure improvements for the site. “This was very unique in that it is one of only a handful of TIF packages ever in the state of Ohio that has included a city, county and developer cooperating in the TIF package structure,” says Aaron Heath, senior real estate advisor with Worthington, Ohio-based Equity.

Located at the intersection of U.S. 30 and State Route 127/224, Van Wert Towne Center is filling a need in the market that has been left empty for quite a while, according to Heath. “Currently between Fort Wayne, Indiana, and Upper Sandusky, Ohio, there are no other full-access regional shopping centers with local, regional and highway traffic services being provided,” he says. “This mixed-use project has been a long time coming to the city of Van Wert and the regional trade area surrounding the city. There have been several other development companies that have made attempts to balance the needs and desires of the regional trade market, the city and county of Van Wert and national retailers with no success until now.”

Planned to feature between 250,000 to 300,000 square feet of retail (including entertainment, restaurant and shopping space), approximately 50,000 square feet of office, 50,000 square feet of multifamily and an approximately 70-room hotel, Van Wert Towne Center’s developers hope it will keep local consumers from spending money outside of the market. “An underserved regional market has shown heavy retail leakage to other markets due to the lack of availability of services,” Heath says. “We hope that with this regional center bringing retail, hotel, entertainment, office and residential components, the project will help fill the current void and spur growth, thereby making the center a success.”

To date, there are nine national tenants and two regional tenants that have signed on for the inline shopping center, as well as three national brand outparcel users. An approximately 185,000 square-foot Super Wal-Mart — the center’s anchor tenant — is set to open in October, along with the Phase I retail strip center and several outparcels. The office and residential components are expected to open in 2006. Bird Houk Collaborative is providing architectural and land planning services for the $40 million project.

In Norwood, Ohio, three things will ensure the success of Jeffrey R. Anderson Real Estate’s newest mixed-use venture Rookwood Exchange: a high-profile location, a past record of success and unique tenants.

Bounded by Interstate 71, Edmondson Road and Edwards Road in Norwood, a suburb of Cincinnati, Rookwood Exchange benefits from direct access to downtown Cincinnati, the midtown submarket and the outer suburbs. “There are only two major East-West arterials in Cincinnati, and we sit on one of them,” says J.R. Anderson, director of development for Jeffrey R. Anderson Real Estate. “And all the demographics of this area, with Hyde Park, Norwood, Mount Lookout and Oakley, make the project a success already.” Combine that with the fact that Jeffrey R. Anderson’s Rookwood Pavilion and Rookwood Commons, a power center and lifestyle center directly across the street, have already proven that it is a lucrative area for this type of project.

The tenants also will help the center to thrive. “The tenants are going to be unique to the marketplace,” Anderson says. “We are going to have the only Crate & Barrel within a 100-mile radius.” Other tenants the company is talking with include Capitol Grille and Black Rock. Sheakley UniService, Inc., will be the 100,000-square-foot lead tenant for the office component.

Sitting on approximately 10 acres, Rookwood Exchange will feature 900,000 square feet of commercial mixed-use space. And, with two nine-story office buildings at 200,000 square feet each, approximately 250,000 square feet of retail, approximately 290 multifamily units, a 150-room hotel and a 2,500-car garage, Rookwood Exchange is packing a lot of punch on a small parcel. “As you can imagine, 900,000 square feet on 10 acres is very dense,” Anderson says. “So it’s a very dense project going very vertical.”

One distinctive feature of the project is that the retail component will be ground-level throughout. “When you’re walking along the sidewalk, you are seeing retail everywhere,” Anderson says. “There’s not one area where you will see multifamily on the first floor.” Retail and multifamily also will laminate the parking garage on all four sides, hiding it from plain view.

Jeffrey R. Anderson, which is developing the project in a partnership with The Miller-Valentine Group (except for the multifamily and hotel components, which are being developed by separate entities), plans to have the retail space open by Christmas 2006. The office, multifamily and hotel sections will open in the second quarter of 2007. RTKL’s Chicago office is providing architectural services.

“In Cincinnati, you don’t really have the ability to walk downstairs and either go to your office or go shopping,” Anderson says. “With the mixes of high-end office, multifamily, retail and hotel, we are going to make this a 24-hour area.”



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