By Kevin Collison
Waddell & Reed and 900 employees won’t be occupying the office tower designed for the firm at 14th and Baltimore after all, dashing downtown’s hopes for a corporate headquarters but opening the door to a long-sought speculative office project.
The company’s new owner, Australia-based global financial firm Macquarie, made it official Tuesday that it has no plans to use the 18-story building currently under construction.
“While we can confirm that we will not be occupying the new building, Macquarie and LPL remain committed to the region and supporting the needs of our clients and staff here,” said company spokesman Lee Lubarsky.
“It is our understanding that construction on the building at 1400 Baltimore will continue.”
City officials emphasized that while the $148 million office development was approved for substantial city and state tax incentives to assist its financing, taxpayers will not be on the hook.
“The developer has indicated that they intend to complete the building, which will be an important asset to downtown,” Chris Hernandez, city communications director, said in a statement.
“This is a good time to point out that incentives generally kick in after the developer or company delivers on the promise to bring in jobs and/or create a new asset such as an office building.
“This project does not involve any upfront payments.”
The Council, after a lengthy and contentious debate, approved a six-year property tax abatement at 75 percent and nine years at 37.5 percent in December 2019. The development received a sales tax exemption on building materials as well.
The incentive ordinance also stated neither the city or the State of Missouri would have any financial obligation to repay or financially back the bonds issued for the project.
The state had agreed to provide a $62 million job incentive package to Waddell & Reed as part of the deal to bring the firm downtown, but the firm would have had to relocate the jobs first before being eligible to receive the assistance.
In fact, the news that Macquarie has no plans to occupy the project was accompanied by an announcement 219 employees at Overland Park-based Waddell & Reed have been laid off as a result of the acquisition announced in December.
‘All affected employees will be eligible for comprehensive financial and non-financial severance benefits, including continued subsidized healthcare and outplacement services to assist them in securing new jobs,” spokesman Roger Hoadley said in a statement,
“While we cannot offer further specifics, there are no changes to the Ivy Funds at this time. Ivy investment teams are expected to manage their portfolios following the close of the transaction.”
As for what’s next for the 18-story building, its developer, a team comprised of Burns & McDonnell and Financial Holding Corp., an entity controlled by Michael Merriman, could not be reached for comment.
The developer signed a 15-year lease with Waddell & Reed to occupy the building.
There had been speculation that Macquarie might want to use the office building for other operations since office rents in Kansas City are less than more expensive markets on the Coasts.
Lubarsky declined to discuss whether his firm had considered alternative uses for the building.
“Unfortunately, that’s not something I’m going to be able to comment on,” he said.
The office tower is expected to be completed in the first half of 2022.
While its original purpose has been scuttled, it will be arriving in a downtown office market that advocates say is very much in need of speculative office space.
“Kansas City has been hoping for a new speculative office building for years and now we may have backed into one, although not the way we planned it,” said Gibb Kerr, a broker with Cushman & Wakefield who specializes in the downtown market.
The tower will be eight stories of office space atop at 10-story, 913-space garage. The lobby itself will be on the 10th floor accessed by either the garage or an elevator lobby at ground level.
That design was criticized by many for turning its back on its downtown surroundings, particularly at pedestrian level, and narrowly was approved last April by the Council with Mayor Quinton Lucas casting the decisive seventh vote.
As to how the newly-tenantless building will compete with other speculative office projects being planned, the 250,000 square-foot Strata project at 13th and Main and the 152,000 square-foot Platform Ventures project at 13th and Wyandotte, Kerr said they may go after different markets.
“I think Strata and Platform might be better suited for smaller tenants,’ he said. “To make sense of the Waddell & Reed layout, it has to be a larger tenant in the 100,000 square-foot range.”
Jon Copaken, who’s firm Copaken Brooks is a co-developer of the Strata building, said he welcomes the potential competition.
“If it becomes sublease space, it provides more Class A competition for sure,” he said.
“Good in the long run to have more Class A investment. Tough in the short run with pandemic induced anemic demand.”
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