The Interaction of Public/Private Development Constraints:
Opportunities for the Reuse of Kansas City's
Historic Union Station
by
James E. Thomas, Jr.
Bachelor of Science in Art and Design
Massachusetts Institute of Technology
Cambridge, Massachusetts
1983
SUBMITTED TO THE DEPARTMENT OF ARCHITECTURE
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS OF THE
DEGREES
MASTER OF SCIENCE IN REAL ESTATE DEVELOPMENT
AND
MASTER OF ARCHITECTURE AT THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
June, 1986
@
James E. Thomas, Jr.
1986
The author hereby grants to M.I.T.
permission to reproduce and distribute publicly copies
of this document in whole or in part.
Signature of Author
James<t 4 Thomas, Jr.
Departmont of Architecture
_Rebuary 10, 1986
Certified by
James McKellar
Professor of Architecture and Planning
Thesis Supervisor
/
Accepted by
Julie Mess rvy
Chairpe son
Departmental Committee for Gricluate/ Stu ents
Accepted by
James McKellar
Chairperson
Interdepartmental Degree Program
MASSACHUSETiS INSy1OF TECHNOLOGY
Rotcfi
JUN 04 1986
UISFRKE"'.
The Interaction of Public/Private Development Constraints:
Opportunities for the Reuse of Kansas City's
Historic Union Station
by
James E. Thomas, Jr.
Submitted to the Department of Architecture on
1986 in partial fulfillment
February 10th,
of the requirements for the Degrees of
Master of Science in Real Estate Development and
Master of Architecture
ABSTRACT
Union Station Train Depot in Kansas City, Missouri is a
valued part of the local environment and is a significant
structure in Kansas City's architectural history. Like many
stations around the country, the station has fallen
train
into dis-use
and had recently been the focus
of varied
redevelopment
attempts on the part of the city and private
developers.
Unfortunately, despite limited financial aid from the
public sector during previous redevelopment attempts, the
private sector owner of the station has been unable to
successfully find a strategy for a profitable redevelopment
of the station.
While the city has expressed interest in
aiding the station's renovation efforts, changing assistance
programs and fluctuating market economics have made the
assistance difficult.
This thesis
looks at the manner in which cities and
developers might identify the key problems and opportunities
in the Union Station project.
Through identification of key
issues,
this thesis suggests that both the public and
private sector will be better able to recognize development
scenarios that both could find significant benefit in.
The thesis examines three
alternative
development
options:
a privately-led option, a publicly-led option, and
a public/private joint development.
Each redevelopment
option is examined for relevant financial issues and for the
institutional and political constraints
that impact the
proposal's chance for success.
2
Conclusions show that the previous commitments of city
likely to spur a redevelopment of Union
is not
benefits
station
Because of the high level of risk of the
Station.
renovation
high
the
and
requirements,
project, large parking
costs of the station building, substantial sudsidy will be
financial
for the station to meet the developer's
required
goals.
return
Examination of previous station attempts shows these
subsidies to have traditionally been provided by the city
have an
funds
As these
funds.
from available federal
uncertain future, alternative subsidy sources are required.
Alternative subsidies suggested are developer subsidy from
increased density on the Union Station site, direct city
subsidy, and indirect subsidy through the effect of city
actions. Each alternative source of subsidy is examined and
its impact upon the Union Station project determined.
Thesis Supervisor: James McKellar
Title: Professor of Architecture and Planning
3
ABSTRACT . . . .
LIST OF FIGURES
LIST OF TABLES.
CHAPTER ONE
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TABLE OF CONTENTS
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The Union Station Redevelopment: Why Hasn't It
Happened? . . . . . . . . . . . . . . . . . . .
The Problem of Union Station's Redevelopment.
Description of the Union Station Building . .
Past Attempts at Redevelopment. . . . . . . .
The IRS Proposal. . . . . . . . . . . . . .
The 1983 UDAG Proposal. . . . . . . . . . .
Immediate Environment . . . . . . . . . . . .
Potential City Involvement in the Future. . .
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10
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20
23
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The Developer and City at Union Station: How Could
They Work . . . . . . . . . . . . . . . . . . . . .
The Developer's Goals . . . . . . . . . . . . . .
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30
31
CHAPTER TWO
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The Developer's Constraints .
The City's Goals. . . . . . .
The City's Resources. . . . .
Missouri 353 as a Resource.
The City's Constraints. . . .
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54
The Search for Projects and Resources . . . . . . . .
The City's View of the Station. . . . . . . . . . .
Developer's Perspective on the Union Station
Building. . . . . . . . . . . . . . . . . . . . . .
Illustrative Development Scenarios. . . . . . . . . .
Private Sector Use at Union Station . . . . . . . .
Economic Valuation by the Developer . . . . . . .
Public Sector Redevelopment Proposal for Union
Station . . . . . . . . . . . . . . . . . . . . .
Joint Public/Private Venture for Union Station. .
Constraints within the joint development effort
Project synthesis . . . . . . . . . . . . . . .
57
59
The Developer's Resources
.
CHAPTER THREE
68
70
71
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87
93
98
100
CHAPTER FOUR
Analysis of Alternative Development Scenarios . . . .
City's Intervention in a Private Redevelopment. . .
City's Involvement in a Public Sector Redevelopment
Public/Private Redevelopment of the Station . . .
Goals for City's Commitments in Projects. . . . . .
101
101
112
115
124
CHAPTER FIVE
Summary .
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134
BIBLIOGRAPHY. . . . . . . . . . . .
APPENDIX A
1981 Study Financial Analysis. .
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Private Sector Redevelopment Financial Analysis. .
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ENDNOTES.
APPENDIX B
APPENDIX C
Public/Private Redevelopment Fianacial Analysis. .
4
LIST OF FIGURES
Fig
Fig
Fig
Fig
Fig
Fig
1
2
3
4
5
6
-
THE UNION STATION TERMINAL . . . . . . .
UNION STATION AND SURROUNDING AREA . . .
THE ORIGINAL REDEVELOPMENT PLAN. . . . .
CHARACTERIZATION OF REDEVELOPMENT RISKS.
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16
18
21
35
SAMPLE FLOORPLAN FOR UNION STATION . . . . . .
SAMPLE ANALYSIS OF INCREMENTAL RESTORATION OF
61
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..
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.
BUILDING . . . . . . . .
PER SQUARE FOOT ANALYSIS OF STATION USES .
PRO FORMA FOR PRIVATE SECTOR REDEVELOPMENT .
PRO-FORMA FOR PUBLIC/PRIVATE REDEVELOPMENT
Fig 7 Fig 8 Fig 9 -
67
80
105
123
LIST OF TABLES
Table 1 Table 2 Table 3 Table
Table
Table
Table
4
5
6
7
-
Table 8 -
SPACE BREAKDOWN FOR UNION STATION. . . .
INCREMENTS OF PRESERVATION . . . . . . .
INCREMENTAL VALUATION OF STATION
PRESERVATION . . . . . . . . . . . . . .
CALCULATION OF RENOVATION COSTS. . . . .
RETURN MEASURES AND CASH FLOW EQUATIONS.
Table 10
Table 11
Table 12
Table 13
Table 14
Table 15
Table 16
Table 17
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17
63
.
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65
SAMPLE NET OPERATING INCOME CALCULATION. .
.
RESIDUAL VALUE OF PROJECT WITHOUT PARKING
COSTS. . . . . . . . . ..
........
RETURN ON EQUITY FOR PROJECT WITHOUT PARKING
COSTS..*..
Table 9 -
.
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.
..
o........
. .. .. .. .
RESIDUAL VALUES OF PROJECT WITH PARKING
COSTS . . . . . . .
'.......
. .. .. .. .
RETURN ON EQUITY FOR PROJECT WITH PARKING
COSTS.........
..
.......
RETURN ON INVESTMENT FOR PROJECT WITH
PARKING COSTS . . . . . . . . . . . . . . .
SPACE BREAKDOWNS FOR PRIVATE REDEVELOPMENT.
PROJECT RETURNS BY % OF PARKING PAID BY
DEVELOPER . . . . . . . .
* .
.. .. .. .
EFFECTS OF ADDITIONAL OF FLOOR SPACE ON
RETURNS . . . . . . . . . . . . . . . . . .
CALCULATION OF INTEREST SAVINGS FOR
TAX-EXEMPT FINANCING. . . . . . . . . . . .
SPACE BREAKDOWN FOR PUBLIC/PRIVATE EFFORT .
RETURN MEASURES FOR PUBLIC/PRIVATE EFFORT .
5
74
75
79
82
82
85
85
85
104
106
110
120
122
124
DEDICATION
Sincere thanks go out to the many individuals at M.I.T.
me conclude a long stint at my
who
helped
Jim
McKellar,
"second
home."
and Imre Halasz all merit
Lynne Sagalyn,
true vote of appreciation for working their way through
innumerable drafts of this product.
a
the
They represent the many
professors at M.I.T. who were only too glad to give of their
time when it mattered.
My
fellow students and friends constantly brought
out
new ideas in the subjects at hand and were a constant source
of
support,
and more importantly,
Colleen, and the CRED family of
Most importantly,
Pauline and Lilian.
humor.
To Paul,
Tom,
'85: Thanks!
I owe my family:
Helen,
Jim, Lori,
If the people of Kansas City are known
for their pride, friendliness, and support, my family is the
best
of the best.
and school,
Despite the great distance between home
you all were never really far away.
Regardless
of the requirements, this product is really for all of you.
J.
T.
6
CHAPTER ONE
The Union Station Redevelopment: ~Wy Hasn't It Happened?
For
Missouri
city
the
years,
and community of
longed for the redevelopment
have
Kansas
City,
the
local
of
Union Station train depot into a productive use.
Newspaper
public
officials'
statements
the
to
letters
stories,
editor,
and
Since the mid 1960's,
of the local Kansas City atmosphere.
the
disrepair
station has fallen into increasing levels of
and decreasing levels of use,
abandoned in 1885.
until the station was finally
Also beginning in the mid 1960's,
local
to
place
began to search for ways in which
leaders
civic
economic uses within Union Station,
station
part
all point to the Union Station as a valued
thus hoping to save the
life
from demolition and return it to a productive
within the city.
Unfortunately,
failed
up
efforts to redevelop Union Station have
this point.
to
have
leaders
Local political
contributed city resources and the developers have
advanced
several proposals, but the station has remained undeveloped.
redevelopment of the Union Station
potential
The
building
from the city and developer's point of view will be examined
spur
in an effort to understand what elements are needed to
a
redevelopment and to see how the city and
joint
players,
development.
might
This
systematic
analysis
developer's
goals,
cooperatively
thesis
developer,
unite to
of the station and of the
and
resources,
7
the
pursue
in
suggests that by engaging
city's
constraints,
as
a
and
players
should
be
able
resources
Station.
exist
to determine
to
whether
facilitate a
or
not
sufficient
redevelopment
If such resources are found,
of
Union
the thesis will show
how the city might weigh the various alternatives.
Chapter
of
One of the thesis lays out the current
the station,
status
briefly recounts the previous attempts
at
redevelopment, and presents some of the reasons why the city
has
found its involvement in the station unproductive up to
thus point.
Chapter Two briefly examines the positions of the
of
city
Kansas City and a hypothetical developer as they come to
the Union Station problem.
requirements
facing
As an examination of the general
joint development between
cities
and
developers,
the goals, resources, and constraints upon both
the
City
Kansas
and
a
hypothetical
developer
will
be
considered against the background of Union Station.
Chapter Three lays out three alternative use
for
the
station:
commercial
a
rental uses,
privately-oriented
package
scenarios
led
by
a publicly-oriented station led by
institutional uses, and a mixed package with a blend of both
commercial
and
institutional
uses,
each
different
levels of civic interest to the city.
resources
necessary
representing
to complete each of the uses
The
will
city
be
drawn out, and their costs examined.
Chapter
Four examines the three alternative
scenarios
to
determine how the proposals affect the city's total cost
in
the Union Station redevelopment,
8
to determine how
each
the
addresses
proposal
how each proposal responds to the the
determine
parties'
constraints.
compared
against
previous redevelopment
the
individual
then
be
attempts
to
be
will
proposals
The
to
and
goals,
desired
city's
determine how the apparent problems have been dealt with.
points
Five offers a brief summary of the key
Chapter
discovered through the thesis.
Through
projects
this process,
from
presented.
a
joint
a means of analyzing
venturer's
potential
perspective
be
will
This process is not a decision making tool,
in
that the process will not point to an outcome that should or
could
be
process
pursued.
which
will
interrelationships
and
to
Rather,
the
intent is to
allow individuals
to
develop
understand
within a project such as Union
consequently understand what problems
a
the
Station,
need
to
be
addressed in order to complete the station project.
The
reader should be cautioned that while the problems
of an actual site within Kansas City are addressed,
the
details
Specific
nature.
market
general
informing
the
analysis
are
many of
speculative
constraints of the current
estate
real
of Kansas City have been considered in only the most
sense.
Further,
information
on
the
specific
willingness of the city and developer to enter into a
venture
outside
are
interviews
Union
in
were
Station
the extent
of
this
thesis.
joint
While
conducted with players familiar
with
the
interviews
were
for
redevelopment,
these
9
informational purposes only.
The Problem of Union Station's Redevelopment
Kansas City values its Union Station.
transportation
station's unique place in local history as a
and scene of local significant events,
hub
a cherished part of the Kansas City
become
such,
it
was
the station has
leaders
declining
fortunes.
to
watch
Falling
as
the
As
landscape.
local
all the more painful for citizens and
political
the
Through
into
fell
station
passenger and cargo
vo lumes
made
the station a shadow of the economic hub it once
With
the
was.
less
lower train volumes came lower revenues and
use for th e station, eventually forcing the station to close
in
Saddled by high operating costs
1985.
and
increasing
maintenance requirements, it just didn't make economic sense
for the owners to keep Union Station open.
and
However,
throughout this decline,
business
officials
the local political
(who we will group together as
some way.
"city") were determined to help the station in
the
transportation use couldn't support the
maintenance
economic
provide
of the station,
operation
the
If
and
perhaps the placement of other
bills
and
the owners a profitable return on their money.
For
uses
within the station could pay the
a number of reasons to be discussed later, attempts to place
economic
common
in
the
uses within the station failed.
The idea
one - use public monies to attract private
form of a developer and investors,
station to a profitable use.
Still,
10
to
was
a
capital,
return
the
due to forces largely
outside
stalled.
redevelopment
the
of the developer and
control
the
city,
the
for
the
Therein lied the problem
city.
"city" was frustrated in its attempt to install
The
at Union Station.
was
an expensive proposition.
wish
to
use
the
Consequently,
using
public
funds.
As
leaders
left
a
own
its
city
Ideally,
funds
to
ultimate
the local
the
party
political
for
for
and
the
not
project.
strategy:
substantial
responsibility
responsible
the
leverage
employed its
money to attract more
result,
the city did
complete
redevelopment with the private sector.
was
Station
The redevelopment of Union
use
a
private
business
station's
Since the developer
execution
of
the
redevelopment, the city enjoyed little direct influence over
the project.
The city of Kansas City provided the Union Station with
several
valuable
abatement,
powers
resources
including
to acquire property,
a
10-year
and assistance
tax
in
perparing studies for the station's reuse.
While the city had made a contribution to the station's
redevelopment,
spur
the contribution had not been sufficient
Perhaps
redevelopment.
contributions
did
not
provide
more
for
importantly,
continuing
involvement and input into in the process of
redevelopment,
one
means of gaining input was
11
the
city
redevelopment.
If the city was unhappy with the progress or product of
station
to
the
to
retain control over the benefits conferred to the developer.
Under Missouri state statute 353 the city had given the
developer broad powers to acquire property and had
a
10-year
tax
on
abatement
the
property.
Missouri
statute 353 provides that upon the approval of the
redevelopment plan for the Union
owner's
Station
project,
would fully confer the redevelopment benefits
the
city
the
developer.
development,
recourse
direct
recipients.
over the continuing performance of the
control
These
little
were granted with essentially
contributions
provided
these
for
developer
the
from
developer's
Were
the
the
city to
be
unhappy
with
to
the
benefits were conferred with no line of
city
other
project.
than
the
At
Union
plan had been approved,
removal
of
the
Station,
the
the benefits had
been
granted, and the developer pursued the redevelopment plan at
their own will and pace.
In addition to the problems of control inherent in
353
program,
the
it was not clear that the benefits offered to
the developer under the 353 program would
truly provide aid
to
the
the
station's redevelopment.
While
353
program
offered valuable benefits to the developer, it was not clear
that
not
been
but
these
benefits addressed the developer's reasons
for
The developer
had
pursuing the Union Station project.
presented with the full range of the city's
despite
good
faith
efforts
on
the
part
benefits,
of
developer, the station redevelopment had not progressed.
12
the
To further complicate matters,
City could offer developers
Kansas
the types of incentives
Federal
changed.
had
more
to spur development had become significantly
benefits
Missouri
had
traditionally offered little in the way of direct aids,
the
to
difficult
city
problem
a
of
state
faced
look to private sources in order to
to
project.
However,
unwilling
to
needed
change
the
the
by
the
the
pursue
private sector had been unable
redevelop Union Station
to find some available
private
other
the city
With the absence of federal aid,
municipalities.
City
with
presented
was
needed
Since
obtain.
sector's
previously.
resources
view of
the
Kansas
that
Union
or
would
Station
project.
If the city wanted continued involvement with the Union
Station project,
it needed to devise a new way to influence
the project's outcome.
more
active
Kansas
One possibility was to enter into a
partnership
with
the
station's
developer.
City was familiar with the earlier programs by which
the city took responsibility for the land clearance and then
handed off to the developer,
engaged
developer
in
a
newer,
but the city had never
joint-development
effort
really
with
The city would need to examine what
before.
a
it
how it might enter into the
might offer in a joint effort,
process, and what commitments would be required.
Description of the Union Station Building
Union Station
From its construction in 1914,
central
landmark
in
the emerging
13
transportation
was
hub
a
of
Kansas
The
City.
an old,
for
replacement
new
Union Station was to
Union
Depot
small
to
a
to
city that planned
metropolis of the Plains.
grand
rail
century
the 19th
It
had outlived its useful purpose.
serve
a
dilapidated
By 1914,
known as Union Depot.
station
and
outmoded,
be
become
too
was
a
great
In addition, the mid-19th century
physical and technical facilities of Union Depot were wholly
unsuited
to
the
transportation
unveiled
its
needs.
in 1914,
Italianate
ground.
scale
and volume of
When
the
new
Kansas
City's
new
Union
Station
was
the city celebrated by setting
the
old
Union Depot on fire and watching it burn to
the
Today,
the new Union Station of 1914 has outlived
intended purpose and is threatened with destruction
to
make way for economic growth, just as its predecessor, Union
Depot, was destroyed in 1914.
Union
Station
was
the product
of
a
joint
venture
between several of the largest rail companies in the nation,
all
of whom needed increased passenger,
capacities
in
Kansas
City's
freight,
central
and mail
location.
The
companies joined together at the turn of the century to hire
Jarvis
Hunt,
designer
a
prestigious
Chicago
architect
of a number of smaller train stations,
Union Station.
and
to
the
design
Rail tycoon E. H. Harriman instructed Hunt
to ". ..give the people a monument,"1t 1 1 and Hunt rose to
the
as
his
occasion.
opportunity
Hunt
to
saw
Kansas
City's
new
station
build bigger and grander than ever
14
before.
In fact, the station is still the nation's second largest in
exceeded
size,
Central
only by New York's Grand
Station.
in Bedford limestone and New Hampshire granite with
Clad
concrete tile roof,
the Union Station was to be a permanent
The station
monument to Kansas City's growth and citizenry.
constructed
actually
was
a
from
1912
1914, and
to
its
completion showed Kansas City a richness and grandeur rarely
before
seen
in
the
day
opening
On
emerging city.
estimated 100,000 people converged on the station - so
an
many
attempted to crowd into the main hall that those who
people
fainted were unable to fall to the floor. {2)
As
a
result of this historic
grandeur,
the
station
became an important and endeared landmark of
instantly
the
area and figured daily in the lives of many of Kansas City's
residents.
following
between
The
station's
decades
by
reputation
serving as the
grew
scene
through
of
the
shootouts
Pretty Boy Floyd and Adam Richetti and the FBI
and
as the rail exchange for almost all central railroads.
Physically,
the
"T" shape (Fig. 1),
space
on
the "T",
"T".
station may be thought of as a
large
with a Main Hall and two wings of office
the south side of the station forming the top
of
and a large waiting room making up the stem of the
Underneath the Main Hall lies a substantial amount of
underground floorspace,
originally used as mail and baggage
storage rooms and as mechanical space.
shown in Table 1.
15
Space breakdowns are
Fig 1 -
THE UNION STATION TERMINAL
r
Source: Gladstone Assoc.,PGAV 1981 Study
16
Table 1 -
SPACE BREAKDOWN FOR UNION STATION
Occupiable space
Floor
Sub-Basement
Basement
Mezzanine
First Floor
Mezzanine
Second Floor
Third Floor
Total
52,905
64,003
23,286
83,875
23,443
22,339
18,247
Mechanical
Circulation
0
0
0
27,833 sf**
2,910 sf
0
4,305 sf
sf
sf
sf
sf
sf
sf
sf
288,098 sf
(86.5%)
35,048 sf
(1 M%)
10,000 sf
0
0
0
0
0
0
10,000 sf
(3.0%)
**(possibility for mixed use space)
The
business
station is positioned midway between the
area
and
a
luxury shopping area
known
downtown
as
the
Country Club Plaza, which is itself becoming an emerging hub
of the city.
The Crown Center Redevelopment Area,
mixed-use shopping,
the
edge
Memorial /
of
a large
hotel and office complex, is located on
the station's property,
Penn Valley Park,
as
is
the
Liberty
a large green area anchored by
a monument at the top of its hill.
17
(Fig. 2)
Fig 2
STATION AND SURROUNDING AREA
-UNION
4.*
4.~9
u
vs
^ -N6
-
.. ..
7A
4Z-
t:
hgSO5
rTY
KANAS
7~
18
X
n
Past Attempts at Redevelopment
From the time of its construction, Union Station was an
idea
whose
beginning
time had passed.
to
America,
make
serious inroads to
and as such,
passenger
to
By 1914 the
automobile
the
was
mainstream
of
the station turned increasingly from
freight volume.
Union
Station's
passenger
volume peaked in 1916 and then began a steady downward fall.
The
50's
and 60's saw even further decay of the
fortunes.
Occasionally, public attention was focused on the
station during renovations and changes.
an
attempt to modernize the station,
counter
station's
During the 60's, in
the
original
ticket
and benches were removed and replaced with brightly
colored plastic seats,
and the front lawn was replaced with
expanded parking.
new
Beginning
in the late 60's,
and
productive
Attempts
more
for
the
a
failing
station.
were made to woo both public and private
workouts
for the structure.
on
use
talk turned to finding
In February 1972 the station was placed
the National Register of Historic Places.
In
1976
the
station
was
placed
within
a
special
redevelopment district known by its Missouri statute chapter
of 353.
The 353 district gave the station's
redevelopment
corporation
(known
Corporation
and consisting of the railroads and
large
tax
as the
Canadian developer)
Pershing
Redevelopment
Trizec,
the power of eminent domain
preferences discussed earlier.
routine
Square
Pershing Square
a
and
(as
a
procedure under 353) applied to the city to declare
19
the area of Union Station as "blighted" and presented to the
city a plan for the station's redevelopment.
Once the city
council had determined that the area was, in fact, blighted,
the
developer
was
granted the
tax
exemption
and
other
powers.
The
original
expansive
Phase
I
between
redevelopment
program
redevelopment of the area,
called
of
hotel
and 410,000 square feet,
around 600,000 square feet,
and 100,000 square feet,
for
an
pictured in Figure 2.
for the construction
240,000
called
space
of
office space
of
retail space of between
30,000
and reuse of the station building.
Phases II through V expanded this scope by the same amounts,
including
950
apartment
buildings. {4
room hotels,
major
office
Unfortunately,
buildings,
and
in the early years
of the redevelopment efforts, construction called for in the
original plan never progressed far.
The IRS Proposal
In 1978, the station was close to being included in
a
major
a
development
regional
IRS
Eagleton,
service
office.
the
proposal
center
development
centering
Led
around the
relocation
by Missouri's
Senator
would have located a
$72
for the Internal Revenue Service
that
would have centered around
of
Thomas
million
within
the
a
station.
The station was seen as a classic example a new urban policy
announced by the Carter Administration in 1978.
was
The station
cited for its potential stabilizing influence upon
local job base
the
and for its potential access to center-city
20
Fig 3 -
THE ORIGINAL REDEVELOPMENT PLAN
I
Pr
ILLK/OL
JLU
7771rn
Source:
Pershing Square Application for Redevelopment, 1974.
21
minority
employees.
have simultaneously saved the station for
would
facility
Thus, relocation of the IRS
the
city,
and reinforced the federal goal of the Carter administration
of
increased
officials
on
urban revitalization.
the
A report
potential
station's
by
federal
revitalization
stated: {5}
regional
location,
the
central
..through
accessibility to a large labor pool is possible,
groups.
Thus,
city minority
central
including
equalized access to job opportunities for minorities is
uniquely available to the proposed Union Station area
and
outlying
site
as opposed to more suburban
locations.
An
editorial in the local paper gave some hint of
the
workings involved in the public/private dealings for the IRS
proposal.
Entitled
"Great Union Station Plan Seems Within
Grasp" the editorial continues:
{6}
The miracle is that the concept unveiled here only
a year ago this week, has progressed as far as it has
without a series of major setbacks.
Some anxious
moments have developed behind the scenes, when it
seemed touch and go.
But on each occasion a sensible
compromise was reached before the project bogged down,
or tempers erupted.
Apparently everyone,
including
interests
Trizec,..,City Hall, Washington, and other
not only sense the potential of this plan but they also
recognize the economic penalties that would come with
of
balancing
a healthy
set
It
is
failure.
circumstances.
Further on, the editorial was delighted to quote,
"It's done," says Jay Solomon, who stepped down
Services
recently as the administrator of the General
Administration, which holds the federal key to this
scheme.
Unfortunately, Mr. Solomon was overly optimistic in his
assessment.
In 1981,
the Internal Revenue Service decided
to scuttle the Union Station project.
22
The commissioner
of
the
$110
Internal Revenue Service cited cost increases from
million
for the project when first announced,
estimated $165 million in 1981.
the
to
The local paper noted:(
an
71
The location of the IRS center became the
source
of border warfare between Missouri and Kansas lawmakers
when Ronald Reagan was elected president.
But in the
end,
(the commissioner's) letter mentioned only the
cost and delay.
While
the
thesis
cannot speculate as
reasons for station's problems,
Carter
administration's
station
to
achieve
expressed interest
social
note
the
the
exact
it is important to note the
goals,
willingness to commit funds to it.
to
to
and
in
using
their
the
resulting
Further, it is important
manner in which this funding was
changed
in
response to unpredictable external forces, in this case, the
political process.
The 1983 UDAG Proposal
Following
the disappointing
proposal,
to
the
redevelop
renovation
station's owners turned to
the
of
station.
Rather than
of
private
paying
the
tenants
for
the
building.
The
Union
Further,
because
from
Station
building was requiring increasing levels of maintenance
expenses
the
the station's owners decided to look to
for
operating
IRS
markets
the station through revenues generated
the public sectors,
private
withdrawl
(around $700,000 annually in
of
the
station's
age
and
and
1983.){8}
condition,
substantial amounts of money would be required to repair the
station and bring it up to modern standards.
23
of the large amount of capital
Because
felt that they would require additional
developers
to
the project work.
make
could
required,
apply
to
the
They turned to the
federal
government
for
the
funding
city,
an
who
Urban
Redevelopment Action Grant (UDAG), federal funding earmarked
to
projects that would create jobs and improve areas
of
a
UDAG grants would have been made to the city of
city.
The
Kansas
City,
to
which would have then lent the money
developers at favorable interest rates.
the
The proposal was to
redevelop the two wings of the Union Station into commercial
office
space (Fig.
rates.
for
have
3),
and then rent the space at
market
The developers would have secured an economic use
a portion of the station but at lower cost
ordinarily been required.
than
would
All the city had to do was
to forward the application to the federal authorities.
The
actual use of the Union Station project was
still
not finalized as the application went in for the UDAG.
The
developer
but
the
planned income producing uses in the
tentative
use of the Main Hall as a
institutional use was uncertain.
an
incomplete
application
wings,
museum
or
other
The city decided to submit
on the last day of
the
fiscal
year, since the final uses and funding for the project could
not
be
agreed upon.
At the zoning board hearing
24
on
the
James
local attorney
of submitting the application,
issue
Kenworthy spoke against the submission:
"There are no apparent plans for permitting the
integration of Amtrak usage, and nothing definite on
the extent or nature of private financing," he said.
"There's no indication of the type of commercial
tenants and no apparent plan or understanding of how
the project integrates into the surrounding area."
Kansas City officials believed that other than the
The
the
details of the application,
incomplete
11 )
UDAG proposal was very competitive.
Union
Station
However, for unknown
reasons, the UDAG application was not approved.
Why did the city submit the incomplete UDAG application
when
the
eventual
use for Union
Station
was
even
less
finalized than in the developer's original application?
The
of
the
city's
contribution
application,
was
the submission
in this case,
cost the city very little.
successful,
If the application
the city would
and the project developed,
stand to gain substantially from the stabilization of
Station.
On
the developer's side,
a savings probably in the
low-cost financing,
millions of dollars,
the costs and benefits
The developer had the chance to tie
were also fairly clear.
in
Union
area
of
and in return had only tied themselves
into a specific use for a portion of the building.
A
bond
station's
majority
proposal
offered by the city to
redevelopment,
of
failed
to
popular vote required for
meet
finance
the
passage.
the
two-thirds
At
this
point the station's redevelopment effort seemed to have lost
momentum.
25
Immediate Environment
Most recently, the station has seen even
construction on a 500,000 square foot,
immediately next to
building
nestled
historic
structure.
This
structure
the
terminal
small
More importantly,
under a nearby expressway.
major
from
permanently halted
early 1985 to be rerouted to a
in
station
was
traffic
Train
changes.
more
Trizec began
office
eleven story
the
(within 30 feet)
office
another
and
building in the planning, begin to fulfill the original plan
for Pershing Square Redevelopment.
Pershing Square Redevelopment's interest
In late 1985,
in the building seemed to be waning.
down
Pershing Square turned
the efforts of one of Kansas City's leading
Hall
Don
of Hallmark Cards.
citizens,
fund
Hall had offered to
part
a
of
study
of the station and to lead an effort on the
local
citizens to fund the purchase of the station from the
characterizing
Square
Square
Pershing
owners.
deal,
the
down
it as "..not beneficial enough for
Pershing
of
Pershing
The project director
Redevelopment."
suggested
Square
turned
that
"We've pretty much
ideas now and I think its time for someone with fresh
to
come
Further,
in."
representing
the
some
redevelopment
officers
company
our
exhausted
and
ideas
attorneys
suggested
that
agreements for a sale would be signed by the end of 1985.{l2}
As
of
Pershing
this writing,
Square
the station is still in the hands
and officials insist that a sale
taken place.
26
has
of
not
Potential City Involvement in the Future
In previous attempts at the Union Station, the city had
in
facility
built a large
had
city
The
process.
and had
early 1970's,
the
development
the
in
player
decision-making
contributing,
resource-
active,
an
becoming
in
experience
little
convention
center
an
active
taken
area.
involvement in luring a Vista hotel into the downtown
many
like
However,
that
involvements
western
provided
outcome
were not common in
Center,
the
a
project's
Further,
City.
Crown
large mixed-use project across the street from
Union Station,
short-term
over
influence
Kansas
continuing
active
cities,
was developed in the early 1970's using only
civic involvement through the 353
redevelopment
statute and had proved a great success for the city.
had little leverage
Additionally,
the
city
redevelopment
of
the
station.
committed
big gun:
through
its
city
eminent domain and
of the project,
the
already
city
abatement
contributed
the
real
It is possible
city
had
enough to the project and that it
was
fathers may have felt
now in the developer's court.
to act,
tax
spur
already
the developer had little
incentive to perform as quickly as possible.
that
had
Since the benefits were loosely tied to
353.
performance
The
to
Thus,
that
the
with little incentive
the parties waited for the circumstances around the
project to change.
Thus,
it
is
within this complex web of
history
requirements that the city and developer find themselves
27
and
as
they contemplate the potential redevelopment of the station.
both
attempts,
Several
public
and
been
private, have
However, in each case, the city of Kansas City's
attempted.
direct involvement in the project has been limited in scope.
"IRS" proposal,
the
Under
the
the federal government was
public agency actually involved in the active development of
the
Certainly
project.
the
city
local
acting
instrumental in coordinating the process and perhaps
as
however,
intermediaries;
was
and
funds
federal
impetus
would have actually provided the
that
commitments
it
were
officials
for development.
in the UDAG proposal,
Later,
to provide a subsidy to the
attempted
project in the form of lower mortgage costs.
the
city's
political
of
forces
the
By applying its ability to secure grants, the
marketplace.
city
subsidize the external
help
to
influence
the city relied upon its
contribution
forces
of
the
was
federal
Unfortunately,
the
upon
dependent
again
Station
Union
would
who
government,
provide the grant money.
The
city
had relied upon outside parties for the
components of the station proposal.
instance
The
the
those
external
Regrettably,
forces had made the project
key
each
in
unworkable.
city needed to find parties willing and able to provide
key
elements to a Union
elements existed.
Station
redevelopment,
In that search,
the city
if
itself
might decide to become one of the key players. This decision
28
on
the
part of the city may
suggests
understanding
available
to
decision
the
that
of
be
the
This
difficult.
should
requirements
result
and
29
from
an
opportunities
the city through involvement with
Station redevelopment.
thesis
the
Union
CHAPTER TWO
The Developer and City at Union Station: How Could They Work
Together?
Station
Union
the
understand
successfully
To
the
redevelopment,
to
parties involved must first be able
understand what each party brings to the venture in terms of
goals,
of
resources, and constraints.
Through the examination
the players will be able to determine what
goals,
Once each
party would like to see happen to Union Station.
goals
parties'
tentative
suggestions
station
have
been
determined,
station's
may be drawn up as to the
The plans for the station's use should then be
uses.
to
the
for
each
able
inform the parties as to the resources required for
station's
station
renovation.
into
For
instance,
conversion
office space would have very
implications
than
of
different
would conversion of the station
the
the
cost
into
a
theme park.
Once
the
indentified,
to
the
parties'
venture should be determined.
parties
station
have
been
the resources that each party might contribute
decision should
the
goals for the
At this
point,
no
be made as to the relative contributions of
(the city contributes more than the
developer,
or the city takes an active rather than a passive position.)
By leaving the exact nature of the contributions open in the
early stages, parties may be able to identify resources that
would not ordinarily be designated if the search for funding
were excessively restricted.
Finally,
the
parties must identify those
30
constraints
bind
will
which
project.
Station
them in their involvement
While
Union
a
with
more
have
the city is likely to
explicit constraints upon its contribution of resources to a
than
project
the
both parties
developer,
need
will
to
understand how their respective resources may be deployed in
order to arrive at an agreeable deal structure.
This analysis will begin by looking at the developer of
the
their
Trizec,
It
have
expressed
interest
Further,
in
selling
developers
of
owners
redevelopment
the
party,
For these reasons,
this has not yet occurred.
explicitly
the current
for the station to some other
opportunity
conjunction
to
difficult
the actual goals that the current
Station have in mind.
although
this thesis
look at the goals that one might generally expect from
a developer,
into
be
would
Union
will
in
this thesis will not be constrained solely to
interests.
determine
current
station's
is Kansas City Terminal Railways
developer
with
While the
Station project.
Union
such as Trizec,
a developer willing to
enter
historic
a large redevelopment project of a difficult
property.
The Developer's Goals
Most of the developer's
with
goals
will
considered
the redevelopment of
the
be
Union
directly
associated
Station.
However it is important to note that the developer
will
undoubtedly be influenced by an entire range of
having no direct tie to the station at all.
influences
These external
might have to do with the corporation's
31
goals
outside
need for capital (thus pressuring them to sell the station),
(thus
their outside goal to diversify their property types,
pressuring them away from certain uses),
or any of a number
of other unascertainable factors.
primary
The
generate
goal for the developer is to
profit for the company.
a
this profit is usually
Of course,
generated through the construction of occupiable space which
is then rented out to tenants or sold.
The developer will have several immediate goals in this
station
developer
the
income,
the
If
process.
will need to identify a
which he can rent the space.
by
its
for
is to rely on rentals
market
to
This situation is complicated
the fact that the station's size and scale are so
large
as
being
no
that
especially
developer
immediate
economic use comes
suited to the space.
mind
to
The actual uses that
the
may rely on could change over time as the markets
within the city change.
Thus flexibility may be one aspect
of the station that the developer would like to maintain.
ramifications
for
larger issues in the redevelopment of the station.
If
This
the
need for flexibility may have
the developer feels the need for flexibility in the
is
product
so broad that the station cannot meet the changing needs
of his development,
into
one
unwilling
While
use
to
or that the station is so uniquely tied
of the marketplace,
even
the
pursue redevelopment
developer
of
a developer would be unlikely to hold
32
may
be
the
station.
this
attitude
the
into
going
Station
Union
market
changing
project,
conditions within the city (such as changing demographic and
patterns) could alter the perception of the
rental
project
within the developer's mind.
the
that
Assuming
developer is
may be targeted and reached through the station,
market
That is, if
project of comparable risk.
developer can make a 10% annual profit upon his money
it
investing
suburbs,
he
especially
in
speculative
would expect at least 10% from Union
Union
since
Station
in
investment
office
he
at least equal
insists upon a return on his money, which is
to the return on a
a
developer
A
will then need to fund and build the station.
a
that
comfortable
would
by
the
Station,
considered
be
significantly more risky than new suburban development.
To achieve a specific return,
the
developer - the initial investment required to renovate
and the profit to be expected over time.
It
be the developer's goal to reduce the initial cost
of
Union Station,
will
the
Union Station redevelopment,
the station,
assuming that the rentals
raise the
or alternatively,
would stay the same,
from
two factors will concern
revenues
assuming that cost would stay the
same,
since each would increase the developer's return.
At
of
the
age
and
of the Union Station Building and because of
the
redevelopment
condition
Station,
Union
extraordinary
are
a
the
problem.
configuration
of
initial
Because
the
costs
of
space,
investment for producing space is a large one.
33
the
the
initial
The station
has large areas of space underground which must be
restored
and maintained to preserve the building's health.
Further,
the
developer is currently faced with operating expenses of
around $700,000 per year.
These operating expenses are well
out of line with the expenses associated with new space.
the developer were to renovate the space into some use,
If
the
income would have to absorb the additional expenses required
for operations.
shortfall in return associated with
specific
The
station's renovation will depend upon the final set of
within the building.
placed
cash flow,
The uses' ability to
uses
generate
along with the uses' associated costs, will vary
between each redevelopment option.
project
the
types
considered
later
As such,
will
each
the different
focus
upon
different sets of economics.
Finally,
to
the
as mentioned earlier, the developer will wish
reduce their risk associated with a given
developer
project.
is putting up money for a project,
desire to gain as much return as possible from the
without
take
increasing his risk in the project.
several
Station.
4
will
project,
This risk may
of
Union
shows a general analysis of the
risks
different forms for the
Figure
he
If
developer
associated with the redevelopment of Union Station.
34
Fig 4 -
CHARACTERIZATION OF REDEVELOPMENT RISKS
SYSTEMATIC
RISKS
<(--------
UNSYSTEMATIC
RISKS
National Economy
Real Estate Economy
Interest Rates
Availability of Credit
Inflation
Labor Costs
Material Costs
Federal Tax Preferences
Local Land Costs
Urban Redeveloppuent Properties
Older Properties
Availability of UDAG's
Tax Exempt Financing Rules
Uncertainty inConstruction
Accelerated Tax Preferences
Potential Uses
Office
Hotel
Residential
Institutiona I
Local Vacancy.
and Aborption
Factors
Local Vacancy
and Aborption
Factors
Local Vacancy
and Aborption
Factors
Local Vacancy
and Aborption
Factors
35
To the left of the chart are systematic risks, or those
risks
of
that cannot be elinimated through the diversification
projects.
risks
that
In other words,
would
be
systematic risks are
inherent in
any
project
those
that
the
developer would pursue. Conversely, on the other side of the
risk continuum are the unsystematic risks.
These risks are
associated only with the Union Station project, and are only
incurred
if the developer should pursue the
Union
Station
redevelopment.
Ideally,
elements
of
However,
given
that
the
developer
risk
since
return
Station
the
would
associated
to
with
to
the
remove
all
redevelopment.
our developer's assumed goal is to
gain
a
for a project of comparable risk,
the
least
developer would like to do is to make
the
Union
no
more risky than other projects in
that would offer the same return.
like
like
minimize
the
Kansas
City
Thus, the developer would
unsystematic risk
from
the
Union
Station.
Removing
the
developer's unsystematic risk
from
the
Union Station project may offer one of the richest areas
potential
civic
involvement.
The Developer's Resources
The developer of Union Station
would
specific profile if the city had its choice.
nature of the Union Station project,
shown
ideally
to
The
to
that
access
resources
36
fall
into
a
Because of the
the process,
be fraught with problems.
have
of
has been
developer
would
make
would
the
While the actual
problems of Union Station less difficult.
in which the city would begin dealing with
circumstances
have
would
some
pursuing the redevelopment.
are
as
of
developer
the
latitude in the choice of
city
the
it is possible that
be varied,
would
developer
a
Thus, the developer's resources
the
to
are
much interest to the city as they
developer.
most obvious resource that a developer brings to a
The
is
project
the
will
developer
project,
since
the
likely
is
redevelopment
be
Union
well capitalized for involvement with the
especially
Station
Ideally,
capital.
to
require substantial contributions before any income is seen.
The
developer,
present
in
developers
is
one
the
of
and had access to a
largest
pool
large
of
Further, the Canadian developers borrow money on a
capital.
single
Canada
Trizec,
each
line of credit rather than mortgaging
for a loan.
project
As a result, Canadian developers may be able to
submitting a specific
commit borrowed capital without
loan
application for the Union Station project.
The next resource that a developer should bring to
table
is experience.
Given that the Union Station project
has the potential for many uses and will be held by
developers,
the
each
with different interests,
development will be make Union Station
complicated project.
experience
dealing
the
several
the details of
an
especially
Thus, the developer should have broad
with the issues likely to arise in
37
the
creation
of a large,
resource
would be previous experience
joint
ventures,
multifaceted project.
since
the
An additional
with
public/private
pairing of these
two
parties
causes new sets of unique problems.
The
the
important aspect of the developer's experience
deep knowledge of the marketplace that a developer will
bring
to
a
struggled
project.
with
understand
the
what
development.
in
is
issues of
physical
of feedback.
extended
to
the
is
likely
marketplace
elements make
up
a
to
have
and
will
successful
As a result, as alternative uses are suggested
the early periods,
means
The developer
developer expertise is one immediate
To the extent that this
uncommon
knowledge
uses through experience
with
mixed-use projects, the developer adds even more.
the present case,
is
other
Again, in
Trizec is the parent company for The Hahn
Company and maintains a large interest in The Rouse Company,
two
firms that have extensive experience in
joint
ventures.
public/private
While the Rouse firm looked at the
Union
Station and was not interested due to the presence of
Crown
Center
across
the street,
one may speculate
that
inter-
company ties might be an asset in a future redevelopment.
The
final
resource that the developers bring
Union Station project is the station itself.
to
the
The station is
currently in the hands of the Kansas City Terminal Railways,
the
consortium
station
in 1914.
Trizec
company
of
railroads
that
originally
built
the
The railways are joint partners with the
in
the
Pershing
38
Square
Redevelopment
Authority.
While
Trizec
at one time offered to sell
the
station to the city for $1 after first acquiring it from the
railways,
according
to
city
officials,
this
recently withdrawn by the developers. {l3}
the
city's
powers
offer
was
Of course, through
of eminent domain and
the
ability
to
transfer limited versions of those powers to developers, the
station
could be acquired,
although the acquisition
would
not be costless.
The Developer's Constraints
The developer that attempts the redevelopment
Union
of
Station will have a number of constraints upon
performance.
Currently,
Pershing
the
their
Square Redevelopment is
faced with the internal dynamics of rectifying two
separate
company's interests, those of Trizec and those of the Kansas
City Terminal Railways, which is further a conglomeration of
different
railroads.
These
internal
dynamics
constrain the "developer" in its ability to rapidly
to
new
proposals.
Depending
Square
Redevelopment
Pershing
hierarchical
developer
upon how the
or
any
respond
structure
other
actually plays out,
could
of
large,
decisions
may
have to be passed along through a number of parties.
The
to
parties
among
developer
these
will need to
successfully redevelop
satisfy
Union
are outside lenders on the
several
Station.
venture.
outside
Chief
Lenders
enjoy such broad influence over projects that the Urban Land
Institute
manual
on
downtown
39
retail
development
between the city,
like
partnership"(1 4 )
the process as "a triangular
characterizes
developer,
and lender. Lenders generally
to finance projects in which they understand the risks
their
money is subjected to.
The more the
project
looks
like the last successful project that the bank financed, the
happier
the
bank
is.
Thus,
for a
project such as Union Station,
very
unconventional
lender requirements for
the
financing may have significant influence.
The
number of lenders who will finance
unconventional
projects such as the Union Station development is
limited.
extremely
Convincing one of this pool of lenders to back the
station
will
Further,
be
a
significant effort
for
Kansas
given the relatively modest size of Kansas
City.
City's
financial community, it would be difficult for local lenders
to
single-handedly put together a package of financing
the station,
city.
upon
for
as they did for the Vista Hotel project in the
Thus,
the station's potential development may hinge
the city's and developer's ability to convince outside
parties to invest in the station.
As
not
was mentioned earlier,
draw
security.
as
such,
many Canadian developers do
financing that is specifically
tied
to
project
These developers draw from a line of credit, and
are
not required to defend specific projects
to
receive financing.
The City's Goals
Next, the issue of the city's goals are considered
in
hopes
to
an
attempt
to
determine exactly what the
40
city
achieve through the redevelopment of the station.
should
Again, it
be pointed out that this thesis cannot determine the
exact
priorities
leaders
that
of
would
the current
act
redevelopment effort.
as
political
the
united
and
business
"city"
in
a
For illustration, several goals that
seem reasonable civic desires for the Union
Station project
will be presumed.
The
city
first point to understand in assessing
involvement
station
is
concerns.
in the Union Station project is that
not
the "beat all to end all"
Kansas
business
and
potential
City
is
a large
residential sectors.
city
of
the
with
While the
the
city's
expanding
city
would
certainly like to see the station renovated, Kansas City has
many other requirements for its limited resources.
would
probably
be
willing
to
commit
The city
resources
to
the
development, but only up to a point.
To
the
most efficiently address a potential involvement in
Union Station building,
determine
what
station.
The
potential
benefits
city
benefits
it
the city needs
hopes
to
to
explicitly
receive
from
further needs to determine
how
are
a
received,
Are
they
byproduct of the station's redevelopment into some
would
the
station
order
for
the
have to take on special
city to satisfy
some
of
the
those
general
use,
or
properties
in
its
goals?
By
determining exactly what the city is after, the city will be
able
to
better
gauge its position within
41
a
future
deal
structuring of a Union Station project.
The first example of a general city goal is to see
station preserved.
leaders,
and
reminder
of
The "city" (political leaders, business
citizens)
values the station as
Kansas City's past.
a
The goal of
different
historic
saving
station is not a general byproduct of a station
since
the
the
renovation,
levels of civic benefit would be
obtained
depending upon how much of the station was preserved and
what
level of detail that preservation took
this
"civic
commodity,
we
benefit"
is
generally
not
place.
a
to
While
quantifiable
will later look at how the city might
think
about those differing levels of civic benefit.
Along similar lines,
design
goals
through the
Station is a landmark along
downtown
area
and
large
Union
Station
project.
Union
Main Street, midway between the
the emerging city center of
shopping district.
from the station,
the city may try to advance urban
the
Plaza
Liberty Memorial Park, across the street
has increasingly been used as a site
for
city gatherings such as the recent Kansas City Spirit
Festival.
Union
While the park served as a civic gathering place,
Station was one of the few areas that the public
did
not have access to during the celebrations.
As
employed
west
link within the city,
a
Union
Station
to bridge the large train tracks
through
Kansas
as
a
the city.
for
be
running east
to
The Redevelopment
City has listed a nearby area,
target
could
increased
of
the South Grand area
development
42
Authority
activity.{1
5
}
Regrettably,
this
isolated
South Grand area is relatively
from any surrounding urban activity.
Union Station could be
other
employed as a bridge between the South Grand area and
areas
of the city to the north of the train
Crown
Center
Trizec's
station
might
to
new
the
south
of
the
tracks.
eleven story office structure
from Main Street directly,
choose
and to
tracks,
Currently,
the
separates
plan
but an innovative
to reestablish this
connection.
While
any
redevelopment of the station might advance some urban design
goals
such
building
the
as removing the decay of the
and introducing activity,
lion's
upon
physical
station
it is more likely
share of the urban design issues
would
that
depend
the specific use to which the station was put and
the
manner in which it was carried out.
Another
Station
the
city
goal
that could be
from
is that of direct economic gain for the
station.
ordinarily
Union
city
According to the Kansas City Star,
will face a budget deficit in 1986.
not
sought
from
the city
While the station would
be thought of as a source
of
income,
station might generate direct gains to the city in the
the
form
of lease revenues, or at a minimum, increased tax revenues.
The city could similarly be after the indirect goal
revitalizing
the
area around Union Station in
indirect
economic benefits.
form
increased
values
of
for
pursuit
of
of
These benefits would take the
tax revenues
through
projects surrounding the
43
higher
station,
or
property
through
higher employment in the area.
likely
a
be
Station,
general
These goals would more than
byproduct
of
a
Union
redeveloped
and as such, would not be of close interest to the
parties in a future deal structure.
The
city
retention
could
through
be after
a
explicit
redevelopment.
job
In
creation
the
1978
redevelopment proposal, one of the main city gains,
of
was
the future points of opposition from
the
fact
government
effective
that Kansas City would retain
jobs
means
within
the
effort
aggressively,
city.
The
to
lawmakers)
station
a
5,000
was
or
an
long-term
The city might wish to
retain endangered jobs,
IRS
(and one
nearly
for catalyzing the jobs into
commitment within the city.
another
Kansas
or
pursue
even
more
might wish to use the station to attract jobs
to the area.
Finally,
Station.
Kansas
Status
City may pursue status through
is crucial to understanding Kansas City's
potential involvement with the station.
second-fiddle
Kansas
a
to
Union
St.
Louis as
Having long played
Missouri's
premier
city,
City's business and political elite have embarked on
path to build the city's pride,
status.
reputation,
and
social
Great pride is taken in the regional and national
reputation of Kansas City's leading firms as ambassadors for
the city.
This is best exemplified by Hallmark,
who
also
developed the Crown Center development.
Kansas City has long suffered from an identity
Despite
consistently
higher qualitative ratings
44
crisis.
than
St.
as
Louis
a
city,
mind
nation's
Kansas City has been
by St.
of
Louis as the representative city
shortage
of national recognition,
leaders,
business
leaders,
yield national attention.
the
Because of
for Kansas City's improvement.
motivation
political
Kansas City's
and citizens love events
that
Up until now, Kansas City has had
bring
rely largely upon sporting events to
and
the
The jealous competition with St. Louis became a
Missouri.
to
in
upstaged
pride to the city such as the Kansas City
recognition
Royals.
In
fact, other than the world series, the big civic interest of
1985
was
placed
consideration of whether or not a roof
on
the Kansas City Chiefs football stadium
hopes
of
avoid
appearing as a "second-class,
While
the
climate,
could
in
attracting such events as the Super Bowl
be
the
and
to
Busch league town."{
city has generally enjoyed
a
healthy
16 }
business
business events have not yet succeeded in bringing
status.
A
major
blow
successfully
came
completed
Station depot,
in
recent
renovation
years
of
as
their
St.
Louis
aging
Union
in a joint venture with James Rouse, into an
award-winning mixed use development featured on the pages of
Time Magazine and the New York Times.
one-upped.
state
St.
Louis,
had done it again,
Kansas City had been
that black sheep cousin across the
while Kansas City stood idly
watching
its prized Union Station
embodies
many
decay.
Thus,
complex civic attitudes within the
45
by,
"status"
city
of
Kansas
City,
any
number
of
which
redevelopment of Union Station.
may
be
impacted
by
Generally, status would be
considered a byproduct of most successful redevelopments
the
station,
of
although the use and varying level of success
would certainly affect the eventual recognition to the city.
Recapping,
goals,
the
city could have a number of
ranging from the quantitative addition of income
the city's coffers,
a
might
be
to
to the fairly intangible realization of
set of urban design visions.
city
different
able
Those resources which
to offer the developer
in
the
order
to
all
the
achieve city goals will now be considered.
The City's Resources
This thesis will
resources
employ
many
that
not
attempt to
identify
the city of Kansas City might
in a potential redevelopment project.
different
types
of
incentives,
targeted to the advancement of development
some
be
able
to
The city has
specifically
projects,
while
others are open to use in general activities.
The
city
may pursue a direct economic involvement
the Union Station project.
in
While this could take any of
a
number of forms, the most direct example would be a grant of
city
funds.
The
developer money,
Similarly,
loan,
the
city has the option to merely
give
subject to some restrictions upon its use.
city
could make the commitment of funds
either at market rates or below-market rates.
developer
the
cannot get financing for the project due
a
If the
to
its
unusual nature, the city's commitment of loan proceeds could
46
be
Of course if the loan were actually at
of great value.
below market rates, the developer would be saving additional
funds from lower interest costs.
The city could take responsibility for a portion of the
redevelopment
employed
other
in
project.
out
involvements.
The
was
has
city's contribution
frequently
could
For
instance,
of
form the project until it was clear that the
project
justified.
The city could make
or new utility
parking
improvements
required
for
or other external
economic success.
general
require,
improvements.
city could take on the responsibility for
constructing
project
This specific
elements
course
of
has been previously recommended for a deal structure
suggested
report
range
withold
as widening of streets,
action
be
the city could prepare early
infrastructure improvements that the project would
The
in
allowing the developer to
economically
such
been
easily
in this case and can take a broad
studies for the project,
funds
path
other public/private redevelopment efforts
cities.
separated
This
by
a 1980
Economic
on the project.
responsibility
Development
Finally,
Administration
the city could take
the
for actually constructing part or all of the
Union Station renovation.
The important issue to understand
is that the city may choose to take on direct responsibility
for executing a portion of the redevelopment,
responsibility
can
exist
on
involvement.
47
a
whole
and that this
continuum
of
The
city could also choose to offer indirect
assistance
to
the project.
One example of this
assistance to the project would be a tax
this
contribution
would
the
is,
indirect
abatement.
reduce the amount
the
be required to pay out over the years,
reduction
That
would
economic
would be passive on the part
While
developer
the means
of
the
the economic reduction would require no
of
city.
explicit
expenditure, merely a foregoing of an opportunity cost.
city could also take indirect economic
The
submitting
action
by
a UDAG application to the federal government
on
the project's behalf, or by approaching local businesses and
tenants
case,
an
for
economic support of the
project.
In
either
the city would merely be using its influence to
economic
commodity
for the project,
with
the
gain
actual
commodity being contributed by a third party.
Missouri 353 as a Resource
One
of
the
biggest
redevelopment
of
issues
in
the
Union Station is the Missouri
potential
state
353
statute which allows developers the rights of eminent domain
and tax abatement.
benefit
This is a classic example of a valuable
granted by a higher authority,
but granted subject
to restrictions.
Should
a
developer
occupied
land,
purchase
of the land,
Missouri
353.
attempts
to
wish to
obtain
the developer has three
Using
large
choices,
federal urban renewal
outright
purchase,
areas
outright
programs,
the
or
developer
persuade each party within the parcel to
48
of
sell
their land at a reasonable price.
may
very time consuming and
be
expensive
for
this process
Obviously,
may
prohibitively
become
urban
Federal
the last remaining parcels.
gives the city powers to assemble parcels
redevelopment
of
land for public purposes, purchasing the land and relocating
the
residents.
consistent
The
competitive
applying
a
public
purpose
with the public plan and advancing a "legitimate
public purpose."
a
land is taken for
Developers are chosen by the city
bidding
for
areas
process,
already
and
are
through
restricted
designated
by
the
to
city's
agencies.
The
the
federal
different
local
Missouri
353 statute achieves results similar
urban
means.
redevelopment
Under 353,
redevelopment
agency
program,
but
area
Once the area has been designated as blighted,
under
parcels,
the city may grant tax relief for
domain.
10
years,
Clearly,
353 is
superior to federal renewal programs from a developer's
point of view.
The developer is granted direct control over
the process of assemblage and relocation.
developer
long
it is placed
upon granting the developer assemblage rights over
with years 11 through 20 at a fixed rate.
far
the
blighted.
the developer for assemblage through eminent
Further,
the
through
developers may apply to
to declare an
to
as
blighted.
Under
can propose a plan for any area of the
the city council eventually approves the
Once
353,
city,
as
area
as
the developer's 353 plan is accepted,
49
the
the
city
may
new restrictions only
impose
amends the original plan.
left
if
the
developer
The only option for intervention
to the city is revocation of the developer's
contract
with
arrangement
over
the
city.
The practical
original
effect
of
is that the city is left with minimal
the
this
leverage
developer's actions once the development plan
is
underway.
The 353 program is unique to the states of Missouri and
Ohio.
Started
the
former
program
director of
offers
police
powers
Missouri
Brian
and
H.
foolish
sector."
an
by
the
Mr.
17
important
private
St.
sector.
executive
Louis,
turn
of
characterizes the
by
the
state
why
only
arrangements,
Kansas
City's
"Nobody else would
over all that power
Collins
Asked
353-type
director
Authority states,
to
for
extraordinary flexibility and use of
Collins,
as
development
Ohio have instituted
Redevelopment
"evil."
in Missouri in 1947 and carried to Ohio
to
353
the
be
so
private
program
as
Despite its controversial nature, the program is
contribution available to the city that
will
continue to play an important role in Union Station.
The 353 program has recently come under fire within the
state.
deals
Controversy
surrounding
program
usually
with the application of 353 to areas which would
ordinarily be considered blighted.
Louis
the 353
Both Kansas City and St.
have seen an extraordinary increase in the number
uses of the 353 program for redevelopment.
increasingly
beginning
to
of
Legislators are
question the wisdom
50
not
of
public
into
introduced
In
subsidy.
without
ahead
353 for projects that
through
subsidies
would
recently
legislation
fact,
gone
have
substantially
the state legislature would
know
Up until
curtail the definition of "blighted" areas.
the definition of "blight" has been left to the city council
to interpret.
Currently, the only way in which citizens can
impact the interpretation of the
vote
353 blight criterion is to
they
city counselors with whose views
out
Needless
to
this voice after the fact is
say,
comfort to citizens once a project is built.
press,
and
disagree.
presumably
citizens,
have
of
little
As such,
begun
to
the
exert
influence upon the political structure to reevaluate the 353
statute.
353
has
also
come under increasing
attack
for
existing
application to past development proposals.
Station
is
the
premier
example
cited
by
its
Union
disgruntled
The Pershing Square Redevelopment Authority's 353
citizens.
application for the Union Station area was approved in
by
the
the Kansas City city council.
As originally
1974
approved,
proposal was to include hundreds of thousands of square
space.
Certification
completely
development
restore
plans.
was
retail
and a great deal of
a hotel,
feet of office space,
contingent
upon
a
pledge
Union Station as a part of the
More than ten years
later,
to
initial
the
only
activity has been construction of one office building with a
second
on
the way.
Union Station still stands in
51
decay,
with
legislators
"353
State
renovation delayed by "changing economics."
point
to Union Station as a prime
gone wild."1 1 9 1
In their view,
example
of
the developer received
substantial operational benefits through eminent domain
and
tax preference, and has in return only allowed Union Station
to decay further.
it
Thus, while 353 is an important resource,
is one which is likely to face a changing application in
the future.
Finally,
the city has one resource that is
relatively
costless and extremely important to the developer, community
and
political
The ULI publication
support.
on
downtown
redevelopment notes, {20)
The sine gua non for a proposed downtown retail
project in the nearly unanimous opinion of the experts
interviewed, is enthusiastic and aggressive
local
political
and civic support.
There are developers
with much experience in downtown projects who will not
consider going into a downtown project unless the city
executive,
the
council,
and the citizenry
are
demonstrably behind it.
The report continues,
An almost universally cited worry of developers is
that
downtown projects can easily become political
Therefore, they try to secure bipartisan
footballs.
support for proposals, or preferably, to have at least
day-to-day decisions removed from the political level
quasi-independent
and delegated to a nonpartisan,
entity.
as was mentioned,
Of course,
the
idea
the city is well
of saving the Union Station building.
behind
The
real
question is whether or not this support is realistic in
its
in
the
understanding
renovation
of
the
difficult choices
of Union Station.
involved
The Kansas City Star
52
Sunday
use
incomes,
and
fantasy
than
the
the
and
the realities of
a
civic
renovation.
station
to
who may need to be addressed for some sort
of
be
would
one
a
that
(remember
financing
failed),
costs
seemed to be based more in a
as such,
in
for
selling of the complex issues of the station
voters,
bond
be bound by the constraints of
to
sugggestions
call
not
did
contest
The
station.
the
for
Thus,
a
recently ran a contest for the citizens to find
magazine
means
of civic
attempt
bond
previous
for
support
the
project.
Another
means
of
civic
support
would
be
some
streamlining of the regulatory process ordinarily imposed by
the
city upon new projects.
whole
range
within
its
essential
flexible
of oversight
borders.
review
upon
requirements.
the
The
The city will normally have a
responsibilities
city may choose to
procedures
exact
upon
or
may
application
relax
choose
of
projects
to
more
less
remain
essential
For example, the current zoning codes impose
a great deal of burden on many historic renovation projects.
Cities are often willing to work with developers to reach
mutually
satisfactory
solution of the zoning
a
These
code.
agreements meet the city's specific safety concerns and will
usually
minimize the problems to the developer
by
working
with the existing structure as much as possible.
The specific city resources valued by the developer and
contributed
by
for the station.
the city will depend upon the eventual
use
As alternative deal structures are raised,
53
the
able
be
will
city
assess
to better
of
which
its
influences will best aid a project.
The City's Constraints
The city is especially constrained in its
Because of its nature as a
with the Union Station project.
city
the
agency,
public
surrounding
circumstances
at
city's
responsibility
the
city
set
unique
a
bound by
is
large.
to
of
its broad responsibility to
the
is
the
for
its
The first of these constraints
public
contribution.
involvement
some
receive
benefit
With competing uses for the city's resources,
of Kansas City will be under pressure
to
insure
that additional contributions on its part actually result in
at
progress
important
the
This
station.
pressure
unsuccessful
given the previously
is
especially
redevelopment
attempts at the station.
pressure be brought to
only would political
Not
would need to serve a public purpose.
evidenced
are
but those benefits
from a commitment of resources,
benefit
of
application
by
the
recent
These two
controversy
Missouri
353
gain
pressures
surrounding
statute
the
mentioned
previously.
With
increasing concern about the manner in which
has been used in the state,
plan
little
any Union Station redevelopment
will become a testing ground for forces on both
of the issue.
353
sides
The general public of Kansas City knows very
about attempts to renovate Union Station.
54
All
the
increasingly
are
they
about
hearing
redevelopment attempts in a negative light.
is
new
that
and
is that the station is unrenovated
knows
public
station's
the
Thus, if there
any
one clear issue which will be carefully examined in
redevelopment attempt,
which
it will be the extent to
and the
the private sector is granted rights by the public,
controls placed upon those benefits.
the
As important as indirect political constraints are
The city will need to
issues of control and responsibility.
determine
explicitly
will
control
operation,
the
liability for each element of a potential
and
maintenance,
who
For instance, if the city chooses to build a
redevelopment.
portion of the actual station rather than a detached parking
What if
complex issues could arise in the future.
garage,
the foundation fails?
Who is responsible for rebuilding the
maintains the city owned
space?
Who
complex
issues
space,
etc.
may need to be especially clear,
These
given
the
public's interest in the use of its funds.
like
Finally,
the current multi-party developer,
the
city will be constrained through the resolution of different
interests within the party.
The city's involvement in
the
station project could be distributed between any of a number
of
organizations within the city.
could
be
The city's
led by the city development
involvement
department,
by
the
Redevelopment Authority, or by several other agencies within
the
city.
To
the
extent that each
of
agencies has different areas of expertise,
55
these
different
the final makeup
of the city's involvement may influence the actual manner in
which the city becomes involved.
Having outlined the goals,
that
which
resources,
influence both the city and developer,
these
and constraints
the manner
in
will
be
influences might play themselves out
considered through several hypothetical projects.
56
CHAPTER THREE
The Search for Projects and Resources
The
the
city faces a difficult challenge in turning around
sector
Both public
Union Station redevelopment.
and
private sector efforts have failed in the past, and the city
must now find a new method of encouraging development on the
site. In order to address the difficulties of Union Station,
the
city must
first understand why specific proposals have
Whether a publicly or privately
not come to fruition.
project,
city must understand the current difficulties
the
In this manner,
facing any given proposal.
be
then
led
able to identify what resources or
the city would
would
actions
eliminate the problems of a given redevelopment proposal and
may
whether
decide
necessary
or
resources.
not
Thus,
city
the
the
would
problem
commit
of
the
examining
alternative reuse proposals is presented.
In practice,
plan
for
the actual process of generating a
a public/private joint venture will
from project to project.
vary
reuse
widely
At times, a use for a project will
be suggested by the city in a Request For Proposal, a formal
announcement soliciting applications for redevelopment.
other
the
times,
as was originally the case at Union
Station,
developer will approach the city with a designated
approached
set
Under 353, Pershing Square
of ideas in mind for a project.
Redevelopment
At
the
city
with
their
office/retail/hotel mixed-use plan for the station area, and
the city reacted on that basis.
57
Trizec
Since
appears
station,
the
method of choosing a development use could come into
either
Should a new developer
play at Union Station in the future.
over the station,
take
sell
willing to
one could assume that they would do
so with some use program in mind.
out a request
put
to
choose
Conversely, the city may
for
progress along on the now-stalled redevelopment.
party
the
looks at
Regardless
the city must
of which party actually initiates a proposal,
each
move
to
redevelopment
a
as
station
understand
that
commodity.
In this way, the city will be capable of judging
its potential involvement in the project.
Again, the city's goal is to assess what problems exist
within a given redevelopment proposal, and then to determine
not the city can correct any shortfalls
or
whether
One way in which to do that is to construct
the proposal.
desires that would simultaneously meet the
In
requirements.
economic
resources
centered around the available city
a use program
and
within
developer's
preparing plans for a use
at
Union Station, the city's goal would be to insure a feasible
and
view
possible,
effort
is
that
project
that
within
to
desirable from the developer's
meets
as
many of
the constraints of
station
city's
will be examined
goals
feasibility.
understand how the city's goals may
through a redevelopment plan,
the
the
point
be
In
of
as
an
pursued
the city's goal of preserving
as an example of
city goal.
58
a
typical
Indentifying Project Objectives: Incremental Decision Making
and Preservation of the Station Building
The city of Kansas City might utilize an analytical
Station building.
developer.
often
uses
This framework should suggest which
the
would be willing to subsidize through aid to
city
the
Union
to help formulate alternative uses for the
framework
The city's contribution of aid to a project will
a
of
allow the city to influence the scope and uses
project. While the city would generally want to minimize its
for the Union Station project,
cost
As cities
which set of uses it is minimizing the cost for.
begin
generate
to
clarify
the city must
the
for
and evaluate alternative uses
different methods of judgement will need to be used
station,
to guide the city's involvement.
The City's View of the Station
Since public funding for a redevelopment of the station
by
city
the
might need to be financed
issue
or tax increase,
could
be
uses.
Station
citizen "support" for
bond
local
a
station
the
one significant criteria in the city's choice
Civic
"support" will have many faces in
Depending
project.
assessment
identify
by
upon the
of the voters' dispositions,
least
Alternatively,
cost for the city as the
the
the
political
Union
leaders'
the leaders
primary
of
might
concern.
voters might actually be more concerned
about the qualitative aspects of the station, such as access
or aesthetics.
One use for Union Station that has been popularly raised
by
the
citizens of Kansas City is a museum.
59
This
thesis
contends
are
that it is not really a museum that
after.
museum
would be economic or especially suited to the
usually
space
citizens' suggestions to the local
paper
cite other reasons for their favorite redevelopment
scenarios.
people
a
While the current Kansas City Museum is in
cramped space,
and
citizens
No arguments are offered by the public that
of the station.
a
the
Typical
letters
to the local paper
note
how
could once again return to the station to
just
sit
people
watch. (211
A museum
idea
suggests
activity,
activity
that would recall the station's earlier days.
reality,
it is restoration of the Main Hall and substantial
public access to the space that the citizens
political
idea
better
desire.
officials to pursue the publicly popular
In
Were
museum
(with the assumption that popular ideas would enjoy
chance
at
bond
approval),
the
officials
a
might
mistakenly ignore a whole range of ideas that would suit the
economic problems of Union Station far better than a museum.
By using an analytical framework such as the one considered,
it is hoped that analysis will clearly reveal the objectives
that the city should pursue,
while developing a set of uses
to which the city would be willing to contribute.
60
Fig 5 -
SAMPLE FLOORPLAN FOR UNION STATION
I-
UPPER
MEZZANINE
Union
Station
KANSAS CITY
MISSOURI
Rwamt
tm
a
0
25
50
61
100
bo
150
200ft-
Figure 5 shows that the historic Union Station building
may
Head House and an adjoining terminal room.
on
broken
is
Of course,
storage areas.
with
hall
primary
most residents of
and
between downtown and the
mid-way
City
Kansas
it.
past
with Union Station just by driving
familiar
Located
a
House
The Head
mezzanines and ancillary supporting office
surrounding
are
into
interior
the
main
a
diagrammatically be divided into two portions:
shopping
luxury
district of the Plaza, the station is a true landmark in the
Citians
Kansas
city.
grand interior was the scene of many
The
House.
and
Kansas
City.
Fewer
Kansas Citians are familiar with
supporting office areas of the station.
of baggage rooms,
historic
office areas,
in
watch
was one of the best places to people
events
Head
the
treasure the main hall in
the
up
Primarily made
and mechanical areas, only
old-time station insiders have occupied these areas.
preserving
an
past,
attitude
in
the assumption that Kansas City is interested
With
the station as a historic reminder of the city's
attempt
about
could be made to prioritize
different
alternatives
for
the
the
city's
saving
different portions of the building.
In
an attempt to create an analytical model for
the
station, an effort will be made to try to place a measure of
the relative worth of different areas of the station.
These
measures are highly subjective in nature, but if the city is
faced
with the prospect of losing the entire
station,
one
alternative would be to decide which portions of the station
62
to save,
prioritization becomes
some
Thus,
different
"savable."
if only some portion of the station is
begin,
To
necessary.
levels of station preservation will be classified
within Table 2.
Table 2 -
INCREMENTS OF PRESERVATION
A)
Preservation of the Head House exterior
B)
Preservation of the exterior areas other than Head
House
C)
Restoration of the the Main Hall interior
D)
Public access to restored Main Hall
E)
Restoration of interiors other than Main Hall
F)
Public access to areas other than Main Hall
These stratifications are based upon two criteria: perceived
"public desires" for the station, and physical configuration
of the station.
from
letters
officials.
interests
City
Perception of the public's desires is drawn
to
In
the editors
reality,
and
interviews
understanding
of
with
the
local
public's
could range from the implicit intuition of Kansas
public
officials
to
an
explicit
survey
of
local
opinion.
Different
accomplished
subdivisions
of
the
station
with different levels of success.
the size and shape of the Union Station
up the station (for instance,
uses could be difficult.
building,
could
be
Because of
breaking
the Main Hall) into different
The most obvious breakdown of
the
station would be the break between the main building and the
north
wing.
Finer levels of differentiation could also be
63
broken out.
through C in Table 2 should
A
Choices
restored
"public access to
For item D,
self-explanatory.
relatively
be
assumes that this condition has been met if the
Main Hall",
use for the Main Hall is some public intensive use
restored
as
such as a museum or lobby rather than a private use such
Item E and F, referring to areas other than the
an office.
primarily
themselves
concern
Hall
Main
large
the
with
waiting room located in the long extension to the station.
the
Thus,
can
commodities
some
station
no
one
instance,
For
another.
the
upon
depend
the
that
public access requires
wishes
visit a
to
have
analytical
is the crucial part of the
assignment
the
for
the
end
choices
commodities
are
valued relative to
the
qualitative,
choices
the
in
saving
city
one
the
to
attempt
the city may
been isolated,
the
Once
station.
decaying
This
assign values to the completion of those commodities.
while
of
precondition
first be restored on the interior since presumably,
commodities
since
and
Note that the commodities are incremental
value.
that
it
city now has a set of alternatives that
depend
process,
upon
how
another.
Again,
are
highly
station
important goal is to give some
sense
of
relative priority for the parts of the station that would be
redeveloped.
For
the purposes of illustration,
a set of values,
through F, will be assigned as shown in Table 3.
64
A
INCREMENTAL VALUATION OF STATION PRESERVATION
Table 3 -
100
A) Head House Exterior
B) Remaining Exterior
50
C) Restore Main Hall
30
D) Public Access to Main Hall
40
5
E) Restore non-Main Hall
F) Access to non-Main Hall
15
These valuations of the station are somewhat
difficult
officials,
upon
Based
assign.
to
a
relative
different
with
show
point system has been used to
options
redevelopment
which
conversations
important than the others.
might
more
considered
be
Again, while the precise nature
difficult,
the
intention is to show which option is the most important
and
of
to
the
give
valuation
some
idea
of
the
of its
increments
relative
is
As
importance.
an
illustrative example, Preservation of the Main Hall exterior
is the most important in Table 3.
without
restoration
Conversely,
public access to areas other than the Main Hall
is
the least valued addition to the restoration.
to
inform
which redevelopment proposals the city might pursue.
If the
The
city
valuation
of the options is
intended
had the choice between two alternative involvements in
the station,
one which saved only the Main Hall,
but which
allowed substantial public access to the hall, and one which
restored
access,
the
how
entire station but which
would
allowed
the city officials weigh
65
the
no
public
relative
city
The
of the choices from the public's point of view?
merit
the relative
address
would
of
merits
each station
proposal.
Once
these
may
outcomes
have
values
examined.
be
through a branching network.
been
assigned,
Figure 6
shows
alternative
outcome
the
For instance, preservation of
the entire exterior, restoration of the entire interior, but
"rating"
public access to the Main Hall would yield a
only
a whole set of alternatives may be weighted
Thus,
of 225.
Further,
one another.
against
place,
alternatives
values
for
fashion,
the
may
is
once the framework
easily be tested again
new
with
this
In
the separate parts of the framework.
in
about
city of Kansas City may begin to think
what it is really after.
Once the station building has been analyzed by the city
in
this
fashion,
the city may proceed to
specific results of the redevelopment.
other
evaluate
The important point
is that decision making should be incremental.
The
use of incremental decision making will allow
station
to
desires
for
split
the
out different components of
station so that those
matched against the developer's needs.
desires
the
city's
might
In order to
the
be
pursue
this "matching" of the city's and developer's interests, the
developer's
view
of
the
station's
examined.
66
potential
will
be
Fig.
6 - SAMPLE ANALYSIS OF INCREMENTAL RESTORATION OF BUILDING
ON
Cosoeodity Values
A
o
C
0
E
F
Head House E.terior
Non-Head House Eoterior
Preser.
Mai. Hall
Public Acc.ess to fMain Hall
Non-Main Hall
Preserv
Public Access to Non-Main Hall
100
50
30
40
5
15
E
C
----
A
...
r
E.trior
of Head House
100
a
?-->100 ---N?--> 0
-------- ------- -
50
o
30
>Restore Main Hall Y?-->160 ---In te7:ior1.
N?-->150
C
> Public Access to
Main Hall
----
----
>Praeerve NonMain Hall
-m---------.----.
->R.tor
> Public
Access
Main Hall
to
5
F
15
V?-->225 ---N?-->220
>Public Access to
Mon-Main Hall
Y?-->185
N?-->100
>Public Access to
No.-Main Hall
Y?-->240
N?-->225
??-->220 ---N?-->160 -- I
30
lMui. Hall Y?-->130
In&terir
N?-->100
>Pre
v NonMain Hall
40
>Preserve Emterior V?-->150
Other then Hd Hoe N?-->100
------------.-----.
----
Y?-->1?0
N?-->130
E
F
5
----
15
Y?-->200
N?-->185
Developer's Perspective on the Union Station Building
The developer, because of his different valuation of
(from his own goals), will look at the breakdown
the station
of
Using the
the station differently than the city.
of
the
building),
system
for
the
city (portions
the
increment
as
applying
a
(economic
return),
different
an
value
the
overlap between
same
but
developer
two
parties'
positions begins to emerge.
Ordinarily,
of
construction
when
a
income-producing building he
an
number of variables open to his decision.
a
building
only
the
the location of the
project,
the
developer's
of
the
the
Thus,
fixed.
variables that the developer may adjust
envelope
and
project,
envelope to house the use are both
uses for the building,
the
of
At Union Station, should a developer decide to
discretion.
pursue
The location
use is housed are all open to
that
any
has
the use of the building, and the shell within
the building,
which
the
contemplates
developer
are
the
and perhaps the minor adjustments to
building,
to the
extent
that
the
developer is able to change it.
The developer could view the Main Hall of Union Station
as his true value in the station.
It is the Main Hall that
hold positive memories for the citizens of Kansas City,
as
such,
is
Unfortunately
the area that would command a
rent
the
premium.
the developer would also be forced to contend
with the Main Hall's increased operating expenses,
holds
and
greatest
volume of air to
68
be
heated
since it
and
the
largests amount of walls to be maintained in relation to its
floor
rentable
Station is one large space,
Hall
so large,
is
the
Further,
area.
Main Hall
of
Union
not easily subdivided. The Main
and the architecture is such
division of the Main Hall into smaller spaces for
the
that
potential
different uses would entail a great deal of construction and
Any subdivision of the space of the lobby would
alteration.
have
the
to be a set of smaller structures deployed within
larger volume of space.
the
wings of Union Station on either side of
two
The
Main Hall would account for a good source of revenue for the
at minimal potential cost.
developer
Since the two
wings
were originally intended as office space, the ratio of floor
to
space
wall
the Liberty Memorial Park,
of
wings
more
Further, since the wings face Crown Center and
reasonable.
corridors.
much
be
to
and volume tends
space
station
the two
the Main Hall,
unlike
Finally,
the
the offices would have good view
could
easily
be
reconfigured
side
to
accommodate several different users.
The basement of Union Station would pose a problem
the
for
developer since the source of its income its not clear.
Large baggage, mail, and other storage rooms exist under the
Hall.
Main
office
and
These
offices are unsuitable
rental
for
as
space since they have no exterior exposure for views
light.
substantial
Further,
the
waterproofing
lower
levels are
repair.
and
Of
in
need
course,
of
the
developer cannot rid himself of this burden if he chooses to
69
form
the
north wing containing the old waiting room is
one
Station,
Union
renovate
since the lower floors
foundation for the upper structure.
The
of
the
biggest questions from the
areas
The
this area is unclear,
eleven
story
(the
Ideally, the developer
building
might wish to make the uses in this portion of the
intensive.
placed
In
more floor area
this way,
directly off the Main Hall entrance.
could
be
The developer
could
increase the intensity of this area by either
floor
space to the existing building interior,
adding
more
or if
by demolishing that portion of
intensity was required,
new
away)
building to the east is only about 75'
and only two floors of space exist.
more
for
The rental opportunities
since the views are minimal
a
and
are fairly voluminous with large windows
deal of wall surface.
great
viewpoint.
developer's
the
building and by erecting a new structure.
Thus,
the
entirely
different
approach
towards
begins
building from the developer's and city's perspective
to
emerge.
value
the
While some commonalities exist,
Main Hall,
the way in which they
both
the
parties
approach
the
functioning of the station project are entirely different.
Illustrative Development Scenarios
If the city's goal is to find some method of preserving
Union Station through the inclusion of the private sector in
the redevelopment process, the city must look at the project
from
the developer's economic terms.
determined
that the location,
It has already
and to a large
70
extent,
been
the
in an attempt to analyze alternative
Thus,
redevelopment.
three alternative scenarios for the
for the city,
projects
reuse
station's
will be
The
presented.
of a largely public set of uses,
consist
Station's
Union
in
fixed
are
envelope,
building
scenarios
a largely private
Each of
and a mix of public and private uses.
set of uses,
will
these different use scenarios represents different levels of
flowing
benefit
different
to
the
strategies
funding
as
and
city,
for
may
such,
imply
station's
the
redevelopment.
Private Sector Use at Union Station
Most recent attention has been focused on producing
a
private sector, market-driven redevelopment proposal for the
As was mentioned,
station.
this focus may be due in large
part to the decreasing levels of governmental assistance for
The private sector redevelopment
urban
redevelopment.
Union
Station is an especially
Pershing
task.
in
good
for some time in an attempt to make the station
work
Redevelopment appears to have been working
Square
faith
difficult
of
However,
with mostly private funds.
up to this point they
have been unsuccessful.
The
renovation
station's
costs
current
require
owners
that
believe
space
be
large
that
rented
at
unrealistically high rents in order for the station to cover
expenses.
A 1981 report funded by the Economic Development
Administration
outlined
specific recommendations
station's redevelopment by the private sector.
71
for
This
the
study
suggested that the station would yield approximately 220,000
square feet of usable space, and suggested that the space be
a
in
utilized
uses.
restaurant
face
at
costs
retail,
and
for
the
findings
study's
the
Taking
renovation
station's
office,
commercial
of
mix
author
the
value,
prepared new cost and income statements reflecting inflation
This material is presented
and current rental assumptions.
in Appendix A.
problem
One
need
station's
drawn
out
the
by
1981
Currently,
for parking.
is
the
the station
has
study
minimal parking facilities by modern standards.
office
modern
and retail spaces in Kansas City
utilize
in the study,
a 1000-car underground
suggested for the front of the station.
appropriate
parking
facilities
an
areas
Based upon the floor
expansive addition of parking.
out
for
the 1981 study called
of floorspace,
feet
square
a
1000
ratio of between 3.5 and 5 parking spaces per
parking
set
Since most
garage
was
The construction of
for the station is
a
big
problem for the station, since each additional parking space
only drives up the cost of the renovation.
Since different
uses require different parking needs, the eventual impact of
parking requirements could hold substantial influence on the
cost of the project.
Assuming
sector
hotel
that the station's redevelopment by
uses is made up of
uses,
office,
private-
retail/restaurant,
and
the developer would determine which marketable
72
would
uses
of
mix
station
space,
of
utilize approximately 227,000 square feet
could
the
for
profit
most
the
1981 study suggested that the
The
redevelopment.
provide
60,000 square feet of space being used for offices and
with
New assumptions for the rental
the balance going to retail.
privately
led
commodity,
the
figure
for
the particular difficulties of a
show
deal
and financing requirements of the
renovation costs,
rates,
redevelopment.
examine the station as an economic
To
were
costs
renovation
to
isolated
By using figures
renovation costs per rentable square foot.
in
may
be
by the amount of money that they would produce
in
square foot"
"per
the
compared
a
yield
uses
different
form,
rent, and in the amount of additional construction costs, in
that they
building renovation,
of
excess
require.
would
Since the cost of the building shell was constant, and since
for
between
net
the uses would lie in the
income
costs
additional
and in the
would eventually yield,
economic
only
the
redevelopment,
station's
the
differences
they
uniform
arrangements would most likely be fairly
financing
that might be incurred to produce the use.
identified
might
be successfully
renovation
that
station.
Differences
mechanical
system
result
in
renovation.
total
different
costs
costs
73
of
at
the
repair,
roof
of
expenditures
other
and
levels
completed
methods
between
repair,
different
The
different
study
1981
The
for
for
the
the
would
station's
station
are
presented in Table 4.
Using the "High" levels of renovation
costs from Table 4, (a more conservative assumption than the
1981
study which used the "Highest" figures) the renovation
costs are estimated at approximately $83 per rentable square
foot using the 1981 study's 227,000 rentable square feet.
Table 4 -
Table
A:
calculation
CALCULATION OF RENOVATION COSTS
o-f Building Costs
PRIMARY BUILDING RENO'ATION COSTS (Aug
EXTERIOR UORK
Structuro Rehab.
E t.
Emter. Skone Rh..
E.ter. Uindows/GlAinq
E.ter. Painting W
Ester. D.o
Replac.e.nt
Car-age Hou.v Resto,.
Emter. Desoliti
Low
797,000
1,200,000
420,000
malls
MISC. & CONTING.
192,000
29,000
26,000
45,000
Annual Inflation of
Building Cost. '00-'8.
1960.)
High
797,000
1,200,000
495,000
192,000
29,000
26,000
45,000
-----------------2,709,000
2,784,000
3,587,000
Low
2,117,000
High
2,970,000
Highest
2,970,000
- - - - - - - -. -----. ----..
. . ..--...... .. . ..
- -. .-.......-.---
--..------
TOTAL BASE CONST. COSTS
Aug. 1980
Low
11,781,000
High
13,313,000
Highest
14,186,00"
TOTAL BASE CONST.
Aug. 1986
Low
16,711,5?4
High
18,84,745
Highest
20,123,112
-.-------
-- --
COSTS
..-------------.
Base Building Shell
'86 Cost / Renltable S.F.
To
shell,
perhaps
this
-----------.
---------..
High
V82.97
Low
$73.13
----------
---------
3,829,000
3,829,000
3,829,000
SITE IMPR01EMENTS
Sito Improve.entr
Low
1,600,000
High
1,930,000
Highest
2,0)00,000
BUILDING
Low
1,526,000
5?0,000
12,351,000
High
1,100,000
850,000
14,163,00O0
Highest
1,300 ,000
INTERIOR
CODE
Building Code Relat.d
NOTE: OFFICE AREA REHAB.
L-w
1,165,000
--... |
the
station's
costs could be added for tenant refurbishments
costs) to arrive at the
costs for the potential use.
ratio for all uses,
requirements
for
determined.
As
050,000
3
11,0 6,0'00
Highest
688.41
base figure for renovation of
parking
Hi ghest
1,165,000
164,000
519,000
1,981,010
High
1,165,0100
164,000
519,000
1,981,000
&
---
6.00%
164,000
519,000
1,981, 000
INTERIOR
Int. Clean
Paint
IntDe
tio
Rostorain/New Const.
Mechan. / Electrical
Highest
1,600,00)
1,200,00
495,00)
192,000
29,000
26,900i
45,00
total
(and
renovation
Using a constant loan /
value
loan proceeds, debt service, and equity
each
of the hypothetical uses
a result,
once the use's net
74
could
income
be
was
calculated, a return measure for the project could be found.
Economic Valuation by the Developer
One manner in which the city might view the return on
a potential Union Station redevelopment project would be the
method of determining the residual value of an investment in
The
station.
the
private
interested in a return on the equity,
the developer puts into a project.
return
or hard
be
will
money,
that
The developer's required
will further be a function of the risk involved with
The more risk that is associated with a project,
a project.
the
developer
sector
a return the developer will
higher
require
upon
his
equity.
The
analysis of the Union Station project will use one
measure of the return upon a developer's equity, the "value"
of
the
project,
and
equity
loan that a
to
relation
in
developer
cost
the
of
a
applies
project.
to
a
The
relationships associated with this analysis are presented in
Table 5.
Table 5
GROSS INCOME
N.O.I. -
RETURN MEASURES AND CASH FLOW EQUATION S
-
VACANCY
DEBT SERVICE
-
=
OPERAT. EXP. = NET OPERATING INCOME
BEFORE TAX CASH FLOW
RETURN ON EQUITY = B.T.C.F. / EQUITY
conversely
BTCF / DESIRED RATE OF RETURN ON EQUITY = VALUE OF BT CF
BTCF VALUE + LOAN = VALUE OF PROJECT
VALUE OF PROJECT
-
COST OF PROJECT =
75
"RESIDUAL" VALUE
Utilizing the equations of Table 5, the return upon the
Alternatively,
developer's contribution may be determined.
a desired return,
given
not
given the
the developer's desired return has been met,
utilize
This process will
developer's initial investment.
the
or
the equations may show whether
determination of a "residual value" for the developer's
investment.
developer
A
of
the
Union
presumably finance the redevelopment of the project
both
debt on the project and equity.
debt
and developer's equity,
cost of the project.
total
Thus,
when added,
would
project
Station
through
the amount of
the
equal
will
financing
As a result of this
strategy, part of the cash flow from the project would go to
the
repay
debt and the remiander would go to
developer with the return on his equity.
amount
the
provide
Thus, to find the
for the return to a developer's equity,
we may take
the net operating income from the project (gross income less
expenses) and subtract the debt service.
This
calculation
will yield a figure for the before tax cash flow.
Since
equity
the goal is to compare the value of the debt and
with
find
in order to
the cost of the project,
a
residual value for the developer's investment, our immediate
effort
upon
the
will be to value the equity.
A value may be placed
the equity by dividing the cash flow before
required
"capping
return for the developer.
This
taxes
by
process
of
out" the equity is extremely sensitive to the rate
of return required by the developer.
76
The value of a
fixed
cash flow is exclusively dependent upon the return required.
of
the
may be added to the loan proceeds (the value of
the
capping
After
equity
out
the value
the cash flow,
In this manner, the value for the
continuing debt service.)
Of course, if the capped value
total project may be found.
of the before tax cash flow and equity is below the cost
of
not
be
the
Since
investment.
wise
a
making
implies that the developer would
it
project,
loan
the
subtracting
from the project cost would show the equity that a
proceeds
would
developer
be required to
contribute,
analysis
the
would tell whether or not a developer would be achieving his
desired return on his equity investment.
Capping the value of the cash flow and debt service
is
equation.
To
the opposite side of the return on investment
discover
whether
objectives,
return
another
line
of
amount
of
equity
meeting
desired
potentially
engage
or not the developer is
the
could
city
analysis.
determine
The city could
that a developer would
required
be
the
to
contribute and then divide that amount of equity by the cash
flow
before
taxes of the project.
This would
return on equity for the developer's investment.
city
would be able to tell whether or not
goal had been met,
the
yield
the
While the
developer's
it would not be able to easily determine
the shortfall or excess in absolute terms.
By valuing the cash flow before taxes and loan proceeds
and
by
then
comparing
the results to
77
the
cost
of
the
city will be able to determine what shortfall
the
project,
Thus,
the developer is faced with in an uneconomic project.
the
to get a feel for the
begins
city
the
of
magnitude
involvement that would trigger a redevelopment project.
5,
be seen from the set of equations in Table
may
As
the
difference between the valuation and the project
may
be
by changes in
adjusted
the
costs
required
developer's
return on his equity (which adjusts the value of the equity)
or
fixed
the
of
valuation
debt
we turn to the Union Station project
Thus,
service.)
(which
loan
the value of the loan supportable by a
adjusts
the
the
change in the interest rate on
a
by
different
private
and
development
proposals.
basis,
as
a
per-square-foot
were divided by the rentable square feet
in
project to yield a $82.97 cost per rentable square foot
the
1981
renovation costs were inflated at a 6% annual
rate
These calculations assume
seen in Figure 7.
study's
to
Union Station on
the renovation figures for the station, exclusive of
parking costs,
the
of
analysis
For
achieve
cost
1987
a
the
for
renovation.
station's
Historical figures for building construction costs suggest a
6%
calculations
loan/value
rate
inflation
annual
also
ratio
employed
for
the
during
this
period.{ 2 2 }
the 1981 study's
project
assumed
financing.
The
90%
Further
interest cost for the project and a 35%
top
return measures were presented for
one
assuming
a 12%
marginal
tax rate,
sample scenario in Figure 7.
78
According
the 1981 study by Gladstone
Associates,
be
for the developer's equity were required to
returns
the
to
Union
20% to 25% range for projects of similar risk to
Station.{ 2 3 }
of
valuation
in
This 20%-25% return requirement was used in the
as
the developer's equity and may be used
a
general benchmark when comparing return measures.
use the per-square-foot
To
calculation of Figure 7 in
office space will
a specific analysis of Union Station,
examined.
Square
Osburn,
project
expected
Redevelopment,
renovated
square
Gerald
director for
office space
that
Union Station could be leased at around
foot. (24)
Using
figures of $6 per square
tenant improvements (up from $5 in the 1981 study),
operating
expenses
(up from $3 in 1981),
Pershing
in
the
$17
per
foot
$4
and using a
vacancy rate, results may be tested as follows.
Table 6 -
SAMPLE NET OPERATING INCOME CALCULATION
Gross Rent
Less: Vacancy @ 5%
Less: Operating Expenses
-
$17.00
.85
4.00
$12.15
Net Operating Income
79
be
for
for
5%
Fig 7 -
PER SQUARE FOOT ANALYSIS OF STATION USES
SAMPLE USE CALCULATIONS
PRIVATE SECTOR REDEVELOPMENT
UNION STATION
(per square foot basis)
(not including parking construction)
OPERATING INCOME
Total Gross Income
Less: Vacancy, Etc. @
Effective Gross Income
Less: Operating Expenses
$17.00
($0.85)
$16.15
($4.00)
5.00%
NET OPERATING INCOME
$12.15
IMPROVEMENT COSTS
Base Building Cost
Tenant Improvements
TOTAL IMPROVEMENTS
FINANCING PROCEEDS @ LOAN/VALUE OF
EQUITY REQUIRED
$82.97
$6.00
$88.97
$80.08
$8.90
Debt Service for 30yrs @
Building Lease Payment
90%
($9.94)
$0.00
12.00%
$2.21
BEFORE TAX CASH FLOW
TAX CALCULATIONS
BTCF
Less: Depreciation @ 30 yrs
Less: Interest (Assume int. only)
Less: Lease Payments
Taxable Income
TAX (DUE) @
$2.21
($2.97)
($9.94)
$0.00
($10.70)
$3.74
351
$5.95
AFTER TAX CASH FLOW
VALUE CREATED CALCULATIONS
$2.21
BEFORE TAX CASH FLOW
VALUE OF NET CASH FLOW e
LOAN PROCEEDS
20% CAP RT.
$11.05
$80.08
$91.12
$88.97
CAPPED VALUE + LOAN
COST OF PROJECT
$2.15
RESIDUAL VALUE
------------------------------------------
$12.15
$88.97
13.66X
Net Operating Income
Cost of Project
RETURN OF INVESTMENT
------------------------------------------
$2.21
$8.90
24.83%
Net Cash Flow
Equity Investment
RETURN ON EQUITY
80
With
shows
an
improvement cost of $6 per square
a "residual" value of around $2 per
nice profit.
However,
foot,
Figure 7
square
foot,
a
other factors begin to whittle away
at this optimistic view.
Tables
alternative
7
cost
through
11
show
different
and income structures.
returns
By
finding
appropriate tenant improvement cost in the leftmost
for
the
column,
and the appropriate net operating income in the top row, the
correct return measure for that combination may be found
the
intersection of the row and column.
the "residual" value of the project
Table
7 presents
(the value of equity and
loan less the cost of the project) and Table
8 presents the
return on equity actually achieved by the investment.
81
at
Table 7
RESIDUAL VALUE OF PROJECT WITHOUT PARKING COSTS
-
Net Operating Income
COST LESS
(Rent-Vacancy-Operating Expenses)
LOAN + VALUE
$10.50 $10.75 $11.00 $11.25 $11.50 $11.75
---------- -------- ----------------------
OF EQUITY
Tenant
1.proveaents
$3.00
$3.25
$3.50
$3.75
$4.00
$4.25
$4.50
$4.75
$5.00
$5.25
$5.50
$5.75
$6.00
$6.25
$6.50
$6.75
$7.00
:
1
|
:
|
I
I
|
I
Table 8 RETURN ON
EQUITY
(BTCF/EQUITY)
Tenant
Improvements
($4.13)
($4.29)
($4.46)
($4.62)
($4.78)
($4.95)
($5.11)
($5.28)
($5.44)
($5.61)
($5.77)
($5.94)
($6.10)
($6.27)
($6.43)
($6.60)
($6.76)
($2.88)
($3.04)
($3.21)
($3.37)
($3.53)
($3.70)
($3.86)
($4.03)
($4.19)
($4.36)
($4.52)
($4.69)
($4.85)
($5.02)
($5.18)
($5.35)
($5.51)
($1.63)
($1.79)
($1.96)
($2.12)
($2.28)
($2.45)
($2.61)
($2.78)
($2.94)
($3.11)
($3.27)
($3.44)
($3.60)
($3.77)
($3.93)
($4.10)
($4.26)
($0.38)
($0.54)
($0.71)
($0.87)
($1.03)
($1.20)
($1.36)
($1.53)
($1.69)
($1.86)
($2.02)
($2.19)
($2.35)
($2.52)
($2.68)
($2.85)
($3.01)
$2.12
$1.96
$1.79
$1.63
$1.47
$1.30
$1.14
$0.97
$0.81
$0.64
$0.48
$0.31
$0.15
($0.02)
($0.18)
($0.35)
($0.51)
$3.37
$3.21
$3.04
$2.88
$2.72
$2.55
$2.39
$2.22
$2.06
$1.89
$1.73
$1.56
$1.40
$1.23
$1.07
$0.90
$0.74
$4.62
$4.46
$4.29
$4.13
$3.97
$3.80
$3.64
$3.47
$3.31
$3.14
$2.98
$2.81
$2.65
$2.48
$2.32
$2.15
$1.99
RETURN ON EQUITY FOR PROJECT WITHOUT
Net Operating Income
(Rent-Vacancy-Op erating Expenses)
i $10.50 $10.75 $11.00 $11.25
$3.00
$3.25
$3.50
$3.75
$4.00
$4.25
$4.50
$4.75
$5.00
$5.25
$5.50
$5.75
$6.00
$6.25
$6.50
$6.75
$7.00
$0.87
$0.71
$0.54
$0.38
$0.22
$0.05
($0.11)
($0.28)
($0.44)
($0.61)
($0.77)
($0.94)
($1.10)
($1.27)
($1.43)
($1.60)
($1.76)
$12.00 $12.25 $12.50 $12.75 $13.00
--- --- --- --- -------------
|
1
1
|
1
1
1
1
|
1
|
1
1
1
10.40%
10.05%
9.70%
9.35%
9.00%
8.65%
8.31%
7.97%
7.62%
7.29%
6.95%
6.62%
6.28%
5.95%
5.62%
5.30%
4.97%
13.31%
12.951
12.59%
12.23%
11.871
11.521
11.17%
10.81%
10.47%
10.121
9.78%
9.431
9.09%
8.751
8.42%
8.081
7.75%
16.221
15.851
15.48%
15.11%
14.75%
14.38%
14.02%
13.66%
13.31%
12.95%
12.60%
12.25%
11.90%
11.56%
11.21%
10.87%
10.53%
19.131
18.751
18.371
17.991
17.62%
17.251
16.88%
16.512
16.15Z
15.791
15.43%
15.07%
14.71%
14.361
14.011
13.66%
13.311
$11.50
22.03%
21.65%
21.26%
20.88%
20.50%
20.12%
19.74%
19.36%
18.99%
18.62%
18.25%
17.89%
17.52%
17.16%
16.80%
16.44%
16.09%
82
$11.75
24.941
24.54Z
24.15Z
23.761
23.37%
22.981
22.60%
22.21%
21.83%
21.461
21.08%
20.70%
20.33%
19.961
19.591
19.231
18.86%
$12.00
$12.25
$5.87
$5.71
$5.54
$5.38
$5.22
$5.05
$4.89
$4.72
$4.56
$4.39
$4.23
$4.06
$3.90
$3.73
$3.57
$3.40
$3.24
$7.12
$6.96
$6.79
$6.63
$6.47
$6.30
$6.14
$5.97
$5.81
$5.64
$5.48
$5.31
$5.15
$4.98
$4.82
$4.65
$4.49
$8.37
$8.21
$8.04
$7.88
$7.72
$7.55
$7.39
$7.22
$7.06
$6.89
$6.73
$6.56
$6.40
$6.23
$6.07
$5.90
$5.74
PARKING COSTS
$12.50
27.85% 30.761 33.66%
27.44% 30.34% 33.24%
27.04% 29.931 32.82%
26.64% 29.521 32.41%
26.24% 29.121 31.99%
25.85% 28.711 31.58%
25.46% 28.311 31.17%
25.06% 27.911 30.76%
24.68% 27.52% 30.36%
24.29% 27.12% 29.96%
23.90% 26.73Z 29.56%
23.52% 26.34% 29.16%
23.14% 25.95% 28.76%
22.76% 25.57% 28.37%
22.39% 25.18
27.98%
22.02% 24.80% 27.59%
21.64% 24.42% 27.20%
$12.75
36.57%
36.141
35.71%
35.29%
34.871
34.451
34.03%
33.61%
33.20%
32.79%
32.38%
31.981
31.57%
31.171
30.77%
30.37%
29.98%
$13.00
39.481
39.04%
38.61%
38.17%
37.74%
37.31%
36.89%
36.461
36.04%
35.62%
35.21%
34.79%
34.38%
33.97%
33.57%
33.16%
32.76%
Looking
the
on
residual
the $6 tenant improvement row in Table
values
for the station
negative at around $11.70.
would
begin
7,
to
This represents only a $.45
go
drop
from the current position, or an increase in vacancy from 5%
to around 7.5%.
that
is
Given the increasing levels of rental space
under construction in the Kansas City
increase in vacancies is likely.
market,
an
Thus, with an increase in
vacancy to 7.5%, the developer would not achieve his desired
return
on equity and city aid might be required to
spur
a
project.
Additional difficulties arise.
City
Other brokers in Kansas
place the value of $17 for renovated space as
at
the
top of the rental market in the city, and think that between
$14
and $15 per square foot would be more realistic for the
renovated
vacancy
station.
Again,
using $14.50 for
and a $4 operating cost,
around $9.75 is reached,
rent,
a
5%
a Net Operating income of
with a residual value so low
that
it doesn't appear on our table.
The
parking
requirement is the final difficulty
needs to be considered.
parking
alone
The above analysis assumes that the
garage for the station is constructed as
facility,
using
that
a
stand-
its own set of costs and income
balance out its economics.
Were the parking to be tied
to
in
with the office economics, the result would be to bring down
the
return
measures
for the office space
to
even
lower
levels.
Since
different uses would require different levels of
83
parking
associated with the project,
parking costs may
split out as a unique sort of tenant improvement
instance,
if
cost.
For
the parking requirement for office space is 4
spaces per 1000 square feet of rentable floor space,
and if
a parking space costs $6000 (subsurface parking in front
the station),
of
then the cost of parking for each square foot
of office space would be $24.
improvements
represent
Since both parking and tenant
additional capital expenditures
excess of the base building renovation,
together
be
within
the
they may be
per-square-foot analysis
to
in
lumped
produce
Tables 9 through 11.
Tables 9 and 10
show the problem parking imposes
the
Union Station project.
for
office
space
and
If the cost of parking is
if office
space
would
require a $6 tenant improvement expenditure,
negative
9
$24
ordinarily
we see a
very
residual value for the $12.15 net operating income
previously
Table
upon
considered.
The
residual value
presented
would run around a negative $13.50 and the
in
return
on equity would be a totally unacceptable negative 4.5% with
the previous assumptions.
Tables
pays
for
the
9
and 10 further show that if
total cost of
a
parking
the
garage,
developer
positive
returns on equity are achieved only with higher (around $13)
incomes
note
and with lower parking costs.
It is important
to
that these are only positive values and are still very
far from the 20% suggested by the 1981 study.
84
Table 9
COST LESS
LOAN + VALUE
OF EQUITY
Tenant
Improvements
& Parking
Stalls Req'd
RESIDUAL VALUES OF PROJECT WITH PARKING COSTS
-
Net Operating Income
(Rent-Vacancy-Operating Expenses)
$10.50 $10.75 $11.00 $11.25
:
$12.00
$12.25
$12.50
$12.75
$13.00
($12.43)
($12.76)
($13.09)
($13.42)
($13.75)
($14.08)
($14.41)
($14.74)
($15.07)
($15.40)
($15.73)
($16.06)
($16.39)
($16.71)
($11.18)
($11.51)
($11.84)
($12.17)
($12.50)
($12.83)
($13.16)
($13.49)
($13.82)
($14.15)
($14.48)
($14.81)
($15.14)
($15.46)
($9.93)
($10.26)
($10.59)
($10.92)
($11.25)
($11.58)
($8.68)
($9.01)
($9.34)
($9.67)
($10.00)
($10.33)
($10.66)
($10.99)
($11.32)
($11.65)
($11.98)
($12.31)
($12.64)
($12.96)
($7.43)
($7.76)
($8.09)
($8.42)
($8.75)
($9.08)
($9.41)
($9.74)
($10.07)
($10.40)
($10.73)
($11.06)
($11.39)
($11.71)
($19.93)
($20.26)
($20.59)
($20.92)
($21.25)
($21.58)
($21.91)
($22.24)
($22.57)
($22.90)
($23.23)
$34.00 |
($24.54) ($23.29) ($22.04) ($20.79) ($19.54) ($18.29) ($17.04) ($15.79) ($14.54) ($13.29) ($12.04)
$34.50
$35.00
($24.87) ($23.62) ($22.37) ($21.12) ($19.87) ($18.62) ($17.37) ($16.12) ($14.87) ($13.62) ($12.37)
($25.20) ($23.95) ($22.70) ($21.45) ($20.20) ($18.95) ($17.70) ($16.45) ($15.20) ($13.95) ($12.70)
($18.68)
($19.01)
($19.34)
($19.67)
($20.00)
($20.33)
($20.66)
($20.99)
($21.32)
($21.65)
($21.98)
($23.56) ($22.31)
($23.89) ($22.64)
($24.21) ($22.96)
($17.43)
($17.76)
($18.09)
($18.42)
($18.75)
($19.08)
($19.41)
($19.74)
($20.07)
($20.40)
($20.73)
($21.06)
($21.39)
($21.71)
($16.19)
($16.51)
($16.84)
($17.17)
($17.50)
($17.83)
($18.16)
($18.49)
($18.82)
($19.15)
($19.48)
($19.81)
($20.14)
($20.46)
($14.93)
($15.26)
($15.59)
($15.92)
($16.25)
($16.58)
($16.91)
($17.24)
($17.57)
($17.90)
($13.68)
($14.01)
($14.34)
($14.67)
($15.00)
($15.33)
($15.66)
($15.99)
($16.32)
($16.65)
($18.23) ($16.98)
($18.56) ($17.31)
($18.89) ($17.64)
($19.21) ($17.96)
($11.91)
($12.24)
($12.57)
($12.90)
($13.23)
($13.56)
($13.89)
($14.21)
RETURN ON EQUITY FOR PROJECT WITH PARKING COSTS
RETURN ON
EQUITY
Net Operating Income
(Rent-Vacancy-Operating Expenses)
(BTCF/EQUITY)
$27.00
$27.50
$28.00
$28.50
$29.00
$29.50
$30.00
$30.50
$31.00
$31.50
$32.00
$32.50
$33.00
$33.50
$34.00
$34.50
$35.00
1 $10.50
$10.75
$11.00
$11.25
$11.50
$11.75
!
-13.981
-14.42%
-14.861
-15.291
-15.72%
-16.15%
-16.571
-16.991
-17.41%
-17.821
-18.231
-18.63%
-19.041
-19.43%
-19.83%
-20.221
-20.61%
-11.71%
-12.16%
-12.611
-13.05%
-13.49%
-13.93%
-14.36%
-14.79%
-15.22%
-15.64%
-16.05%
-16.47%
-16.88%
-17.29%
-17.69%
-18.09%
-18.49%
-9.43%
-9.891
-10.351
-10.81%
-11.261
-11.71%
-12.15%
-12.591
-13.02%
-13.45%
-13.88%
-14.30%
-14.72%
-15.141
-15.55%
-15.961
-16.37%
-7.16%
-7.63%
-8.10%
-8.57%
-9.03%
-9.48%
-9.94%
-10.38%
-10.83%
-11.27%
-11.71%
-12.14%
-12.57%
-12.99%
-13.42%
-13.83%
-14.25%
-4.891 -2.61%
-5.371 -3.11%
-5.85% -3.60%
-6.32% -4.08%
-6.791 -4.56%
-7.261 -5.04%
-7.72% -5.51%
-8.181 -5.98%
-8.64% -6.44%
-9.09% -6.90%
-9.531 -7.36%
-9.97% -7.81%
-10.41%
-8.26%
-10.85%
-8.70%
-11.28% -9.14%
-11.711
-9.58%
-12.131 -10.01%
1
1
1
I
1
:
1
|
|
I
|
I
1
Table 11 -
-16.25%
-16.68%
-17.11%
-17.541
-17.96%
-18.37%
-18.79%
-19.20%
-19.60%
-20.00%
-20.40%
-20.80%
-21.19%
-21.58%
-21.97%
-22.35%
-22.73%
$12.00
$12.25
-0.34%
-0.84%
-1.34%
-1.84%
-2.33%
-2.81%
-3.301
-3.771
-4.25%
-4.72%
-5.18%
-5.64%
-6.10%
-6.561
-7.001
-7.45%
-7.89%
$12.50
1.93%
1.42%
0.91%
0.41%
-0.10%
-0.59%
-1.08%
-1.57%
-2.05%
-2.53%
-3.01%
-3.48%
-3.95%
-4.41%
-4.87%
-5.32%
-5.77%
$12.75
4.211
3.681
3.161
2.65%
2.14%
1.63%
1.13%
0.631
0.14%
-0.351
-0.83%
-1.31%
-1.79%
-2.26%
-2.73%
-3.19%
-3.65%
$13.00
6.48%
5.95%
5.42%
4.89%
4.37%
3.85%
3.34%
2.84%
2.33%
1.83%
1.34%
0.851
0.37%
-0.12%
-0.59%
-1.07%
-1.53%
RETURN ON INVESTMENT FOR PROJECT WITH PARKING COSTS
Net Operating Income
RETURN ON
(Rent-Vacancy-Op erating Expenses)
INVESTMENT
(NOI/TOTAL COST)
Tenant
Improvements
& Parking
Stalls Req'd
$11.75
$27.00 :
$27.50 I
$28.00 I
$28.50 I
$29.00 |
$29.50 :
$30.00 1
$30.50 1
$31.00 I
$31.50 I
$32.00 ;
$32.50 :
$33.00 :
$33.50 |
Table 10 -
Tenant
Improvements
& Parking
Stalls Req'd
$11.50
I $10.50
$10.75
$11.00
$11.25
$11.50
$11.75
$12.00
$12.25
$12.50
$12.75
$13.00
1
|
9.55%
9.50%
9.46%
9.42%
9.38%
9.34%
9.29%
9.25%
9.21%
9.17%
9.13%
9.09%
9.05%
9.78%
9.731
9.691
9.64%
9.601
9.56%
9.52%
9.47%
9.43%
9.391
9.35%
9.311
9.27%
10.00%
9.96%
9.91%
9.871
9.82%
9.78%
9.74%
9.69%
9.65%
9.61%
9.57%
9.53%
9.48%
10.231
10.181
10.14%
10.091
10.05%
10.001
9.961
9.911
9.871
9.83%
9.78%
9.74%
9.70%
10.46%
10.41%
10.36%
10.32%
10.27%
10.22%
10.18%
10.13%
10.09%
10.05%
10.00%
9.96%
9.92%
10.681
10.64%
10.591
10.541
10.49%
10.45%
10.40%
10.35%
10.31%
10.261
10.221
10.18%
10.13%
10.91%
10.86%
10.81%
10.76%
10.72%
10.67%
10.62%
10.58%
10.53%
10.48%
10.44%
10.39%
10.35%
11.141
11.09%
11.04%
10.991
10.94%
10.89%
10.84%
10.80%
10.751
10.70%
10.651
10.611
10.561
11.37%
11.31%
11.26%
11.21%
11.16%
11.11%
11.06%
11.02%
10.97%
10.92%
10.87%
10.83%
10.78%
11.59%
11.541
11.49%
11.44%
11.391
11.34%
11.29%
11.24%
11.191
11.141
11.091
11.04%
10.991
11.82%
11.771
11.71%
11.66%
11.61%
11.56%
11.51%
11.46%
11.41%
11.36%
11.31%
11.26%
11.21%
$33.50 1
9.01%
9.231
9.44%
9.661
9.87%
10.09%
10.30%
10.52%
10.73%
10.95%
11.16%
$34.00 1
$34.50 1
$35.00 |
8.98%
8.94%
8.90%
9.19%
9.15%
9.11%
9.40%
9.36%
9.32%
9.621
9.58%
9.541
9.83%
9.79%
9.75%
10.051
10.001
9.96%
10.26%
10.22%
10.17%
10.47%
10.43%
10.381
10.69%
10.64%
10.60%
10.90%
10.851
10.811
11.11%
11.07%
11.02%
$27.00
$27.50
$28.00
$28.50
$29.00
$29.50
$30.00
$30.50
$31.00
$31.50
$32.00
$32.50
$33.00
I
:
1
|
1
I
1
1
|
|
85
Again,
these measurements of "value" of a project
are
highly subjective and tend to overly dramatize an artificial
"cutoff" point whereby
been
created,
the decision is made
or that it hasn't.
that value has
Looking at Tables 8 and
10, the same sets of analysis for Union Station is presented
in terms of Return on Equity, or the amount of cash received
divided by the amount of equity actually invested.
Through
these numbers, the city could determine the return on equity
actually reached by the product in an effort to see
whether
the return is significantly different from the target.
is,
rather
Station
than
Union
the city contributing funds to the
project
"residual"
That
because
value,
the
the
station
has
a
negative
city might be able to convince
the
developer to accept an 18% or 19% return instead of 20%.
The
18%,
manner
20%,
or 25% return is required reveals a
f or
problem
forces
in which the developer decides
the
city in relying upon the
tc do the project,
incentive.
project
The
will
marketplace.
whether
fundamental
private
sector
motivated primarily by financial
standards against which the Union
be
The
a
measured
by
the
developer
return that a potential
Station
is
the
developer
will
look to the Union Station project for are those returns that
could
be expected upon a similar project of
Further,
risk.
the marketplace will influence the inputs into the
income section of the model:
the rent,
vacancy, and tenant improvements.
atmosphere
similar
of the city,
operating expenses,
Depending upon the rental
the developer could be required to
86
charge lower rents, pay more of the tenants operating costs,
or
provide
the
tenant with a better
resulting in higher initial costs.
standard
of
space,
Thus, the marketplace is
the ruling externality in the analysis of the Union
project,
an
externality
which
can
rapidly
station
alter
the
feasibility of a potential redevelopment.
Thus,
the developer will need to find a combination of
uses in the Union Station project that will, on the average,
meet the competitive return requirements for other projects.
While the simplistic solution for the city would be to
one
use
that
met the return
requirements,
and
find
then
persuade the developer to fill the entire station with
use,
the
influences
given
closer
developer
into
will
need
to
again
bring
that
market
consideration to determine how much
use the market will support.
to
of
a
Chapter 4 will take
a
look at the comparison of different options for
the
city and developer in a private development proposal.
Public Sector Redevelopment Proposal for Union Station
A public sector redevelopment at Union Station would be
judged
by
different
measures
than
redevelopment previously considered.
costs
would
market-driven
While many of the same
difficulties would be present, such as
and a need to pay for renovations,
the
high operating costs
the means in which these
be incurred and repaid could be
substantially
different.
The 1981 study of the station briefly considered use of
87
the
station
by the public sector as a museum,
number
of
notion
is that public sector redevelopment of
would
for
reasons,
entail
a
rejected the idea.
for
Implicit in
the
public-intensive
use.
Suggestions
to
this
funds
the
a civic botanical
local
garden,
a Kansas City Aquarium are all similar in that the
revolve
around
station.
the
general
public's active
use
uses
of
the
As a consequence, all the uses mentioned provide a
great deal of direct benefit to the Kansas City's
since
a
station
conversion of the building with public
newspaper for a military museum,
or
and
all
make
substantial
options
use
public
are
of
a
access.
renovated
public
The "public"
all just that,
public,
citizens,
space
use
with
renovation
allowing citizens
to
freely use the renovated station.
Although
involvement
physical
the
and
above
support
provide substantial
requirements
Consequently,
uses all
the
public
active
benefit,
for the uses are extremely
costs
public
diverse.
associated with producing
uses would be equally diverse.
the
those
For instance, the city would
find an entirely different set of economics for an aquarium,
with
its substantial renovation of the space and
maintenance
which
might
costs,
than
it would for a
military
not be substantially different
than
its
high
museum,
ordinary
office space.
It is important to note,
around
however,
that uses centering
intensive public use of the station are not the only
potential "public" options for the station.
88
Alternatively,
the
city
fathers
could look to
the
workspace
for
buildings
to house civic agencies,
public agencies.
station
to
provide
Rather than building
new
the station shell could
be renovated for office use by the public sector in the same
way a developer might renovate it.
Previous studies of the
Union Station as a home base for civic offices required that
the renovation be broadly comparable on economic terms
with
alternative methods of providing space.{ 2 5 }
Regardless of whether the eventual use for the
is
station
actively open to the general public or merely used for a
specific public purpose,
take
on
the public sector would presumably
the Union Station redevelopment in
an
effort
conclusively control the station's redevelopment.
direct
responsibility
station,
the
outcome
of
city
for
would
the
use
and
the station's redevelopment and
By taking
funding
gain control of the
to
of
the
method
and
would
not
be
faced with the complexity of dealing with another party as a
partner in the redevelopment.
Taking
on responsibility for the station would
expensive proposition for the city.
would
take
be
on
Immediately,
be
the city
forced to commit significant amounts of money
the station project.
If the city were to
an
to
assume
the project alone, the station, and perhaps surrounding land
would need to be acquired from Kansas City Terminal Railways
through the city's powers of eminent domain.
domain,
Under eminent
the city would be forced to compensate the railways
89
the
is
the amount would be in the
but in all likelihood,
unclear,
domain
be forced to pay under eminent
would
city
that
The amount
for the fair market value of the station.
millions of dollars.
$17 million to $20 million.
of
these costs cannot be avoided,
previous
disintegration
building
future
for
elements
building,
run
for
in
For the most
to
the
part,
since they merely repair the
of the station and
use.
stabilize
Additional
requirements such as tanks for an aquarium,
roof
private
the
to modern standards would
systems
mechanical
the
and to bring the
it to meet local building codes,
renovate
range
in
As was seen
work to stabilize the
redevelopment,
sector
for
would be required to pay
the station.
of
renovation
city
the
Further,
the
construction
or
specialized
a botanical garden would add
to
these
minimum costs.
city would probably fund the redevelopment of
The
station
through
borrow money
the issuance of
bonds.
The
from investors by issuing bonds,
the investors' money with interest over
repay
could
repayment
station
or
from
come
a
from the profits
city
would
promising to
time.
generated
tax increase upon the
the
voters
This
by
the
of
the
district.
In
Kansas City,
a bond proposal would require a
thirds majority of the voters to approve the issue.
two-
As was
a bond proposal to renovate
mentioned earlier in Chapter 1,
the station had failed in the early 1980's.
90
This two-thirds
majority holds broad political impact for the station's use.
If
the bond interest could be repaid by the income from the
facility,
taxes."
the
bond
If,
proposal could be said to
"not
raise
however, the eventual use for the station did
not produce enough income to cover the debt service for
the
station,
the
a
station's
greater
special
renovation.
level
redevelopment,
tax
tax would be required to pay
of
since
A
special
political
for
tax introduces
uncertainty
a
much
into
the
voters would certainly question a new
more than they would question borrowing that was to
repaid by the project's profits.
control
of
fund
Thus, for the city to gain
Union Station's future through the
redevelopment,
requirements
be
for public bond
process
of
financing
to
the redevelopment places increasing reliance upon
the
external forces of the political process.
The
1981
potential
study suggested philanthropic donors
as
a
source of funds for a public-sector redevelopment
of Union Station. As philanthropic donations were increased,
the amount of the redevelopment financed through bonds could
be
reduced.
lower
debt
covered
With reduced levels of
service
bond
payments would be more
financing,
likely
by operating revenues form the station.
As
the
to
be
such,
the probability of a tax increase to fund the bond repayment
would be lowered.
However,
interviews
during
the 1981 study
indicated
that the base of such philanthropic funds within Kansas City
91
was
quite low. 26}
found
study
local
monies
Further,
activities.
cultural
the study
that
concluded
local
monies were unlikely to support the station if
these
art
looking at potential national
after
of philanthropic money,
sources
already
and other
the Kansas City Art Institute,
museum,
were
their efforts to fund the Kansas City
in
overextended
that
the
sources,
for the station would be from local
activity
1981
philanthropic
Assuming that the bulk of
efforts were not also committed.
With
the
philanthropic
above
funds
reservations
in
mind,
private
might still play an important role
the public-sector redevelopment of Union Station.
in
While the
philanthropic funds might not be able to support all of
renovation,
the
funds
could
shortfalls for the station.
fill
in
crucial
the
funding
Private funds could be employed
when it would be politically difficult to rely on additional
public
monies.
Previous
suggestions by the
Foundation offer an example.
Foundation,
recently
offered
Bill Hall,
Hall
Family
head of the
Hall
to provide seed money for
detailed study of the reuse of Union Station.{ 2 7 }
a
This money
would have been a limited involvement, intended to point out
how the station redevelopment could be accomplished.
some
city
leaders feel the station has
been
Since
"studied
to
death"{ 2 8 }, Mr. Hall's proposal might have given the city the
necessary impetus to pursue a redevelopment, without placing
city funds at risk early in the process.
Thus,
for
the city to successfully complete the Union
92
Station redevelopment,
income
the city could potentially draw upon
from the station,
philanthropic
required,
oriented
revenues from
sources.
the
To
higher
the extent tax
taxes,
increases
or
are
station's uses would need to be increasingly
toward
approval
by
being
understandable
and
valuable to the voters of Kansas City.
The process of determining a viable use for the
redevelopment
city's
of Union Station would center on repaying the
debt for the renovation of the station and in paying for the
operating
these
expenses of the building.
payments
method
will come from the normal operating
for administration space,
mix
Since the
of
budget
or from a tax increase, the final
for the station will have to meld
building
efficiency
and political popularity within one proposal.
Joint Public/Private Venture for Union Station
The developer for Union Station might join together in
a
joint
development effort for
several
reasons.
party might not hold sufficient resources to
complete
the
project:
Either
singlehandedly
one party may need a resource
that
only the other party possesses; the parties may wish to pass
some
risk
to
another
party
through
a
sharing
of
responsibility; or the parties may be able to purchase goods
more efficiently as a joint effort.
The
if
reason for entering into a joint venture is
clear
neither party holds sufficient resources to complete the
development alone.
While capital may be borrowed to develop
93
Union Station from commercial lending sources,
be
will
value.
limited
to between 75% to 90%
of
these
the
loans
project's
If, for instance, the city had engaged a small local
developer
to
pursue
the
Union
Station
project,
it
is
possible
that the small developer might not be able to fund
the
to 25% equity required for the
10%
project.
In
this
case, the city might enter the project to enable their local
choice of developer to complete the redevelopment.
Similarly,
obtainable
a party might need a crucial resource
from
the
other
party.
As
an
only
illustrative
example, were the city to pursue lead responsibility for the
station's
station
redevelopment,
from
mentioned,
Kansas
this
it
City
would
Terminal
have
to
acquire
Railways.
the
As
we
would entail a substantial expenditure
at
the early stages of a project, before the project's fate was
determined.
The
city
might prefer to enter into a
joint
development with Kansas City Terminal Railways, allowing the
company to maintain ownership of the station.
In this way,
the
while
city
would avoid the early
expenditures
still
gaining necessary control over the station.
Were
the city to enter into a joint development effort
with the Terminal Railways as was previously mentioned,
city
the
would also effectively reduce its risk.
amount
that the city needed to spend to
By
the
lowering
purchase
the
station, the city would lower the chance of overexpenditure,
foreclosure,
financial
or other financial
troubles to arise,
troubles.
Further,
the city might be better
94
were
off
If the joint
than if they had developed the project alone.
losses
for
loss
the station.
of
responsible
had
city
if the
Conversely,
the station during a sole
purchased
the
the developer would be
proportionally,
shared
parties
specified that both
agreement
development
effort,
redevelopment
city would have lost the money they had invested in the
station.
were a joint venture to fail, both parties
Thus,
would lose less than if they had gone it alone.
The
venture,
obvious
final
efficiencies
than
development
portions
reason for entering a public/private
the
purchased
preceding
effort,
of
Union
the
in the purchasing process,
reasons.
Station
more
cheaply
station by themselves.
is
Through
both parties may be able
joint
a
to
than
less
joint
construct
if
In theory,
they
if
station is thought of as being made up of a number of
(inputs
such
hypothetical
as
labor,
parts,
A
materials,
and
B,
could
the
parts
or
capital,)
two
be
isolated
for
illustration.
Assuming
that
the station needs both A and
B
to
be
completed and that for the city or developer to complete the
station alone, each party would be forced to purchase both A
and B.
purchase
Further,
the
that the developer can
for $2 and may purchase B for $10.
A
illustration,
commodity
it may be assumed
it may be assumed that the city can
a for $6 and can purchase B for $6.
developer
Again
95
purchase
either
For
or the city to purchase both A and
for
B,
each
If,however, the
party would be required to spend $12 total.
together in a joint development,
join
assumed
that each party would take responsibility
the goods that it could get cheaper
of
purchase
buy B for $6.
would
together
be
for
the
than
the
Thus, the developer would buy A for $2 and the
other party.
city
may
it
parties
the
As a result,
two
parties
only $8 for the purchase of A and B
spend
rather
than the $12 previously required.
this purchasing requirement has also led to
Of course,
some
in
inequities
the split of
portions of A and B are required,
three
times
Thus,
we
the
can
sophisticated
of
amount that the
imagine
costs.
equal
Assuming
the city is now
developer
that the parties
is
would
agreement about how the potential
costs and benefits would be rectified.
spending
spending.
require
inequities
If other
costs
were required for the hypothetical project posed above,
parties
might agree that in the future,
a
the city would
the
be
required to buy $4 less of material than the developer would
be required to buy.
to
give
the
Alternatively, the parties might agree
city a proportionately larger
share
of
the
benefits from the project than would flow to the developer.
These
realities
likely
negotiations
will-become quite complex
purchasing
Since it
of a public/private joint venture.
that the city will be less capable
power
to the project than
the
in
of
the
is
contributing
developer,
and
since the "benefit" flowing to the various parties are often
quite difficult to quantify exactly, the agreement might try
96
to
while
cost to the city,
the
minimize
offering
still
sufficient assistance to the developer.
The practical application of these concepts are readily
are
two
might
hold
very
costs for the city and the developer.
The
city
example
different
holds
Financing and labor
in the Union Station project.
present
the
of
which
commodities
potential for
achieving
below-market
rates through its bond financing capabilities.
hand,
than
union
the
the
developer
the city,
interest
On the other
may have access to lower labor
since a developer may be able to
labor at lower rates.
joint development
use
non-
It is important to note
that
process
may constrain
the
parties
ablility to freely trade their different commodities.
is again a good example.
city
commit
politically
union
this access may
off by the city's involvement in the project.
to
funds to
necessary
labor.
redevelopment
Thus,
Labor
While the developer may ordinarily
have access to non-union labor markets,
cut
costs
the
project,
it
be
For the
could
for all labor on the project
become
to
be
the structuring of the public/private
agreement will need to deal
with
purchasing
efficiencies that "disappear" once the parties join forces.
The
specific
redevelopment
were
structure
of
a
public/private
effort would depend upon whether the
primarily interested in gaining additional
reducing
risk,
efficiencies.
or
advantage
taking
Fortunately,
these
97
of
goals are not
joint
parties
resources,
purchasing
mutually
exclusive, so a sophisticated joint effort could conceivably
take advantage of several benefits.
Constraints within the joint development effort.
While the construction of a joint development
proposal
can take advantage of many benefits, it must also respond to
a
broad
range
of constraints peculiar to a
joint
effort
between parties with different interests.
example of concerns that might arise deal with the
One
combination
of
marketing plan.
a
developer's
adjust
the
different
uses
within
the
developer's
Flexibility is often a desirable trait for
product.
product
In this way,
to
best
fit
the
the
developer
current
may
market
conditions. For instance, marketing of the development space
may require changes, adjustments, or controls upon the space
of a project.
space
of the project,
specific
the
In order to attract customers to the retail
the developer might wish to target a
retail market.
Often this will involve
changing
merchandising profile of stores in order to insure
right
"aura" for the
sector
center.
Unfortunately,
the
public
inclusion in the project often fixes a specific
for a portion of the station.
realignment
As a result,
the
use
the developer's
of retail profiles could be substantially
more
difficult.
A
similar example could arise during a sale of
the station to another developer.
Spreading control of the
station between development partners could cause concern for
potential
buyers of the station since potential
98
buyers
of
have
could
thestation
inflexible
uses
sets of
the
development
station placed in the hands of an uncooperative
In the same way that the title to downtown land is
partner.
often
for
clouded,
purchase of a joint public/private
project
may carry many intricacies in ownership.
Even
more
stringent
financing of a project.
during
concerns may arise
the
Were a commercial bank to issue the
Union Station project a mortgage, the bank would look to the
If the bank
Union Station as an asset to secure their loan.
was forced to foreclose upon the station, they would look to
a sale of the development for the return of their money.
the
the
public sector had placed an "odd" use in
If
station,
such as a museum or other public facility, the bank may have
While the
difficulty selling the station to another buyer.
problem
is
station
because
of an inflexible use,
problem
are
more
selling
the
the results of
the
the same- difficulty
general
severe.
in
The bank may be
unwilling
to
finance the station at all, since the odd use may reduce the
chances
bank's
of fully recovering
outstanding
its
loan
balance.
These
influences during the planning of the
can
make
difficult.
The
uses
the
synthesis
developer
and
of
city
a
project
may
judge
station's
extremely
uses
by
different criteria, such as flexibility and profitability as
opposed to public benefit.
These different criteria must be
rectified for a common project to emerge.
99
Project synthesis
immediate
In the
problems
of
Union
the
Station,
developer is faced with significant economic problems within
The renovation costs and the requirements for
the station.
parking in order to market the station effectively raise the
of the station development above the cost of pursuing.
cost
total
the city would not be able to pursue the
Conversely,
of the station without relying upon some sort of
renovation
tax subsidy of the station's
obvious.
risk is
The station's
bond repayment.
New projects throughout
Union
the city are rising to meet the needs of Kansas City.
however, is an unknown commodity.
Station,
and the even larger areas
areas of waiting room,
large
Any use for the
of
lower level space would need to compete with spaces designed
of the station is
and the "fit"
to
meet
addition,
contribution
address
the economic
to
meet
venture would
realities
of
of resources,
developer.
the
the political needs of
the
city's
the project would also need
"public" interests such as the preservation of
station previously analyzed.
as museums,
be
subject to substantial risk.
the use for a public/private joint
Thus,
In
possible,
have to be fit into the station as best as
would
need
The needs of the marketplace
for modern uses.
exclusively
resolved
to
the
The interaction of uses, such
that would be politically popular, must finally
with
the
financing,
design,
and
marketing
requirements station within the developer's control.
100
CHAPTER FOUR
Analysis of Alternative Development Scenarios
ranging from an active city
redevelopment of Union Station,
role
Each
assistance.
public
city
and
requires
Using
the
specific
of the city's and developer's positions,
the city
commitments
different
analysis
to the
of resources.
its
to understand how
able
be
should
different
brings
alternative
responsibilities
and
benefits
require
or may not,
redevelopment that may,
market-driven
sector
private
to a
entirely by public monies,
led
the
achieve
to
options
several
faces
city
The
will
intervention
affect the likelihood of a successful development under each
scenario, and should be able to determine the relative costs
of each alternative.
City's Intervention in a Private Redevelopment
For the purposes of our discussion, we will assume that
the city is preparing to aid the current owners of the Union
Station
property
simplifying
sort
through some
assumption
will
of
contribution.
A
able
to
be that the city is
cost.
obtain the Union Station building without significant
This
could
city
to
owners
donated
join
to
partnership.
station
building
in redevelopment efforts
the station,
of
Were
be accomplished in one of two ways.
the
deal
with
the building could
without
Alternatively,
the
additional
city could
the
current
presumably
cost
the
to
acquire
be
the
the
from the current owners at minimal cost so that the
might be transferred to another
101
redeveloper.
At
one
point the current owners of the station had offered
sell the building to the city for $1,
current
of
been
the already substantial renovation costs
Given
and
station
the
owner's
has
to "give away" the building
willingness
uncertain.
although the
to
need
the
parking
increased
for
a private-sector redevelopment
capabilities at the project,
Acquisition costs for the station would
will be difficult.
only complicate our current difficulties further.
per-square-foot analysis of the
As shown in chapter 3,
station,
using
renovation
economic
of
as
the
project
programatic
add
current
office
rents,
base building with parking
for the developer.
parking requirements,
much
suggests
is
Depending
that
not
an
upon
the
addition of parking
can
as 30% to the renovation
While
the
removal of parking from the project (presumably through
the
assumption
measures
of
the garage by the city) improved the
to a marginally acceptable
were
very sensitive to rent levels.
uses
with
acceptable
configurations of
absorption
costs.
rents,
levels,
Thus,
suitable
Union Station,
those
return
levels
finding stable
to
the
spatial
and with solid chances of
the
city's
60,000
square
by the market becomes the issue for
assistance of a private redevelopment.
The
feet
of
retail.
City
1981
office
This
study suggested constructing
space and using the balance
of
space
suggestion was criticized within the
business community,
as
Kansas
since addition of retail space to
the city did not seem viable.
The presence of Crown Center
102
street from Union Station,
the
across
combined
lackluster performance of the Crown Center shops,
many
convinced
not
members of the community that retail space was
station's
the
for
option
viable
the
with
a
Their
redevelopment.
concern was in the amount of space that could conceivably be
at
supported
actual
Later proposals by the
the station.
space
developers of the station revolved more around office
for
private
hypothetical
The
station.
the
projects
considered here will pursue this focus.
the
Of the roughly 227,000 square feet of the station,
proposal
private
will
consist of 40,000
square
feet
of
retail and restaurant space and the balance of office space.
At 40,000 square feet, the retail and restaurant space would
occupy
the large Main Hall,
of the station,
main
the Carriage House to the west
and some assorted areas on the path to
Waiting Room.
the
The retail could be considered support
services for the large office population, and as restaurants
for the after 5:00 crowd.
the
Unfortunately, a large portion of
lower levels are not suitable for
they enjoy neither light nor views.
be
used
occupancy
unlikely
uses,
since
While these areas could
other
short-
the lower areas involved are vast.
It is
in part for restaraunts,
uses,
office
bars,
or
that much of the lower level space could be
even by entertainment uses.
used,
Thus, under an office building
scenario, the station might not be fully utilized.
103
that
12 shows the hypothetical space breakdowns
Table
the private-sector redevelopment project might pursue.
SPACE BREAKDOWNS FOR PRIVATE REDEVELOPMENT
Table 12 -
0
20,000
67,600
21,000
21,500
17,500
40,000
187,600
8
redevelopment.
in
development
desired
to produce.
is
million.
coincidence.
burden
that
in
the
private-sector
the
analysis,
In
other
a
20%
equity,
the
assuming
words,
developer's
enough,
looking at the figures in
is
that the cost of the parking garage
The
of these numbers
similarity
However,
it
parking
has
costs
dollars less than it
worth $4.6 million
the
residual
negative
current form has a
Interestingly
we find
$4.7
seen
be
of return upon the
rate
development
detail,
its
can
-$4,598,814.
of
value
TOTAL
INCOME-PRODUCING
SPACE
presents a proforma for
As
116,908
0
40,000
147,600
Figure
Other
52,905
64,003
Hotel
Retail
Office
Sub-Basement
Basement
Low Mezzanine
First Floor
1st Fl. Mezz.
Second Floor
Third Floor
does point out the
placed upon
the
is
about
merely
extraordinary
Union
Station
redevelopment.
Judging from the numbers,
make
Table
up the shortfall
the city
has a large job
to
within the Union Station development.
13 shows the developer's return on
104
equity
depending
Fig 8 -
PRO FORMA FOR PRIVATE SECTOR REDEVELOPMENT
ILLUSTRATIVE PRO FORMA
PRIVATE SECTOR REDEVELOPMENT
UNION STATION
OPERATING INCOME
Office
Retail
Hotel
Other
Total Gross Income
Less: Vacancy, Etc. @
Effective Gross Income
Less: Operating Expenses
NET OPERATING INCOME
2,509,200
600,000
0
350,724
3 459,924
1172,996)
3 286,928
1778,854)
2,508,074
5.00%
IMPROVEMENT COSTS
Base Building Cost
Tenant Improvements
Parkin
TOTAL IMPROVEMENTS
FINANCING PROCEEDS @ 90% L/V
EQUITY REQUIRED
Debt Service for 30yrs @
Building Lease Payment
18,884,745
2,394,680
4,742,400
26 021,825
23,419,642
2,602,182
12.00%
(2,907,400)
0
BEFORE TAX CASH FLOW
(399,326)
TAX CALCULATIONS
BTCF
Less: Depreciation @ 30 yrs
Less: Interest (Assume int. only)
Less: Lease Payments
Taxable Income
TAX (DUE) @
(399,326)
(867,394)
(2,907,400)
0
(4,174,121)
1,460,942
35%
AFTER TAX CASH FLOW
1,061,616
VALUE CREATED CALCULATIONS
(399,326)
NET CASH FLOW
VALUE OF NET CASH FLOW @
LOAN PROCEEDS
20% CAP RT.
(1,996,631)
23,419,642
CAPPED VALUE + LOAN
COST OF PROJECT
21,423,011
26,021,825
RESIDUAL VALUE
(4,598,814)
Net Operating Income
Cost of Project
RETURN OF INVESTMENT
2,508,074
26,021 825
4.64%
Net Cash Flow
(399,326)
2,602 182
-15.35%
Investment
RETUEquity
N EQUITY
105
what percentage of the parking garage is funded by the
upon
With
developer.
parking
required
for
the
up
all
the
garage and the city picking
far below the desired 20% return.
only 6.13%,
garage,
negative
(15.35%).
a
return on equity is
the
parking
another
As
entire
if the developer pays for the
of the station,
view
nothing
developer's return on equity for the project is
the
costs,
paying
developer
the
disappointing
the developer will not pursue
Clearly,
the project under these circumstances.
-
13
Table
BY
PROJECT RETURNS
DEVELOPER
Percent of
Parking
Paid by
Devel
RET.
ON
INVEST.
RET.
ON
EQUITY
RESID.
VALUE
PAID
PARKING
OF
%
BTCF
6.13%
1.91%
-2.02%
-5.68%
|
|
|
|
11.79%
11.36%
10.97%
10.60%
$42,231
($46,076)
($134,383)
($3,557,542) |
-9.11%
|
10.26%
($222,690)
|
-12.33%
|
9.94%
($310,998)
($4,598,689) I -15.35%
|
9.64%
($399,305)
0%
17%
33%
50%
||
||
||
||
($1,475,249) |
($1,995,822) I
($2,516,396) |
($3,036,969) |
67%
||
83%
||
($4,078,116)
100%
||
BY
$130,539
RET. ON EQUITY = BTCF / EQUITY INVESTMENT
RET. ON INVEST.
percentage
positive
Thus,
the
be
may
As
if
=
NOI /
TOTAL PROJECT COST
seen
in
Table
13,
of parking costs accepted by
of
regardless
the
developer,
After Tax Cash Flow is suggested by the
the
a
analysis.
the developer could make use of the tax losses on
station,
the
project
could
have
immediate
value.
Unfortunately, the current uncertainty regarding federal tax
laws
does
not necessarily suggest that tax losses
106
may
be
used to forgo taxes in the future.
and more stringent minimum tax
be deducted,
may
may
in
the
For reasons such
early years of the Union Station project.
as
laws
the value from after-tax benefits
of
much
remove
Limits on interest that
the
both the 1981 study and this thesis look at
these,
economic value of the project before taxes.
the return on
For the developer to pursue the project,
would
project
the
currently
are
project
logical choice to lower the
the
raise revenues and/or lower project costs in an
to
bring
returns to
project
illustration,
additional
developer's
year
attempt
As
levels.
acceptable
the city could offer
each
monies
developer's return.
the
seems
initial
developer's
to
extreme
in
city could intervene in any of a number of ways
the
costs,
the
for
high
too
While the city purchase of the garage
project.
like
million
to achieve the desired return upon his equity
developer
the
$4.5
the
of
The costs
need to be higher.
as a subsidy
the
to
an
developer
raise
the
In essence, the city is already raising
return by abating taxes
on
the
project,
resulting in a reduction in the developer's expenses.
The city could use its position to apply for additional
aid for the Union Station project.
case
for
the city's 1983 application for a
Development Action Grant.
been
lent
In essence, this was the
at
federal
Urban
The $6 million dollars would have
below-market
rates
to
the
developer, {29}
possibly allowing the developer to place less equity in
107
the
of
The
nothing.
to
cost
the
essentially
been
the city would have
the
of
In the case
having the garage pay for itself.
UDAG,
in the hopes
and to maintain lower interest rates,
project
the
federal government would have picked up
cost for the station's garage.
However, the city would have
its
gained the benefit of seeing the station redeveloped in
The
entirety.
saved
and
ended blight,
city would have gained jobs,
the
building
historic
federal
the
on
all
government's funds.
the
Unfortunately,
continuance of the UDAG program in
for
As a result,
the future is open to great uncertainty.
the immediate future, the city must probably look to another
One
possibility
is for the city to build the garage on its own.
The effect
source to reduce the project's shortfall.
of
parking garage contribution is the same as that
the
of
The developer's private-sector project, outlined
the UDAG.
previously, would be realized and the city would gain in the
associated benefits.
the
would
city
be
Unfortunately,
scenario,
under this
$4.5
the
out
forced to actually pay
million dollars or more from its own funds.
Regrettably,
there
station,
would
The
dollar
renovation
of
the
private
uses
sector
in
reduce
strongest
price
Union
tag
the
upon
burden
civic
the
probability then becomes a
for the
Station
redevelopment.
108
into
city
a
to
achieve
closed
the
that
is little else that the city could do
substantially
finances.
million
with
$4.6
the
office
the
Were the city to allow substantial modification to
station, the developer might be able to preserve the station
If the developer could find a product that
single-handedly.
would yield a profit, additional floorspace could be used as
a private subsidy for the Union Station building.
no
doubt
the
original
intention
of
the
This was
353
original
The specifics of this potential
redevelopment application.
private subsidy are as broadly defined as the market itself.
the extent that the developer could fit
To
a higher profit could be made.
floorspace into the station,
Since
the station offers an existing enclosure of roof
and
construct
the
the
walls,
additional
floorspace
only have
to
theory,
this
could be produced at a cost lower than the
cost
platform
bearing
would
developer
for the office space.
of new construction,
In
and as such, would offer a substantial
profit to reduce the deficit seen in the previous renovation
analysis.
As an example,
if the developer could build
an
additional 35,000 square feet of office space in the station
for $50 per square foot,
and achieve the same rents for the
the Return on
office
space as for the rest of the project,
Equity
would rise from 6% to nearly 17% as shown
14.
in
Table
obviously, this margin would change depending upon the
amount of floorspace added, and the rates at which the space
was built and rented.
109
EFFECTS OF ADDITIONAL OF FLOOR SPACE ON RETURNS
Table 14 -
With additional
Standard
35,000 SF
--------------
----------------------
23,029,425
Total Project Costs
(Excluding Parking)
21,279,425
Financing Available
19,151,482
20,726,482
2,127,942
2,302,942
Net Operating Income
Debt Service
(12%, 30 years)
2,508,074
-2,377,535
2,963,074
-2,573,061
Before Tax Cash Flow
130,539
390,013
(90% L/V)
Equity Required
The
16.9%
6.13%
Return on Equity
additional
factor upon the inclusion of
limiting
and
floorspace to the station is again the marketplace,
to
The city's hopes for the station's
some extent, the city.
of
the
If
the
real
estate market in Kansas City was not cooperative,
the
city
could
be forced to watch the station
decay
city's
goal of initiating development
through
would
redevelopment
tied
up in
ability
the
to fill the space built at the station.
developer
The
be
further.
direct
city involvement in the process would be at the whims of the
private market.
The city also holds limited influence over the addition
of floorspace to the Union Station building.
Union
Station's
renovation
has often
station
would
be kept largely intact.
options
often
involve
only
cosmetic
station's architectural integrity.
power
over
presumed
Common
that
the
renovation
alterations to
the
The city currently holds
the physical form of the
110
Discussion of
station
through
its
review
zoning
designation
and through
process
powers.
historic
limited
its
Once the city lists Union Station
in
the city's historic register, it becomes much more difficult
for the building's owner to demolish all or parts of it.
the
extent
that the city opened up
review
To
and
processes
supported the addition of additional floorspace to
publicly
the building,
the project might be able to proceed.
Again,
however, the city would presumably now require an input into
the
redevelopment product in exchange for its
and
support
relaxed regulatory requirements.
summarize briefly,
To
the city has many ways that
it
could conceivably aid in th e achievement of a private-sector
The city's
redevelopment.
take
a
broad ra nge in bot h cost and involvement
cost
with
the
The co ntribution of a garage to the redevelopment
product.
would
effort
contribution to such efforts can
the
be costly to
city
the city,
as much as it
would
would
since a garage
cost
the
developer.
However, the city might be able to advance the same product,
the
developer's
office
and
retail
project, with
accompanying restoration of the station,
a UDAG or other grants.
obtain
commitments
to
through the use of
The city would use its position to
the
federal
through
passive
the station funded by
Finally,
government or some other party.
relaxation
its
of some requirements for the station,
the
city
might be able to encourage the developer to pursue a project
which might otherwise be thought infeasible.
111
City's Involvement in a Public Sector Redevelopment
As one might expect, the costs and requirements of the
city in a public sector redevelopment proposal would be much
required
those
than
higher
under
a
led
privately
redevelopment. For the specific public use to be examined, a
project
hypothetical
employing
several
of
public
the
sector's needs will be constructed.
a minimum,
At
the
city $21 million to renovate the base building for use.
Regardless
would
was
cost
the station's redevelopment would
of the building's eventual
the
use,
cleaned.
need to be stabilized and the interior
the
mentioned,
The
developer.
face
the
city will need to borrow funds in order to
complete the station's redevelopment,
to be repaid.
As
high
city will be faced with the same
costs and mortgage payments that would
operating
structure
a debt that will need
Thus, the station's reconstruction would have
to be financed from a tax in the city,
such as a sales tax,
or by the station's revenues.
As
sector,
a hypothetical redevelopment project for the public
several
City could be combined in the station.
the
station
of
uses suggested by the citizens
would
the uses for
Again,
ideally yield some sort
Kansas
of
continuing
station,
income in order to pay the operating costs for the
and would be politically popular enough so as to warrant the
issuance of a bond proposal that would meet voter
Further,
for
to
approval.
the extent that the city could use the station
purposes that the city would otherwise
112
already
engage
in,
city
the
for
benefit
gaining double
be
would
its
expenditures.
The Waiting Room at the north side of the station could
the side wings
be used to house a new Kansas City Aquarium,
could be used as civic office space, and the Main Hall could
be
teaching
renovated into a botanical garden/agricultural
Since the city needs income from the station,
museum.
the
city could use some income producing uses such as museums to
station.
The
initial construction costs would be financed through a
bond
the
maintain
operating
to the city or county,
proposal
for
expenses
the
repay
using taxes to
the
interest and principal on the bonds.
station
the
a bond proposal would be required,
Since
have to be a product that could easily be sold to the
would
voters
The inclusion of
the area.
of
aquarium
the
and
botanical garden would offer this understandable edge to the
Thus,
proposal.
the redevelopment is presented to the
as
the station could be positioned as helping all
voters,
Whereas
public.
bond
a
proposal for aid
private
a
to
the
proposal might be looked upon by some voters as a bailout of
a
landowner,
wealthy
the
has
idea
aquarium/museum
the
clarity of public purpose and benefit.
a
With
space
botanical garden in the Main Hall,
could still be opened to the public.
office
aquarium
and
selected
portions
checkpoints
of
space could make
the garden
Users
their
before
lobby
the
way
reaching
of
the
through
ticket
The botanical garden would
for the aquarium.
113
the Main Hall interior to remain intact,
allow
The plants, because of their scale and
the ornate ceilings.
the
to
well as those individuals that paid to see the
as
station,
visitors
appreciated by casual
be
could
volume,
for
except
plants up close.
The
option.
redevelopment
open
is
and
restored
immediate
of
deal
great
"city" as the public at large would gain
the
Thus,
benefits
Main Hall of
for
substantial
public
this
from
station
the
a
is
access.
public
using the aquarium and the city office space would
Citizens
Further, the space would be
be able to enjoy the interior.
used
being
of
capable
for
in
celebrations
public
the
Pershing Square/Crown Center area and would truly remain
in
Through a publicly-led restoration
of
the
public domain.
the station,
many of the city's previously identified goals
a small
for the Union Station building would have been met,
number
of
memorable
a
major
civic node would have been created from an
urban
jobs
would
have
been
created,
and
design point of view.
The public proposal would require large expenditures on
the
part
of the city.
would receive the direct benefit,
would
be
renovation.
the
city
the citizens of the
area
Just as the citizens of
forced to bear the substantial cost of a
The
manner
in which
the
station
redevelopment
was
funded would vary the proposal's impact upon the populace of
the
city.
Many
cities
use tariffs
114
such
as
hotel
or
taxes
airport
backs
improvements onto the
local
for
payment
in an effort to shift the burden of
non-residents.
of
Alternatively, the city might fund the redevelopment through
a
sales
tax,
the
a tax that would affect the citizens of
area much more directly.
Not only would the method of funding vary in
different
public redevelopment proposals, but the extent of continuing
The city would
civic involvement in the project could vary.
not
requirements
be taking on additional funding
only
assuming the responsibility for the project.
by
The city would
need to be concerned with the organization and institutional
requirements for the completion of the project, and with the
responsibility for the maintenance and operation of
ongoing
Thus,
the project.
the
the city would be entering into
station
involvement
by pursuing a public redevelopment
a
of
continuing
private
far in excess of that required under a
redevelopment.
Public/Private Redevelopment of the Station
A public/private redevelopment of the
city
the
allow
station,
to
assist in
thus gaining control,
the
redevelopment
would
of
the
and could allow the city to
simultaneously pursue its desired goals.
redevelopment
station
A
public/private
effort in the instance of Union Station would
probably function more successfully if the eventual use
for
than
the
In the case of Union Station and Kansas City,
the
that
the
the
station
public.
lack
of
were closer to the private scenario
available
public
funds would
115
suggest
station's redevelopment be focused on income-producing uses.
through
proposal
private
existing
the
would be to modify
goal
the
Thus,
of
inclusion
the
sector
redevelopment
public
sector components in an effort to make the
proposal
more viable.
In
for
order
the
redevelopment effort to have effect,
have
value
economic
to
the
the contribution
must
contribution
city's
to the developer.
The
should
city
contribute up to a point where the redevelopment proposal is
the
is
city
contribution
city's
the
should require as little fianancial
while
possible,
constrained,
fianancially
since
Further,
viable from the developer's point of view.
input
as
still achieving the desired results in the
station's redevelopment.
Thus,
while the city could
give
the developer $4.6 million to eliminate the shortfall in the
development project,
that
commodity
an effort should be made
to find some
is worth $4.6 million to the developer
but
costs the city substantially less.
In the previous example,
the developer will retain the
office component of the station.
of
Since the retail component
the developer's project left doubts of marketability
some people's minds and contributed heavily to the need
additional
ways
in
parking for the station,
in
for
the city will look for
of
the
the earlier assessment of the city's resources
for
which
it
might improve
that
component
project.
In
116
project,
the
of the main influences
one
was
bonds
to use low-cost financing techniques such as
ability
The city has the capability to issue
to fund its projects.
As a result
bonds whose interest payments are non-taxable.
of
city's
the
being non-taxable the bonds carry a lower interest rate,
since the recipients of the bond interest retain all of
However,
interest.
issuance of these tax exempt bonds
the
federal
under increasingly stricter
come
has
the
regulation,
restricting their tax exempt status to certain occasions.
are
exempt bonds,
one
type of financial instrument that has
in
used
bonds,
known as industrial revenue
Tax
estate
the past for financing real
often
been
improvements.
Unfortunately, just as the UDAG grants are facing increasing
uncertainty,
Industrial Revenue Bonds are presented with an
For
future.
uncertain
considering
federal
instance,
proposals that would restrict the use
exempt Industrial Revenues Bonds to facilities
no
more
issue
the
officials
for
to the developer
bonds
the
tax-
that contain
the city could
Thus,
than 1% private uses.
of
are
not
Union
entire
Station project if the station were developed into a private
use.
If, however a portion of the station could be reworked
such
that it contained only public uses (as defined by
Internal Revenue Service),
the
station's
standards,
interest
and
rate.
it is possible that a portion of
redevelopment
as
such,
the
might
comuild
h
bypass
financed
federal
the
at
This lowering of the developer's
a
interest
rate would not cost the city any monetary commitment,
117
lower
since
the federal government would, in essence, be subsidizing the
interest payments through foregone taxes.
Thus, one potential redevelopment scenario would be for
the
to take responsibility for some
city
Since the use would be replacing
as a public use.
station
the
of
portion
the income-producing retail space, the new use would need to
order
in
income
generate
the
station
to
project
As was mentioned previously, the
eventually come out ahead.
use that would be placed within the station would be
actual
of
for
great interest to the developer.
would
be
to
need
the office space already planned
with
compatible
by the city
station
the
into
placed
use
the
Presumably,
the
for
redevelopment.
One
public/private
Let
college.
Kansas
of
example
City
joint
a
use
that
redevelopment is that of a
currently
considering
community
city
of
constructing
or
us hypothetically suppose that the
was
a
satisfy
might
renting a sight for a new adult/extension community college.
By
locating the community college within the
station
both
the city and the developer may benefit from the action.
Depending upon
could
the city's plan for the
build a new college facility,
would
they
either rent space in some building for the college or
Were the city to desire to
build an entirely new facility.
between
college,
the cost would run
$50 and $80 per square foot.{ 3 0 }
have
This new
to be funded by the city in much the
118
somewhere
facility
same
way
The city would either
that the Union Station project would.
raise taxes for a special purpose facility;
they would draw
income form the use of the facility to pay for the mortgage;
or
draw
would
they
from
city's
the
general
reserves.
rental option for the city would not require an initial
The
investment of the size of new construction,
rental
but the
would result in a continuing requirement for the city to pay
rent.
Since
undertake
the
types of cash flows that the city
under each option are now
alternatives may be compared.
known,
the
would
different
Table 15 shows the results of
the mathematical analysis of the different alternatives.
For a base building cost of $83 per square foot with a
$6
per square foot improvement cost for the college (as
in
and a $12 per square parking cost
(2
space),
office
the
spaces
*
normally
financing.
$6000
be $91,
/1000 sq.ft)
the
amount
financed
using the previous assumptionsof 90% debt
Assuming that market-rate financing is currently
running at 12%,
the interest cost would be $11.30 per year.
Since the construction of the college would now be
by
would
it may be assumed that the
lower rate tax-exempt bonds,
interest
rate would fall to 10%.
interest
cost would be $9.65.
financed
the
Under this new rate
Thus,
the developer
essentially gain $1.65 in extra money over taxably
would
financed
uses. This gain would come through lower interest costs
each
square
foot of space the city occupied that would
eligible for tax-exempt financing.
119
for
be
$83.00
6.00
2.00
Construction Cost
Tenant Improvements
Parking @ 2/1000
$101.00
$90.90
Amount Financed @ 90%
$11.28
$9.64
Mortgage Payment @ 12%, 30 yrs.
Mortgage Payment @ 10%, 30 yrs.
Savings PSF of lower interest
$1.64
effects.
direct
also has other
tenancy
college
The
TAX-EXEMPT
CALCULATION OF INTEREST SAVINGS FOR
FINANCING
15 -
Table
space
the retail
Because of the nature of a retail market,
in the developer's project would have had to occupy a fairly
In
building.
location within the Union Station
prominent
for the public to find and use the retail operations,
order
Hall
the space would probably have been located in the Main
or
college
as
the
requirements
would not have the same accessibility
retail space,
the
Since
in one of the adjoining ground-floor winds.
add
to
the developer would be able
productive floorspace to the rental roles.
The basement of the Union Station is not an ideal space
for
rental
require
Since most
on the open market.
light
office
basement
space,
and desire views for their
users
space is nearly impossible to rent at market rental rates as
office
storage
space.
space
requirements.
placed
some uses,
Conversely,
do
not
Because
"expansion
have
the
such as retail
of this situation,
retail"
presumably
120
and
view
the 1981
study
light
same
or
renting
at
normal
Union
the
surrounding a potential retail portion of
doubt
With the
in the lower levels of the station.
retail rates,
such
the city might be able to add a use,
Station project,
to the station to take up basement space that
as a college,
would otherwise be lost to unproductive uses.
With
the
light
users,
requirement.
designed
to
generally
not
does
become as
many
Further,
exterior
avoid
specifically
are
classrooms
distractions
continuing
a
of
much
college
the
transient nature of
to
the
class.
Further, the space would not require immediate access to the
Main
Lobby,
Figure
16
the
desirable space
most
suggests
in
20,000 square feet of
the
building.
space
on
the
ground floor intended for use as administration offices and
community
lecture hall,
and another 20,000 square feet
short-term classroom space in the lower level.
of
It should be
noted that the use of the classroom space in the lower level
effectively raised the amount of floorspace by 20,000 square
feet over the private sector redevelopment proposal.
121
SPACE BREAKDOWN FOR PUBLIC/PRIVATE EFFORT
Table 16 -
Office
Other
52,905
Hotel
College
Sub-Basement
0
20,000
Low Mezzanine
First Floor
20,000
87,600
20,000
1st Fl. Mezz.
21,000
Second Floor
Third Floor
21,500
17,500
Basement
64,003
0
40,000
167,600
207,600
96,908
TOTAL
INCOME-PRODUCING
SPACE
The results of this action will substantially raise the
private
for the project over those of the entirely
returns
as
venture,
may
be seen in Figure
9.
Here
return
problem of the qualitative nature of the developer's
faced.
is
measures
This
the
again,
a
20%
that
the
analysis again assumes
return of equity is the desired measure of return.
return
The
may
developer
measures
are
improved
still
begin to pay for parking and
return measures for the project.
positive
enough
achieve
shows
Table 17
the returns for the developer depending upon how much of the
parking
not
until the developer is relieved of 50% of
garage
It
garage costs are assumed by the developer.
cost
before-tax
that
the developer's return
on
the
parking
equity,
return on the money the developer actually
into the project, becomes positive.
122
is
the
puts
Fig 9 -
PRO-FORMA FOR PUBLIC/PRIVATE REDEVELOPMENT
ILLUSTRATIVE PRO FORMA
PUBLIC/PRIVATE REDEVELOPMENT
UNION STATION
OPERATING INCOME
Office
Retail
Hotel
Other
Total Gross Income
Less: Vacancy, Etc. e
Effective Gross Income
Less: Operatinq Expenses
NET OPERATING INCOME
2,849,200
762,000
0
290,724
3 901,924
(195,096)
3, 706,828
(878,854)
2,827,974
5.00%
IMPROVEMENT COSTS
Base Building Cost
Tenant Improvements
Parking
TOTAL IMPROVEMENTS
FINANCING PROCEEDS @ 90% L/V
EQUITY REQUIRED
Debt Service for 30yrs 9
Building Lease Payment
18,884,745
2,214,680
4,502,400
25,601,825
23,041,642
2,560,182
12.00%
(2,860,474)
0
BEFORE TAX CASH FLOW
(32,500)
TAX CALCULATIONS
BTCF
Less: Depreciation @ 30 yrs
Less: Interest (Assume int. only)
Less: Lease Payments
Taxable Income
TAX (DUE) @
(32,500)
(853,394)
(2,860,474)
0
(3,746,368)
35%
1,311,229
AFTER TAX CASH FLOW
1,278,729
VALUE CREATED CALCULATIONS
NET CASH FLOW
VALUE OF NET CASH FLOW @
LOAN PROCEEDS
(32,500)
20% CAP RT.
(162,500)
23,041,642
CAPPED VALUE + LOAN
COST OF PROJECT
22,879,143
25,601,825
RESIDUAL VALUE
(2,722,682)
Net Operating Income
Cost of Project
RETURN OF INVESTMENT
2,827,974
25,601 825
11.05%
Net Cash Flow
Equity Investment
RETU N 0 EQUITY
(32,500)
2,560 182
-1.27%
123
Table 17 -
RETURN MEASURES FOR PUBLIC/PRIVATE EFFORT
RESID.
VALUE
Cost of
Parking
Paid by
Developer
OX $242,807
17% ($251,421)
33% ($745,650)
50% ($1,239,878)
67% ($1,734,107)
83% ($21228,335)
100% ($2,7221564)
Depending
upon the specific return goal the
requires,
financing
the
may
city's
or
city
resources,
was
to
a
$1,377,116
$1,360,719
$1,344,321
$1,327,924
$1,311,527
$1,295,130
$1,278,733
add
developer
tax-exempt
redevelopment.
tax-exempt financing and city
a $4.5 million
The
tenancy,
able to drastically lower the shortfalls
developer
to
$470,550
$386,712
$302,873
$219,035
$135,197
$51,358
($32,480)
that through a low-cost use of two
developer's returns for the project.
able
13.40%
12.941
12.51X
12.11%
11.731
11.381
11.051
intervention
may not trigger
important point to see is
city
22.301
17.70%
13.401
9.381
5.61X
2.071
-1.27%
ATCF
BTCF
Rol
ROE
in
the
Rather than giving the
parking facility,
make up over $2 million in
the
the city
shortfall
was
through
an
understanding of the developer's requirements and needs.
Goals for City's Commitments in Projects
The
beauty of the hypothetical
scenario
the
is
(hypothetically)
city's
the
is
for
benefit
college
that the city was able to substantially
developer's
scenario
community
problems by purchasing
a
was to be purchased anyway.
commodity
was
that
college
The
one example of increasing the amount of
a fixed contribution of funds.
able to leverage its
commitment of resources.
124
civic
By tying
contribution into a previously existing public
city
reduce
own goals by
a
the
goal,
single
public
One
discussion
goal
has
that
been
in
implicit
the
of public involvement is the goal of control and
influence on the Union Station redevelopment.
Once the city
granted the developer's designation as a
redevelopment
has
authority,
of
substance
extremely
the redevelopment process is
removing
is faced with few options short of
city
The
the direct control by the city over the pace and
low.
the
developer from the project.
While
is
means through which the city might
one
353 redevelopment project,
a
over
desirable
means
resort
cannot
project
direct involvement with a redevelopment
from
to
important 353 project.
clearly it is
a policy point of
involvement
direct
influence
gain
The
view.
to
not
finetune
the
city
each
Rather, the process might involve a
depending
phased distribution of benefits to the developer,
It is exactly this frame of
upon
the project performance.
mind
that the city would ideally pursue in its
involvement
with the Union Station project.
The
could
city
to
substantive intermediate goals
Union
Station
Union
Station developers.
tax-exemption
contributions
its
tie
Rather than granting a
for the project,
the city might be
to
the
for
the
blanket
able
to
phase its exemption with automatic extensions, except in the
case
of
Further,
proceeds,
be
non-performance
the
on
the part
of
the
contribution of city resources such
planning funds,
developer.
as
loan
or garage construction could all
tied to the attainment of certain benchmarks on the part
125
of the developer.
As with cities enjoying an expansive construction boom,
as Boston or San Francisco,
such
the city of
require certain planning and design conditions be met
could
The cities of Boston and
in order to receive city approval.
San
City
Kansas
Francisco
doing
developers
developers
currently impose
business
within
offer,
need something the city has to
are
developers
willing
The
cities.
their
approval in a very profitable market,
upon
requirements
strict
building
and in exchange,
the
exactions
and
to contribute cash
submit to increased city involvement in design issues. While
Kansas
the city may be in the position to offer
and San Francisco,
the
the
developer the valuable contributions to
In
development.
exchange
for this involvement
further its interests through a careful
could
Boston
City does not offer the same "hot" market as
concessions
intervention
as would be the case in an
private-sector project,
city
the
Rather than merely gaining
in the planning of the project.
a redeveloped station,
project's
entirely
the city might be able to gain such
as continued public access or landscaping for a
project with city involvement.
The resolution of the city's and developer's
will be a difficult technical process.
interests
Disagreements as to
The
the costs and needs of the project are likely to arise.
developer
parties
and
city
may need to rely upon
such as arbitrators or mediators
126
external
third
(either formal
or
informal) to determine
to
of
and
Thus,
new
parties.
the
impasses between
adjudicate
levels
common sets of cost information
redevelopment
complexities are entered into the
even
process by extensive negotiations and the inclusion of
more players in the redevelopment process.
As a result of these increased requirements,
the
need
element
in
the
becomes
flexibility
for
crucial
a
The project scope and
public/private redevelopment process.
while
Thus,
forces.
political
prolonged
understanding
original
gain
may
city
the
market
of
the parties may change due to a variety
between
and
The
negotiation.
public/private
a
of
change over the course
often
will
costs
increased control over the eventual product of the station's
and
city
input
this
redevelopment,
developer,
both
the
will undoubtedly cost both
time
and
aggravation
the
of
negotiations.
the
In a project developed entirely by the city,
would
gain
explicit control over the
operation of the station.
the
the
scope,
responsibility
redevelopement
for
and
design,
However, with this control comes
extraordinary costs associated with the
station's
city
and
assumption
of
continuing
the
of
the organization and operation
the
station.
the
city
enjoy the return of the station to a productive
use,
Through
might
an
entirely private redevelopment,
but the inclusion of additional civic goals,
such as
urban
design and public access, would be chance occurences, rather
127
than
through
importantly,
enjoy
not
does
most
an entirely private venture the
city
chance
the
The
redevelopment.
to
development
project's
the
trigger
of the station remains
a
of the external marketplace of the city,
function
the
Perhaps
additions that the city could control.
cannot
city
or
predict
control.
a
force
developer's
The
incentive to pursue a project is dependent upon when and
if
strong
to
the
local
real
estate market is
sufficiently
absorb the station's redeveloped space.
strategic placement of city resources through a
Using
joint venture,
public/private
gain
redevelopment
both
the
could
city
conceivably
and
The city of Kansas City is
worlds.
Through
constrained.
of
parts
desirable
the city
a public/private
private
capital
redevelopment,
the
city would not be faced with the difficulties of funding the
themselves.
Contributing
to
the
entire
redevelopment
project
would allow the city to gain a say in the project's
to city goals,
attention
influence
significant
project
proceeded.
and would allow the city to
in how and when
the
Union
have
Station
Finally through the judicious analysis
of the city's existing priorities, the city might be able to
engage
in
the
additional cost.
Union Station project
with
only
moderate
If the city is able to combine previously
required capital expenditures with the station project,
city
might
be able to gain dual benefit from
expenditures.
128
one
set
the
of
CHAPTER FIVE
Summary
The
the
Union
of
redevelopment
Because
Station.
requirements
profitable
redevelopment of the station is not possible
of
the
station's
the
of
difficult
economics,
at
If the city desires to stop the station's decay
this time.
through
in
city of Kansas City faces a difficult prospect
city
the
the redevelopment of the building,
will
need to intervene in the process to make the station's reuse
more realistic for a potential developer.
While
city
the
involved
has already become
in
the
station's redevelopment through the assignment of a Missouri
not
that action alone has
353 redevelopment corporation,
state
legitimate
high
reasons of high renovation costs,
low
and
costs,
market
within
economics
For
reuse.
been enough to warrant the station's
the
parking
city,
developer has not pursued the station's redevelopment.
parties
might
station
was
argue that redevelopment of
burden the developer
a
acceptance of the 353 designation,
additional
commit
not
the
the
Some
non-economic
a
through
assumed
the
and that the city should
resources
to
the
station.
Unfortunately, regardless of the original assumptions by the
developer,
the
station is now in a state of decay with
no
Unless the city
is
profitable
clear
use on the horizon.
willing and able to force the developer into compliance with
the
original
commit
redevelopment plan,
the city
will
need
to
additional resources in order to encourage action by
the private sector.
129
Previously,
the
was
city
benefits
redevelopment projects because of the broad set of
afforded
Urban renewal,
cities by the federal government.
grants,
UDAG
generous
preferences
tax
historic
for
and low-income housing were all oriented
properties
the
cities' contributions to private
As
these
federal
programs
dried
the
under
toward
efforts.
development
up
bond
industrial
extensive use of tax-exempt
and
financing,
into
intervene
to
able
Reagan
administration, the city of Kansas City was left without the
Cities became
traditional tools that had used in the past.
more
and
more dependent upon the ability to
leverage
the
private market for public purposes.
requires
The use of new private development incentives
a
careful understanding of the problems faced by a specific
development and the ways in which the city might be able
to
addresses those problems.
In the case of Union Station, the eventual developer of
the
costs
station is faced with extraordinarily
renovation
relation to the amount of floor area that may
in
marketed
high
within the project.
automobile-oriented
city
be
Parking requirements for the
exacerbate
the
high
renovation
costs for the station.
This thesis suggests that the city of Kansas City would
be unwise to single-handedly assume the responsibilities for
the
Union
Station
redevelopment.
Assumption
station's problems would require an unusually large
130
of
the
expense
for
a
require
Kansas City and would
of
city
the
operate
organizational and financial burden for the city to
the
station successfully.
While the city would be able to
directly influence the redevelopment,
and would be able
to
the
to
scope of the Main Hall so important
the
influence
large
these objectives might be achieved through
area's citizens,
less demanding involvements.
Alternatively, the city might contribute resources to a
private
contributions
for the city would certainly be lower than
effort,
redevelopment
publicly-led
necessary
While the
sector redevelopment effort.
the
of
control
a
the
project afforded the city would also be substantially lower.
If,
however,
the costs passing to the station were of sole
to
importance
city,
the
city's
the
that
is likely
it
immediate contribution to the project would be lowest
under
a private redevelopment effort.
city could find some way to adequately
impact
the station's design so as to provide desired public
access
If
to
the
the Main Hall and other important areas of the
station,
the private redevelopment effort might be the most desirable
for
option
redevelopment
city.
the
effort
would
require the
lowest
involvement and responsibility for the city.
had
traditionally
contribution
to
this
pursued
course
private redevelopment
a
to
Contributions
private
level
of
Since the city
of
efforts,
external
it
might
prefer to continue in this vein.
Were
the city to contribute to a private redevelopment
131
effort, it is imperative that the city do so contingent upon
contributions
to the redevelopment effort have been offered
Ten years
to the developer with few stipulations attached.
little
authority,
the creation of the redevelopment
after
city
Previous
the developer's response to civic concerns.
substantial progress has been made upon the station
itself.
While several other office buildings have been started,
developers
the
have been under minimal true pressure to provide
a redeveloped use for the station building.
for the city and
Unfortunately
assistance
contributions
falling
designed
programs
away.
to
difficult
Given
the
the
to aid
station,
cities
redevelopment
current
federal
external
in
projects
federal
are
budgetary
constraints, the city may need to rely increasingly upon its
own resources to spur private projects.
If this means hard
cash, the city may be unwilling or unable to contribute to a
project
without receiving a more significant voice
in
the
outcome of the project.
A
public/private joint venture would be the
providing
exchange
project.
additional
civic
are
be
the
of
product
in
redevelopment
the
In order for the city to successfully address the
Since
the city may attack on several
the city is cash constrained,
no apparent grants to be used,
able
into
for the city's contribution to
difficulties of the station,
fronts.
input
means
the city is unlikely to
to reduce the initial cost of
132
and as there
the
redevelopment.
Rather,
a creative structuring of the
through
development
product, the city might still be able to take advantage of a
tax-exempt financing
tightened
use its tenancy to take up space in
could
city
the
Further,
capability.
lower
the
unproductive.
levels of the station that would otherwise be
Finally, the city could continue tax abatements in the short
term.
specific
the
While
suggestions above may
for the city at the current time,
possibility
be
not
the
a
general
goal is that of utilizing low-cost intervention of the
part
the city to improve the economics of the project for the
of
developer.
process
The
developer's
one.
by
which
requirements
Without
a
the
city's
resources
are rectified will be an
flexible
attitude,
and
arduous
careful
analysis/understanding of the developer's difficulties,
and
on the part of the city and developer to
see
a
the
commitment
station
achieve
unlikely to succeed.
a
a
productive
use,
the
is
process
However, with measured cooperation and
careful eye toward the costs and benefits available
from
each option, the city and developer may be able to raise the
Union Station building to a productive use for the future.
133
ENDNOTES
James Kindall, "Union Station, Could this be the
end of the line?" The Kansas City Star Magazine, 18 December
1983, p.8.
{2)
Kindall, p. 9.
and
PGAV-Community
Associates
Gladstone
(3)
for the
Reuse Analysis
Resource Corporation, Adaptive
U.S.
MO.:
(Kansas City,
Kansas City Union Station,
Department of Commerce, Economic Development Administration,
1981) p.20.
Pershing Square Redevelopment, "Application for
{4)
application,
Unpublished
Rights,"
Redevelopment
353
Pershing Square Redevelopment, 1 July 1974, p. VI-1 to VI-6.
{5}
Thomas
Watts,
"Study Says Union Station is
Good Home for IRS," Kansas City Star,
col. 2.
{6)
18 July
1978,
a
p.3A
Kansas
City Star Editorial,
"Great
Union
Plan Seems Within Grasp," The Kansas City Star, 3
Station
April 1979, p.
8A col.
1.
Andrew Miller, "IRS Decides to scuttle Union
(7)
Station project," The Kansas City Star, 11 September 1981,
p. Al col. 2.
{8)
James
line?", p.9
Kindall,
"Union Station..
end
of
the
Steve Nicely, "$24 million renovation eyed for
{9)
1983, p.Al
Union Station," The Kansas City Star, 23 April
col.1-2
& p.A4 col.l-3.
{10)
Steve Nicely, "Partial request made on Union
Station grant before deadline passes," The Kansas City Star,
30 April 1983, p.Bl col.2
{11}
Ibid. p.Bl col 3.
(12}
Joe Lambe,
"Owners of Union Station reject local
1985,
renovation bid," The Kansas City Star, 29 September
p.Al col.1-2 and p.A4 col. 1-5.
(13)
renovation
p.4A col. 2
Joe Lambe, "Owners of Union Station reject local
1985,
bid," The Kansas City Star, 29 September
134
(14)
The Urban Land Institute, Revitalizing Downtown
Retailing, Trends and Opportunities, (Washington, D.C.: The
Urban Land Institute, 1983), p.22.
{15)
Raymond,
Parish, Pine, & Weiner, Inc., Downtown
(Kansas City, MO.:
2000, A Plan for Downtown Kansas City,
The Kansas City Redevelopment Agency, 1983.) p.38.
{16}
William D. Tammeus,
"From brrrr to brrrr,
'85
29
December
covered all the bases," The Kansas City Star,
1985, p.6H col 2.
(17)
Joe
Lambe,
"Of blight and right:
Concept of
Star, 29
City
Kansas
The
shifts,"
353
law
Missouri's
December 1985, p.13A col 1.
{18)
James Kindall, p. 18
{19}
Joe Lambe, "Of blight and right...", p.13A
{20)
The Urban Land Institute,
Retailing..., p.19
{21)
William
Lincoln,
Letter to the editor:
Station,"
January 1985, p.12A, col, 4.
(22}
{23)
Revitalizing Downtown
"Some Thoughts- on Union
The Kansas City Star, 27
Means Cost Data: 1985, p. 285.
Gladstone
Associates
and
PGAV-Community
Resources, p. 172
(24)
Delbert Schafer, "Committee studies plans to
The Kansas City Business Journal,
renovate Union Station,"
16 January 1984,
(25}
Station",
1.
Andrew
Miller, "IRS decides to scuttle Union
The Kansas City Star, 11 September 1981, p.6A col
(26)
Gladstone Associates..., p. 217
(27}
Joe Lambe,
"Owners of Union Station
reject..",
p.4A col 1.
(28}
Steve Nicely, "Company to empty Union Station
except for Amtrak, two restaurants," The Kansas City Star,
21 July 1983, p. lA col 3.
(29}
Steve Nicely, "Partial request made on Union
Station grant before deadline passes," The Kansas City Star,
30 Aprt OI983, p.
1B col 1.
Means Per Square Foot Costs, 1985, p. 190
135
BIBLIOGRAPHY
Anderson Notter Feingold, Inc., Recycling Historic Railroad
US
D.C.:
(Washington,
A Citizen's Manual,
Stations:
Government Printing Office, November, 1978.)
Center for Real Estate Development, Massachusetts Institute
of Technology, "An Examination of Public/Private Issues in
Real Estate Development", Proceedings, Spring Seminars 1984,
(Cambridge, MA.: M.I.T. Center for Real Estate Development,
1984.)
National
and the
Laboratories
Facilities
Educational
Endowment for the Arts, Reusing Railroad Stations, Book 1,
Educational Facilities Laboratory, May,
(New York, NY:
1974.)
National
the
Laboratories and
Facilities
Educational
Book 2,
Stations,
Railroad
Reusing
Arts,
for
the
Endowment
(New York, NY: Educational Facilities Laboratory, September,
1975.)
Landmarks
Interview with Jane F. Flynn, Administrator,
Commission, Kansas City, Missouri, August 19, 1985.
Frieden, Bernard, Jacques Gordon, and Lynne Sagalyn, Horton
Plaza: A Case Study, (draft, September 1984.)
Resource
PGAV-Community
and
Associates
Gladstone
Corporation, Adaptive Reuse Analysis for the Kansas City
Economic Development
(Kansas City, MO.:
Union Station,
Administration, U.S. Department of Commerce, 1981.)
Interview with Jill E. Kammerer, Senior Planner, Kansas City
Missouri Redevelopment Authority, August 18, 1985.
"353"
Department,
Kansas City, Missouri City Development
Urban
Redevelopment Corporation Law in
Kansas
City,
Missouri, preliminary discussion draft (Kansas City, MO.:
City Development Department, Kansas City, Misouri, March
1985.)
The Kansas City Missouri Redevelopment Authority, Downtown
(Kansas City, MO.: The Kansas City Redevelopment
Projects,
Agency, June, 1985.)
136
"Great Union Station Plan Seems
Kansas City Star Editorial,
Within Grasp" The Kansas City Star, 3 April 1979, p. 8A col
1.
Kindall James, "Union Station, Could this be the end of the
line?" The Kansas City Star Magazine, 18 December 1983,
p.8-9,
p.
17-19.
Interview with Robert Kipp, Former city manager of Kansas
with Crown Center Redevelopment
currently
Mo,
City,
1985.
18,
August
Corporation,
Lamb, Robert, and Stephen P. Rappaport,Municipal Bonds, (New
York: McGraw-Hill, 1980.)
Lambe, Joe, "Of blight and right: Concept of Missouri's 353
p.1,
law shifts." The Kansas City Star, 29 December 1985,
cols. 1-4, p.12A, cols. 1-4, and p.13A, cols. 1-4.
Lambe, Joe, "Owners of Union Station reject local renovation
bid " The Kansas City Star, 29 September 1985, p.lA, col 1-2
and p.4A col 1-5.
Interview with John Laney, Assistant City Manager, Director
of Development, Kansas City, Missouri, August 18, 1985.
Miller, Andrew, "IRS decides to scuttle Union Station
project" The Kansas City Star, 11 September 1981, p.Al, col
1 and
p.6A col 1.
Interview with Steve Nicely, real estate
Kansas City Star, August 19, 1985.
editor
of
the
"$24 million Renovation eyed for Union
Nicely, Steve,
Station" The Kansas City Star, 23 April 1983, p.lA. col 3-4 and
p.4A col 1-2.
"Company to empty Union Station except for
Nicely, Steve,
Amtrak, two restaurants," The Kansas City Star, 21 July
1983, p. 1A col 1-3.
Nicely, Steve, "Partial request made on Union Station grant
before deadline passes" The Kansas City Star, 30 April 1983,
p.lB. col 1-2 and p.7B col 1-3.
Interview with Garold F. Osborne, Project Director, Pershing
Square Redevelopment Authority, August 18, 1985.
137
Raymond, Parish, Pine & Weiner, Inc., Downtown 2000, A Plan
for Downtown Kansas City, (Kansas City, MO.: The Kansas City
Redevelopment Agency, 1983.)
Schafer, Delbert, "Committee studies plans to renovate Union
Station," The Kansas City Business Journal, 16 January 1983.
Interview with Delbert Schafer, real estate editor of
Kansas City Business Journal, August 14, 1985.
the
In the Public
Projects:
Barbara, "K.C.'s 353
Shelly,
Interest?" The Kansas City Star, 29 December 1985, p.41A and
p.42A.
Stonebraker, Gary, Problems, Economics, amd Incentives in
The
(Kensington, MD:
Restoration of Railroad Stations,
Advanced Planning Research Group, Inc., 1974.)
Tammeus,
William,
"From brrrr to brrrr,
'85 covered the bases,"
The Kansas City Star, 29 December 1985, p. 6H col 1-4.
"A Look at the Union Station" The Kansas City Post
Unknown,
12 July, 1925, p.lC and lD.
The Urban Land Institute, Adaptive Use,
The Urban Land Institute, 1978.)
The Urban Land Institute,
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(Washington, D.C.:
Revitalizing Downtown Retailing,
(Washington, D.C.: The Urban Land
"Study Says Union Station Is a Good Home for
Watts, Thomas,
IRS" The Kansas City Star, 18 July 1978, p.3A col 1.
Witherspoon, Robert, Codevelopment: City Rebuilding by
(Washington, D.C.:
Business and Government,
The Urban Land Institute, 1982.)
138
APPENDIX A
Supporting Financial Analysis for 1981 Study Update
UNION
KANSAS
CITY,MISSOURI
STAT1N:
PRO-FORMA
FINANCIAL
Exhibit
1:Assumptions
CALCULATIONS
FOOTAGE
SQUARE
SpaceAvailable
forRenovations
--- -------------------------------
Office
Gross
Sub-Baseeent 62,905
64,003
Basement
Low Mezzanin 23,286
FirstFloor 139,541
IstFl. Meot 26,353
Second
Floor 22,339
22,552
floor
third
l
Gross Rentate
7,800
7,800
27,000 21,000
28,600 22,800
60,000 60,000
56,000 56,000
20,000 20,00'0
40,000
40,000
House
Carriage
HeadHouse
Main
Hall
Exhibit
& Mezz.
UpperFloors
Ground
Floor
Wings:
LowerMerz.
LowerLevels
360,979
227,600
$6.00
s0.50
$12.00
$10.00
Other
Hotel
52,905
24,003
40,000
20,000
107,600
21,000
21,500
17,500
60,000
167,600
TOTAL
SPACE
INCOME-PRODUCING
227,600
315931
87.521
0
$17.00
/RSF
Rate:Office
Rental
Rental
Rate:Retail
Rental
Rate:Hotel
Rental
Rate:Other
/RSF
Office
Costs:
Operating
Operating
Costs:
Retail
Hotel
Costs:
Uperating
Costs:
Other
Operating
$15.00
$12.00
$3.00
924.00
$30.00
Exhibit
2:Calculation
ofBuilding
Costs
Annual
Inflation
of
Building
Costs'90-'86
PRIMARY
BUILDING
RENOVATION
COSTS(Aug980)
Highest
Low
EXTERIOR
WORK
Structure
Rehab. 797,000 797,00 1,6
00,000
Exter.
1,200,000 1,200,000 1,200,000
Exter.
Stone
Rehab.
Windoms/Olazinn420,000 495,000 495,000
Ester.
Exter.
Painting
I Halls 192,000 19,000 192,000
Ester.
DoorReplacement 29,000 29,0001 29,000
26,000
26,000
CarriageHouseRestore.
26,000
45,000
45,000
45,000
Exter.
Desolition
---------------- --------I.58/,o00
2,709,0001 2, 784,00
Hiohest
Hi0
Low
2,117,0002,970,0002,970,0100
MISC.& CONIING.
ghst
High Hi
Lox
COSTS
CONST.
TOTALBASE
13,313,0014,186,000
11,781,000
Aug.1980
Highest
Hit.
Low
COSTS
TOTALBASECONST.
2012.5,112
18,984,745
16,711,574
Aug.1986
TOTALCONST.
COSTS
Aug.1986
Low
High HighPst
29,144,792
27,906,425
25,733,254
Base Building Shell
S.F.
'B6Cost/ Rentable
TOTALCOST
S.F.
'86Cost/ Rentable
Low
973.43
Low
9113.06
fgh
82.97
High
Hibest
590.41
Highest
6.001
High
Low
INTERIOR
lat.
1,165,000 1,165,000
Clean
I Paint
1,165,000
164,000 164,000 164,000
lt. Demolition
519,000
Restoration/New
Const. 519,1000 519,000
1,991,0001,981,000
Mechan.
/ Electrical 1,981,000
3,829,000
3,929,000
Low
High
Highest
INTERIOR
BUILDING
CODE
1,90000.
Building
CodeRelated 1,526,0001,800,000
NOTEOFFICE
AREAREHAB. 570,000 850,000 850.000
15,036,000
14,163,000
12,351,000
TENANTIMPROVEMENTS
($360,000)
($360,000
OfficeImprovements 19360,000)
(11,424,600)($1,424,600)(11,424,600)
Improvements
Retail
90
t9
90
HotelImprovements
($769,00)
1$769,080)
(1769,080)
Otherleprovements
PARKINS
Parking
Office
ParkInq
Retail
(1,440,001)
(5,029,000w
$122.01128.05
501
19
12.501
10.501
3,829,000
SITEIMPROVEMENTS
Low
High Highest
1,600,000 1,930,0002,000,000
Siteleprovements
Assuaptions
TaxRate
TopMarginal
Life
Depreciable
30 yearint.rate
Standard
int.rate
Taxexeopt
76,908
Operating
Costs
Rental
Rates
Costs
Iaprovesents
Interior
/RSF
leprov.:
Office
Interior
Interior
1eprov.:
Retail
Interior
Improv.:
Hotel
Interior
Isprov.:
Other
16,000
Space
Costof Parking
1001
1 PaidbyDeveloper
Parking:
Office/RSF
H 4/1000
Parking:
Retail/Restaurant
@ 5/1000
Retail
Net
52,905
64,003
23,286
111,708
23,443
22,339
18,247
250
TaxCredit
Invest.
139
$4.00
$3.25
$9.00
s0.50
ILLUSTRATIVE PRO FORMA
PRIVATE SECTOR REDEVELOPMENT
UNION STATION
OPERATING INCOME
Office
Retail
Hotel
Other
Total Gross Income
Less: Vacancy, Etc. @
Effective Gross Income
Less: Operating Expenses
NET OPERAT ING INC ME
1,020,000
2,514,000
0
230,724
3 764 724
1188,236)
3,576,488
(823,154)
2,753,334
5.00%
IMPROVEMENT COSTS
Base Building Cost
Tenant Improvements
Parking
TOTAL IMPROVEMENTS
FINANCING PROCEEDS @ 901 L/V
EQUITY REQUIRED
Debt Service for 30yrs @
Building Lease Payment
18,884,745
2,553,680
6,468,000
27*9064425
25,1151782
2,790,642
12.00%
(3,117,965)
0
BEFORE TAX CASH FLOW
(364,631)
TAX CALCULATIONS
BTCF
Less: De reciation @ 30 yrs
Less: Interest (Assume int. only)
Less: Lease Payments
Taxable Income
TAX (DUE)
*
(364,631)
(930,214)
(3,117,965)
0
(4,412,811)
1,544,484
35%
AFTER TAX CASH FLOW
1,179,852
VALUE CREATED CALCULATIONS
NET CASH FLOW
VALUE OF NET CASH FLOW @
LOAN PROCEEDS
(364,631)
20% CAP RT.
(1,823,156)
25,115,782
CAPPED VALUE + LOAN
COST OF PROJECT
23,292,626
27,906,425
RESIDUAL VALUE
(4,613,799)
Net Operating Income
Cost of Project
RETURN OF INVESTMENT
2,753,334
27,906 425
9.87%
Net Cash Flow
Equity Investment
RETURN ON EQUITY
(364,631)
2,790 642
-13.07%
%$X%$X$X$X$Z$X$X$%$X$X$Z$Z$X$Z$X$Z$%$1$%$%%$$$%$%S$$%$%$$%$$$$%$$$
14o
APPENDIX B
Supporting Financial Analysis for Private Redevelopment
UNION
STATION:
KANSAS
C11. MISSOURI
FINANCIALPRO-FORMA
Exhibit
1:Assuaptions
CALCULATION5
SQUARE
FOOtAGE
SpaceAvailable
fcrRenovations
Gross
Gross Rentable
7,80)
7 80.0
27,000 21.000
28,600
22,800
60,000
60,000
56,000 56,000
20,000 20,000
40,000 40,000
Carriage
House
mainHeadHouse
Exhibit
Hill
UpperFloors H
Me:.
Nings:
Ground
Floor
LowerMezz.
LowerLevels
2'7,600
Office
Net
52,905
64,003
23,286
111,708
23.443
22,339
18.247
Sub-Basesent62,905
Basesent
64,003
LowMezzanin 23,286
FirstFloor 139,541
Ist
Fl. Mez: 26,353
Second
Floor 22,339
Third Floor
22,552
Retail
57,905
64,003
20,000
67,600
21,10
21,500
17,500
360,979 315931
87.521
lprovements
Costs
Interior
Rental Rates
Rental
Rate:Office
/RSF
Rental
Rate:Retail
Rental
Rate:Hotel
Rate: Other
Rental
laprov.:
40,000
147,600
TOTAL
INCOME-PRODUCING
SPACE
Interior
Ieprov.:
Office
/RSF
$6,00
88.50
Interior
Isprov.:
Retail
Hotel
Interior
$12.00
Interior
leprov.:
Other
$10.W
CostofParking
$6,000
Space
I Paidby levelope,
1001
Parking:
Office/RSF
4 4/1000
124,00
Parking:Retail/Restaurant
H 5/1000
530.00
Hotel Other
40,000
187,600
Operating
Costs
$17.00
$15.00
Operating
Costs.
Office
/RSF
Operating
Costs:
Retail
Operating
Costs:
Hotel
Operating
Costs:
Other
$12.00
$3.00
Exhibit 2: Calculation of Building Costs
PRIMARY
BUILDING
RENOVATION
COSTS(Aug1980)
Annual
Inflation
of
Building
Costs'80-'86
EXTERIQRWOORK
INTERIOR
Low
High Higihest
Rehab. 797,000 797,000 1,60N00
Structure
Eater.
Exter.
StoneRehab.
1,200,000 1,200,000 1,200,000
Exter.
Windoes/Glazing
420,000 495,000 495,000
Exter.
Painting
I Is
192,000 192,000
192,000
Exter.
DoorReplacement 29,000
29,000
29,000
Carriage
HouseRestore. 26,000 26,000
26,000
Exter.
Demolition
45,000 45,000
45,000
---------------------------2,70q,000 2,784,000 3,587,000
Low
Hgh
Highest
Int.
Clean& Paint
1,165,000 1,165,000 1,165.000
Int.Demolition
164,000 164,000
164,000
Restoration/New
Const. 519,000 519,000 519,000
Mechan./ Electrical
1,981,000 1,981,000 1,981,000
MISC.& CONTING.
INTERIOR
BUIlDING
CODE
Low
High Highest
Building
CodeRelated 1,526,0001,800,000
1,800,000
NOTE: FICEAREAREHAB. 570,000 850,000 850,000
12,351,00014,163,000
15,036,000
Lox
High Highest
2,117,0002,970,0002,970,000
Low
High Highest
TOTALBASECONST.
COSTS
Aug.1980
11,781,000
13,313,000
14,18,000
TOTALBASECONST.
COSTS
Low
Hith Highest
Aug.1986
16,711,574
18,804,745
20,123,112
TOTALCONST.
COSTS
Aug.1986
Lox
Hih
Hihest
23,648,654
26,021,8527,26,192
BaseBuilding Shell
Low
06Cost/ Rentable
S.F. 873.43
TOTALCOST
Low
$104.70
S.F.
86 Cost/ Rentable
8ich
Highest8
27
588.41
High
3,829,000
3,829,000
TENANT
IMPROVEMENTS
Office
laprovements
($885,600W
(1885,600)
(885,600)
Retail
Improvexents($340,000)
($340,000)
($340,000)
HotelImprovements
s0
80
s0
Otherlproveents ($1,169,0801)(1,169,080)
(11,169,080)
PARKING
Office
Parking
Retail
Parking
fighest
114.S3
$119.77
351
19
12.501
10.501
3,829,000
SITEIMPROVEMENTS
Lox
High Hihest
Sitelprovements
1,600,0001,930,0002, 000
Assumptions
TopMarginal
TaxRate
Depreciable
Life
Standard
30yearint. rate
Taxexempt
int. rate
0
Invest.
TaxCredit
141
(3,542,4001
11,200,000)
$4.00
$3.25
19.00
$0.50
APPENDIX C
Supporting Financial Analysis for
Public/Private Redevelopment
CITY,MISSOURI
UNIONSTAIIIN:
YANSAS
PRO-FORRA
fINANLIAL
REDEVELOPMEN1
PUBLIC/PRIVATE
Exhibit
1:Assumptions
CALCULATIONS
FOOTAGE
SNUARE
forRenovations
SpaceAvailable
- -------- --- ---------------- ----Gross Rentable
7,800
7,800
27,000 21,00
28,600 22,800
60,000
60:000
56,000 56,000
20.000 20,000
40,000
40,00
House
Carriage
MainHeadHouse
Hall
Exhibit
&Mezz.
Upperfloors
Floor
Wings:
Ground
LowerMezz.
LowerLevels
Office College
Gross
Sub-Basement 62,005
Basement
64,003
LowPezzanin 23,286
Floor 139541
First
Ist
Fl.Mezz 26353
Second
Floor 22,339
Third
floor
22,552
Wet
52,905
64,003
23,2B6
170
111,
23,443
22,330
18,247
167,600
87.521
52,905
44,003
20,000
0
20,000
87,600
21,000
21,500
17,500
360,979 315,931
227.600
Hotel Other
20,000
40,000
0
96,908
TOTAL
SPACE
INCOME-PRODUCING
Interior
Improvements
Costs
Rates
Rental
Operating
Costs
$6.00
/RSF
Ieprov.: Office
Interior
$6.00
College
laprov.:
Interior
$12.00
Hotel
laprov.:
Interior
810.00
Other
interior Iprov.:
$6,000
Space
Costof Parking
1001
1 Paidby teveloper
$24.00
Parking:
Office/RSF
H 4/1000
82/1000
812.00
College/RSF
Parking:
$17.00
/RSF
Rental
Rate:Office
019.05
Rental
Rate:Collegew
$12.00
Rental
Rate:Hotel
$3.00
Rental
Rate:Other
we Assumes
$2.05interest
savings
/RSF
Costs:
Office
Operating
College
Costs:
Operating
Hotel
Costs:
Operating
Operating
Costs:
Other
Exhibit 2: Calculation of Building Costs
AnaualInflation of
Building
Costs
'80-'6
BILODING
RENOVATION
COSTSfAug1980)
PRIMARY
High Hihest
Low
NORK
EXTERIOR
Rehab. 197,000 707,0001,600,000
Structure
Exter.
Exter.
StoneRehab.
1,200,000 1,200,000 1,200,000
495,000
420,000 495,000
Exter.
Nindows/Glazingh
192,000
& ValIs 192,000 192,000
Painting
Exter.
20,000 29,000
Exter.
DoorReplacement 29,000
26,000
26,000
26,000
CarriageHouseRestore.
45,000
45,000
45,000
Exter. Demolition
-------- ,7---0
-------2,784,000
3,587,000
2,709,000
MISC.
& CONTING.
Low
Hi 0
ighest
2,117,000 2,970,000 2,970,000
High Hi hest1:
Low
COSTS
TOTALBASECONST.
14,186,000
11,781,000 13,313,000
Aug.1980
High Highest
Low
COSTS
TOTALBASECONST.
20,123,112
18,884,745
16,711,574
Aug.1006
COSTS
CONST.
TOTAL
Aug. 1986
Hihest
High
Low
,192
26,84
25,601,825
23,428,654
SheL
BaseBuilding
S.F.
'86Cost/ Rentable
TOTALCOST
S.F.
8BCost/ Rentable
Low
$73.43
Lop
Hih
$82.7
HI
Highest
S88.41
Hihest
6.001
Highest
High
INTERIOR
Low
1,165,000 1,165,000 1,165,000
Int.Clean
& Paint
Int.
Demolition
164,000 164,000 164,000
510,000 519,000 519,000
Restoration/New
Const.
Mechan.
/ Electrical 3,982,000 1,81,000 1,981,000
3,829,0003,820,000
3,029,000
SITEIMPROVEMENTS
Low
High
Hi hest
1,600,000 1,930,000 2,00 ,000
Site Improveents
Low
High
Hinhest
INTERIOR
RUILDING
CODE
CodeRelated 1,526,0001,800,0001,800,000
Building
AREAREHAB. 570,000 850,000 850,000
NOTE:OfFICE
15,036,000
14,163,000
12,351,000
TENANT
IMFROVEMENTS
005,6001
Office lproveaents
1(1005,6001(81
(110056100
(1240,0001
1240,0001
Retail Improvements 1240,0001
s0
80
80
Hotel Improvements
t$69,0801
($?0,0801
Otherlaprovements lC?6?,0801
PARKINS
Office
Parking
Retail
Parking
14 022,400)
1480,0004
117.93
$112.49
$102.94
Assumptions
TaxRate
TopMarginal
Life
Depreciable
Standard30 year int. rate
int.rate
Taxexeapt
503
19
12.501
10.501
TaxCredit
Invest.
142
251
$4.00
$4.00
89.00
80.50