Kansas City Business Journal - Original Article
July 6, 2016
BROOKFIELD BUILDING'S LONG SALE SAGA FINALLY REACHES A CLOSING
The Brookfield Building, a vacant downtown office tower that's defied redevelopment for more than a decade, finally has sold to a development group that's prepared to breathe new life into the historic 12-story building.
Pat Murfey, an Evergreen Real Estate Services broker who's been marketing the building at 101 W 11th St. for three years, said the latest buyers - Brookfield Hotel Investment LLC of Madison, Wis. - closed on the $2.725 million purchase of the building on June 28.
It was the second time Murfey has sold the building, which he's also had under contract with multiple would-be buyers since 2013.
One of them, Michigan based Odawa Development, placed the building under contract in December 2014 and January 2015 but failed to close both times, Murfey said.
Odawa's latest contract was terminated in April 2015, at which time Brookfield Hotel Investment stepped in with a renovation plan calling for a 113-room Hotel Indigo topped by 27 luxury apartments.
Led by John Kothe, president of Kothe Real Estate Partners, Brookfield Hotel Investment scheduled a July 2015 closing.
But selling the Brookfield Building is never that easy.
There were five extensions over time, extending the closing to May 13," Murfey said. "All parties prepared to proceed to closing on the 13th. But for various reasons, it did not happen. It finally closed June 28."
Now, the new owners are "all queued up" to begin the building's $33 million transformation, Murfey said, noting that concrete barricades were placed in front of the structure this week.
In August, the developers were granted a standard Chapter 353 property tax abatement that will waive all new real estate taxes generated by the project for 10 years, followed by 50 percent for 15 years. Additionally, they will receive $1.2 million in brownfield tax credits and $10.9 million in state and federal historic tax credits.
Built in 1929 and 1930 as the Fairfax Building, the structure was renamed for Unitog Co. founder Arthur Brookfield after Unitog bought the building in 1975. California resident Richard Turner, a co-developer of The View condominium project in Kansas City, bought the 106,000-square-foot Brookfield Building in 2004, by which time it was largely vacant.
The few remaining tenants subsequently were chased away by a fire in a ground-floor sushi restaurant and flooding from a broken water line, and things got worse from there.
Filled with mold and pigeon droppings, the structure made the city's dangerous building list in 2012, when pieces of terra cotta fell from its top, causing officials to barricade sidewalks in the area.
Murfey first became involved with the Brookfield Building in the spring of 2013, while touring downtown properties with a principal of Michigan-based Affiliated Holdings. When the principal, Bruce Michael, asked why the downtown streets were torn up, Murfey recalled, he told him that utilities were being moved in preparation for Downtown's new streetcar line.
Micheal responded with a request for Murfey to "find me anything within a block of the streetcar line," Murfey recalled. And though the Brookfield Building wasn't on the market at the time, Murfey helped Affiliated Holdings get it under contract from Turner in April 2013.
Affiliated ultimately decided not to proceed and canceled the contract that September. But that didn't end Murfey's involvement with the Brookfield.
He persuaded Turner to let Evergreen list the building for sale in May 2014, by which time Turner "owed portions of four years' back taxes," Murfey said.
After a marketing campaign and several low offers, Murfey added, the Brookfield Building sold to Sunflower Development Group, an active local historic tax credit developer on August 27, 2014.
The sale terms had been structured such that the proceeds would cover all of Turner's back taxes plus the closing costs, Murfey said. But an additional $37,000 in taxes, which came due after Sunflower had put the building under contract, showed up on the closing statement. As a result, Murfey said, Turner declined to pay Evergreen's 6 percent commission, which was roughly double the unexpected tax liability.
"To get the transaction finalized and Evergreen paid, "Murfey said, "Sunflower agreed to pay half of the sale commission. Evergreen and Chicago Title Co. also negotiated a partial payment of the back taxes with Jackson County with an agreement for Sunflower to pay the remainder at a later date."
Sunflower Development had planned to redevelop the Brookfield as apartments. but on August 23, 2015 - the day after it closed on the building - Sunflower principal Jason Swords made the decision to flip it instead.
So Murfey listed the building again, this time with a new seller (Sunflower) and a new sales advantage.
In December 2014, after Sunflower had put the building under contract, Murfey explained, it applied for listing on the National Register of Historic Places, making the building's redevelopment eligible for historic tax credit financing.
Murfey played a role in that development, as well.
During a 1973 remodel, Murfey said, the exterior of the building's bottom three floors were covered by cement panels covered with white marble chips.
"Previous brokers, owners, historians and economic development officials thought the building's terra cotta was removed in this remodel, Murfey said, noting that historic designation would have been difficult to obtain had that been the case.
Murfey proved it wasn't by reviewing 1972 construction drawings at the Kansas City Landmark Commission, which showed the terra cotta had merely been encased by the new panels.
Then Murfey got a crowbar, peeled back a metal lath panel on a corner of the building and revealed the terra cotta was, indeed, intact.
According to Murfey, the building's original facade will be restored as part of its redevelopment by the current owners.
Pat Murfey, CCIM specializes in Commercial Properties with Kansas City based real estate brokerage Evergreen Real Estate Services. Pat can be reached at 913-951-8402 or Pat@KCEvergreen.com.