Lenexa gives developer another 6 months to start on second Logistics Center North building

A rendering of one of the Logistics Center North buildings.
A rendering of one of the Logistics Center North buildings.

By Jerry LaMartina

The Lenexa City Council approved extending by six months the deadline by which the city can issue roughly $40 million in industrial revenue bonds to help finance the cost of acquiring, building and equipping the Lenexa Logistics Centre North Building 2 at 17800 College Blvd.

At its Nov. 21 meeting, the council approved extending the deadline for issuing the IRBs from Feb. 16, 2018, to Aug. 15, 2018. The city had adopted a resolution in January 2016 stating its intent to issue the IRBs for the 635,800-square-foot commercial facility and approving a 10-year tax abatement for the project, starting in the calendar year after the year when the bonds are issued, and subject to a payment in lieu of tax agreement.

Building 2 will cost an estimated $35 million to build, Lenexa Communications Manager Denise Rendina said in an email. The estimated value of the tax abatement is $7.3 million for all taxing jurisdictions — the state, Johnson County Community College, Johnson County, the Olathe School District and the City of Lenexa. The estimated payment in lieu of taxes for 10 years is $1.1 million for all taxing jurisdictions.

The city also intends to lease the building to its owners, Lenexa Logistics North LLC and BK Properties LLC; BLNW II Associates LLC owns Lenexa Logistics North, and both are subsidiaries of BK Properties, Rendina said. The final lease arrangement between the city and the companies will be determined when the bonds are issued, which typically occurs after construction is finished.

“It could be done under an IRB structure where the City holds title until the bonds are redeemed, but since the legislature changed the law several years ago, we are doing more lease/leaseback arrangements where the City never actually takes title to the property,” she said in the email. “Building 1 was done under the scenario where the City holds title.”

Building 1 contains 605,000 square feet and was completed in January 2017.

According to a Nov. 21 memo to the council from City Attorney Cindy Harmison and CFO Doug Robinson, the company was waiting to start construction of the second building until the first one was “substantially leased.” Slower-than-anticipated leasing of the first building prompted the company to ask for more time to start building the second one.

“We believe the Developer had delays in obtaining final plat approval and completing some of the infrastructure improvements,” Rendina said. “The developer was also wanting to get Building 1 substantially leased before commencing Building 2 and the leasing of Building 1 was progressing slower than he originally anticipated.”

If the city issues the IRBs, then the principal amount of the bonds will not increase, and they “are not backed by the full faith and credit of the City,” according to the memo. “The company will remain responsible for repayment of the bonds and the PILOT payments.”

The Aug. 15, 2018, deadline will remain unless the city issues the bonds or the company obtains a city building permit for the project “and is diligently pursuing construction of the Project to completion,” according to the memo. The city can extend the deadline if the company requests it in writing.

A map from the Block Real Estate Services brochure for Logistics Center North. The second building is the one at the top of the north project parcel.
A map from the Block Real Estate Services brochure for Logistics Center North. The second building is the one at the top of the north project parcel.