One of downtown Kansas City’s landmark historic buildings came this close to a foreclosure sale earlier this summer, after its out-of-state owner faced accusations of defaulting on a loan for its redevelopment into an $88 million hotel.
In late March, Ignite Funding sent a notice of default to Delta Quad Holdings LLC, which owns the former Federal Reserve Bank of Kansas City building at 925 Grand Blvd., plus an adjacent four-story annex building and parking garage.
Ignite, a Las Vegas investment company, issued a $6.5 million construction loan in December 2020 to facilitate the 1921 building’s conversion into a 284-room Embassy Suites hotel. Its notice alleged a failure to maintain property insurance, unpaid property taxes and mechanic’s liens.
On June 9, Ignite sold its loan to SunPlat Holdings KC-III LLC, an entity affiliated with two local developers — Sunflower Development Group and Platform Ventures LLC. The next day, SunPlat notified Delta Quad of a scheduled June 30 foreclosure sale.
On June 29, a Jackson County Circuit Court judge granted Delta Quad’s request for a temporary restraining order to enjoin SunPlat.
Delta Quad, an affiliate of Roos Enterprises Inc. of Niles, Michigan, argued in legal filings that it was taking steps to cure Ignite’s alleged loan defaults, some of which it said resulted from activities beyond its knowledge or control.
In investigating the unpaid property tax claim, Delta Quad said it learned that Ignite’s title company, tasked with paying 2019 and 2020 property taxes on the two-parcel site from loan proceeds, sent Jackson County a check for the full amount owed but directed as payment only for the parcel housing the former Fed building.
The county returned the $240,000 overage in January 2021, but Delta Quad said Ignite’s title company did not return the funds or apply it to taxes outstanding on the garage parcel.
Delta Quad said in court filings that it provided Ignite property insurance certificates in April. The property owner said it intended to pay remaining taxes and mechanic’s liens from a $950,000 insurance check approved to address a casualty loss claim. But Ignite allegedly deposited the two-party check in a bank account unknown to Delta Quad, rather than return it or deposit it into the property owner’s account.
Delta Quad alleged other “material errors” in a loan payoff statement it received from SunPlat one week before the scheduled foreclosure sale.
Although SunPlat’s statement included more than $1 million in late monthly payment fees, the developer said the loan’s positive reserve fund balance — from which Ignite allegedly stopped applying automatic payments three months prior — was proof it couldn’t have defaulted on them.
“Though the (hotel) project has faced some challenges, Delta Quad — with Ignite’s knowledge and approval — has been working diligently to resolve those issues,” Lewis Rice LLC attorneys wrote for the developer. “However, unbeknownst to Delta Quad, Ignite reversed course and sold the loan to SunPlat, another Kansas City-area commercial real estate developer who has expressed interest in buying the property. … Simply put, the (foreclosure) sale will divest Delta Quad of its ownership of the property and terminate its redevelopment of the property and future business plans.”
In opposing the petition to block the sale, SunPlat argued that it had a contractual right to foreclose because Delta Quad did not cure defaults — $880,148 in unpaid 2019, 2020 and 2021 property taxes, and more than $500,000 in known mechanic’s liens — within an allowable 10-day period.
“Borrower’s interpretation that it basically has an unlimited time to cure these major defaults is nonsensical,” according to a filing by SunPlat’s attorneys with Polsinelli PC.
Beyond Ignite’s default notice, SunPlat also noted that Delta Quad had not paid its loan’s outstanding principal balance, due in one lump sum, by the agreed-upon June 13 maturation date.
And, SunPlat said, the Ignite loan documents required Delta Quad to “not cause, conduct or permit any nuisance” on the historic properties, “neither to abandon or leave (them) unattended” and to “protect and preserve” the site.
Sunflower principal Jason Swords said the building had fallen into “complete disrepair.” Swords — who declined to comment for this story — testified in an affidavit that he observed extensive damage and waste during an inspection.
Among the carnage, according to Swords’ affidavit: the Fed’s large bronze seal has been torn from the middle of the grand lobby; six floors of handrail have been cut off and removed; elevator operating systems have been stripped and cables cut, rendering them unsalvagable; some historic decorative windows appear to have been stolen; garbage, human waste and signs of drug use are evident on lower floors; and exterior limestone panels show signs of partial release at the southwest corner, creating a potential pedestrian hazard.
On July 19, a county judge signed off on a joint stipulation between Delta Quad and SunPlat to a preliminary injunction that would block a foreclosure sale until Aug. 10.
Ultimately, Delta Quad paid off the remaining loan amount, and the foreclosure was canceled, Lewis Rice attorney Doug Stone said. An Aug. 12 release of deed of trust filed with Jackson County reflects full satisfaction of the loan.
The 21-story former Federal Reserve building is listed on the National Register of Historic Places as one of 12 original Federal Reserve banks Congress established in 1913. The downtown building has remained empty since June 2008, when federal workers finished relocating to 600,000-square-foot facility at 1 Memorial Drive, about two miles south near Liberty Memorial.
Delta Quad acquired the property in May 2014 and in 2016 won approval of a tax increment financing plan for Grand Reserve, which was amended in 2020. The project’s latest version encompasses the proposed Embassy Suites, a 450-stall parking garage and a 40,000-square-foot family entertainment center, for a total $182 million cost.
Roos Enterprises President David Roos said last year that his group had invested about $42 million in the building at that point — including for interior demolition work and asbestos remediation — and was continuing to seek construction financing.
Grand Reserve’s 23-year TIF plan was activated in 2016, but the property tax increment won’t be redirected until Delta Quad completes its hotel, meaning the developer continues to lose value from the incentive.
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