Occidental Management buys Sprint campus
Wichita-based Occidental Management bought Sprint’s Overland Park campus for $250.9 million — tens of millions of dollars below Johnson County’s appraised value of $342.5 million, according to research compiled by the investment research firm Moody’s.
In exchange for what Moody’s characterized as a “modest” sale price, Sprint secured a 10-year lease of office space well below market rent.
Occidental announced on July 9 that it had closed on its purchase of the 190-acre campus. It declined to disclose what it paid for the Sprint campus at the time.
Sprint also declined to discuss financial terms and the transaction has not appeared in filings with the Securities and Exchange Commission.
Moody’s recently evaluated a $202 million loan Occidental borrowed from JP Morgan Chase. That transaction used the Sprint campus as collateral.
Moody’s said the Sprint campus had “significant upside potential,” owing to the unusual terms of Sprint’s sale-leaseback arrangement with Occidental Management.
Sprint’s rental rate is well below average asking price for office space in the area.
While Sprint’s $3.67 per-square-foot rental rate is well below market rate, Moody’s research shows that it is not a full-service rate. That means it likely excludes the added costs of things like taxes, utilities, building maintenance and campus amenities. Other rental rates on the campus range from $9.75 to $20. 37 per square foot.
In the second quarter of this year, landlords sought an average of $26.81 per square foot for Class A office space in southern Johnson County, according to commercial real estate firm Cushman & Wakefield.
Moody’s report listed the various companies leasing space at the Sprint campus, including a 187,772-square-foot lease by office co-sharing company WeWork. The WeWork lease has not been signed. Occidental Management has placed $18.6 million in an escrow account, which it will use to reduce the sale price in case the WeWork lease doesn’t go through.
WeWork has space in the Corrigan Station building in the Crossroads Arts District and is planning new space in Lightwell, or the former City Center Square building, in downtown Kansas City.
Japan’s SoftBank Group, the majority owner of Sprint, also owns a stake in WeWork.
WeWork officials declined to comment for this story. Officials with Occidental Management could not be immediately reached.
When asked about the transaction Tuesday, Sprint officials declined to discuss the terms of the sale, calling them confidential.
Earlier this month, Occidental officials said that they had received ample attention from parties interested in leasing space as well as developing about 60 acres of bare ground on the campus.
Occidental chairman and chief executive Gary Oborny acknowledged earlier this month that the Sprint campus is in the running to house two U.S. Department of Agriculture research agencies that are relocating from Washington, D.C., to the Kansas City region.
“USDA toured the property and yes, we are in discussions with them,” Oborny said.
USDA is also considering locations in downtown Kansas City and in Lenexa.
Oborny also said in an earlier interview that Occidental plans a significant investment to update and redesign the campus.
“We’re going to start to put our contemporary slant and our design concepts and creativity,” he said.
Occidental officials said there was about 220,000 square feet available to lease on the Sprint campus.
Johnson County property records show the campus had an appraised value of $342,451,000 in 2019.
Moody’s said Sprint has also pledged to spend $25 million of its proceeds from the campus sale to upgrade its work spaces.