Imagine the city's glee, then, when a developer came to town with a bold plan to build condominiums where vagrants slept, made fires and sprayed graffiti.
The Vista del Rio is being transformed into the View, 142 units of swank living, at a projected cost of $30 million. Construction workers are busy at the site. The developers hope to hand keys to buyers early next year. Models begin at $145,000.
Presented with the plan, a grateful city agreed not to tax the improvements. For the next 25 years, the assessor's office will pretend that the View is still the Vista del Rio circa 2003; its property taxes are frozen at around $23,000 a year.
The condominiums will generate no new property taxes, but officials believe their contribution is being felt already. "If you saw it a year ago, and you see it now, you can honestly say that there's something going on. It's helping the area," says Al Figuly, the executive director of the Planned Industrial Expansion Authority, the quasi-public agency that administered the tax break.
A tax abatement was not the only concession to be made in the name of progress, however. At some point in the process, Figuly and others had to accept the fact that a prominent member of the development team is an ex-convict.
G. Wayne Reeder is a wheeler-dealer who has spent most of his 72 years in Southern California. Born in Missouri, Reeder settled in Kansas City after his release from federal custody in 2002.
Reeder served 28 months and was ordered to pay $16.5 million in restitution for his role in the sudden failure of two insurance companies. Prosecutors alleged that Reeder and another man looted the companies as soon as they got their hands on them. A jury in Providence, Rhode Island, convicted Reeder on ten counts of wire fraud and transportation of stolen property.
At his sentencing, a defense attorney argued that Reeder had played a minor role in the fraud. Yet he was no stranger to dubious deals and questionable associations. A suit filed in bankruptcy court in 1987 accused Reeder of participating in a scheme to make off with the assets of an insolvent hotel. A year before, he was among friends and relatives who posted the $6 million bond of a Tennessee banker who was later convicted of fraud and money laundering. In the time between their respective incarcerations, Reeder and the banker sued each other over a real-estate deal gone bad.
"Wayne Reeder had a life before this," admits Bob Mayer, a former chairman of the Tax Increment Financing Commission, another city-affiliated entity that gives incentives to developers. Mayer was hired to advise the View. "But the issue is, from Kansas City's standpoint, is this a good project?"
The Planned Industrial Expansion Authority decided that the answer was yes.
Figuly says he is aware that Reeder had an eyebrow-raising past, though he isn't well-versed in the details. "I don't know if he's an ex-con or not, but I know he had some problems," he says. Accordingly, the PIEA took "extra precaution," Figuly says, before its board welcomed the View into its tax-abating bosom.
It turns out that Reeder's past cost the View nothing at the negotiating table. The property tax it received is, to use a PIEA term, "extraordinary." The 25-year full abatement on improvements is a first for the PIEA. (The owner of a typical PIEA project has to begin paying some new taxes after 10 years.)
"Sometimes," Figuly says, "unconventional people and unconventional approaches require thinking outside the box."
Wayne Reeder is on the phone. "I understand you're interested in some of my ..."
The sentence pauses for a momentary chuckle.
Reeder dialed the Pitch after a reporter had called the View LLC's director of real estate, Larry McMillin, and inquired about Reeder's past and other matters relating to the View. McMillin answered the questions, but Reeder also wanted to take a crack.
"When you called Larry, I was most anxious to clear the air so that you would have the true facts," Reeder says at our meeting, which takes place at Interstate Underground Warehouse and Distribution Center, a storage facility cut into cliffs on Kansas City's east side, near the point where interstates 435 and 70 meet. A sign outside tells truck drivers who arrive in the dead of night to wait for the doors to open at 5:30 a.m. The reception area resembles the inside of old gas stations that sold only gum, maps and quarts of oil.
Reeder bought the warehouse in the 1970s. It was a troubled property, he says. Reeder has a reputation for buying distressed real estate. According to one newspaper report, people call him "the Garbage Man."
The warehouse is owned today by Sammy Jo Reeder, Wayne's ex-wife. She took title to the property in a divorce settlement. Reeder says he and his former wife maintain an "excellent relationship." Their marriage dissolved in 1992, a few months after a receiver for one of the bankrupt insurance companies sued Hill Top Developers, Reeder's main real-estate development and holding company. A recent court document says Hill Top had a one-time book value of $150 million. "Not all the value is gone," Reeder says today, "but the other side of the family has a lot of it."
Sitting in a back office, Reeder is dressed in a plaid short-sleeved shirt, dark slacks and loafers. He has white hair and a sad countenance. He speaks slowly and quietly. He looks harmless, though there's a hint of screw-you in the way he props a foot on the corner of the desk.
He is joined by McMillin, whose short, solid stature suggests a high school wrestling coach, and a daughter, Leslie, who has blond hair, closely set eyes and a deep tan.
Leslie sits behind the big desk. Her father takes one of the two chairs facing the desk, a subordinate position. The seating arrangement underlines a message that the Reeders wish to impart on their visitor: The felon is not running the show at the View.
"I am retired," Wayne Reeder says. "I am out of the picture, and I always have been, except to advise Leslie, who is a very dynamite executive. She knows what she's doing in all facets of the building, so it isn't as if I'm the mastermind here. I am not the mastermind."
Reeder is technically a "consultant" to the limited liability corporation developing the View. The owners of record are a Reeder family trust, of which Leslie is president, and Richard Turner, an accountant whom Leslie says she has known for 20 years (and her father has known for 40).
The Reeders are obviously aware that it might look unseemly for the city to grant a tax break to a one-time white-collar criminal, hence the emphasis on semantics. Leslie says, "A convicted felon consulting on the project, should that have anything to do with the project getting tax credits or not? No. If it was an ownership interest, or maybe a director of the board, would it be more impactful? Yes. But he's not that."
She adds, "Who I hire as a consultant is entirely up to me."
Leslie claims she saw the condominium potential in the Vista del Rio -- built in 1965 as an apartment house for retired teachers, the building was essentially abandoned in the early '90s -- after coming to Kansas City to visit her father. Prior to moving here, she lived in Phuket, Thailand, for 4 years. She also has a residence in San Diego. She decided she needed a break from Asia, she says, when she saw the downtown and the tax advantages Kansas City had to offer. The Vista del Rio was a perfect qualifier, she says.
The quality of life isn't bad, either. "You know, Kansas City's a nice part of the world to be in," Leslie says. She and her father live in separate apartments on the Plaza. "We love it here."
"Great fishing here," her dad says. "It's a wonderful place."
It would be a mistake, though, to believe that Reeder the elder spends all day chasing after croppie. The View file at the PIEA office suggests that Reeder has been very active in the development of the project and that his role as consultant was chosen after his past came to light.
A sheet of paper in the file, for instance, is stapled with the business cards of Wayne Reeder, Larry McMillin and Bob Mayer -- but not Leslie. Her name also is absent from the sign-in sheet from a 2003 meeting that her father and McMillin held with Figuly and city officials, including Bob Langenkamp, the acting director of City Planning and Development.
Shortly before the 2003 meeting, a city employee learned of Reeder's past by performing a Web search. Donovan Mouton, who works in the office of Mayor Kay Barnes, found a court decision upholding Reeder's fraud conviction and an Orlando Sentinel story about a legal dispute between Reeder and a former director of Hill Top.
Mouton forwarded his discovery to Mayer, according to copies of e-mails in the PIEA file. Mayer's response indicates that Wayne Reeder's role was then clarified. Mayer told Mouton that he discussed the cases with Reeder and his daughter.
Mayer continued, "Without going into a lot of detail in this e-mail, Reeder did explain the circumstances; he will be a Consultant to the Family Trust; his daughter Lesley [sic] will be the primary Owner's Representative, and they do have the Financial Backing and Team to get this deal moving."
Mayer tells the Pitch today that he's always understood Wayne Reeder to be a consultant. "He told me all along that the family trust, through his daughter, were the primary principals of this and he would be a consultant to the project, and that's the way it's been," he says.
Wayne Reeder has made deals since 1955. For most of his career, he was based in Bakersfield, California, where he grew up. His father, a railroad man, moved the family to the San Joaquin Valley from Warsaw, Missouri, when Wayne was 2 years old.
Reeder attended UCLA and earned a master's degree in real estate. Over time, his holdings stretched to 17 states. On weekends, Leslie and her sister Stacy accompanied their father while he inspected new developments. "Our big thrill was playing house in the models," Leslie says, punctuating the sentence with a cigarette-hardened laugh.
Wayne Reeder lets his daughter provide the colorful details. He keeps it spare when asked about his past, though one project he mentions by name is a Radisson Hotel in Mission Valley, California.
He neglects to mention that the project went bust.
The company that developed the Radisson -- Reeder was a 50 percent owner, according to the Los Angeles Times -- defaulted on a $27.5 million construction loan. The year was 1984, in the midst of what would become known as the savings and loan crisis. Carelessly deregulated in the early 1980s, S&Ls across the country failed by the hundreds, their deposits wasted on shady deals like the Radisson. The S&L that lent the money to Reeder and his partners was seized by the government. Regulators found $200 million in "grossly imprudent loans" on its books.
The LA Times reported that Reeder severed ties with Carroll Davis, the Radisson development's general partner. A suit filed later in bankruptcy court, however, accused Davis, Reeder and another man of making off with $1.4 million of the development company's assets.
Reeder was mentioned in other S&L debacles. The Houston Post reported in 1990 that he allegedly defaulted on $14 million in loans from Silverado Savings and Loan of Denver. Silverado's demise cost taxpayers $1.3 billion. (Neil Bush, the son of then-President George H.W. Bush, was a Silverado director.) According to newspaper reports in Knoxville, Tennessee, Reeder posted the bail of and gave away the bride to C.H. Butcher Jr., a banker who spent 7 years in prison for fraud and money laundering.
Reeder lived in freewheeling times. Inside Job, a 1989 book about the savings and loan scandal, puts Reeder at an arms demonstration conducted in 1981 for the benefit of Nicaraguan Contra leaders. According to the book, the Contras were considering buying military equipment from John Nichols, Reeder's partner in an American Indian reservation bingo parlor. Nichols was later sent to prison for his role in a murder-for-hire scheme.
Reeder also was friendly with Henry Beebe, who in testimony before Congress was referred to as "the godfather of the failed Texas S&Ls." Beebe served time in prison after he was accused of defrauding 16 banks and S&Ls in 4 states.
Reeder tells the Pitch that he knew Beebe from La Costa, a resort north of San Diego, where both men had homes. It was Beebe who introduced Reeder to a smooth-talking Texan with an idea to buy insurance companies.
A high school dropout from Dallas, Charles "Chris" Christopher had a gift for salesmanship. In the 1970s, he convinced Lloyd's of London to insure computer leases that he and others sold.
Lloyd's regretted accepting the proposition. The venerable insurer faced more than $200 million in claims -- its largest loss in history, at the time -- when advances in computer technology prompted the lessees to want out of their existing deals. Time magazine, in its account of the affair, called Christopher a "hustler" and a "sharpie."
Christopher tried oil after the computer business. Then he decided he wanted to run insurance companies.
He found two that he liked: American Universal Insurance in Rhode Island and Diamond Benefits, which was licensed in Arizona but had offices in California. Neither was a winner. American Universal, for instance, invested primarily in humdrum government securities. Christopher vowed to jazz up the portfolios.
Reeder provided much of the capital that Christopher needed to get his hands on the companies. He contributed $62 million in promissory notes that were secured by three of his properties, including a golf resort. In return, Reeder received 60 percent of Resolute Holdings, a company Christopher formed.
Insurance is a regulated industry. In order to buy American Universal and Diamond Benefits, Resolute Holdings had to show that it was sound. On May 24, 1988, Reeder signed a capitalization agreement representing that "no actions, suits or proceedings" threatened the properties which secured the promissory note to American Universal.
But it wasn't true.
A $10 million note on one of the properties, Heritage Ranch, was past due. Continental Bank in Chicago had demanded full payment on the loan a month before Reeder signed the capitalization agreement. He owed another bank, Home Fed, $7 million.
Reeder was walking a financial high wire. Once Resolute Holdings took control of the insurance companies, they were used to settle his existing debts. Diamond Benefits was flush with cash after Resolute had arranged for it to assume the annuity obligations of another insurance company. Diamond Benefits took on the obligation in exchange for $18 million upfront, with another $11 million to follow.
Within days of coming under Resolute's control, Diamond Benefits made an $18 million loan to Reeder's Hill Top Developers. (The word "loan" is surrounded by quote marks in a 1999 decision by the U.S. Court of Appeals to uphold Reeder's conviction. That decision is the primary source of the information printed here.) Reeder used the new loan to pay his old ones. He settled with Continental Bank for $8.7 million. Home Fed got $5.9 million.
Reeder also paid himself. According to the Court of Appeals decision, he admitted that a portion of $825,000 transferred from a Diamond Benefits bank account to a trust maintained by one of his lawyers represented payment he felt that he was owed by Home Fed.
Poor attempts were made to kick dirt over the money trail. A day after the Diamond Benefits bank account transferred $465,000 to the Burrillville Land Company in Santa Monica, Burrillville cut three checks to Hill Top in increments of $100,000, $315,000 and $50,000.
Settling Reeder's scores hadn't been Resolute's only dubious move. Christopher engineered a series of questionable investments, including the purchase of a $5.4 million note from a company owned by his brother. He also took hundreds of thousands of dollars to pay off the mortgage and liens on his house in Texas.
With Reeder's debts squared and Christopher's mortgage paid off, no money remained to pay the annuity holders. Diamond Benefits began cutting rubber checks. Colleen Comey, the president of Diamond Benefits, asked Christopher and Reeder where the $18 million had gone. They provided no meaningful answers, according to the Court of Appeals. Comey froze the bank account and alerted regulators. She was fired the next day.
Diamond Benefits went into receivership soon after Comey blew the whistle. American Universal staggered along before becoming irretrievably insolvent in 1991, the largest insurance company in Rhode Island to fail; 400 jobs disappeared along with it. "When it collapsed, a lot of people were hurt," Sheldon Whitehouse, the former director of Rhode Island's Department of Business Regulation, tells the Pitch. The Providence Journal-Bulletin estimated the total cost to insolvency funds in Rhode Island and Arizona at $120 million.
Lawsuits and a criminal investigation followed. Christopher and Reeder were tried separately. Christopher was convicted of looting $26.7 million. Sentenced to 10 years, he is ex-pected to be released from prison in 2006.
Reeder's first criminal trial ended with a hung jury. The government retried the case and won.
At his sentencing, Reeder said he was "ashamed" of his conduct. Today he strikes a more defiant pose. He disputes the assertion that insurance regulators were deceived. He says there was a $12 million deed of trust on his collateral but it was "fully disclosed."
The jury in the first trial voted 8-4 to acquit, Reeder notes. A second jury did not see him in as favorable a light, but Reeder believes the jurors lacked important facts. "I was found guilty by skill on the prosecution's part, because they didn't bring back the witnesses that we destroyed at the first trial to show that I was an innocent man."
The government won its case but did not defeat the man. Reeder calls the prison camp at Nellis Air Force Base in southern Nevada, where he served 16 months, a "country club." He spent another year at a halfway house in Kansas City. "I never had a cuff laid on me, from start to finish," he says.
The real villain, the Reeders say, is Christopher. "We fired him in 6 weeks," Wayne says. Leslie calls Christopher "the only man who's ever defrauded Lloyd's of London, which, of course, we find out a little bit later."
Reeder feels betrayed also by Herman Beebe, who introduced him to Christopher. "That was absolutely the last the time you and Beebe were ever friends," Leslie says, looking at her father.
"Oh, absolutely," he says.
Was Reeder duped? Whitehouse, who later became the U.S. attorney for Rhode Island, doesn't believe so. "It didn't seem plausible to prosecutors. It didn't seem plausible to judges. It didn't seem plausible to the Department of Business Regulation."
Outside the gate that nonunion workers use to enter the View work site, ironworker Joshua Huffman stages a one-man picket line. What Huffman lacks in company he makes up for in enthusiasm.
Huffman waves at motorists as they travel along East Ninth Street. Huffman's is not a Queen Elizabeth wave. He leans his body into the motion, as if trying to get the attention of a favorite celebrity passing in a limousine. "A lot of guys get bored out here," Huffman says. "I make it a good time."
Ironworkers Local No. 10 pays Huffman, its designated picketer, $24.50 an hour to stand outside work sites that, in the union's estimation, flaunt established working conditions. When he picketed his first work site, in 2002, Huffman thought that workers nearing retirement were best suited for the task. But he came to like it. He passes the time listening through headphones to commercial and shortwave radio. Worried about sunscreen's chemical properties, he wears tape on parts of his nose and cheek that have burned in the past. A hard hat and work gloves honor his trade. Huffman calls himself a "silent warrior."
Huffman usually arrives at the View before 7 a.m., when nonunion workers begin arriving in dented Toyota Tercels and Chevy Luminas. One car entering the site has plastic for a rear windshield. Another needs a bungee cord to keep the trunk lid shut.
Huffman does not taunt the arriving workers. His sign does the talking. He holds it like a mask as they pull into the driveway.
Huffman is on the line because the View's developers did not give ironworkers a bidding chance, says Mike Bright, Local No. 10's assistant business agent. "They're going to renovate them as cheaply as they can and sell them for big money," he says.
Other residential projects in the downtown were built with a healthy supply of union workers, Bright says, a point made also by Jack Earley, the business agent for the Carpenters' District Council. "There's every opportunity to do things fair and right," Earley says. He calls the View "a bad job in every respect that I know of." (Earley is also critical of the redevelopment of the Western Auto Building, which a Chicago-based developer is turning into condominiums. "Every now and again this happens," Earley says. "Owners make silly decisions that affect us all.")
The Reeders dispute the union officials' assertions that the View is somehow unique. "We're not any more or less union than anyone else," Leslie Reeder says. "There are projects that are doing the exact same thing that we're doing. There's no difference. We're not going anywhere anyone else hasn't gone."
Her father notes that union members installed plumbing, glass and sprinkler systems. "I don't know why you're singling us out, when Western Auto and all these other people have had bigger problems." But even when Huffman drops his sign for a quick nap in his car, the View is an unusual-looking work site. Outward appearances suggest a do-it-yourself approach. The absence of mesh screens allows anyone standing outside the chain-link fence surrounding the area to see all the demolition that misses the dumpsters. The beware-of-dog signs and other posted warnings look homemade and match those hanging from the gates at Interstate Warehouse.
The View LLC opted not to hire J.E. Dunn, the area's largest commercial contractor and the builder of the original Vista del Rio, or another local company. In fact, the developers decided not to hire a general contractor at all, instead appointing what Reeder calls "property manager overseers."
The overseers are from California. Leslie Reeder says the decision not to hire a local company was made for comfort. "We really felt like working with someone we had a history with, because we were dealing with some unknowns in that building," she says. "It's a blighted building. There are a lot of variables that could come into play, and we needed someone we could trust. They're someone I trust."
Not hiring a traditional contractor will also save money. The developers expected a return of between 21 percent and 24 percent, according to a memo Figuly wrote last December.
In addition to construction costs, the Reeders also are saving on loan charges. They did not go to a bank. "They've been funding it all on their own," Larry McMillin says. A document at the PIEA office lists the Reeder trust, Richard Turner and five other individuals as the ownership group. Four of the five individuals have invested with the Reeder family for at least 25 years, the document says.
Absent a big check from a bank, the View LLC wants to move in buyers before the entire building is renovated. Workers will finish three or four floors at a time, after which buyers can move in, and the workers will move up to the next set of floors. Other residential projects in the downtown have proceeded in this way, McMillin says. "When it's an existing building like that, you can do it in stages."
Yet the architects hired at an early stage of the building's redevelopment are no longer working on the project. When the View LLC was negotiating with the PIEA and city officials, Crawford Architects was part of the team. Crawford, a firm with offices in Sydney, Australia, and midtown Kansas City, is working, with star architect Frank Gehry, on landing the commission to design the new downtown arena.
The more obscure Bradley and Associates took Crawford's place 4 months ago.
Leslie Reeder says the View never entered into a formal agreement with Crawford, whose expertise, she notes, is sports architecture. "I think they're an excellent firm," she says. "We felt our needs were a little better suited to Bradley and Associates."
While experienced in stadium and arena design, the architects at Crawford also handle high-rises. They are turning the Law Building at 12th and Grand into residential units. Tom Proebstle, a principal at Crawford, says the firm resigned from the View because of "philosophical differences." "Die honky."
A spray of graffiti in a stairwell reminds a visitor to the View that for the last decade or so, vagrants ran the place. Windows were removed. Aluminum frames were sold for scrap. Fires were set for warmth and for the hell of it.
But no bum could damage the structure itself. "This place was built like a fortress," says View LLC co-owner Richard Turner.
An unlikely-looking certified public accountant, Turner wears gold jewelry and the thick-framed eyeglasses of a Hollywood producer. A cigarette appears in his cupped hand as he and McMillin lead a brief tour of the View. They point to the future location of the swimming pools (outdoor and indoor) and basketball courts. Future residents also will enjoy a massage room, sauna, fitness center and artificial putting green
A one-bedroom model is finished and ready for display. A larger unit, with a three-sided view, was being readied when the Pitch toured in mid-August.
The project is behind schedule. Models were supposed to be completed in May. McMillin blames a wet spring. Leslie Reeder blames the difficulties of working with an existing building. "Although it was structurally sound, we might have been a little ahead of ourselves on the projections," she says. Leslie admits to being a bit meticulous: "It's got to be perfect or it's not going to work."
The PIEA's Al Figuly is not concerned. He understands the project to be coming along "very, very nicely."
Figuly says the PIEA entered an agreement with the View LLC with eyes wide open. He notes that no cash subsidies have been handed out. The existing property taxes continue to be paid. The public, Figuly says, is exposed only if the View LLC is not able to finish the job, and the building will continue to bring to mind a rough section of Beirut or Sarajevo.
Before the Reeders arrived, the city had tried once before to lend a generous hand to a developer who dared to dream on Vista del Rio. In the late '90s, developers wanted to turn the building into a Sheraton hotel. The Kansas City Council approved tax-increment financing, a scheme that allows developers to skim their future property taxes. But the developers couldn't obtain the rest of the financing they needed, and the building became the property of a Kansas bank.
Powerful forces encouraged the PIEA to get a deal done with the Reeders. William Dietrich, the president and CEO of the Downtown Council, a coalition of major property owners, wrote a letter to Figuly a year ago and rhapsodized that "restoration of this project will send another strong signal to the community that Downtown is on the rebound."
"If there was some opportunity to get something done, people were really wanting to get it done, because it was a huge, huge eyesore," Figuly says.
Figuly says there were concerns about what Wayne Reeder could and could not do. He is, after all, a developer from a sunny climate whose real-estate projects -- golf courses, storage facilities, mobile-home parks, as well as apartments and condominiums -- have tended to stay close to the ground. The View is a high-rise that needs to withstand all of the whims of Midwest weather.
And there is the niggling matter of Reeder's occasional bust-out. Figuly says there are provisions in the contract that detail how development rights are to be reassigned if the View is not completed. In the meantime, Figuly prefers to look at the positive. "He's already got four floors done -- that's four more than were done a year ago."