After Securing Big Tax Breaks, Waddell & Reed Won’t Move To Kansas City After All
Waddell & Reed's proposed downtown Kansas City headquarters figured prominently in ongoing debates about the propriety of tax incentives to attract businesses to Kansas City from elsewhere.
Waddell & Reed Financial Inc. will not move into new headquarters in downtown Kansas City and is laying off 219 employees in connection with its pending sale to an Australian financial group.
The Overland Park, Kansas-based company had planned to move into a $140 million, 18-story tower currently under construction at 14th Street and Baltimore Avenue. But the parent company of Macquarie Asset Management, which in December announced a $1.7 billion deal to acquire Waddell & Reed’s stock for $25 a share, said in a statement Tuesday that it was abandoning those plans.
“While we will not be occupying the new building, Macquarie and LPL remain committed to the region and supporting the needs of our clients and staff here,” the statement said. “It is our understanding that construction on the building at 1400 Baltimore will continue.”
LPL is LPL Financial Holdings Inc., a Boston-based broker-dealer. Macquarie plans to sell Waddell & Reed’s wealth management group to LPL for $300 million once its acquisition of Waddell is completed.
About 900 Waddell & Reed investment advisors are expected to join LPL in connection with that transaction, leaving Waddell & Reed with considerably less need for the space provided by the downtown tower.
New tax reforms
The tower has figured prominently in ongoing debates about the propriety of tax incentives to attract businesses to Kansas City from other cities.
Missouri granted Waddell & Reed $62 million in incentives to relocate from Overland Park and the Kansas City Council approved a 75% tax abatement for the tower over six years followed by a 37.5 abatement over nine years.
Morgan Said, deputy chief of staff for Kansas City Mayor Quinton Lucas, said that Macquarie remains contractually committed to lease or sublease the tower and the developer is committed to finishing the building.
“The developer has shared that the project remains on time and on budget,” Said said in an email. “Although this deal was first hatched under a prior administration, the City expects the 1400 Baltimore building to be a strong asset for office relocations to downtown Kansas City. The project also will support much-needed parking demand due to the shuttered and expensive-to-replace Barney Allis Plaza garage.”
The tower was one of the last projects allowed to proceed before Missouri and Kansas agreed to end the practice of granting generous tax breaks to induce companies to move across the state line.
In 2019, after weeks of debate and pressure from Kansas City Public Schools, Waddell & Reed agreed to shave nearly $9 million from its original request.
Last week, the Kansas City Council unanimously approved a measure limiting tax subsidies for most projects and reducing the maximum period for them from 25 to 15 years.
The other fallout from the deal with Macquarie – the elimination of 219 positions at Waddell & Reed – was announced in a notice last week to the Kansas Department of Commerce and Overland Park Mayor Carl Gerlach. Waddell & Reed said the layoffs will take place beginning April 30. It did not specify the nature of the jobs being eliminated.
Roger Hoadley, a spokesman for Waddell & Reed, said in an email that the affected employees will be eligible for severance benefits, “including continued subsidized healthcare and outplacement services to assist them in securing new jobs.”
Hoadley said Waddell & Reed’s Ivy Funds brand, one of its investment distribution channels, will not be affected by the layoffs.
“Ivy investment teams are expected to manage their portfolios following the close of the transaction,” he said.
Macquarie is expected to complete its acquisition of Waddell & Reed, which has more than $74 billion in assets under management, sometime in the middle of this year.