Title
Authorization to Enter into Ground Lease with TR Phoenix Airport Industrial, LLC for Parking Lot Expansion on City-Owned Property (Ordinance S-45313)
Description
Request to authorize the City Manager, or his designee, to enter into a ground lease, and any other related documents, with TR Phoenix Airport Industrial, LLC to allow for parking lot expansion on City-owned land adjacent to 3333 S. 7th St. Further request authorization for the City Controller to accept funds related to this item. Annual revenue initially will be $19,602 plus applicable taxes, and later adjusted to $94,090 plus applicable taxes at the stabilized rental rate.
Report
Summary
TR Phoenix Airport Industrial, LLC (Lessee) owns the existing warehouse at 3333 S. 7th St. and is working with potential tenants to expand operations and bring new jobs to the site, resulting in a need for 500 additional parking spaces. The current footprint of the warehouse will only accommodate the addition of 150 vehicle parking spaces. Therefore, the owners approached the City regarding potential use of approximately nine acres of City-owned land adjacent to the east side of their property for the addition of 350 parking spaces, as well as the addition of an outside storage yard and trailer drop parking.
Base rent at commencement will be at the vacant/unimproved rental rate of $0.05 per square foot per year, or approximately $19,602 plus applicable taxes annually. Thereafter, base rent will be adjusted to the stabilized rental rate following the earlier of (1) Certificate of Completion issued by the City of Phoenix for the improvements proposed by the Lessee, (2) 30 days following receipt of a Refusal Notice from the City of Phoenix or (3) two years from the lease commencement date. The stabilized rental rate will be $0.24 per square foot per year, or approximately $94,090 plus applicable taxes annually, and will be adjusted annually by 2 percent on the lease anniversary date. This rate is within the range of market rents as determined by the Finance Department's Real Estate Division.
Lessee will develop, landscape, screen and maintain the leased area at its sole expense in accordance with all zoning, permitting and environmental requirements. Lessee shall provide insurance and indemnification acceptable to the City's Risk Management Division and Law Department. The lease may contain other terms and conditions deemed necessary by the City. The lease may be canceled pursuant to A.R.S. 38-511.
At the end of the ground lease, any improvements will become property of the City of Phoenix. Throughout the lease, the City will retain the right to access any City-owned water or wastewater infrastructure that may exist on the site, as well as any landfill monitoring that may be required.
The land covered by this lease is part of the closed Del Rio Landfill. A Request for Proposals (RFP) for redevelopment of the landfill was issued by the Community and Economic Development Department, with a response deadline of April 24, 2018, and two proposals were received. Both proposers were deemed non-responsive, and the RFP was canceled. This transaction does not limit the ability to issue an RFP, or other transaction, to develop the Del Rio Landfill in the future.
Contract Term
The term of this contract is 20 years, with three 10-year options to extend at the City's discretion.
Financial Impact
Annual revenue initially will be $19,602 plus applicable taxes, and later adjusted to $94,090 plus applicable taxes at the stabilized rental rate.
Location
The ground lease is for a portion of two parcels (assessor parcel numbers 113-15-051 and 113-15-001T) near the northeast corner of 7th and Elwood streets.
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Managers Deanna Jonovich and Karen Peters, and the Community and Economic Development, Public Works and Finance departments.