Title
Agreements with Hubbard Street Group for Development of Property Located at 6th and Garfield Streets in Downtown Phoenix
Description
This report requests the Workforce and Economic Development Subcommittee recommend City Council approval to enter into a development agreement, lease agreement, easements and other agreements as necessary (Agreements), with Hubbard Street Group, or its City-approved designee (Developer), for the development of a 26-story multi-family rental and commercial project located at the southeast corner of 6th and Garfield streets in downtown Phoenix. There is no impact to the General Fund.
THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.
Report
Summary
On Dec. 27, 2019, the Developer submitted a proposal in response to the 2017-2018 Downtown Development Request for Proposals (RFP) requesting the City's consideration of a Government Property Lease Excise Tax (GPLET) transaction for the development of a 26-story, 309 unit, multi-family rental residential project that will include approximately (approx.) 7,000 square feet (SF) of commercial space and 201 parking spaces (Project) on approx. 18,000 SF of vacant land at the southeast corner of 6th and Garfield streets in downtown Phoenix. The Project will bring a new co-working space option into downtown near the Phoenix Biomedical Campus that will double as community space and will include at least 10 percent of the total units for workforce housing during the term of the lease.
If approved, the Project will bring a capital investment of approximately $87 million to the downtown community and create approximately 264 construction jobs and 77 permanent jobs. Upon issuance of a certificate of occupancy (C of O) for the Project, and other terms and conditions specified in the Agreements, the Developer will convey title of the property to the City, and the City will lease the property back to the Developer for a term not to exceed eight years. The GPLET on the Project will be abated for up to eight years from the date of the C of O. The Developer has also agreed that the Project will generate to the City and other taxing jurisdictions new revenue in the form of certain minimum tax payments (in the construction and leasing of the Project, and in ad valorem property taxes after the lease term). These minimum tax payments would be estimated by a third party economic impact study. Details regarding those minimum tax payments will be specified in the Agreements, as well as other terms and conditions deemed necessary by City staff.
Procurement Information
An evaluation panel, consisting of a representative from the Downtown Voices Coalition and City staff from the Community and Economic Development and Planning and Development departments, was convened earlier this spring to review the proposal. The panel recommended the City begin negotiations with the Developer.
Contract Term
The lease term will be for a maximum of eight years upon issuance of the C of O. There are no extensions to the proposed lease, and upon conclusion of the term, ownership of the property will be transferred back to the Developer. The Developer will have the ability to terminate the lease at any time subject to the terms of the Agreements.
Financial Impact
The Project will have no expense impact to the General Fund. The estimated one-time construction sales tax revenue to the City is $1,040,000, plus an estimated annual commercial rental tax revenue generation of approximately $145,000 at stabilization. The Developer will pay an annual rental payment starting at $25,000 in years one and two, $50,000 in years three and four, $75,000 in year five and escalating to $100,000 a year for the remaining three years of the lease. The rent payments will be deposited into the Downtown Community Reinvestment Fund.
Public Outreach
Staff presented to the Downtown Voices Coalition on Aug. 8, 2020 and the Evans Churchill Association on Aug. 12, 2020. The Developer also met with the Phoenix Elementary School District No. 1.
Location
Southeast corner of 6th and Garfield streets
Council District(s): 8
Department
Responsible Department
This item is submitted by Deputy City Manager Jeff Barton and the Community and Economic Development Department.