Title
Authorization to Enter into Development Agreement for Fillmore Mixed-Use Redevelopment (Ordinance S-43802)
Description
Request to authorize the City Manager, or his designee, to enter into a disposition and development agreement, and other agreements as necessary, (collectively, the “Agreements”) with High Street Fillmore, LLC, or its City-approved designee (“Developer”) for the sale and development of the Fillmore Properties as a mixed-use redevelopment project.
Report
Summary
The Developer submitted its proposal in response to the Community and Economic Development Department (“CEDD”) Request for Proposals (“RFP”) for the disposition and redevelopment of the City-owned properties located south of Fillmore between 4th and 6th Avenues in Downtown Phoenix (collectively "Fillmore Properties" or "Site"). The Fillmore Properties are approximately 7.6 acres in total area and consist of the former Thomas J. Pappas school site, the Beeline Transportation site, and four adjacent properties that were assembled by the City over several years in financial partnership with the Phoenix Industrial Development Authority ("PIDA").
The Developer's proposal is to redevelop the Site as a mixed-use project. The two-phase project will contain approximately 659 multifamily residential units, 20 townhomes, 17,457 square feet of retail and office space, 957 parking spaces in both structured and street parking, 20,000 square feet of amenity area, and a new east/west street. In addition to the proposed multifamily uses, retail and office uses will be concentrated along Fillmore Street, and townhomes will be located at the southeast corner of the Site. The Developer has also agreed to construct an east/west street (paseo) near the south end of the Site to improve multi-modal connectivity in the area. The paseo is a continuation of the Taylor Street Mall concept discussed in various Downtown planning documents and was strongly requested by the community during the original public outreach associated with the issuance of the RFP. The Developer's proposal was reviewed and selected by an RFP review panel and recommended to progress to the negotiation of business terms.
The project will be constructed in two phases, bring a capital investment of approximately $140 million to the Downtown community and break up two superblocks in Downtown with the reintroduction of Taylor Street. Additionally, the project will create approximately 500 construction jobs and 60 full-time jobs, along with Trammel Crow relocating its Arizona offices to the project. The proposed key business terms include:
- Developer will enter into a Development Agreement within six months, and each phase shall have development benchmarks for construction.
- Developer shall commence Phase 1 within 18 months and Phase 2 within four years of City Council authorization.
- Developer shall have an option to extend the Phase 2 commencement date by no more than two years, pursuant to certain conditions and payment of an annual carry payment of 2.5% of the Phase 2 purchase price during the extension.
- Developer shall purchase the Site in two phases at a total price of $10,000,000 (approximately $29.96 per square foot). The land payment for each phase will be based on square footage determined by a survey & replat of the Site. Payment for each phase shall be made upon the commencement of construction.
- Developer commits to work with the City and Phoenix Elementary School District #1 (District) to explore integrating a potential school of up to 60,000 square feet into the project as part of the Phase II development.
- Developer shall construct certain public infrastructure improvements, to the City's specifications, including the construction of the Taylor Street Paseo, estimated to cost $3.1 million. When accepted by the City, the City will reimburse the developer for the expense of the public infrastructure improvements, up to $3.1 million. Based on the outcomes of discussions with the District and identification of their development needs, Taylor Street Paseo may be developed in two phases with reimbursement to the Developer at the end of each phase.
- When the Developer constructs and dedicates the new street/paseo, to the City's specifications, City shall credit the Developer the land cost of the area dedicated as public rights-of-way. This credit may be broken into two phases to match the construction of the paseo.
- The source of funds for the infrastructure reimbursement will be from revenues created by the sale of the property, the Downtown Community Reinvestment Fund and the Strategic Economic Development Fund.
- The reimbursement will occur only A) up to the $3.1 million authorized, B) over time when the Developer has actually purchased the land for each phase and has completed the agreed to public infrastructure improvements, C) not to exceed 10 years following the completion of each individual phase. The reimbursement shall not exceed two phases.
- If the project does not meet the stated construction goals as outlined in the development agreement, the City will have no further reimbursement obligations to the Developer.
- The agreements will include other terms and conditions deemed necessary by the City.
City staff shall continue to work with Developer and the District to find a mutually agreeable solution for an urban school site. During this time, City will work with the Developer and District to determine if a feasible school pad could be integrated into the Phase 2 Parcel or the City shall assist the District in identifying alternative sites for an urban school. If the mutually agreeable solution alters these business terms, those amended terms will be brought back to City Council for authorization.
This project will bring a significant number of additional residential units to the Downtown area, especially west of Central Avenue, which is supported by the City Council adopted Downtown Strategic Plan. Furthermore, this project will add to the diversity of housing in the Central City area, provide additional connectivity and circulation for pedestrians, bicycles, and vehicles in the Van Buren area, provide activation at the ground floor level and put vacant City property back into private use.
Procurement Information
In November 2015, CEDD issued an RFP for the sale and development of the West Fillmore Properties. Four proposals were received, one of which was deemed nonresponsive for failing to comply with the RFP requirements. On Aug. 16, 2016, an evaluation panel interviewed the three remaining proposers. The panel included representatives from the Roosevelt Action Association, Phoenix Industrial Development Authority, DWG Phoenix, P.B. Bell Commercial Development, and two City departments. The panel ranked High Street Fillmore, LLC, as the top proposer and recommended the City initiate negotiations with the Developer.
Contract Term
The total term of the development agreement is 20 years.
Financial Impact
The sale of the Site will put 7.6 acres back into private control which will generate net new property tax revenues. The total project is estimated to generate approximately $1.3 million in construction taxes, and, over 20 years, approximately $6.5 million in residential and commercial rental taxes to the City.
The purchase price will be used to reimburse the Phoenix Industrial Development Authority $3,930,023 pursuant to the City's Agreements with the PIDA with the sale of the first phase. Reimbursement to the Developer for public infrastructure improvements in an amount not to exceed $3.1 million shall come from the net revenue from the sale of the property, the Downtown Community Reinvestment Fund and the Strategic Economic Development Fund. Reimbursement to the Developer will be made over a period of up to 10 years, following Completion of Construction of each individual phase, until the reimbursement is completed or the 10-year period for each phase ends. Any funds remaining after the reimbursement to the Developer for public infrastructure improvements, on either phase, will be deposited into the Downtown Community Reinvestment Fund.
Funding is available in the Community and Economic Development Capital Improvement Program Budget.
Concurrence/Previous Council Action
This item was recommended for City Council approval by the Downtown, Aviation, Economy and Innovation Subcommittee on June 7, 2017, by a vote of 3-0.
Public Outreach
Two public meetings were held regarding the proposal. The first was on May 13, 2017, with Downtown Voices; the second was on May 16, 2017, with the Roosevelt Action Association.
Location
City-owned property located between 4th and 6th Avenues, south of Fillmore Street in Downtown Phoenix, and with multiple addresses: 355 N. 5th Ave., 358 N. 5th Ave., 378 N. 5th Ave., 365 N 6th Ave., 373 N. 6th Ave., 377 N. 6th Ave. and 385 N. 6th Ave.
Department
Responsible Department
This item is submitted by Deputy City Manager Paul Blue and the Community and Economic Development Department.