Title
Agreements with XSC Acquisitions, LLC for Development of Property at 625 N. 2nd Ave. (Ordinance S-46935)
Description
Request to authorize the City Manager, or his designee, to enter into a development agreement, lease agreement, easements and other agreements as necessary (Agreements), with XSC Acquisitions, LLC, or its City-approved designee (Developer), for the development of a 19-story, multi-family rental residential and commercial project located at 625 N. 2nd Ave. in downtown Phoenix. There is no impact to the General Fund.
Report
Summary
On Dec. 31, 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 19-story, 375-unit multi-family rental residential project that will incorporate 6,000 square feet (SF) of commercial space and 144 parking spaces (Project) on approximately 0.64 acres of vacant land at 625 N. 2nd Ave. in downtown Phoenix. The project will incorporate a large number of studio units to provide a lower, more affordable price point in the area and will include a minimum of 10 percent of the total units for workforce housing during the term of the Lease.
If approved, the proposed Project will bring a capital investment of approximately $92 million to the downtown community and create approximately 300 construction jobs and eight 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 will be abated for up to eight years from the date of the C of O. The Developer also has 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 Roosevelt Action Association and City staff from both the Community and Economic Development and the 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 conditions 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 $1,025,000, plus an estimated annual commercial rental tax revenue generation of approximately $170,000 at stabilization.
Public Outreach
Staff presented to the Downtown Voices Coalition on Aug. 8, 2020 and provided information to the Roosevelt Action Association.
Location
625 N. 2nd Ave.
Council District: 7
Department
Responsible Department
This item is submitted by Deputy City Manager Jeff Barton and the Community and Economic Development Department.