Title
Amend Disposition and Redevelopment Agreement with Equus Ellis Limited Partnership to Charge Construction Staging Rent for Redevelopment of Ellis Building (Ordinance S-45982)
Description
Request to authorize the City Manager, or his designee, to amend Contract 149551 with Equus Ellis Limited Partnership (Developer) to allow for a construction staging rent alternative to rent required under Chapter 36-31.2(A) of Phoenix City Code.
Report
Summary
In March 2019, staff entered into a Disposition and Redevelopment Agreement (DRA), Contract 149551, with the Developer for the sale and redevelopment of the former City-owned Human Resources Building located at 135 N. 2nd Ave. On April 22, 2019, the City closed on the sale and received a sales proceed of $2.25 million. Under the DRA, the Developer has two years to complete its project, a complete remodel of the building for office use with ground floor retail and commercial space in the basement. The building will be rebranded as ‘The Ellis,’ an acknowledgement of the building’s original name when opened in the 1920s.
Due to the footprint of the Ellis Building taking up the entire extent of the property, the only on-site area for the Developer to stage their construction materials and equipment is in front of the building in the City’s Right-of-Way (ROW). The ROW on the east side of 2nd Avenue contains five parking meters, which would need to be closed for the duration of the construction staging period. Under Chapter 36-31.2(A) of City Code, the annual fee for the proposed meter closure is estimated to be approximately $18,000 or about $5.40 per square foot (SF) on an annual basis. This is nearly 11 times greater than the construction staging rent normally charged by the Community and Economic Development Department (CEDD) to developers. The CEDD construction staging rent is $0.50 per SF annually. In order to support redevelopment of the Ellis Building, as previously authorized by City Council, and the additional direct benefit to the City that the redevelopment will bring, staff proposes charging the Developer the construction staging rent that is normally charged of other projects. Staff and Developer have negotiated the following business terms to amend the DRA:
- Parking meter fees under Chapter 36-31.2(A) of City Code will be waived upon City Council authorization, and instead a construction staging rent of $0.50 per SF annually will be charged to Developer.
- A waiver of fees under Chapter 36-31.2(A) shall expire on Sept. 30, 2021. Staff will have the authority to extend this period for up to one year.
- Upon execution of the amendment, Developer will make a non-refundable payment to the Street Transportation Department in an amount sufficient to relocate the parking meters, which City staff estimates at $3,000.
- Only the sidewalk, parking meters and spaces on the east side of 2nd Avenue will be closed by Developer; vehicle traffic on 2nd Avenue will remain open in both directions.
- When the initial term of the waiver expires, Developer shall provide to the City documentation of the additional tax revenue generated by the redevelopment of the Ellis Building. In the event the City determines that the additional revenue does not exceed the normal $10 per day parking meter charge, Developer shall make an additional payment to the City to make up that difference.
- The amendment may contain other terms and conditions deemed necessary by City staff.
All other terms and conditions of the DRA shall remain in full force and effect.
Financial Impact
Fees for closure of parking meters under Chapter 36-31.2(A) are estimated to equal approximately $36,000 during construction. Staff is instead asking for an alternative total consideration of approximately $6,000 from the Developer since the project is estimated to result in a net benefit to the City of $150,000 annually in increased revenues from property taxes, construction sales taxes, leasing, utility and retail sales tax. Construction staging fees received will be deposited into the General Fund.
Concurrence/Previous Council Action
City Council originally approved:
- Ordinance S-45119, which authorized the DRA on Nov. 7, 2018
- Subsequently approved amending the ordinance on Jan. 23, 2019 to extend the closing of escrow as well as an option to alter the proposed deed restriction for office use.
Location
135 N. 2nd Ave.
Council District: 7
Department
Responsible Department
The item is submitted by Assistant City Manager Deanna Jonovich, Deputy City Manager Mario Paniagua and the Community and Economic Development and Street Transportation departments.