Title
Authorization to Enter Into Contracts with True North Holdings, LLC for Sale and Redevelopment of City-Owned Knipe House Properties (Ordinance S-44110)
Description
Request authorization for the City Manager, or his designee, to enter into any and all agreements necessary (“Agreements”) with True North Holdings, LLC, or its City-approved designee (“Developer”), to facilitate the sale and redevelopment of seven City-owned parcels located at 1009, 1015, 1016, and 1025 N. 2nd St.; and, authorize the City Treasurer to accept funds. This contract will have no expense impact to the General Fund.
Report
Summary
In June 2017, the Community and Economic Development Department ("CEDD") issued a Request for Proposals ("RFP") for the disposition and redevelopment of the historic Knipe House and six additional vacant parcels of land north of Roosevelt Street on both sides of 2nd Street encompassing approximately 1.5 acres ("Site"). The City received one responsive proposal for this RFP.
The Developer controls property directly adjacent to the Site along 1st Street and Portland Street and plans to develop its project on a combined site including its own property as well as the City-owned Site. The Developer has proposed a comprehensive four structure project including (all numbers are approximate) 305,000 gross square feet ("GSF") of commercial office space, 77,000 GSF of retail space, 32 Residential Rental Units, and 1,200 Parking Spaces, with at least 250 spaces open to the public at all times. Overall the project’s anticipated value is approximately $151 million featuring 759,000 GSF of uses. Staff and the Developer have negotiated the following business terms for Council consideration:
- City will sell the Site to the Developer for the fully appraised value of $3,560,000.
- Developer shall construct a mixed-use project consisting of: a 19-story office building with ground floor commercial use; two five-story commercial office buildings with ground floor commercial use and rental residential; and renovation and preservation of the Leighton G. Knipe House.
- Developer will provide a 50-year conservation easement to the City for the Leighton G. Knipe House.
- Within six months of Council Authorization, the parties shall enter into Agreements. Within 18 months of Council Authorization, Developer must secure the first building permit. Developer shall complete the project within 36 months from the first building permit.
- CEDD shall assist the Developer with right-of-way and permitting coordination through the development process.
The Agreements will include other terms and conditions as needed, and deadlines for performance benchmarks may be modified at the City's discretion.
In addition to the physical improvements created by this project, including the restoration and preservation of the historic structure, the project is estimated to create approximately $151 million in new capital investment, generate approximately $2.8 million in construction tax revenues, approximately $2.3 million in retail, rental and other annual privilege license tax revenues and 2,300 jobs at build-out. Approval of this agreement will also sell seven City-owned parcels and return them to the public property tax rolls.
Procurement Information
In June 2017, CEDD issued a Request for Proposals for the disposition and redevelopment of the Knipe House properties (RFP-CED17-KHP). Prior to the issuance of the RFP, staff met with the neighborhood groups in the vicinity including the Evans Churchill Community Association, Downtown Voices Coalition, and the Roosevelt Row Merchants Association to elicit feedback. One proposal was received for the RFP and staff verified the proposal was responsive to the RFP requirements. On Aug. 24, 2017, an award recommendation was posted, and staff began negotiations with the Developer.
Contract Term
The term of the development agreement will be approximately five years.
Financial Impact
This contract will have no expense impact to the General Fund. $2,560,000 of the proceeds of the sale will be deposited into the Downtown Community Reinvestment Fund and $1,000,000 of the proceeds of the sale will be deposited into the General Fund.
Concurrence/Previous Council Action
City Council approved the issuance of the RFP on June 7, 2017. This item was recommended for approval by the Downtown, Aviation, Economy and Innovation Subcommittee on Nov. 1, 2017.
Location
The Site is located on both sides of 2nd Street between Roosevelt and Portland Streets in downtown Phoenix with the street address of 1009, 1015, 1016, and 1025 N. 2nd St. The other two parcels are incorrectly addressed as 549 E. Lynwood St. The City parcels include seven distinct APNs: 111-36-029A, 111-36-029B, 111-36-030, 111-36-040, 111-36-042, 111-36-043 and 111-36-044.
Council District: 7
Department
Responsible Department
This item is submitted by Deputy City Manager Deanna Jonovich and the Community and Economic Development Department.