Title
Development Agreement and Lease with NIXDT, LLC for Development of Property Located at 117, 125, 133 and 141 E. Jackson St. in Downtown Phoenix (Ordinance S-46333)
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 NIXDT, LLC, or its City-approved designee (Developer), for the development of a six-story hotel located at 117, 125, 133 and 141 E. Jackson St. that will incorporate and reactivate the historic Fuller (W.P.) Paint Company Warehouse as the hotel lobby, and for the City Treasurer to accept funds related to this item. The project will have no financial impact to the General Fund.
Report
Summary
On July 1, 2019, the Developer submitted its proposal in response to the 2017-18 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 hotel project that will incorporate and reactivate the historic Fuller Paint Company Warehouse located at 117 E. Jackson St. as the hotel lobby. The new hotel will be built on a parking lot located east of the Fuller Paint Company Warehouse at 125, 133 and 141 E. Jackson St. The project will bring an additional hotel option to an area of downtown that has limited lodging options and support the renovation and rehabilitation of a historic building.
If approved, the project will result in an approximately six-story, 140-room hotel; renovation and rehabilitation of the Fuller Paint Company Warehouse as the hotel lobby; and 23 parking spaces (Project) on the approximately 27,500 square foot property. An extensive renovation is necessary for the Fuller Paint Company Warehouse including a new roof and roof decking, paint removal, brick repair, overhaul of the building's structural support and window replacement. The rehabilitation costs are estimated between $1.17 million and $1.45 million. The Fuller Paint Company Warehouse and adjacent lot are currently vacant. The proposed Project will bring a capital investment of approximately $21 million to the downtown community and create approximately 100 construction jobs and 30 permanent jobs. Upon issuance of a Certificate of Occupancy for the Project, and other terms and conditions specified in the Agreements, the Developer will convey title of the property and improvements to the City, and the City will lease the property and improvements back to the Developer for a term not to exceed eight years for an annual rent as detailed below. The GPLET on the project will be abated for up to eight years from the date of the Certificate of Occupancy for the Project.
Procurement Information
An evaluation panel, consisting of a representative from the Warehouse District and City staff from both the Community and Economic Development Department and the Office of Historic Preservation, was convened earlier this summer to review the proposal. The panel unanimously recommended the City begin negotiations with the Developer.
Contract Term
The lease will be for eight years upon issuance of the certificate of occupancy. 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 financial impact to the General Fund. The estimated one-time construction tax revenue to the City is approximately $175,000, plus an estimated annual hotel tax revenue generation of approximately $270,000 at stabilization. The Developer will pay an annual rent to the City starting at $10,000 in year one and escalating incrementally to a year eight annual rent of $65,000 for a total of $300,000 over the term of the lease. The rent payments will be deposited into the Downtown Community Reinvestment Fund.
Concurrence/Previous Council Action
This item was recommended for approval by the Workforce and Economic Development Subcommittee at the Dec. 3, 2019 meeting by a vote of 3-1.
Public Outreach
Staff presented to the Warehouse District on Nov. 19, 2019 and the Downtown Voices Coalition on Dec. 14, 2019. The Developer also met with the Phoenix Elementary School District No. 1 and the Phoenix Union High School District.
Location
117, 125, 133 and 141 E. Jackson St. (southwest corner of 2nd and Jackson streets)
Council District: 7
Department
Responsible Department
This item is submitted by Assistant City Manager Deanna Jonovich and the Community and Economic Development Department.