Title
Agreements with Aspirant Partners for Development of Property Located at 2nd Avenue North of Van Buren Street in Downtown Phoenix (Ordinance S-49923)
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 Aspirant Partners, or its City-approved designee (Developer), for the development of a two-phase multi-family rental and commercial project located on 2nd Avenue between Fillmore and Van Buren streets in downtown Phoenix. Further request to authorize the City Treasurer to accept all funds related to this item. There is no impact to the General Fund.
Report
Summary
On June 11, 2020, the Developer submitted a project proposal requesting the City's consideration of a Government Property Lease Excise Tax (GPLET) transaction for the development of a multi-phased, mixed-use development on 2nd Avenue between Fillmore and Van Buren streets in downtown Phoenix. Now that the project is ready to move forward, the Developer re-submitted an updated project proposal on April 18, requesting the City's consideration of a GPLET transaction for the development of a two-phase, 697 rental unit, 229 hotel room, multi-family residential rental, and commercial project that would include approximately 36,000 square feet (SF) of commercial space, 185,000 SF of office space, and 1,156 parking spaces (Project) on approximately 2.18 acres of surface parking lot on 2nd Avenue between Fillmore and Van Buren streets in downtown Phoenix. The Project will bring a new co-living space option into the area, offers workforce housing units, adds 147 exclusive parking spaces for the neighboring YMCA, and extends a widened Paseo from its current terminus at the YMCA, across the alleyway, through the development, and over 2nd Avenue.
If approved, the Project will bring a capital investment of approximately $535 million to downtown and create approximately 4,191 construction jobs and 2,563 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 on the Project will be abated for up to eight years from the date of the C of O. The Developer has also 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.
The Developer also recognizes the issues relating to affordable housing in this and other markets across the country. To help address this critical issue, the Developer has proposed a one-time contribution of 200 percent of the City’s share of property taxes otherwise due during each of the two lease terms to the City's Affordable Housing Trust Fund, which will be used in the future by the City towards affordable housing in Phoenix.
Evaluation
An evaluation panel, consisting of a representative from the Roosevelt Action Association, the development community, and City staff from the Community and Economic Development and Planning and Development departments, was convened in September 2020 to review the proposal. The panel recommended the City begin negotiations with the Developer.
Contract Term
The lease term for each phase will be for a maximum of eight years upon issuance of the C of O for each phase. 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 expense impact to the General Fund. The estimated one-time construction sales tax revenue to the City is $5,382,000, plus an estimated annual commercial rental and transaction privilege tax revenue generation of approximately $4,396,500 at stabilization. The Developer will pay an annual rental payment, per phase, starting at $25,000 in years one through four, and $75,000 in years five through eight. The rent payments will be deposited into the Downtown Community Reinvestment Fund. The estimated total deposit into the Affordable Housing Trust Fund will be approximately $5,500,000.
Public Outreach
Staff presented to the Roosevelt Action Association on Dec. 15, 2020 and the Downtown Voices Coalition on Jan. 9, 2021 and June 10, 2023. The Developer also met with the Phoenix Elementary School District No. 1.
Previous Council Action
The item was recommended for approval by the Economic Development and Equity Subcommittee at the June 13, 2023 meeting by a vote of 4-0.
Location
333 - 377 N. 2nd Ave.
Council District: 7
Department
Responsible Department
This item is submitted by Interim Deputy City Manager John Chan and the Community and Economic Development Department.