Title
Amend Ordinance S-47581 and Development Agreement (City Contract 157059) with Laveen Baseline LLC (Ordinance S-53031) - Districts 7 & 8
Description
Request to authorize the City Manager, or his designee, to amend Development Agreement (City Contract 157059) with Laveen Baseline LLC to allow for alternative retail uses at Laveen Park Place shopping center located at the southeast corner of Loop 202 South Mountain Freeway and Baseline Road.
Report
Summary
Laveen Baseline LLC (Developer) is the owner of an approximate 65-acre site located at the southeast corner of the Loop 202 and South Mountain Freeway and Baseline Road known as Laveen Park Place (LVPP). In 2019, as part of the first phase of development of LVPP, the Developer constructed a 150,000 square foot shopping center consisting of major anchor retailers, restaurants, and accompanying shops. As the Developer planned the second phase of LVPP, it was identified that additional public infrastructure was required to support the growth of the project and the area at large.
On May 19, 2021, City Council approved Ordinance S-47581 (Ordinance) authorizing staff to negotiate and enter into a Development Agreement (DA) with the Developer for the installation of public infrastructure improvements to include the half street construction of 59th Avenue from Baseline to north of the South Mountain Avenue alignment (Improvements) as well as construction of an, at least, 50,000 square foot lifestyle center with a movie theater (Theater Phase), herein, comprehensively, noted as LVPP Phase 2. The DA was executed on September 13, 2022. Pursuant to the DA, the Developer was to construct the required Improvements and the City will reimburse the Developer a maximum of $2.5 million (paid at $250,000 annually) upon completion of construction of LVPP Phase 2, including the City's acceptance, and dedication of the Improvements to the City. The following item under the current terms of the Ordinance and DA is the subject of this request:
- Developer is required to construct at least a 50,000 square foot lifestyle center, with a movie theater, and the required public infrastructure improvements within 10 years of entering into the DA with the City.
The Developer began construction of the Improvements in 2022 and transferred ownership of certain parcels of LVPP to Harkins Laveen, L.L.C., for the construction of a new movie theater/entertainment complex. The Developer completed construction of the Improvements, as noted in the DA in 2024, and construction of the theater remains outstanding.
During this time, the Motion Picture Exhibition Industry (Theaters) was recovering from the effects of the COVID-19 Pandemic but also faced other unforeseen market disruptions such as the Writers Guild of America (WGA) and Screen Actors Guild (SAG) strikes of 2023. To date, these disruptions have placed a significant strain on the production of movies which are a large source of revenue for Theaters. This has caused Harkins to reposition its growth strategy, which has led to the decision to dispose of its portion of the LVPP site, as it is no longer feasible for development as a theater by Harkins. Harkins has engaged with an entity that is seeking to locate a general retail/mass retailer to the site that will fulfill a long-term need and a long-standing community request for increased amenities in the trade area. To move forward with the proposed project and fulfill the obligations under the DA, an amendment is required to the Ordinance and DA. The proposed amendment will remove and replace Section D of the Ordinance to state:
- Developer will construct a shopping center of at least 50,000 square feet consisting of general retail/general mass merchandise retailer, providing not less than a diversified inventory of grocery, soft goods, household commodities and other goods and services, subject to review and approval of the Community and Economic Development Director, by December 31, 2030. If construction is completed by this date, then the agreement will stay in place for a period of 10 years from the construction completion date. If construction is not completed by December 31, 2030, then, upon Community and Economic Development Director review and approval of an alternative development schedule and plan from the Developer, which must be provided to the City prior to July 1, 2030; City may extend the LVPP Phase 2 completion date to December 31, 2032.
No other modifications are proposed.
This area of Phoenix continues to be a high-demand and high-growth area for both new residential and employment uses. Although the area continues to expand, retail amenities continue to be in short supply and more options are needed to meet demand. LVPP Phase 2 will not only serve residents and employees living and working in and around the South Mountain Technology Corridor and the community at large, it will also assist to alleviate the sales tax leakage Phoenix experiences as a result of the lack of retail amenities in the area.
Contract Term
The original term of 10 years from the proposed Construction Completion date will remain unchanged.
Financial Impact
There is no change in the financial terms. The maximum reimbursement amount of $2.5 million, with annual reimbursements not to exceed $250,000, will remain unchanged as stated in the original DA. Funding is programmed in the Strategic Economic Development Fund.
Concurrence/Previous Council Action
- The DA was recommended for approval by the Economic Development and Housing Subcommittee at the April 28, 2021, meeting by a vote of 3-0.
- The DA was approved by the City Council at the May 19, 2021, Formal City Council meeting.
Location
Southeast corner of Loop 202 South Mountain Freeway and Baseline Road
Council Districts: 7 and 8
Department
Responsible Department
This item is submitted by Assistant City Manager Ginger Spencer and the Community and Economic Development Department.