Title
Authorization to Amend Development Agreement (City Contract 164469) with Pennrose, LLC for the Sale and Development of City-Owned Property Located at 1016 North 2nd Street (Ordinance S-52672) - District 7
Description
Authorization to amend the Development Agreement with Pennrose, LLC (Developer) to modify the purchase price for the City-owned property located at 1016 N. 2nd Street and authorize the Community and Economic Development Department to pay a portion of the development’s permit fees. Further request authorization for the City Controller to disburse funds related to this item.
Report
Summary
In 2023, City Council authorized the issuance of a Request for Proposals (RFP) for the City-owned property located at 1016 N. 2nd Street. The RFP sought a mixed-use high-rise development and required any proposals with a residential use to designate a minimum of 20 percent of the proposed units as affordable or workforce housing. On April 9, 2025, City Council authorized the City enter into a development agreement with Pennrose, which agreed to build a 64-unit, 100 percent income restricted project.
The project is dependent on Low-Income Housing Tax Credits (LIHTC). The Arizona Department of Housing’s Qualified Allocation Plan (QAP) includes the criteria to qualify for LIHTC. The 2025 QAP includes a criterion that the municipality where the project is located must commit to funding a minimum of $100,000 of the project’s permit fees. The City and Developer have agreed to modify certain terms of the agreement to satisfy the 2025 QAP while also maintaining the existing economics of the agreement. The business terms would be modified as follows:
- The City commits to funding $100,000 of the project’s permit fees.
- The Developer agrees to increase the purchase price for the property to $1,600,000 from $1,500,000.
- The Developer agrees to refund the $100,000 to the City should the project fail to complete construction.
Financial Impact
There is no impact to the General Fund. Funding is available in the Downtown Community Reinvestment Fund.
Concurrence/Previous Council Action
On April 9, 2025, City Council approved Ordinance S-51809 that authorized City Contract 164469.
Location
The Site includes three individual parcels (APNs 111-36-029A, -0298 and -030) and is collectively referred to as 1016 N. 2nd Street.
Council District: 7
Department
Responsible Department
This item is submitted by Assistant City Manager Ginger Spencer and the Community and Economic Development Department.