Title
Authorization to Enter into Clark Street Holdings, LLC, Development Agreement (Ordinance S-43419)
Description
Request to authorize the City Manager, or his designee, to enter into a development agreement, lease agreements and other agreements as necessary ("Agreements") with Clark Street Holdings, LLC, or its City-approved designee ("Developer") for the development of three high-rise, multi-family rental residential towers at the northeast corner of 3rd and Pierce Streets in downtown Phoenix; and for the City Treasurer to accept funds related to this item.
Report
Summary
On Aug. 2, 2016, the Developer submitted its proposal to the Downtown Redevelopment Area Request for Proposals (RFP) for consideration of a Government Property Lease Excise Tax (GPLET) transaction for a mixed-use redevelopment project on six vacant parcels located at the northeast corner of 3rd and Pierce Streets in downtown Phoenix (Site). If approved, the project will result in three high-rise, multi-family rental residential towers, including 24,500 square feet of accessory commercial space, 646 structured parking spaces and resident amenities (Project). Phase 1 is planned as an approximately 450,000-square-foot high rise, including 252 rental residential units, ground floor commercial space and 225 structured parking stalls. Phase 2 would be an approximately 300,000-square-foot high rise tower, including 204 rental residential units, ground floor commercial space and 275 structured parking stalls. Phase 3 would be an approximately 225,000-square-foot high rise tower, including 156 rental residential units, ground floor commercial space and 146 structured parking stalls.
This proposal was reviewed by a panel and recommended to progress to negotiations of business terms. The 612-unit development will be constructed in three phases on a vacant 55,979-square-foot site and will bring a capital investment of approximately $175 million to the downtown community. Additionally, the Project will create approximately 250 construction jobs and 50 full-time jobs. The proposed business terms are listed below:
- Developer will enter into a Development Agreement in 6 months, and each phase shall have development benchmarks for the construction.
- Upon completion of construction of each phase, the parties shall enter into a Lease for each individual phase including GPLET treatment. Phase 1 will be a 20-year lease; Phase 2 will be an eight-year lease; and, Phase 3 will be an eight-year lease.
- Each Lease shall include the abatement of the Excise Tax for the first eight years.
- Developer shall provide five percent of the units in each phase for workforce housing during the term of the lease.
- Developer shall pay the City an annual lease payment of $10,000 per lease, per year.
- The agreements will include other terms and conditions deemed necessary by the City.
This project will bring a significant number of additional residential units to the downtown area in close proximity to the Arizona State University Downtown Phoenix Campus and the Phoenix Biomedical Campus, which is supported by the City Council adopted Downtown Strategic Plan. Furthermore, this project will add to the diversity of housing in the central city area, provide community activation of the ground floor areas if not rented for commercial uses, and provide a workforce housing component.
Procurement Information
On Aug. 2, 2016, the Developer submitted its proposal to the Downtown RFP for consideration of GPLET assistance. In accordance with the RFP, the City convened a panel on Oct. 19, 2016, to review and score the proposal, based on specific evaluation criteria and make a recommendation. The panel consisted of representatives from the Evans Churchill Neighborhood Association and City staff from the Housing and Planning and Development departments. The panel unanimously recommended proceeding to negotiations with the Developer.
Contract Term
The Project is a three-phase development and will result in three separate lease agreements. The Phase 1 lease will have a 20-year lease term while the Phase 2 and Phase 3 leases will have eight-year lease terms. There are no extensions to the proposed leases and the Developer will have the ability to terminate the lease at any time subject to the terms of the contract.
Financial Impact
The Project will have no expense impact to the General Fund. The estimated construction tax revenue to the City for all three phases is approximately $1,710,115 plus an estimated annual tax revenue generation of approximately $200,000 for all three phases. The Developer will pay an annual rental amount of $10,000 for each phase and such payments shall be deposited into the Downtown Community Reinvestment Fund.
Concurrence/Previous Council Action
This item was to be heard by the Downtown, Aviation, Economy and Innovation Subcommittee on April 5, 2017; however, the meeting was canceled.
Location
The Site has multiple current addresses, including 707 N. Third St. and is located at the northeast corner of 3rd and Pierce Streets in downtown Phoenix.
Department
Responsible Department
This item is submitted by Deputy City Manager Paul Blue and the Community and Economic Development Department.