Title
Authorization to Modify Ground Lease 157982 with Phoenix Rising FC, LLC (Ordinance S-51348) - District 8
Description
Request to authorize the City Manager, or his designee, to amend Ground Lease 157982 with Phoenix Rising FC, LLC to increase the maximum rent credit for eligible improvements. Further request to authorize the City Controller to disburse funds related to reimbursement for electrical infrastructure equipment for the site.
Report
Summary
Phoenix Rising FC, LLC (Phoenix Rising) currently leases approximately ten acres of land at 3801 E. Washington Street, for a soccer stadium and additional facilities in support of its soccer franchise from the Aviation Department (Aviation) under Ground Lease 157982. In reviewing the approved construction work costs, staff verified the improvements totaling $2,103,948 as eligible for rent credit. The Ground Lease currently set the maximum rent credit amount at $1,502,820. This amendment would increase the maximum rent credit by $601,128.
Additionally, Aviation seeks to reimburse Phoenix Rising in the amount of $1,500,000 for the cost of the new electrical infrastructure equipment installed at the site. Since this electrical equipment has an expected useful life of 25 to 30 years, staff identified this equipment would also benefit Aviation beyond the term of the lease if the equipment were not decommissioned and removed at the end of the lease. Phoenix Rising installed this equipment as a tenant improvement in compliance with Title 34 and intended to remove the equipment at the end of the lease. Phoenix Rising has agreed not to remove this equipment at the end of the lease as a condition of reimbursement.
The amendment would also include the following:
1. Two of the existing one-year extension options will be exercised resulting in a seven-year primary term with three one-year renewal options. The original ten-year lease term remains unchanged.
2. Add a lease provision to allow use of the facilities, including the soccer fields and parking area, three times annually for Aviation Department events at no cost to the Aviation Department.
3. Replace the Phoenix-Mesa-Scottsdale Consumer Price Index annual adjustment with a flat three percent annual adjustment to be applied to the option years.
4. Amend the Performance Guarantee lease provision to be required at the start of the option years.
Contract Term
The amendment does not change the total number of years of the lease term.
Financial Impact
If amended, the annual rent will continue at $300,564 for the seven-year primary term and the Net rent for the lease option years will be approximately $956,883 if all three, one-year option years are exercised.
Funding of the $1,500,000 for electrical infrastructure equipment is available in the Aviation Department’s Capital Improvement Project budget.
Concurrence/Previous Council Action
City Council previously approved Ground Lease 157982 with Phoenix Rising (Ordinance S-49193) on November 16, 2022.
City Council previously approved an amendment to Ground Lease 157982 (Ordinance S-49366) on January 25, 2023.
Location
3801 E. Washington Street
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Aviation Department.