Title
Sale and Redevelopment of City-Owned Property at 723 W. Polk St. to Cardinal Capital Management, Inc. (Ordinance S-47839)
Description
Request to authorize the City Manager, or his designee, to enter into a disposition and redevelopment agreement, and other agreements as necessary (Agreements), with Cardinal Capital Management, Inc., or its City-approved designee (Developer), for the sale and redevelopment of the American Legion site located at 723 W. Polk St. Further request authorization for the City Treasurer to accept, and for the City Controller to disburse, all funds related to this item. Sale of the property will result in payment to the City of $1,605,000.
Report
Summary
The City owns a parcel comprised of approximately 73,220 square feet (SF), or 1.68 acres, located at 723 W. Polk St., at the southwest corner of 7th Avenue and Polk Street (Site). The Site, zoned C-3 (General Commercial), is located within the Downtown Phoenix Redevelopment Area as well as the Arts, Culture, and Small Business and Capital Mall overlays. The Site was deeded to the City in 1920 to allow the establishment of the American Legion Post No. 1 (Legion). The original agreement allowed the Legion to use the Site, subject to certain limitations and contract provisions, for 99-years with an end date of Feb. 20, 2019. In September 2018, the City Council approved an 18-month lease extension allowing the Legion to continue operations while the City determined the future of the Site. City staff sent a lease amendment to the Legion for execution; however, the Legion did not execute the amendment. On July 1, 2021, the City Council via Ordinance S-47830 amended the Legion's lease of the Site to retroactively extend the term of the least until Aug. 1, 2022. The lease amendment with the Legion has been executed and provides that once the Developer is ready to take title to the Site and commence construction, the City will terminate the lease with the Legion.
The property is not designated on the Phoenix Historic Property Register or the National Register of Historic Places. A National Register Nomination was prepared by individuals not associated with the Legion, however, the Legion does not support the nomination moving forward.
In June 2019, the City Council authorized the Community and Economic Development Department (CEDD) to issue a Request for Proposals (RFP) seeking offers for the disposition and redevelopment of the Site for a compatible, infill, mixed-use, mixed-income development. The City received two proposals in response to the RFP, which was issued in October 2019. Only one of the proposals was responsive as the other proposal was received after the published proposal deadline and staff entered into negotiations with the responsive proposer. If approved, the redevelopment will result in a mixed-use, mixed-income development consisting of one building ranging between four and five stories with approximately 160,000 gross SF of building space (Project), which will include:
Approximately 132 multifamily residential units offered in a mix of Market, Affordable and Workforce units with a preference for veterans, and distributed as follows:
Approximately 36 percent of the total units will be dedicated as Affordable Housing, restricted to households with incomes less than or equal to 50 percent of Phoenix-Mesa-Scottsdale, AZ MSA Area Median Income Limits (AMI).
Approximately 17 percent of the total units will be dedicated as Income Restricted Housing, restricted to households with incomes that are less than or equal to 80 percent of Phoenix-Mesa-Scottsdale, AZ MSA AMI.
Approximately 17 percent of the total units will be dedicated as Workforce Housing, restricted to households with incomes that are between 80 to 120 percent of Phoenix-Mesa-Scottsdale, AZ MSA AMI.
Approximately 30 percent of the total units will be dedicated as Market Rate Housing.
Attempt to maintain the historic eligibility of the property by preserving the pre-1949 portions of the structure.
Minimum 3,000 SF for community support services for veterans.
A pedestrian gateway into the Project at the southwest corner of 7th Avenue and Polk Street.
An interpretative feature documenting the history of the Luke-Greenway American Legion Post No. 1, to be located in a prominent, publicly accessible area of the Site.
Preservation of the existing flagpole or, if preservation of the existing flagpole is not possible, construction of a comparable flagpole of at least the same size.
Preservation and re-purposing of the existing meeting hall as a community meeting space.
Creation of an approximately 6,500 SF gathering space.
Sufficient parking spaces provided in a mix of covered and surface parking.
Subject to City Council approval, the following major business terms have been negotiated with the Developer and would be implemented through the Agreements:
Purchase price $1,605,000, equal to the appraised value.
99-year deed restriction guaranteeing the income restrictions, with a preference for veterans, on the Site.
City will provide a minimum of 25 project-based Veterans Affairs Supportive Housing (VASH) Vouchers for a term of 20 years, subject to future fund allocations to the City from the U.S. Department of Housing and Urban Development.
Developer will work with the Office of Historic Preservation to preserve the pre-1949 portions of the structure and maintain the historic eligibility of the property if possible. If the Developer is successful in maintaining the historic eligibility of the property, the City will:
Provide a one-time contribution of $300,000 for rehabilitation of the historically-eligible building after completion and acceptance of improvements, as well as execution of a 99-year conservation easement for the 7th Avenue frontage and the pre-1949 portions of the structure.
City will reimburse the City's share of Construction Sales Tax paid during the construction of the Project, in an amount not to exceed $265,000, in exchange for Developer executing a 99-year public access easement, enforceable by the City, to provide public access to at least 2,000 SF of the Site on which the interpretive feature documenting the history of the Luke-Greenway American Legion Post No. 1 is located.
Developer will preserve existing memorabilia at the Site.
Developer will apply to rezone the Site within 90 days of the Authorization Date and diligently pursue rezoning.
Developer will commence construction within 18 months of completion of the rezoning process.
Developer will complete construction within 24 months of construction commencement.
Agreements may contain other terms and conditions deemed necessary by City staff.
The Project will adaptively reuse a portion of the existing building and preserve key elements of the Legion property while adding veteran preference housing aimed at a mix of income levels. The Project will create approximately 100 construction jobs and approximately 20 permanent jobs after completion. In addition, the Project will create other new revenues through construction sales tax, new property tax and rental sales tax.
The Developer continues to work closely with the Legion to ensure their ability to remain on the site with the American Legion Post No. 1, up to the commencement of construction and again following the redevelopment of the property.
Financial Impact
Sale of the property will result in payment to the City of $1,605,000. Funding for the one-time historic preservation activities to maintain the historic integrity will not exceed $300,000 for which funding is available in the Downtown Community Reinvestment Fund. Construction Sales Tax reimbursement will not exceed $265,000.
Public Outreach
Staff presented to the following organizations:
Downtown Voices Coalition - May 8, 2021
Central City Village Planning Committee - May 10, 2021
Grand Avenue Members Association - May 11, 2021
Grand Avenue Arts & Preservation - May 11, 2021
Historic Preservation Commission May 17, 2021
Roosevelt Action Association - May 18, 2021
Military Veterans Commission - June 17, 2021
Staff also contacted the Capital Neighborhood Association and the Triangle Neighborhood Association to provide information, and worked with the American Legion to gather feedback.
Concurrence/Previous Council Action
This item was recommended for approval by the Workforce and Economic Development Subcommittee at the June 23, 2021 meeting by a vote of 3-0.
Location
723 W. Polk St.
Council District: 7
Department
Responsible Department
This item is submitted by Deputy City Managers Ginger Spencer and Gina Montes and the Community and Economic Development, Housing and Planning and Development departments.