City gets tough on progress of projects

Time is money.

That’s the message City Manager Mike Hein is driving home with the newest development agreements for Rio Nuevo projects involving private sector developers and city-owned land.

Town West Design Development’s El Mirador hotel-condo-brew pub proposal at the north end of downtown is the first development agreement to face stepped-up financial penalties and precise timeframes for potential penalties that could exceed $360,000.

“Town West will have financial penalties if they miss dates,” Hein said.

Development agreements expected in the coming months for a Tucson Convention Center hotel and the 14.3 acres on West Congress Street will have similar precise timeframes/penalties, unlike earlier development agreements that are peppered with “shalls” and “musts,” but with scant consequences to back them up.

“We will be more rigorous with our management to make sure they conform to the terms,” Rio Nuevo Director Greg Shelko said.

Rio Nuevo has endured drawn out housing proposals from 2003-04, with predictions they would be done by now but the ground remaining untouched.

Three years ago, Bourn Partners outlined that The Post loft on Congress Street would be finished now, but Bourn is still waiting for a contractor bid with hopes to start construction in coming weeks.

Presidio Terrace has had completion dates announced for 2007, 2008 and 2009, but developer Peggy Noonan never got a shovel into the ground before Shelko pulled the plug on her development agreement in November.

Hein acknowledges that even though The Post development agreement called for construction to start in July and be finished by December 2008, ownership of the property passed to Bourn in the agreement and the only prescribed penalty for missing timelines is forfeiting a $40,000 bond.

“In that specific agreement, there is very little remedy,” Hein said. “Peggy Noonan symbolizes the fact that we are taking things more seriously.”

Shelko insisted there had been rigorous attention to other development agreements, citing frequent talks with the Bourn and Noonan teams throughout last year. But he said Rio Nuevo intends to push proposals to commitments at a brisker pace.

“We’ve probably been far too generous in the period of time from ‘we love your project’ to getting to a contract,” Shelko said.

Rio Nuevo has seven high-profile development agreements in play for downtown private sector mixed-use housing project that involve retail, office, hotel and entertainment uses.

This is look at two of the seven
agreements based on their requirements and status.

El Mirador
Town West Design Development

• Project description: Three connected seven-, nine- and 15-story towers with a street-level brew pub, 100 condos and 220 hotel rooms. A fourth building proposed across Ninth Avenue from the rest of El Mirador would have an additional 50 condos. At Franklin Street and Stone Avenue at the north end of downtown.

• Timeline: 21 months to close on the purchase of city-owned land at Franklin Street and Stone Avenue. Construction must be done within 39 months of closing or by November 2012.

• Current status: Development agreement was approved Nov. 27 and Town West is in the first nine-month contingency period, where a development plan must be completed and a preliminary conceptual architectural plan must be submitted.

• Will pay: $700,000 for 3.6 acres of city-owned land at the end of a 21-month closing period that started Nov. 27.

• Prognosis: Uncertain. How much will be condo, how much will be hotel is likely to continue changing, and Town West president Jim Horvath openly acknowledges the time extension options as well as having no compunctions about paying penalties if deadlines are missed.

• History: This started as a Nimbus Brewing Co. proposal to build a brew pub, restaurant, seven stories of condominiums, space for a specialty grocery store and other retail stores. Managing partner Jim Counts in September 2005 projected a construction start in spring 2006 with an opening date at the end of 2007. The property remains untouched.

Counts brought in Town West in early 2006 after he missed a December 2005 deadline to have financing in place, stirring the wrath of the City Council.

September 2006: El Mirador would have 140 condos in six-, 10- and 12-story towers.

June 2007: That changed to seven, nine and 15 stories with a 220-room hotel in the lower towers, 100 condos in the 15-story tower and 50 condos in a fourth building proposed across Ninth Avenue from the rest of El Mirador.

“If everything remains status quo, I don’t know if condos are viable, but the hotel is viable and the retail is viable,” Horvath said. “We’re hoping the housing market improves over the next three years. We can adjust (the hotel-condo mix) for the economic need. We do hope in the next two-three years to have more demand in the housing market.”

• Penalties:

>Town West put up a $15,000 bond at the end of November that would be forfeited if a conceptual architectural plan and development plan does not get city approval in nine months.

> Three four-month periods follow, each requiring a $15,000 bond, with deadlines for preliminary financing, construction documents, final financing commitments, beginning marketing and presales and obtaining a building permit.

Those four $15,000 bond periods add up to 21 months with allowance for two six-month extensions that could each incur another $15,000 bond.

Any time a deadline is missed, all accumulated bond payments are subject to forfeiture. That could be as much as $90,000.

> Town West has to put up another $300,000 bond or letter of credit upon closing of the sale. This requires construction to finish within 39 months, by November 2012 (or November 2013 if both six-month extensions are used).

“At the end of the day, if the market isn’t there, there are provisions,” Horvath said. “We can hold on to a point until the market and economy are viable to build. This agreement gives us 33 months with all the extensions to get to a point of construction. If not, we pay a penalty and still own the land. We hope within the five years span (to complete the project).”

The Post
BP Post Investors (Bourn Partners)

• Project Description: A six-story building with 52 condos and street-level retail and a restaurant.

• Timeline: First proposal came in 2004 when the city sought developments for the Thrifty Block on Congress Street at Scott Avenue. Development agreement on April 18, 2006: 15 months to close on purchase, plus 18 months to compete construction or 33 months to be finished or December 2008. Under the agreement, construction was supposed to start in July.

• Status: out for bid for a contractor to start construction.

“Best case, we can start some time in January,” said Don Bourn, managing partner at Bourn Partners.

• Paid: $100 for a half acre at Congress Street and Scott Avenue (formerly the Thrifty Block).

• Prognosis: Uncertain start date for construction, which depends on a favorable construction price.

• History:

The Thrifty Block was demolished in September 2004 at which time Bourn Partners proposed an eight-story complex with 60 condos with an estimated completion date for The Post in 2007.

What happened? Two things: Real estate went in the tank, but before then The Post was delayed by about two years as Bourn unsuccessfully tried to acquire the Chase Bank garage, which would have allowed The Post to be larger.

February 2006: a brief flirtation with a 13- or 14-story building with 90 to 95 condominiums that fell to the wayside when Bourn did not win some $4 million in public incentives or the Chase garage.

August 2007: six stories, 52 condos

Bourn submitted a $40,000 bond to assure The Post would be finished by December 2008. That will not happen, but don’t expect Bourn to suffer any penalties.

“The Post met every obligation up to and including closing of the real estate,” Rio Nuevo director Greg Shelko said. “For The Post, it should not be portrayed as an issue of contract compliance. They should be applauded for hanging in there in this tough market. It would be terribly unfair of the city to penalize Bourn.”

Bourn has $17 million in financing in place and pre-sold about half the condos.

“We’re out to bid with a contractor,” Bourn said “We’re getting numbers in (soon). We’re hoping to have a price in the next couple weeks. If there are price issues that need to be worked through, that could take some time. Best case, we can start some time in January. Construction pricing is so erratic right now.”

Here are the remaining five Rio Nuevo projects

Presidio Terrace
Reliance Commercial Construction (Peggy Noonan, president)

Project description: A seven-story luxury housing complex with 92 condos and nine townhomes on a former Tucson Museum of Art parking lot at Paseo Redondo and Main Avenue.

• Timeline: Development agreement from Oct. 18, 2005: Set a closing date six months later with construction supposed to start 15 months after that or by August 2007. The development agreement was terminated in November.

• Would have paid: $734,000 for a former Tucson Museum of Art parking lot

• Prognosis: Uncertain. Rio Nuevo wants to have a new development team in place for the 14.3 acres on West Congress Street before looking for a new developer for Presidio Terrace. And then the new developer has to face off with the El Presidio Neighborhood, which was resistant to Noonan’s proposal.

• History:

September 2004: Noonan hoped to break ground in spring 2005 and finish fall or winter 2006.

May 2006: Start construction in early 2007

June 2006: Noonan expects to start construction in spring 2007, with people able to move in 18 to 24 months after.

November 2006: Start construction in summer 2007, finish in mid-2009.

September 2007: Shelko gives Noonan 30 days to satisfactorily fulfill financing, marking and design requirements.

November 2007: Shelko terminates the development agreement with Noonan. No work was ever done at the site.

“That contract was extended one year in a two-year contract,” Shelko said.

Mercado District of Menlo Park
Rio Development Co.

Project description: Five developers building different style homes but all fitting a historic regional feel from 100 years ago.

• Timeline: Development agreement from Oct. 13, 2003, calls for five model homes to be finished within two years but spells out no time requirements for any subsequent homes in the 99-home development.

• Paid $1.475 million for 13 acres on West Congress Street near Grande Avenue.

• Prognosis: 16 of 99 proposed homes have been built. Intention is to finish most of rest in the next two or three years.

• History:

September 2004: Estimated completion date was 2007.

Depot Plaza
Williams & Dame Development Co./Peach Properties and Tucson Community Services Department

Project Description: A three-tower project just east of the Ronstadt Transit Center. This includes the former Martin Luther King Jr. Apartments, which will have 96 market-rate apartments, a new tower with 45 market-rate apartments and 11 affordable-housing apartments and an four-story public housing tower with 68 apartments for low-income seniors and the disabled.

• Timeline: Development agreement from Nov. 21, 2006: complete rehabilitation of former MLK apartments, 1 N. Fifth Ave., and a commercial strip along Congress Street in two years (November 2008). The second tower must be completed in four years (November 2010)

• Will pay: $630,000 for 30,000 square feet of real estate that includes MLK and the land where W&D will build a second tower.

Prognosis: Optimistic, if there is such a thing. Williams & Dame has a solid track record in Portland, Ore., where the developer played a key role in creation of the Pearl District.

Penalties: Williams & Dame has to pay a $25,000 bond upon closing for each land purchase for MLK and the second tower.

• History:

In 2006, the intention was to demolish the former Martin Luther King Jr. Apartments and build two private-sector market-rate apartment towers and one public housing tower for the elderly and disabled.

Depot Plaza originally was a public-private partnership with downtown developers Doug Biggers and Tom Powers. They sold out to Williams & Dame Development Co. in 2006.

Williams & Dame decides to redevelop the existing MLK rather than demolish it.

Nov. 21, 2006: Williams & Dame project manager Matt Brown commits to having the MLK ready for residents in 12 to 14 months. Now W&D says July 2008. Federal government approval slowed things a bit because MLK was a federally subsidized public housing. W&D started work inside MLK in October.

Tucson Convention Center hotel
• Timeline: A final agreement with three development teams is expected to go to the City Council in February. A precise design and construction schedule is unknown at this time.

West Congress

Gadsden Co. or Williams & Dame Development Co.

Project description: mixed-use development for 14.3 acres on West Congress Street, between Interstate 10 and the Mercado District of Menlo Park

• Timeline: A development team should be chosen by the end of January with a development agreement finalized two or three months later. Construction would be expected to start 18 to 24 months later or late 2009-2010. Both teams want to have a substantially finished housing-and-commercial for the state centennial year in 2012.

• Price: to be negotiated

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ON THE WEB

2004 downtown strategic plan:

www.tucsonaz.gov/pdf/downtownstratplan04.pdf

Presidio Terrace development agreement:

www.ci.tucson.az.us/agdocs/20051018/oct18-05-576a.pdf

The Post development agreement:

www.ci.tucson.az.us/agdocs/20060418/april18-06-186a.pdf

El Mirador development agreement:

www.ci.tucson.az.us/agdocs/20071127/nov27-07-654a.pdf

Mercado District of Menlo Park development agreement:

www.cityoftucson.org/agdocs/20041101/nov1-04-605ord.pdf

Depot Plaza development agreement:

www.ci.tucson.az.us/agdocs/20061121/nov21-06-635a.pdf

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STATUS OF RIO NUEVO PROJECTS

El Mirador – hotel, condos, brew pub on Franklin St.

Start Status Prognosis

2005 Early design Uncertain

The Post – 52 condos on Congress Street

Start Status Prognosis

2004 Building soon Uncertain

Presidio Terrace – condos on Paseo Redondo

Start Status Prognosis

2004 Starting over Uncertain

Mercado District of Menlo Park – 99 West Side homes

Start Status Prognosis

2003 Construction Finish in two to three years

Depot Plaza – Three apartment towers

Start Status Prognosis

2003 Early construction Promising

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This entry was posted on Monday, January 14th, 2008 at 12:01 am and is filed under Edge, Local. Tags for this post: Briefs, Edge-Briefs, Edge-Briefs-Local, Edge-Government, Edge-Government-Local, Government, Govt/Politics, Local-Govt/Politics, page-a01, Teya Vitu. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.