Mixed-use high-rise planned downtown

Developers of $18M building aim to benefit from city tax incentive
2012-08-22T00:00:00Z Mixed-use high-rise planned downtownDarren DaRonco Arizona Daily Star Arizona Daily Star
August 22, 2012 12:00 am  • 

A planned nearly $18 million high-rise residential and commercial project - billed as the first of its kind in downtown - is also on track to become the first beneficiary of a new city tax incentive aimed at spurring development.

Art Wadlund and Rob Caylor, partners in One East LLC, are hoping to capitalize on the upcoming streetcar line.

The two are planning a building called One East Broadway - a mixed-use commercial office, residential and retail complex at 1 E. Broadway, on what is now a parking lot adjacent to the Chase Bank building, and right on the future streetcar line.

"There's never been a mixed-use project like this built downtown," said Wadlund, who along with Caylor bought and renovated the Chase Bank building in 2007. "And we think with the modern streetcar, plus other activity, it will be a good (project)."

Their plans call for approximately 26,434 square feet of office space, 4,115 square feet of retail space, 36 apartment units and a 119-space parking garage. The total cost for the seven-story building is $17.9 million. Construction will be performed by Caylor's company, Caylor Construction.

Wadlund said they plan to break ground this fall and be done on time for the opening of the streetcar in November 2013.

They already have an anchor tenant: the taxpayer-funded Pima Association of Governments. PAG has signed a lease and will relocate from the downtown Transamerica building and occupy the entire 26,434 square feet of office space when the project is completed. The Regional Transportation Authority will share the space.

PAG Director of Administration Rob Samuelsen said the move is partly motivated by the fact that PAG and the RTA have been major players in bringing the streetcar to downtown, and they want to back that up with a commitment to helping bring new development along the route.

"We are excited to be part of the revitalization of the downtown," Samuelsen said. "We've put in around $88 million into the streetcar, and this is our commitment to that project."

PAG will pay between $21.50 and $26.50 per square foot, depending on the extent of tenant improvements it makes to the new office space, Samuelsen said. The agency currently pays $18 a square foot.

In addition to PAG, Wadlund said there are ongoing discussions with potential retailers in the building, including a coffee bar, a bike storage company and others.

A little help never hurt

In the last week One East Broadway became the first proposed new downtown development to complete the first of three steps to qualify for the city's new Government Property Lease Excise Tax when the City Council unanimously approved the preliminary review.

How the incentive works is that when a qualified project is complete, the city takes over the property for up to eight years and leases it back to the owners for a minimal fee.

As a result, the owners are allowed to operate their business and establish a cash flow while not having the burden of paying property taxes, since the building is technically owned by the city. The city is exempt from property taxes.

The idea is to give businesses a little help to increase the chances they become long-term revenue producers for the city.

Wadlund said in this economy a project like this would not have gotten off the ground without some help from the city's business development office and its economic development incentives.

"It's been über-important," he said. "It's very difficult with the construction costs and the returns to make a deal pencil out. ... And lenders are not jumping up and down to lend downtown. And when they do, they are somewhat conservative on the debt."

In June, the city created a streamlined process for developers and businesses to apply for various economic development incentives as a way to stimulate growth downtown and elsewhere.

According to city Economic Development Manager Debbie Chandler, Tucson offers 21 economic incentives to businesses. She said most are available based solely on the business location or type. But four, including one being used for One East Broadway, require an extensive application and review process to qualify.

"Those are the ones with the most significant benefits to the owner or developer," Chandler said. "So the (economic development) process was put together by the city to make it easier to apply and qualify for these four benefits."

In the past, the application process for these incentives was somewhat oblique, which resulted in many businesses missing out on these opportunities.

Chandler said the city ensures it receives an economic benefit in return before it hands out any economic incentives, and One East Broadway fits that mold.

Approval expected

In order to receive these incentives, businesses must go through a three-step process made up of a pre-proposal and initial screening, an independent financial analysis and, finally, approval by the mayor and City Council.

One East Broadway is in Step 2.

Even though the company isn't completely through the process, Chandler said the initial screening is so thorough that once a company makes it past Step 1, it's a good indication that it will receive final approval. She said now they have to work out the dollars and cents to see exactly how much of an incentive the project will receive.

One East is the first company to enter into this process.

Did you know?

The National Fire Protection Association defines "high-rise building" as one that is 75 feet or more in height.

But in the early 1980s, when the Tucson Fire Department was seeking to require sprinkler systems in all high-rise buildings in the wake of the deadly Pioneer Hotel fire a decade earlier, the standard was set at 50 feet based on the reach of the ladder trucks at that time.

Contact reporter Darren DaRonco at 573-4243 or ddaronco@azstarnet.com

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