You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur. FOR OVER 20 YEARS, I HAVE WORKED EXTENSIVELY WITH OWNERS AND BUYERS IN LAND, COMMERCIAL AND INVESTMENT REAL ESTATE IN PHOENIX, TUCSON AND THROUGHOUT ARIZONA. PLEASE LET ME KNOW HOW I CAN HELP YOU. Call me if you want to sell your property and need an estimated value. Phone / Prefer cell: 520-975-5207
Office: 480-948-5554 or email me walterunger@ccim.net. – What is a CCIM.
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News alert: Exclusive: Arizona Coyotes propose a $1.7 billion arena and development in Tempe. Here’s what would be included
Paulina Pineda Arizona Republic 9/20/2021
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The Arizona Coyotes are proposing a $1.7 billion development in Tempe with a hockey arena, hotels, apartments and shops that the team says would be financed by private investors, although it wants to use a portion of city sales tax revenues generated on the site to help pay for $200 million in additional costs.
A large portion of the additional expenses are for infrastructure work and remediation of the 46 acres on the south bank of the Salt River that previously were used as a sand and gravel mining operation and a dump.
Despite the proposed injection of taxpayer dollars to prepare the site, team officials bill the project as a first-of-its-kind in Arizona, bucking the trend of publicly funded sports venues. The arena itself would be built and operated by the National Hockey League team.
Team representatives acknowledged the appetite for paying for sports arenas with public money isn’t there, and that the project reflects that.
Coyotes representatives sat down with The Arizona Republic to detail the proposal they recently submitted to Tempe.
Team officials call it a transformative development that would take what once was a city dumping ground and turn it into a city landmark that they project could generate $154 million in net new taxes for the city over 30 years, $5.9 billion in direct spending in the city and 6,900 permanent jobs
They say billionaire owner Alex Meruelo, who bought the team in 2019, has the real estate and financial muscle to pull off a development of this size. And they say it shows his commitment to keeping the team in the Valley.
Rebranding:Coyotes’ rebrand brings return of white Kachina jersey
The Coyotes have had a tumultuous relationship with Glendale, which is still repaying the millions it borrowed to open a hockey and concert arena in 2003. The team operates on a year-to-year lease at Gila River Arena.
Coyotes President and CEO Xavier Gutierrez said the Tempe deal “pencils out for us because we believe very strongly in this community, we believe very strongly in this market and we believe very strongly in the type of real estate programming that we’re going to do.”
He said Meruelo would kick in his own money and is lining up a group of private investors to help fund construction.
“You have an individual who is very much experienced in real estate, is experienced in investments and very experienced in looking at large opportunities where people did not see it,” Gutierrez said.
Still to play out is how city leaders will respond to the team’s proposal. The Coyotes have been in talks with Tempe officials for at least two years and submitted the only response to the city’s request for proposals to develop the city-owned land just west of Tempe Town Lake, near Priest Drive and Rio Salado Parkway. Among the requirements the city laid out in its request was that the developer pay to remediate the land.
The team also seeks a property tax abatement.
Tempe officials are mum for now as a city committee reviews the bid.
“We know we’re responding to an RFP because the city thinks that they have a vision of what they’d like to see, and we think that we have a vision that meets that, but we understand this is not our decision and we’re in a process,” Gutierrez said.
The stakes for the Coyotes to close on a Tempe deal were heightened last month when Glendale announced it would not renew the team’s lease after the upcoming season.
Remediation would be paid with bonds
The Coyotes would need to remove an estimated 1.5 million tons of trash and remediate the site before construction can start, Gutierrez said. He said the team’s assessment is similar to the city’s, which pegged the cleanup costs at $70 million.
“That is significant and, truth be told, it’s a higher cost than the value of the land,” Gutierrez said.
The team proposes to pay $40 million for the east parcel, which he said would cover the cost of remediating that part of the land. The team proposes to put $8 million toward remediation of the west parcel, with the remaining remediation costs paid through bonds.
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Thebonds also would help pay to:
- Bury electric lines, construct water and sewer lines and pave roads.
- Clear the title on a portion of the site, which a company tied to used car dealer Carvana has the rights to develop.
- Build a parking garage at the northeast corner of the property that would be owned and operated by the city.
The team’s proposal is for Tempe to create a special taxing district on the site, known as a Community Facilities District, that would sell special assessment revenue bonds to raise $120 million for the east parcel and $80 million for the west parcel. The bonds would be issued in phases to pay for projects as they get underway.
Once each parcel is remediated and site work is completed, the title would be conveyed to the developer and assessment liens would be attached to the land.
The proposal would repay the bonds over 30 years from three revenue sources:
- A portion of the city sales taxes generated on the site and parking revenue. Tempe’s sales tax rate is 1.8%, with 0.6% designated for specific priorities such as art and transportation. The proposal is to use all but the designated sales tax funds generated on the site.
- Up to a 6% surcharge on retail sales, including ticket, merchandise and concession sales at the arena.
- Real estate tax assessments on the property.
Bond repayments would first be made through a debt service reserve and by the developer through assessment fees on the land. Sales taxes from construction and retail sales would be used to repay the debt once the first phase opens.
The team did not say how much each source would contribute to the bond repayment but said sales taxes would make up the bulk of the pot.
The amount of retail sales tax generated at the site would depend on the project’s success. The team’s proposal is for any excess taxes collected to help repay the bond early and then the 1.2% collected would go to city coffers. The bond structure would allow for prepayment of the debt, the team said.
Team officials said the city would have no obligation to guarantee city sales tax beyond what’s generated at the site, norhave money come out of its general fund to cover the bond debt. The land and the improvements on the land would be used to secure the bond, the team said, and the team would increase the assessment fee if retail sales aren’t enough to cover the debt payment.
“We’re on the hook for all of this,” Gutierrez said. “It really is going to be something that has no financial liability for the taxpayers or the residents, and we’re willing to really embrace that risk.”
Tempe has used the Community Facilities District mechanism before to help pay for construction and maintenance of Tempe Town Lake through assessment fees charged to property owners around the lake.
Using sales taxes is uncommon, but a similar funding proposal was used to pay for parts of the Park Central Mall redevelopment in midtown Phoenix.
Gutierrez defended his position that the project would be privately financed. He said the site doesn’t currently generate sales tax revenue and that the bond borrowing, which would largely be repaid with sales tax revenue generated from the development, would go toward public improvements. The site would be one of the few developments around the lake generating retail sales taxes, he said.
Gutierrez said it would be different if the sales tax money generated on the site were going back into the team’s coffers.
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SEE IT ALL WITH PICTURES: https://www.azcentral.com/story/news/local/tempe/2021/09/20/arizona-coyotes-reveal-proposal-for-new-arena-entertainment-district-tempe/8376362002/
“It’s public dollars for public use and private dollars for private use,” he said.
A 16,000-seat arena
The proposal calls for an approximately 16,000-seat arena, which would be fewer seats than in Glendale. Gutierrez said it’s still early in the process, but the idea is for the arena to feature a larger lower bowl to bring fans closer to the ice.
Gutierrez said the trend is to build smaller, more intimate arenas that provide a better fan experience.
The Coyotes, who were one of 18 organizations that received a sports betting license from the state this month, plan to have betting on site. The team hasn’t yet announced a betting partner.
The team proposes to commit $1 million to design and build sensory rooms and aid stations in the arena for fans living with disabilities.
The project would include a 54,000-square-foot team headquarters and practice rink. The building would be open to the public and double as the headquarters for the team’s youth hockey program.
The hockey-related development would be part of the development’s first phase, and Gutierrez said the team would like to play its first season in Tempe in 2025.
“We are very cautious in terms of timing because we haven’t been awarded a contract yet,” he said.
As the Coyotes pursue a long-term deal in Tempe, team officials are looking at options for an interim location to play once the lease in Glendale is up in spring 2022.
Gutierrez said the team is finalizing the arena design and seeking a general contractor for the project that stretches well beyond hockey.
The Coyotes propose to create a year-round destination that attracts visitors outside the NHL season, which runs from October through April.
The proposal calls for more than 300,000 square feet of commercial space, 320,000 square feet of office space, 1,600 residential units and two hotels. The scope of the project is beyond what the city asked for in its request for proposals.
Plans lay out the development in two phases.
Phase 1 includes:
- The arena.
- A 1,500-seat theater with space for small shows and performances.
- A commercial district with fine dining and boutique retail shops.
- A 200-room boutique hotel.
- Offices geared toward medical tenants.
- Up to a 12-story apartment building with 180 units.
The second phase would feature:
- More than 1,500 apartment units spread across three complexes up to 12 stories high.
- A convention-style hotel with 300 rooms.
- Retail center and offices.
Visitors also could expect to see a shaded courtyard with gathering spaces, a new walkway along Tempe Town Lake, and maybe water in the dry riverbed one day. A plan led by Arizona State University called Rio Reimagined seeks to have the Salt River flow again, and the Coyotes hope their investment would encourage others to kick in funding for the river project, Gutierrez said.
Vertical construction would be paid for by investors, including Meruelo, whose business portfolio includes several construction companies, TV and radio stations, restaurants and a local bank in California and two hotels and casinos in Nevada.
“He is fully committed to do so, and he has the financial wherewithal to be responsible for that,” Gutierrez said.
Meruelo’s company would serve as the master developer of the project, and the intent is for the company also to manage the district, Gutierrez said.
The team, under Mueruelo, was months late in paying $500,000 in rent at Gila River Arena in 2020. In a July letter to the arena’s manager, a Glendale official wrote that the Coyotes owed the arena $1.46 million, with more than $300,000 of that more than four months overdue.
Gutierrez described that as mischaracterizations and said the team meets its financial obligations. Meruelo is a businessman “with a track record of success,” Gutierrez said.
Meruelo and the team believe the estimated 3 million annual visitors to the lake, the site’s proximity to ASU, access to multiple freeways and proximity to the airport plus the diverse uses proposed for the site would create a successful district that could generate the funds necessary to repay the bond debt and make the project viable for investors.
“In making the proposal, what we saw was an opportunity to create a district, and districts are what are the economic engine that makes these types of investments not just viable but compelling,” Gutierrez said.
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25 years of arena drama:Timeline of Arizona Coyotes in Arizona
Property tax break
Once construction is complete on each parcel, the team hopes to capitalize on a development mechanism that allows properties to remain off the tax rolls for a period of time by transferring ownership to the city and then leasing it back, typically for a fee.
The team is proposing to use two different types of Government Property Excise Lease Tax, or GPLETs, as they are known. The more traditional type of GPLET would allow non-arena components of the project to have up to an eight-year property tax exemption while the arena, practice facility and theater would remain off the tax rolls for longer through an exemption built into the law to encourage private development of airports, convention centers and entertainment facilities.
How long those buildings would remain tax exempt would be negotiated with the city as part of the development agreement, Gutierrez said.
Many of the properties along Rio Salado and around the lake have received similar property tax breaks. City officials have said such tax breaks were previously needed to incentivize development when the lake first opened. The use of GPLETs has come under greater scrutiny in recent years by fiscal conservatives and some residents who say such deals favor developers and are no longer needed.
Other elements of the deal
Tempe is expected to benefit from branding and naming rights at the entertainment district surrounding the arena, which the team estimates is worth $135 million over 30 years.
The city would be able to use facilities within the project, and the team would provide space to house a police substation rent free.
The Coyotes’ proposal commits to pay the prevailing wage for major subcontractors, to promote apprenticeship programs and to prioritize local and diversity-owned businesses, Gutierrez said.
“We want to make sure the project reflects the community’s values,” he said.
Beyond the city, the Coyotes are proposing a partnership with Valley Metro that would allow arena visitors to use their game tickets to ride the light rail to the event for free, which would be paid for through a 30-cent surcharge on tickets. The team also is proposing to pay for a shuttle service to the two closest light rail stops during big events to encourage the use of public transportation.
The Coyotes are working with Chicanos Por La Causa to create a workforce housing fund and propose to jump-start the fund with a $2 million contribution and help to fundraise additional money.
What’s the next move?
The city committee reviewing the team’s proposal will make a recommendation to the City Council.
Tempe officials said the process could take months, although people close to the deal have said the city could award a contract by the end of the year.
If the contract is approved, city officials then would hammer out the details in a development agreement.
Tempe Mayor Corey Woods told The Republic he hasn’t seen the team’s proposal and couldn’t comment on specifics of the plan.
Generally, he said he wants to see a project that fits with the city’s culture and values, generates excitement, attracts and keeps visitors in Tempe and brings in revenue.
“If it does all of those things, I would deem it to be a successful project,” he said. “We’re just waiting to see what’s contained in the proposal and whether we think it meets what we’re looking for, and when it’s presented I’m going to look at it from a neutral and impartial place.”
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SEE IT ALL WITH PICTURES: https://www.azcentral.com/story/news/local/tempe/2021/09/20/arizona-coyotes-reveal-proposal-for-new-arena-entertainment-district-tempe/8376362002/
Where to go from here? Glendale cuts ties with Coyotes
Councilmember Lauren Kuby said she has asked city staff to share an overview of the team’s proposal to better guide the council as it seeks an outside firm to help with the review process. She said she has many questions about the project and has heard from residents who are similarly waiting to know more.
She said she has no appetite for public investment in a project of this size and wants to ensure that whatever is planned is the best use of the land and a benefit to the community.
“I’m eager to dive in and look at the elements of the proposal, and I hope and expect that any development is built in a way that represents the values of our residents,” she said.
Gutierrez said the team believes it has delivered the city an appealing proposal. It’s a project that team officials believe in, and the Coyotes hope to be awarded the contract, he said.
“We feel very confident about saying this is the highest and best use, not just from a real estate perspective, not just because of the fact that you’re returning professional sports back to Tempe, but because you’re generating economic activity,” he said.
“This is the right project that we think is incredible for the city, is incredible for the state and is incredible for the fans and fans in waiting. It’s exciting.”
Reach reporter Paulina Pineda at paulina.pineda@azcentral.com or 480-389-9637. Follow her on Twitter: @paulinapineda22.
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SEE IT ALL WITH PICTURES: https://www.azcentral.com/story/news/local/tempe/2021/09/20/arizona-coyotes-reveal-proposal-for-new-arena-entertainment-district-tempe/8376362002/
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West USA Commercial Division
7077 E MARILYN RD.
Suite 200, Building 4.
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Phone: 480-948-5554
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7077 E MARILYN RD.
Suite 200, Building 4.
Scottsdale AZ, 85254
Phone: 480-948-5554
Cell: 520-975-5207
FOR OVER 20 YEARS, I HAVE WORKED EXTENSIVELY WITH OWNERS AND BUYERS IN LAND, COMMERCIAL AND INVESTMENT REAL ESTATE IN PHOENIX, TUCSON AND THROUGHOUT ARIZONA. PLEASE LET ME KNOW HOW I CAN HELP YOU PLEASE CALL ME
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