Sunday, May 22, 2011

CityScape developer takes on 2 more projects

The developer of downtown Phoenix's $500 million CityScape retail and office project is going to handle leasing and management of two other Phoenix office and retail centers: Town & Country Shops at 20th Street and Camelback Road and the embattled CityNorth in the city's northeastern corridor, near Loop 101 and Arizona 51.

RED Development has entered a 50-50 joint venture with Town & Country Camelback, a limited-liability company that owns Town & Country, said Mike Ebert, a managing partner at RED.

RED also has a separate agreement to manage and lease spaces at High Street - an office, residential and retail project at CityNorth, a 144-acre property that has been tangled in legal battles. That deal includes managing and leasing the luxury apartments on the site.

The terms of the agreements at the two properties are private. But Ebert said RED was well-positioned to take over their leasing, given its track record with development and leasing in the Phoenix area.

RED is building a Target center in Chandler, and it has nearly filled CityScape.

"We have in-house leasing, development, management, financing and marketing," Ebert said. "Those are all the things it takes to operate properties."

While some developers are still struggling to recover from the recession, RED, which has offices at CityScape and in Kansas City, Mo., is expanding its roots in Phoenix. But it has taken on two projects that have challenges.


High Street at CityNorth has about 628,000 square feet of space. RED said the 99 luxury apartments that were part of the project are 97 percent leased. Retail tenants include restaurants such as Kona Grill, Blue Martini, Mojo Yogurt and Ocean Prime.

Ebert said RED's new role at High Street would not impact the legal cases that have hindered development around the 144-acre CityNorth, which has been the center of legal disputes.

High Street opened in November 2008 and was CityNorth's first phase. More phases were supposed to open annually, but the recession led to the withdrawal of three department stores and a halt to development. The first phase went into foreclosure in January 2010 and was sold in July to the lender, Capmark Financial Group.

The rest of the land remained under control of Northeast Phoenix Partners, which in turn was controlled by the Klutznick Co.

Klutznick teamed with Related Urban Development to promote the site. But NPP may lose control of the property once a resolution is reached in a $110.7 million legal verdict that NPP lost to Gray Development Group.

Gray won the verdict in a lawsuit alleging NPP had blocked its efforts to develop a different parcel. The matter now is in mediation.

The economic-development agreement with Phoenix for CityNorth remains alive. It survived a court challenge, but CityNorth is far from meeting the benchmarks required for the deal to take effect.

Under the deal, Phoenix will give the developer either half of the sales taxes collected at CityNorth for 11 years and three months or about $97.4 million - whichever comes first. In return, the developer will build about 3,180 free parking spaces, with 200 of those for park-and-ride use.

The deal goes through only if CityNorth first opens 1.2 million square feet of sales-tax-generating retail space. An analysis by The Arizona Republic shows that for CityNorth to reach the $97.4 million mark by the deadline, it will have to become one of the most successful shopping areas in the state.

Town & Country

Ebert said he and the other partners at RED have wanted to work on something with Town & Country Shops for at least three years. They knew that the residential areas around the center have been filling up with new homeowners, and local customers continue to patronize the shops in the quaint single-story center, recognized by its rough shingled rooftop.

The 1970s look at the 325,000 square-foot outdoor shopping center is outdated, but "everybody loves it," Ebert said.

The anchor tenant is Trader Joe's. Other renters are LA Fitness, My Sister's Closet, Yogurtology and Hi Health. A farmer's market also is held there.

Ebert said RED was filing the paperwork to knock down the Black Angus building on the property and come up with a plan for possible revitalization.

RED managing partner Scott Rehorn, who handles leasing agreements, said the challenge RED faced at Town & Country is updating it without damaging its charm.

But Jim Shough of Town & Country Camelback believes the new partnership with RED, a company largely known for building and leasing shopping centers will be a boost to Town & Country.

"We are optimistic about the revitalization of this Phoenix landmark with RED's involvement and look forward to sharing more plans with the community as we move ahead," he said in a statement.

by Emily Gersema and Michael Clancy The Arizona Republic May. 19, 2011 12:00 AM

CityScape developer takes on 2 more projects

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