Sunday, October 2, 2011

Developer leaves Glendale, Scottsdale picking up pieces

Scottsdale got SkySong, a fledging office park with a giant playground canopy for $120 million.

Glendale got the Phoenix Coyotes, an arena and Westgate City Center for $230 million, a whopping debt that is $50 million more than the city's original bet to lure NHL hockey across town.

The man in the middle of this development power play was Steve Ellman. Just this week, Ellman lost ownership of much of Westgate next to the Jobing. com Arena where the Coyotes are on thin ice for staying in the desert.

Former Scottsdale City Councilman David Ortega, who was caught in Ellman's political crossfire, said the financial wreckage is devastating for Scottsdale and Glendale.

"(Ellman) left a trail of people who will be paying the price for this for a long time," Ortega said.

Ellman, in default on about $300 million in loans related to Westgate, did not return calls seeking comment.

The ongoing collapse of the Ellman empire, as reported by The Republic's Rebekah Sanders, and the collateral damage raises some intriguing questions and second-guessing about decisions made a decade ago:

- Would the hockey arena and adjacent shopping center have succeeded at the Los Arcos Mall site in Scottsdale as originally planned?

- Is Scottsdale better off with SkySong, the Arizona State University Innovation Center as the linchpin of its efforts to revive south Scottsdale rather than a hockey arena or shopping center?

- Who got the worst of this - Scottsdale or Glendale?

First, a little background for those who missed the Coyotes arena drama: Ellman tore down Los Arcos Mall at Scottsdale and McDowell roads in 2001 as he negotiated with Scottsdale for sales-tax incentives. When he could not get what he wanted, Ellman took his puck and turned to an offer from Glendale to play hockey in the West Valley.

He then convinced Scottsdale in 2003 to give him $36 million in tax subsidies to build a Walmart and other big-box retailers at Los Arcos. A voter referendum doomed that Plan B.

Plan C was the ASU Foundation buying the Los Arcos site from Ellman and selling it to Scottsdale for $41.5 million. With infrastructure costs and other subsidies, the city is investing $120 million in SkySong, a business incubator that steadily has been attracting startups.

So what if there was a hockey arena there instead of 9-to-5 office buildings?

Most observers agree the Scottsdale location would have had a much better chance of succeeding.

There is far more disposable income in and around Scottsdale to support hockey, said Ross Smith, Cassidy Turley BRE Land Group senior vice president.

Ray Artigue, former head of the sports-business program at Arizona State University, said losing the arena was a "lost opportunity of significant proportions" for Scottsdale.

"There's no question that the former Los Arcos site would have been ideal for the Coyotes arena and any ancillary restaurant and retail development," said Artigue, who heads his own public-relations firm.

Former Scottsdale City Council member Tom Silverman, who opposed the arena at Los Arcos because of its negative effects on the neighborhood, also conceded the Coyotes would have drawn better in Scottsdale.

Meanwhile, Ortega is adamant that SkySong was a terrible deal for Scottsdale. The city paid nearly triple what the land was worth to bail out Ellman, it took the property off the tax rolls and it gets very little return on its investment, he said.

"I kind of call it 'SadSong,' " Ortega said.

He was targeted in his failed 2004 mayoral election bid because he opposed Ellman's doomed Walmart plan.

Ortega did support the hockey arena at Los Arcos but said Ellman failed to lease up the new shopping center to fund the arena.

The former councilman said he thinks Scottsdale only is marginally better off now than Glendale in the aftermath of Ellman's deals.

Others are encouraged that SkySong and the McDowell corridor are making progress - a land deal last week could lead to apartment development at Los Arcos Crossing.

"It's another step forward," Smith of Cassidy Turley said. "I'd like to see the city put light-rail extension up Scottsdale Road (to Scottsdale Fashion Square)" to further revive south Scottsdale.

by Peter Corbett The Arizona Republic Sept. 22, 2011 05:26 PM

Developer leaves Glendale, Scottsdale picking up pieces

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