Apartments, office project near Peoria spring training stadium could begin next year

As seen on AZCentral.com: https://www.azcentral.com/story/news/local/peoria/2022/12/13/apartments-office-project-near-peoria-spring-training-to-begin-next-year/69713956007/

Written by: Corina Vanek

A long-awaited plan to redevelop the parking lots of Peoria Sports Complex into apartments, offices, a hotel, restaurants and a public plaza could begin construction in the middle of 2023.

The development, called Stadium Point, will use 17 acres of land that is currently owned by the city. The project has been in the works for years, and the city chose master developer, American Life Inc., operating as Stadium Point at P83 LLC, in 2020. Steinhauer Properties Inc., which came out of American Life Inc. this year, is now the developer.

The first phase planned to be built will be a 400-unit, market-rate apartment complex, Katie Gregory, deputy city manager for the city of Peoria, said.

Later phases include about 400,000 square feet of office space, a 200-room hotel and 30,000 square feet of dining. The hotel and office pieces are planned to begin development after the apartment complex, but Gregory said market conditions will determine when is the right time to build the office portion.

City focused on adding office

“The office was part of the requirement, and it’s a very important element for the city,” Gregory said.

While there are “all indications now that they are moving forward” with the office portion, Gregory said it is likely construction will not start until there is a large corporate tenant that has signed a lease for some of the office space.

The West Valley, which has long been dominated by warehouses and industrial employment, has long desired Class A office space. One of the first new office developments in the West Valley is beginning to open in Goodyear. However, the Covid-19 pandemic significantly disrupted the office market nationwide and in the Valley, leading to high vacancy rates and large amounts of sublease space on the market. Sublease space can often be high-end office space that is offered at a discount, so the tenant leasing the space can recoup some of their costs for unnecessary office space.

According to research from real estate firm CBRE, the West Valley, which includes portions of Phoenix, had a higher vacancy rate than the other areas of the Valley. Across the metro, there is very little new office space under construction, with new office buildings going up in only north Scottsdale, Tempe and the Camelback area, which are more traditional office-heavy markets than the West Valley.

“This will be the only real Class A office in this part of the region,” Gregory said. “This will be different than the sublease space that is on the market.”

Discussing the project at a city council meeting in November, Mayor Cathy Carlat said the office element will be a “game-changer” for Peoria.

“We have been without Class A office for too long,” she said.

Other attempts to develop have floundered

Efforts to redevelop the land around Peoria Sports Complex on 83rd Avenue, south of Bell Road, have come in stops and starts, including a couple attempts over the last decade that have not been successful. A 2012 proposal also wanted to build high-end apartments, a hotel, retail and dining on the site, but it did not move forward.

However, Gregory said, this time the developer has experience with a mixed-use development around a sports complex.

“We feel really good that we have the ability to go forward,” she said.

Property tax incentive to be offered

In November, the Peoria City Council approved an implementation development agreement that will allow the city to sell the land to American Life for the development. The land will then be deeded back to the city for a government property lease excise tax, or GPLET, agreement, that will be used to reimburse the developer for public infrastructure improvements on the site. By temporarily leasing the site from the government, the arrangement allows the developer to avoid property tax on the site. Katie Gregory, deputy city manager for the city of Peoria, said the agreement will only be in place until the public infrastructure improvements on the site are reimbursed, or for eight years, whichever comes first. Councilwoman Denette Dunn voted against the arrangement.

GPLET deals have come under fire in recent years by groups that argue that it violates Arizona’s Gift Clause by giving a subsidy without a direct benefit to the taxpayers. Both Peoria and Phoenix have recently lost court cases over the use of GPLETs to incentivize development in their city. Peoria was sued over a deal given to Huntington University, and Phoenix lost a suit over a deal given to an apartment development downtown.

However, Gregory said, this deal will only reimburse the developer for public infrastructure, not any of the private improvements on the site. The setup is different than most, which simply allow the developer to avoid paying property taxes for the term of the lease, to offset the cost of building the project.

Jon Riches, vice president of litigation for the Goldwater Institute, a libertarian think tank that has brought lawsuits against cities over GPLETs, said he was not aware of any opposition to the Stadium Point deal, and said if there is a measurable, direct public benefit from the arrangement, it could comply with the Gift Clause.

“The purpose of the Gift Clause is to prevent taxpayer resources being used to benefit a private party, or to prevent draining taxpayer money without a benefit to the taxpayer,” he said.

The Goldwater Institute is in ongoing litigation with the city of Phoenix over a GPLET granted to another apartment development downtown.

In total, infrastructure improvements on the site will cost about $40 million, but not all of that will be public infrastructure, and therefore will not all be eligible for reimbursement, Gregory said.

The project still needs to receive final city approvals before its first phase can begin construction, but is expected to begin in mid- to late summer 2023, she said.