TO: Mayor Collins and Town Council Members
FROM: Kevin Burke, Town Manager
DATE: January 14, 2016
DEPARTMENT: Town Manager
Staff Contact Kevin Burke, 480-348-3690
End
AGENDA TITLE:
Title Five Star/Ritz Carlton Development Agreement
Consideration of a Development Agreement associated with implementing the Special Use Permit for a Five Star resort development project at 7000 E. Lincoln
Body
Council Goals or Other Policies / Statutory Requirements:
Support resort industry and manage its development such that it maintains the Paradise Valley quality of life and financial health.
RECOMMENDATION:
Recommendation
Consider the Development Agreement with Five Star Development
Background
SUMMARY STATEMENT:
The Development Agreement is the third major part of a new development. The other two parts being the site plan and the stipulations. Combined these three components regulate when, where and how a development will be accomplished within the Town of Paradise Valley. This Development Agreement (D.A.) has several components of high profile:
• Minimum Hotel Quality Standards;
• Phasing of the Development;
• Resort Payments; and,
• Identification & Payment of Offsite Improvements.
The attached Development Agreement has been significantly modified since the December 17, 2015 version made public. This is based upon direction given to staff from Mayor & Council and negotiations with Five Star. Below is greater detail about the current status of the aforementioned deal points.
Minimum Hotel Quality Standards - The application has been branded a Ritz-Carlton since submittal in May. Mayor and Council requested assurities that this is indeed the resort product that would be provided. Five Star has agreed that the development shall open as a Ritz-Carlton. This is reflected in recital Y, Definitions and Section 2.3.1. Principal Resort Hotel. The Town Manager has reviewed an Operating Agreement contract between Five Star and Ritz-Carlton affirming this relationship. The D.A. further specifies numerous amenities that must be provided. The quality assurance requirement is in place in perpetuity with different degrees of latitude to operate under different luxury brands after five years.
Phasing of the Development - The development is broken into seven parcels labeled A, A1, B, C, D, E1 & E2. The sequence of those developments is very important to the Mayor & Council. Of utmost importance is securing the resort hotel. The applicant shares this interest and has asserted that the financial feasibility of the resort and the remaining development are intertwined. Therefore, Five Star is proposing the following phasing:
Parcel A & E1 may commence construction in accordance with the SUP.
Parcels A1 & C cannot receive Certificates of Occupancy for any residential unit until the Certificate of Occupancy has been issued for the primary building of the Principal Resort Hotel and 150 Hotel Keys and the spa is substantially complete.
Parcel B structures may not obtain building permits until the the subterranean garage for Area A has been completed and the framing of the primary building of the Principal Resort Hotel (lobby, meeting space, ballroom) is completed. However, building permits for B may be obtained earlier if:
- A copy of the contract with the hotel brand demonstrating i) an operating agreement; ii) a date by which the hotel must commence construction; iii) a date by which the hotel construction must be completed and iv) a completion guarantee with the brand.; and
- Complete grading of the Open Space Wash; and,
- The Owner pays the Town $3 million to complete street improvements beyond the developer responsibility including Mockingbird from Indian Bend to Northern and the South side of Lincoln Drive.
Parcel D structures may not obtain building permits until: i) the subterranean garage for Area A is completed, ii) the primary building for the Principal Resort Hotel is framed; and, iii) building permits have been issued for 150 Hotel Keys and the spa.
Parcel E2 shall require an intermediate amendment to the SUP for any future development.
Resort Payments - The Development Agreement calls for a payment by the Master Association to the Town to offset the bed tax and sales tax that the Town believes would otherwise have been generated by more hotel units if there were not residential units on that same land. This shall be a lump sum fee of $850,000 per year commencing 5 years after the certificate of occupancy is issued for the first Resort Unit anywhere on the Property. The fee may be reduced to $575,000 per year upon the opening for business (and sales tax collection) of 50% of the gross leasable area in E1. No further discount is contemplated in this agreement.
Identification & Payment of Offsite Improvements - The Town required the applicant to conduct a Traffic Impact Analysis (TIA) associated with the proposed development. This resulted in numerous modifications to existing streets. Those modifications are listed in Exhibit E. Some of them depend upon what the City of Scottsdale approves for modifications to intersections on Scottsdale Road. In short, the D.A. says the Town will design and construct those street modifications in Paradise Valley and the applicant will reimburse the Town for those costs. This is of benefit to the Town because: a) it ensures the design and construction are consistent with Town design objectives and construction standards, and b) the Town may choose to make road improvements (such as Mockingbird from Indian Bend to Northern) that are not the responsibility of the applicant but desire to have a single construction project to ensure consistency throughout the corridor. Further, Five Star agrees to submit and advocate for certain Scottsdale Street improvements that the Town prefers.
In summary, this document represents agreement between Five Star and Town Staff, based upon direction received from Mayor & Council, but does not mean approval by the Mayor & Council.
ATTACHMENT(S):
AMENDED AND RESTATED DEVELOPMENT AGREEMENT, RESRTICTIVE COVENANT, AND RELEASE BETWEEN THE TOWN OF PARADISE VALLEY AND FIVE STAR DEVELOPMENT RESORT COMMUNITIES.