Efforts to put together a financing deal for the basketball-themed "USA Place" development on Arizona State University land in Tempe have gone into overtime.
The $350-450 million hotel-and-conference-center project was announced to the public in July 2013, with an expected groundbreaking that year. But it's so far been unable to lock down any financial backers.
A 99-year lease for the project on the southeast corner of Mill Avenue and University was signed with ASU in September, requiring the financing to be in place by December 31, New Times has learned.
With that deadline and another expected groundbreaking date now blown, USA Place LLC is prepared to put $4 million down as a deposit in order to keep the deal with ASU alive.
See below for update
The company has already put $1 million in escrow for ASU, in effect as earnest money. On Thursday, the Arizona Board of Regents (ABOR) confirmed that it must approve any changing of the lease-deal terms.
USA Place is a lofty plan that would improve an eyesore parking lot on a high-profile corner in the downtown Mill Avenue District, and would come during a Tempe building boom. Structures will be packed densely, with an Omni Hotel, 30,000-foot conference center, event arena, retail shops, apartments and the new home of USA Basketball, the nonprofit Colorado company that serves as the governing body for the sport in the United States.
The Tempe City Council approved an incentive package last year that would forego sales-tax collections at the development for 20 years in order to help sweeten the deal.
The hopeful development team includes: Susan Eastridge, CEO of Concord Eastridge; Michael Hallmark, principal of Future Cities; Robert Harris, CEO of Harris Sports & Entertainment; and Sean Duncan, a former senior designer with The Jerde Partnership. USA Place is also being promoted by sports mogul Jerry Colangelo, who serves as chairman of USA Basketball's board of directors.
Following delays that included missed groundbreaking dates in 2014, a flurry of news articles appeared last fall after ASU's lease deal was approved by ABOR. An Arizona Republic article from September 5 says, based on statements from Eastridge, that the "last big hurdle" of financing would be obtained by the year's end. Construction was expected to begin in December.
However, three-quarters of the way into the story, the Republic quoted Mark Stapp, director of ASU's Masters in Real Estate Development program in the W.P. Carey School of Business, who said he was "concerned about the financial feasibility of the project."
Stapp tells New Times he expects the project might have trouble attracting a high-end retailer, and that people would be willing to pay high rent prices at the site.
With a massive parking garage to accompany the project, the large up-front expense of USA Place is a liability.
"It means you've really got to drive significant revenues pretty quickly in order to make it work," he says.
On Wednesday, New Times asked ASU to comment on USA Place missing the December 31 to obtain financing for the project.
In response, ASU spokesman Mark Johnson confirmed the deadline had passed and added that "we have no developments to report at this time." He declined comment on follow-up questions.
USA Place, through DRA Communications, released the following statement about the missed deadline and what will happen next:
"USA Place made the required deposit of $1 million prior to the deadline. The deposit remains in escrow.
"Prior to the deadline, we have reached agreement with ASU on the terms within the option agreement for the site. We have agreed to deposit an additional $4 million upon ABOR approval of the agreement in early February.
"USA Place has one remaining contractual issue unresolved with ASU which has to do with ASU's cooperation in completing the land agreements prior to seeking ABOR approval in early February. This is a minor request given that the agreements in question are currently nearly complete. USA Place anticipates continuing its dialogue with the University to resolve this minor issue and to allow this project to continue to move forward."
We asked two follow-up questions: "How much of the $5M does USA Place forfeit if the project doesn't happen?" and "What's the new ASU deadline for obtaining the financing agreement and moving to groundbreaking?"
USA Place responded that, "The $1 million currently on deposit is released to ASU upon ABOR approval which is anticipated to be February 4. Upon ABOR approval, we post the additional $4 million which is released to ASU in 90 days from that posting."
ABOR has meetings scheduled in Tucson for February 5 and 6.
Sarah Harper, spokeswoman for ABOR, declined to answer New Times' questions.
ASU had reportedly received five other bids to develop the 10.7-acre property before deciding on USA Place.
UPDATE: Minutes after this article was published, Sarah Harper of ABOR told New Times that ASU released the following statement:
"Arizona State University and USA Place, LLC were unable to reach agreement regarding USA Place's proposed development at University and Mill prior to the expiration of the exclusive negotiating period. ASU remains committed to developing a first-class hotel and conference center at the site and intends to pursue other options to move forward with the City of Tempe to realize that goal."
This makes it sound like USA Place is done.
We'll do another update when we get more info. In the meantime, we published an article about the now-doubtful status of USA Basketball's move from Colorado to Arizona:
Got a tip? Send it to: Ray Stern.
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