After four years of negotiations, the elected officials of the City of Tucson (COT) voted unanimously to kill the sale of 22 acres at the northwest corner of Irvington and I-19. The City canceled the purchase option it had with Irvington Interstate Partners, an affiliate of Irvington Interstate Manager, LLC (Paul Schloss, manager) in September, 2011, when it was ready to sell the property for $4 million ($182,000 per acre) for development of a Sam’s Club.

The City however, ignored its own contractual land use restrictions on the property that it conceded in 2009 to the developer of the southwest corner of Irvington and I-19, the Barclay Group of Scottsdale, for the Home Depot and Target anchored, Tucson Spectrum. According to the Arizona Daily Star, the deal with the Spectrum provided encumbrances to restrict retail competition that favored the Tucson Spectrum until 2017. Restrictions such as these are certainly not uncommon, intended to persuade developers into economically disadvantaged areas, however, this restriction was never recorded. So who knew?

When the Barclay Group heard of the potential sale, in August 2011, it filed a claim against the City for a $112 million, just before the City decided to cancel its purchase option the Irvington partnership. This in turn prompted the Irvington partnership to file its own claim for $13 million against the City, for negotiating in bad faith.

Last October, the council re-opened discussions with the Sam’s Club developer, when the Tucson mayor and city council discussed the lawsuit and revisited the potential sale of this property. The following excerpt is from this Executive Session meeting dated Oct. 23, 2012:

“… it was moved by Council Member Romero, duly seconded, and CARRIED by a voice vote of 6 to 1 (Vice Mayor Kozachik dissenting), to authorize negotiations with Irvington Interstate Partners regarding possible terms for a sale and purchase agreement pursuant to the following conditions:

1) Interstate shall commit to analyze the feasibility of limiting the size of the retail development to less than one hundred thousand square feet in compliance with the City’s large retail establishment ordinance and that the City will reject Interstate’s proposal in the event that Interstate determines that it will not limit the retail development as described.

2) Interstate shall commit that as part of any purchase of the property; it will take the property subject to any enforceable condition on retail development on the site and will indemnify the City against any claims relating to such prior conditions on the property.”

Developers can’t easily redesign store sizes to oblige Tucson. The City passed the big box ban in 1999. Since then, the City should have learned from lessons such as The Bridges of Tucson, where a decision to waive the big box ban was met by cheering Southside residents in support of the waiver. Jobs were important on that day in 2007, and could be argued even more important today, with unemployment even higher.

It also seems a far-stretched idea for the City to ask a private developer to accept liability for any maltreatment of the City’s own contractual land use restrictions.

Sam’s Club would have been completed this year, in an underdeveloped, economically poor area in Tucson’s Ward One. It would have added approximately 160 new jobs; it would have brought about $4 million to the city coffers from the sale and as much as $750,000 more in impact fees. In addition, it would have brought an estimated $1.5 to $2 million annually in sale taxes for many years to come.

The Irvington partnership still has time to move forward with its claim against the City if it so elects.

However, many questions linger for the public following the death of this project. Why did the City allow such a long time lapse, after full disclosure was made that the site was going to be used for development of a 136,000 sq. ft. Sam’s Club? Shouldn’t the City Planning Department be privy to contractual land encumbrances for city property? How can a city plan without knowing where encumbrances lie? Then, exactly how far reaching are these retail restrictions for Tucson Spectrum, across the street, within a one-mile radius, two-mile, or more?

No one we spoke with at Tucson City Departments was able to answer any of these questions at this time.

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Kamel Properties, LLC an affiliate of Pools By Design, Inc. (Kenneth Larison, President) bought a 1,760 sq. ft. office condo at 7368 N La Cholla Blvd. in the La Cholla Corporate Center at La Cholla & Magee, for[mepr-show rules=”58038″]$265,000 (about $150 per foot). The property was bank owned by Compass Bank when it sold and will be owner occupied by buyer.

Pools By Design, a Tucson-based business, is in custom swimming pool designer and landscape construction company with 35 years experience in the industry. During Larisons’ years of experience he has worked as a designer, project manager, sales manager and general manager for three of the largest pool companies in the nation. He has been a leader in the industry with many design awards and achievements.

From the company’s website, Larison states, “My focus is on providing guidance based on my years of experience coupled with my commitment to conservation and intelligent design. So much of my success has come from a commitment to people, not only to my clients, but also my subcontractors, vendors and business professionals. Every day I ask people to perform above and beyond on my projects. I can only be successful if I provide the same willingness to serve.”

Larison started Pools by Design partly as a result of the changing market. Consumers must be selective to protect their investment. “Today our clients are looking for a higher level of service, attention to detail and a great value. At Pools by Design, that is our mission. We focus on providing excellent service while keep our overhead low. This creates happy customers, which makes for new business referrals. Lower operating costs are passed on as savings to our clients. It all works very well.”

David Montijo and Jeff Casper of CBRE in Tucson had marketed the property for $290,400 and handled the REO sale for Compass Bank. Maryanne Larison of Russ Lyon Sotheby’s represented the buyer.

Ken Larison can be contacted at (520) 797-6675. Dave Montijo is at (520) 323-5136 and Jeff Casper at (520) 323-5181. Maryanne Larison can be reached at (520) 742-1335.

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Rillito Marketplace One, LLC an affiliate of the Krausz Companies, Inc. (Ron Krausz, President) of California closed on its second acquisition in Tucson, the Rillito Crossing Marketplace at 4206-4282 N 1st Ave. for[mepr-show rules=”58038″]$16.9 million ($134 per foot) from Continental Tucson 61, LLC, an affiliate of Continental Properties, Inc. The 126,017 aggregate rentable sq. ft. on 13.31 acres is located at the northeast corner of 1st Avenue & Limberlost; 34,643 sq. ft. of this aggregate was planned future space at time of sale.

The Krausz Companies, established in 1996, is a privately held California company. This second acquisition for Krausz in Tucson comes almost exactly one month after acquiring Campbell Plaza Power Center at Campbell and Glenn in Tucson for $31.5 million. Nancy McClure and Michael Sandahl of CBRE in Tucson handled the Campbell Plaza transaction and continues to lease that property for Krausz.

The Krausz Companies also owns the Prudential Plaza Office Tower in Phoenix, located on Central Avenue Corridor in midtown Phoenix. Krausz is interested in additional retail and office investment opportunities in Arizona.

Continental Properties Company, Inc. (James H. Schloemer, Chairman & CEO), the seller and developer of Rillito Crossing, is privately held and headquartered in suburban Milwaukee, Wisconsin. Rillito Crossing was its only venture in Tucson, which began development in 2007; L.A. Fitness opened there in 2007 and Sunflower Market and additional in-line retail space and pads followed in 2009. Sunflower Market merged with Sprouts last year and changed its name to Sprouts.

Rick Borane commented, “Although Campbell Plaza and Rillito Crossing Marketplace properties differ in many ways, the investor was attracted to both centers due to the tenant mix. Rillito Crossing, with L.A. Fitness and Sprouts as anchors, is also positioned close to student housing that gives it enhanced tenant appeal with consistent day and night traffic.” The center was approximately 90% occupied at time of sale, with 10,000-11,000 sq. ft available and running lease rates of $24 per sq. ft.

Rick Borane and Dave Hammack of the Volk Company of Tucson handled the Rillito Crossing project from its inception, and represented Continental in both its acquisition and sale. Borane and Hammack continue to be retained by the Krausz Companies for the management and leasing at Rillito Crossing.

David Pyle, VP at Krausz , is at (415) 732-5600. Continental Properties can be contacted at (262) 502-5500. Dave Hammack and Rick Borane at Volk Company should be reached at (520) 326-3200.

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