Boulder Oro Valley, LLC (Ross Rulney and Malcolm Berman) in a non-arms length transaction, paid $1.15 million for 11.29 acres to Holualoa Oracle Linda Vista, (Michael Kasser, CEO) Scotia Group Limited (Peter Aranoff, CEO) Ashland Group Millenium (Duff Hearon, manager) and The Lenihan Company (Stephen Lenihan, President) to restructure the investment group and make whole again the abandoned hotel site at the northeast corner of Oracle Road and Linda Vista Blvd in Oro Valley.

The Sunway Hotel Group, based in Overland Park, KS, purchased the site in two transactions in 2007 and 2009, for an aggregate price of $6.57 million. Sunway began construction of a 123-room, 95,000 sq. ft., 2-story hotel, but abandoned the project, partially completed, in May 2011. Leaving a slab, with incomplete buildings and exposed wooden framing that lacked roofs, when it was repurchased out of foreclosure by Boulder Hotel Oro Valley, managed by Ross Rulney. The slab and partial construction was razed by Boulder Hotel Oro Valley.

“The parcel is now back to its original size of 20 acres,” said Rulney, who first began to assemble this site in 2003 for development. “The new plan is to construct a 228-unit multi-family apartment complex on the back 13 acres and 47,200 sq. ft of commercial retail / office in five buildings on the 6.6 acres along Oracle,” added Rulney.

According to the new conceptual site plan labeled “El Corredor” the actual gross acreage of the site is 22.80 acres with 19.58 net; 6.6 acres are reserved for commercial use along Oracle and 12.9 acres in back, for construction of a 228-unit multi-family complex with 40% one-bedrooms, 48% two-bedrooms, and 12% three-bedroom units. The back 12.9 acres was rezoned recently to high density PAD for the multi-family development.

According to Rulney, “The multi-family project is timely, there has been positive apartment absorption since 2010 in the Tucson market. This one should be easy.” Perpetual optimism coming from the guy who has been waiting more than a decade to see something come out of the ground at Oracle and Linda Vista. General Contractors are being interviewed.

For more information on El Corredor contact Ross Rulney at (520) 850-9300.

CPP Star Pass, LLC an affiliate of Columbus Pacific Properties, Inc. (Brian Shirkin and Rick Margolis, partners) of Santa Monica, CA bought The Reserve at Star Pass from EDR Tucson Phase II, LP a subsidiary of Education Realty Trust, (NYSE:EDR) a real estate investment trust based in Memphis, TN for $26 million ($25,500 per bed). The 1,020-beds in 336 units, was built in 2000, to be a resort-style student apartment complex on 21.46 acres. The property was running at 65% occupancy when it sold.

CPP rebranded the property shortly thereafter to The Ranch at Star Pass, and intends to invest in new transportation shuttles to transport students the 5.6 miles to the UA as well as upgrade the on-site programming for residents. CPP is expanding into the student housing market via Class-B properties within driving or walking distance of major universities, where investments and capital improvements will increase demand.

In September 2012, Columbus Pacific Properties, Inc. under the name of CPP Tucson, LLC purchased NorthPointe Apartments at 850 E Wetmore Road, Tucson, for $29.75 million ($32,600 per bed) also from EDR. This 300-unit student property with 912-beds was 95% occupied at time of sale. CPP now claims 5,545 beds in its portfolio and is looking to become a top owner in the student housing market.

CPP engages in real estate investment, development, and lending businesses. It develops and redevelops shopping centers and residential properties in California, Arizona, New Mexico, Texas, Indiana, Nevada, Georgia, Kentucky, and Ohio. The company was founded in 1995. Since 1995, CPP has purchased and redeveloped over 5 million square feet of retail and 3,100 multi-family units and has provided over $200 million in mezzanine and equity capital, funding projects with an underlying value in excess of $1.4 billion.

The seller, EDR, exchanged NorthPointe and The Reserve for The District on 5th Street, a Class-A, LEED Silver student community, for the approximate price of $67 million ($87,000 per bed) for 764-beds and 208-units in two-, three- and four-bedroom floor plan configurations that opened September, 2012. The property is located at 550 N 5th Avenue, within walking distance to University of Arizona, built in 2012 with resort-style amenities. The District was 99% leased, with an average lease rate of $633 per bed when it closed, and sold at a 6.3% cap rate based on income for 2012-2013 academic year.

EDR is a self-administered and self-managed real estate investment trust, or REIT, with a large national footprint; it currently owns and manages 34 on- or off-campus communities with more than 25,400 beds in 23 states, and provides third-party management services for another 20 properties with more than 10,000 beds. Since 2000, the Company has developed more than 33 privatized housing communities and completed more than $2.4 billion in collegiate housing transactions both on- and off-campus. Of these transactions, EDR invested more than $1.3 billion in private equity and ranks second only to American Campus Communities in number of beds owned by student housing owners.

For more information, contact Rick Margolis of EDR at (901) 259-2500. CPP can be reached at (310) 395-2580. The Ranch at Star Pass is at (520) 624-3972 and The District on 5th is at (520) 918-6466. Contact NorthPointe Apartments at (520) 888-3838.

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.