Block 23 high-rise and grocery store proposal heads to city council for final vote

(Nathan Thrash/DD)

The proposal for construction of the Block 23 high-rise and Fry’s grocery store will head to city council for a final vote after it was approved by the Downtown, Aviation, Economy, and Innovation subcommittee Wednesday.

The plan for the area between First and Second streets and Washington and Jefferson streets is being led by RED Development, a company that has already made a footprint in downtown Phoenix for constructing CityScape.

RED Development and Baron Collier Companies, the previous owner of Block 23, had a joint deal with the city that RED Development would build CityScape, while BCC would develop Block 23. However, they failed to develop the project, according to city documents. RED Development has now secured all development rights to Block 23 from BCC.

As part of the amendment to the original agreement, RED Development and the city decided on new terms to make development financially viable for RED Development.

As part of the deal, the city will change the duration of the Government Property Lease Excise Tax from 75 years to 50 years. GPLET agreements are based on a provision in Arizona’s tax code that exempts land owned by governments from property taxes. GPLET allows the city to take over the rights to a piece of land and lease it back to the developer at a significantly reduced rate that replaces the normal property tax.

RED Development will pay the city annually over the 50 year GPLET contract. The total will be $15 million, with another $3 million payment at the end of the GPLET agreement, according to city documents.

GPLET rates are based on the size of a property and the buildings on it, as opposed to the property’s value. RED has used GPLET for the construction of CityScape.

The city could also have to pay up to $18.3 million in support during the first half of the GPLET agreement after construction is complete to help sustain the development until it can stand on its own, city documents show. The aid will be performance based–the better it performs, the more aid there is to help offset taxes.

The project will be turned into a plaza that houses a Fry’s grocery store, office buildings, various retail stores and a new high-rise apartment complex.

Jeff Moloznik, vice president of RED Development, said he is very optimistic about the future of this development, noting that not only is it good for local residents around the area, but for future business opportunities as well.

Moloznik said the Block 23 project will be a “catalyst for residential and retail development around the area because of the commitment made from Fry’s and Kroger to support the project”.

Jo Ellen Lynn, Kroger’s Director of Community and Public affairs for Fry’s Food Division in Arizona expressed interest in connecting the local business within their community.

“Our business is very smart, innovative, and community based,” Lynn said. “Our produce comes from a lot of local farms, we have our own dairy in Arizona, and a lot of local companies got their own start within Fry’s.”

Correction: September 1, 2016:

A previous version of this story said the proposal was approved by city council. It has been updated to show the proposal’s approval by the Downtown, Aviation, Economy, and Innovation subcommittee.

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