RED Development gets Loan for Hotel in Downtown Phoenix
[Source: City of Phoenix Press Release]
Loan Approved for Downtown Construction Financing
The Phoenix Community Development and Investment Corporation (PCDIC) today announced that it has approved a $34.3 million New Markets Tax Credit (NMTC) loan to RED Development that will bridge a financing gap for construction of the Kimpton Palomar Hotel at CityScape in downtown Phoenix. “CityScape is creating thousands of construction jobs, opening retail, restaurant, entertainment and office doors and attracting thousands of long-term sustainable jobs,” said Mayor Phil Gordon. “This loan fills a financing gap that allows CityScape to deliver on a promise of sustainable jobs, future growth and expansion.”
The loan, from the NMTC program, provides below market rate commercial real estate loans to small businesses, developers and mission-focused nonprofits to encourage neighborhood revitalization and stabilization in qualified low- to moderate-income communities in Phoenix. The Palomar loan utilized developer equity of $25.9 million to leverage $8.4 million in the NMTC structure.
“Prior to the CityScape development, this area was occupied by an outdated park and an underutilized surface parking lot with no landscaping and was generating zero jobs and zero tax revenue for the city,” said Councilman Michael Johnson. “This public/private partnership enhances downtown Phoenix’s redevelopment and renaissance efforts, creates a sustainable tax revenue source and long-term jobs.”
“CityScape serves as the downtown link that provides a much needed amenity for Convention Center visitors and hotel guests looking for a convenient place to lodge, shop, dine and enjoy entertainment,” said City Manager David Cavazos. “Conventioneers often told us that the downtown area lacked amenities within walking distance of their convention. This PCDIC loan provides the financing needed to bring these components together, enhance our downtown and create new jobs.”
The Kimpton Palomar Hotel in downtown Phoenix is the second phase of the CityScape project, which represents a nearly $500 million investment in the downtown core.
“We wouldn’t be where we are today without the support of Phoenix Community Development and Investment Corporation,” said Mike Ebert, managing partner for CityScape developer RED Development. “The PCDIC investment not only supports the CityScape project and the overall Phoenix economy, but it helps all of the other projects and investments that have been made downtown by the public and private sector. They are terrific partners.”
“Projects like the Kimpton Palomar Hotel demonstrate our commitment to serve by creating jobs and revitalizing downtown, which is located in one of the poorest census tracts in Maricopa County. With our New Markets Tax Credit allocation, the PCDIC board is working with our investor partners to create economic opportunities for under-served communities in Phoenix by providing below market rate commercial real estate loans,” said Jerome Miller, deputy city manager and PCDIC chairman.
As part of the NMTC financing, RED committed a $1 million endowment for the benefit of low- to moderate-income students pursuing four-year degrees at accredited universities and incorporated Small Business Enterprise recruitment for construction subcontractors.
“Recovery strategies come in different shapes and sizes and PCDIC is pleased to play a role in the financing so we can help bring much needed jobs to Phoenix,” said Patricia Garcia Duarte, president and CEO, Neighborhood Housing Services of Phoenix, and PCDIC board member.
“CityScape represents the crown jewel of our ever improving downtown. The fact that PCDIC could add to the success of this endeavor is a good feeling. I hope that we can continue to be associated with projects of this nature,” said Don Keuth, president and CEO, Phoenix Community Alliance, and PCDIC board member.
PCDIC has also utilized the NMTC program in providing financing to these community development projects in the Phoenix area:
- Native American Connections, 4520 N. Central Ave., $6.1 million loan
- Hacienda Skilled Nursing Center, 1402 E. South Mountain Road, $6 million loan
- Arizona Bridge to Independent Living, 5025 E. Washington St., $16.5 million loan
- YMCA, N. 3825 67th Ave., $6 million loan
- Phoenix Rescue Mission, Changing Hands, 338 N. 15th Ave. $4 million loan
Other commercial redevelopment projects in Phoenix also financed through PCDIC and its NMTC program are:
- Spectrum Mall, 1703 W. Bethany Home Road, $37.5 million
- Clarendon Hotel, 410 W. Clarendon Ave., $4.2 million
- Riverside Industrial Center (new Amazon center), 4950 W. Mohave St., $44.5 million
While the NMTC program supports a range of economic development strategies, the NMTC program is highly effective in attracting private sector investment to Phoenix’s NMTC Census Tracts, characterized by highly stressed demographics, including a poverty rate above 30 percent and/or family median income that is 60 percent or below the Phoenix Metropolitan Statistical Area’s median income.
To implement the NMTC program, the city created the nonprofit corporation, PCDIC, governed by a seven member board of directors. In 2002, PCDIC received a $170 million NMTC allocation and in 2008 a $40 million allocation. PCDIC created commercial real estate loan funds that have closed on 23 loans totaling $276.5 million, resulting in $370 million in private investment and creating 4,800 construction jobs and 3,611 long-term jobs.
PCDIC has $8 million of NMTC financing available for commercial real estate projects in the NMTC census tracts. For information on obtaining a loan, contact 602-495-5247.