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Nordstrom opts out of northeast Phoenix CityNorth project

[Source: Michael Clancy, Arizona Republic] — Nordstrom has pulled out of the CityNorth project, leaving the next phase of development at the new northeast Phoenix center up in the air.  The Seattle-based luxury retailer was the first business announced for the mixed-use project.  Now, it has become the first to walk away.  Nordstrom spokeswoman Julee Kraus said the development failed to meet milestone dates, but she declined to elaborate.

Najla Kayyem, vice president of marketing for Related Urban Development, one of CityNorth’s two developers, said the decision was based on deadlines to begin work on the project’s second phase.  “We are disappointed that this has not moved forward,” she said, “but we don’t control the capital and financial markets.”

CityNorth has been plagued by bad timing.  Phase 1 opened on schedule in November 2008 in the midst of the recession.  Phase 2, originally scheduled for a November 2009 debut, was pushed back a year when the economy turned south.  Since then, it has been put on hold as the developers have continued to seek financing.

When the Nordstrom deal was announced in August 2006, developer John Klutznick of the Klutznick Co. said Nordstrom likely would attract other high-end retailers.   On Thursday, he said retailers are cutting back everywhere.  “We are operating in a global economic downturn,” Klutznick said.  “Developers cannot move forward on projects until the credit markets recover and financing is available.”  He added that Nordstrom, which has cut back expansion plans elsewhere, as well, will reconsider CityNorth when the economy rebounds.

David Krietor, a deputy city manager who oversees economic development in Phoenix, said the city was notified two weeks ago.  “They said they had run out of time to complete the transaction with Nordstrom,” he said.  “We were hopeful we could aggregate several high-end, big-box stores at CityNorth.  We are disappointed.”

Krietor suggested that an ongoing lawsuit over a development agreement between CityNorth and Phoenix may have played a role in delaying further progress…  [Note: To read the full article, click here.]

Phoenix’s CityNorth legal fight has fallout for business valley wide

[Source: Max Jarman, Arizona Republic] — A legal battle over parking garages for upscale shopping center CityNorth could trigger major changes in how cities work with private developers and in the longtime practice of awarding sales-tax subsidies to them.  A high court decision against a $97.4 million subsidy offered to CityNorth by Phoenix potentially could scuttle other deals, create liability for cities, and change the equation on developers’ decisions on whether to build high- profile projects.

Billions of dollars in sales-tax rebates have been handed out by Valley cities to car dealers, mall developers, and retailers.  Projects such as Tempe Marketplace, Mesa Riverview, and the Nordstrom at Scottsdale Fashion Square were subsidized by such rebates.  Several major new developments, including the Prasada master-planned community in Surprise, include sales-tax rebates as well…  A ruling against the rebate could affect some high-profile projects in downtown Phoenix, such as CityScape, a mixed-use project that has $96 million in city subsidies, including $26 million in tax breaks. [Note: To read the full article, click here.]