Prospect of hotel development fuels latest Scottsdale SkySong amendment

(photo by Melissa Fittro)

SkySong — The ASU Scottsdale Innovation Center is located 1301 N. Scottsdale Road. (photo by Melissa Fittro)

Scottsdale City Council adopted yet another ground lease amendment with Arizona State University Foundation Scottsdale, LLC that will set in stone the location and configuration of SkySong — the ASU Scottsdale Innovation Center.

The ground lease amendment, which is the seventh in a decade, is spurred by ASUF’s intent to pursue a transaction with a hotel developer for a pad located on the 37.5-acre site.

The city has a remaining 1.5-acre parcel on the nonprofit campus on the southeast corner of Scottsdale and McDowell roads, which has been coined a technology and innovation center.

The Arizona State University Foundation, a 501(c)3 nonprofit meant to support the Tempe-based university, is requesting the city identify a specific location and configuration for its 1.5-acre parcel that is excluded from the ground lease and depicted as a generalized 1.5-acre bubble in an “approximate location subject to change.”

Following a July 6 presentation by the city’s Senior Real Estate Manager Martha West, Scottsdale City Council voted 6-1 to adopt the resolution with additional amendments. Councilman David Smith was the dissenting vote.

The campus, most notably recognized for its uniquely large white shade structure seen from miles away, is home to both startup and Fortune 500 companies.

The goal of the facility is to attract cutting-edge and innovative companies and their base of knowledgeable workers from around the world, “integrating the resources of ASU with the opportunities of the private sector,” according to SkySong.com.

A 2009 Independent article describes the project:

“SkySong, a collaboration between Scottsdale and the Arizona State University Foundation, is a mixed-use development that, when completed, will replace the vacant Los Arcos Mall lot at the intersection of Scottsdale and McDowell roads. At full build-out, SkySong will feature 1.2 million square feet of office, research and retail space, a hotel/conference center, and multi-family residential units.”

The Arizona State University Foundation looked at two sites on the property for the 1.5 acreage. One, at the southeast corner of McDowell Road and Innovation Place and another in an “approximate location” near the southwest corner of the SkySong property.

SkySong, the ASU Scottsdale Innovation Center is home to a global business community that links technology, entrepreneurship, innovation, and education to position ASU and Greater Phoenix as global leaders of the knowledge economy. (Photo courtesy of SkySong)

SkySong, the ASU Scottsdale Innovation Center is home to a global business community that links technology, entrepreneurship, innovation, and education to position ASU and Greater Phoenix as global leaders of the knowledge economy. (Photo courtesy of SkySong)

Both parcels were valued at $37 per square foot or $2.4 million for stand-alone, vacant land at highest and best use for both locations in May 2016.

The proposed excluded parcel at the southeast corner of McDowell Road and Innovation Place is burdened by a sublease and parking easement between ASUF and SkySong 1, LLC.

Additionally, the Innovation Place parcel is subject to a well site and access easement in favor of Salt River Project that has been in place since 1990. Staff has initiated discussions with SRP and is optimistic that the test well sites can be relocated to facilitate more efficient future development of the excluded parcel, according to council documents.

ASUF intends to complete a transaction by April 15, 2017 that would bring a 120-room branded hotel to this location, states the council report.

If a sublease is completed by July 6, 2017, ASUF will pay additional annual rent for the hotel, according to Ms. West. The amount of additional rate is .42 cents per square foot until the expiration of the hotel lease, she said.

Council’s view

Scottsdale Mayor Jim Lane and several members of council expressed their support for what SkySong stands for during the July 6 regular city council meeting.

“With this effort and the opportunity the ASU Foundation has with this particular project, it’s like a lot of other things,” said Mayor Lane.

Jim Lane

Jim Lane

“We certainly are looking for continued success in something the city’s heavily invested in. At the same time, we’re very interested in how we are able to exercise our control over the 1.5 acres the city has determined its own future for.”

Councilman David Smith was the only member of council who voted against the seventh amendment. He also made a motion to continue the item until a later meeting date, but the motion died for the lack of political support on the local dais.

“This is our land, which we have leased to ASU Foundation. And they’re telling us where the acre and a half is going to be,” said Councilman Smith. “What I’m hearing tonight is ‘here’s what we’ll allow you to have, provided of course, you approve us building a hotel on the acre and a half that was sort of the bubble you had before.’”

Back in 2004 when council was first reviewing SkySong plans, the campus was to include 90 percent office and research, and 10 percent retail and support to focus on creativity, technology and innovation.

Over the years, and many amendments later, the focal point of the campus is still technology and innovation but additional building heights and other changes have been included, said councilman Smith.

“I wonder how some of these things fit into the definition of the ASU-Scottsdale Center for New Technology and Innovation,” said Councilman Smith.

“Are they supportive? I suppose anything is supportive depending on how broadly you define that term. But remember — we the city, you the citizens — have invested almost $2 million an acre in this property.”

Councilwoman Linda Milhaven motioned to adopt the resolution, stating the agenda item is not about the hotel — it’s about the acre and a half of land.

“Any other conversations are not relevant,” said Councilwoman Milhaven. “Since it’s just a matter of identifying our acre and a half, we can decide later what we’re going to do with our acre and a half.”

Northeast Valley News Services Editor Melissa Rosequist can be e-mailed at mrosequist@newszap.com or can be followed on Twitter at twitter.com/mrosequist_.

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