[vertex]

$200 million W Hotel dealt a killing blow by ruling (http://www.azcentral.com/business/articles/0919biz-Whotel0919.html)

Lawsuit arose in bid to save Sun Mercantile Building

Jahna Berry
The Arizona Republic
Sept. 19, 2007 12:00 AM
A proposed $200 million boutique hotel in downtown Phoenix was on life support, but a judge's Tuesday ruling has effectively killed the existing deal, the developer said.

Phoenix Suns majority owner Robert Sarver was poised to build a 39-story W Hotel near US Airways Center. The development would have included an 11-story office and condo tower built on top of a historic 1920s warehouse.

Maricopa County Superior Court Judge Peter Swann ruled that a jury should decide whether the Phoenix City Council had improper talks with Sarver before it decided the fate of the warehouse on the hotel site.

That litigation could drag on for a year or two years on appeal, said Robert Yen, an attorney who represents several groups that want to protect the Sun Mercantile Building, which is considered by many to be the last vestige of Phoenix's once thriving Chinatown.

"It was a building built by a very prominent Chinese family," Yen said of the Sun Mercantile. Back in the 1920s, the property housed a wholesale grocery store owned by Shing Tang, a Chinese immigrant. The Tang descendents, many of whom still live in Phoenix, include the late Thomas Tang, a former Phoenix City Councilman and federal judge.

The hotel project had another problem, Sarver said Tuesday. The agreement with Starwood Hotels and Resorts Worldwide Inc.'s W Hotel brand expired because the project didn't break ground by June 30, he said.

"It's too bad, because that's a part of Phoenix that needs development," Sarver said.

Possession is now back with Sarver. Let's see if he tosses up another lazy airball...

[HX_Guy]

What do you mean possession is now back with Sarver? It seems pretty clear to me that it's dead and done with.

[vertex]

If Sarver can't come up with another solution for this block, then he's not trying hard enough.

[HX_Guy]

Maybe he will down the road, but as the article says, the agreement with Starwood Hotels expired because the project didn't break ground by June 30th.
I would expect anything anytime soon...hell, he might even do like Trump and say "screw this!".

Man, how awesome would that have been if it had broken ground by then? We'd have a tower crane in the air by now.

[vertex]

^^^He might, but somehow I doubt it. The site might be awkward, but the location is too good to ignore. Plus, I don't think the expiration of the 'W' agreement is a complete deal-breaker.

He just needs to swallow some pride, and re-evaluate the situation. I would be really surprised if he couldn't come up with a back-up plan that everyone could agree to (though the development cost might be a little more).

I guess all of this ruminating is pointless, if in fact this goes to trial.

[CANUC]

To Downtown resident and the rest of the posters that were so in favor of preserving the Sun Mercantile building, give yourselves a great big’ol pat on the back. Way to go, great job! People like you got exactly what they wanted and what we as Phoenicians deserve because of this ass backwards mentality, a cancelled 39 story W Hotel and a still underutilized P.O.S warehouse…disgusting.

[soleri]

Some skepticism is in order here. The W could not happen without the high-end condo component. This was the key to the entire project and a deflated housing bubble has killed off the chances for major new condo projects in the near future. Sarver's team was engaged in ongoing contact with 44 Monroe's sales staff, trying to gauge the market. They read the tea leaves and, quite rationally, decided not to proceed in a cold market.

I have no idea whether the annex over the Sun Merc building was crucial to the overall plan. I suspect not, but we'll probably never know one way or the other. What is clear is that the real-estate market is the main arbitrater of what gets built and what doesn't. The W's demise is due mostly to unfortunate timing. If it were announced a year earlier, we'd be chatting about the crane and the W's rising profile on Jefferson.

Sarver's original idea was a good one: a luxury hotel catering to visiting sports' teams. That part is still good. In time, the luxury condo part could make a fresh deal work.

[PHX31]

/\ I know that is the thought process that is in commom agreement around here, but I don't fully buy it. It's true, the deflating market caused the project to languish while it was tied up in court, if the market was stronger, the development team would have done anything, or found a way to work it out with the Sun Merc people, to get it through court or to settle the dispute and get the project going.

But I still think the entire project was viable enough at its conception (a slightly less soft market existed back then, although it was falling fairly quickly). And if not for the initial roadblock of the Sun Merc people, which wasted time and ultimately proved the project didn't have legs in the market, it would be nearing completion (at least being topped off) right now. So I do blame the Sun Merc people. I hope they all of the sudden enjoy the boarded up, empty warehouse that they purposely and deliberately haven't enjoyed for the past few decades.

This isn't to say that Sarver wasn't somehow stupid/at fault for chosing the design he did, but we're not Sarver's development team, and we don't know the whole story for why he didn't pick the Bruder design, maybe it was much more expensive in design.

(ps. soleri, i hope your last paragraph proves correct, and I think it will.)

[Gump]

/\ I know that is the thought process that is in commom agreement around here, but I don't fully buy it. It's true, the deflating market caused the project to languish while it was tied up in court, if the market was stronger, the development team would have done anything, or found a way to work it out with the Sun Merc people, to get it through court or to settle the dispute and get the project going.

But I still think the entire project was viable enough at its conception (a slightly less soft market existed back then, although it was falling fairly quickly). And if not for the initial roadblock of the Sun Merc people, which wasted time and ultimately proved the project didn't have legs in the market, it would be nearing completion (at least being topped off) right now. So I do blame the Sun Merc people. I hope they all of the sudden enjoy the boarded up, empty warehouse that they purposely and deliberately haven't enjoyed for the past few decades.

This isn't to say that Sarver wasn't somehow stupid/at fault for chosing the design he did, but we're not Sarver's development team, and we don't know the whole story for why he didn't pick the Bruder design, maybe it was much more expensive in design.

(ps. soleri, i hope your last paragraph proves correct, and I think it will.)
The way to gauge a market is to bring a project to the market. That's what developer's do. When you have the "W" in hand and are unsure whether the high end condos will sell, you bring the condos on-line. Calling other projects and asking their opinions is not much of a market analysis. Had The Esplanade done that when they had The Ritz we probably would have vacant land at 24th and Camelback.

[plinko]

^When it involves construction loans and outside investors you don't 'bring the project on-line' when it doesn't pencil. EVER. I'd like to meet a developer who would do that. Banks and investors don't take risks on projects that are likely to lose money.

Ritz/Esplanade was a Symington project. Enough said as to how that might have been done.

My guess is that Sarver REALLY wants this project, the Starwood people obviously thought it would pencil (for them), but the Bruder design with its cantilever was too expensive to make the numbers work. My guess is that the project barely penciled anyway with the approved design. So without the SunMerc lawsuit it was still a 50/50 shot. With the market the way it is? Dead, dead, dead.

My guess? 3-4 other developers are right now approaching Starwood about alternate lots downtown for a W project. Don't be suprised to see a design for one 6 months from now on a totally unexpected lot. It might even get built (if the DT Phoenix market is truly that underserved in terms of hotel rooms). Collier Center anyone?

[jvbahn]

Sucks about the W, but hey, Soleri is back in the mix, that's good news.

[andrewkfromaz]

^^^ Yeah!

I'm excited to see what Sarver will come up with next. He seems to be held in high regard for his San Diego projects, so hopefully this prime lot will have new, profitable plans unveiled soon. Construction prices are bound to come down, the Fed is making some moves, there's as yet little evidence of recession so banks should be bringing the money back, I think Sarver either sells the lot at a small profit or unveils another proposal. Six months, says I, before something moves on that site.

[scottkag]

I thought the city of Phoenix owned the "W" land?

[Gump]

^When it involves construction loans and outside investors you don't 'bring the project on-line' when it doesn't pencil. EVER. I'd like to meet a developer who would do that. Banks and investors don't take risks on projects that are likely to lose money.

Ritz/Esplanade was a Symington project. Enough said as to how that might have been done.

My guess is that Sarver REALLY wants this project, the Starwood people obviously thought it would pencil (for them), but the Bruder design with its cantilever was too expensive to make the numbers work. My guess is that the project barely penciled anyway with the approved design. So without the SunMerc lawsuit it was still a 50/50 shot. With the market the way it is? Dead, dead, dead.

My guess? 3-4 other developers are right now approaching Starwood about alternate lots downtown for a W project. Don't be suprised to see a design for one 6 months from now on a totally unexpected lot. It might even get built (if the DT Phoenix market is truly that underserved in terms of hotel rooms). Collier Center anyone?
You never know...until you know.

Condos attached to The W would fetch $$$ greater than any project in the City. Comparing 60-100 luxury condos on top of The W to anything in Phoenix would be a mistake. I believe that those type of units would sell for $650+ per foot (Seatlle/San Diego $$'s). When you have the land for free and The W on the lease, how sharp does the pencil need to be?

[Cranetastic]

Disappointing. May we please have a moment of silence...

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Thank you. Bruder's design looks like it had more square footage, but it's hard to tell from their website how tall it was. Their pitures are super small.

[HX_Guy]

While the market conditions are mostly to blame now, I do think the preservationists had a bit to do with delaying the project enough time to where the developers realized what was happening with the market. The original project was announced back in 2005 and permits had already started to be issued in October 2005...back then, the market wasn't nearly as bad as it is now and it's really about the same time that 44 Monroe got underway...so without the delay from the preservationists, the W could have sold a few units already and be at least half way built right now.

Here are the permits that were already given to the project...

ADDR-050783 11/30/05 OPEN PHOENIX W HOTEL AND CONDOMINIUMS
FLSR-05010 12/21/05 OPEN PHOENIX W HOTEL AND CONDOMINIUMS
PAPP-0504144 10/14/05 EXPR PHOENIX W HOTEL AND CONDOMINIUMS
PRLM-0504637 11/14/05 OPEN PHOENIX W HOTEL AND CONDOMINIUMS

[loftlovr]

Welcome back Soleri!

If the W couldn't pencil out simply because it had to have the 11 stories on top of Sun Merc and there is NO other lot in Phoenix that would work- Good Riddance..... Sarver- Why not buy one of the other 10 potential lots in the area?
Yes- W hotels in Phx would fetch top dollar....
But nobody is buying anything right now. Nobody.
Maybe next year.... we have some bad ass things happening Downtown and maybe it will give the Real Estate market enough time to hit bottom and start the up-cycle.
We can always be positive about it and hope for the Rock and Roll Hall of Fame.
If this ever happens mark my words that people will be greatful we kept that building.
(Kind of like Bentley Galleries and Ice House)
The City tried their hardest to get rid of the Blighted IceHouse when BOB was built.... Good thing they failed-
It is amongst my favorite places to visit Downtown now.

I am right in the middle of this debate. I reaaaaly wanted the W.
I would have been fine with the shell if it meant a W...
But maybe it will teach developers a lesson to quit picking lots with valuable structures stationed on them. (District 8 style)
What if we bulldozed the Warehouse District? Made room for a bunch of future hotels?
Think of it that way......
Go to Denver or SD and see first hand why we need all we can get.
I am not saying I am right vs. the next guy- just know there is a reason why there are people on both sides of this debate.
Now.... C'mon Rock and Roll Hall of Fame!

[HooverDam]

Sarver- Why not buy one of the other 10 potential lots in the area?

If someone could explain this line of thinking to me, it would be greatly appreciated. "Hey, there are issues XYZ about your current lot, just by another one of the zillion dirt lots of surface lots in the downtown area!" Its really not that easy folks.

[HX_Guy]

I completely agree HooverDam, I've heard argument countless times and I don't get it either.

First of all, if there was another lot close by, it would cost millions upon millions for the size that is needed. Sure Sarver probably has the money, but it would just make the whole project more expensive. Then...who says there are lots available big enough and close enough for sale?
Finally, this lot, literally right next to US Airways Center would have a great selling point, just like Summit...what other lot would be that close? And available? And not outrageously expensive?

[Cranetastic]

There was a rendering on here a while back for a hotel that looked fantastic. It was modern and had a large curved facade facing South Mountain. This hotel was going to be put up right next to US Airways arena on the West side filling up the current parking lot that exists there. This would be an excellent vacation.

In general I used to work in the hotel industry. With all of the hotels that are in city downtowns and the general mass of them. I'm pretty shocked that the "W" could not pencil with just the hotel aspect alone, especially with the convention centers demand and pre-bookings. It's simply justifiable.

There has got to be more to this story than we will ever know. My guess is that it all started with a bruised ego.

[NIXPHX77]

good points, loftlover.

in my opinion, i question why a developer, such as the one who is purchasing the Historic Luhrs block, would even purchase a property which he knows
contains a building(s) that is historic or is a landmark or is going to be
a battle for some reason. i could see if this was NY, Chicago or another very dense city, but being it is downtown Phx, with so many vacant lots and lots with non-historic structures, why not purchase one of those to start and avoid the hassle, the problems, the negative feedback, controversy, and time delays and added cost incursions? These somewhat insensitive developers made the choice to purchase lots which they had to know would be controversial/difficult to develop.

back to sun merc, if the building was important enough to save in the early 90s when the arena was built, why think less of it now?
it has great potential. and it has historical significance - it wouldn't be designated "Historic" if it did not. it's not an easy or rubber-stamped process.
we should really cherish those relatively few bldgs that have been designated and look to expand the list of designees. they are really important to the urban fabric of a city.

i have a feeling that the "W" Hotel/Sun Merc lot would exactly the same today
even if there never was a lawsuit, though Sun Merc might only have a facade or less. i do not think that Sun Merc killed this project. but, as we are not the players, all we have is speculation.

ps- welcome back Soleri. i've enjoyed your posts the past year or so.

[HooverDam]

good points, loftlover.

in my opinion, i question why a developer, such as the one who is purchasing the Historic Luhrs block, would even purchase a property which he knows
contains a building(s) that is historic or is a landmark or is going to be
a battle for some reason. i could see if this was NY, Chicago or another very dense city, but being it is downtown Phx, with so many vacant lots and lots with non-historic structures, why not purchase one of those to start and avoid the hassle, the problems, the negative feedback, controversy, and time delays and added cost incursions? These somewhat insensitive developers made the choice to purchase lots which they had to know would be controversial/difficult to develop.


Huh? It was my understanding that while the developer wanted to knock down one of the smaller one story buildings, he wanted this block precisely because of its Historic value, because they want to rehab the Luhrs complex.

[JimInCal]

:previous: YEP...I think you're right Hoov! The Luhrs block also occupies frontage to the light rail system as well as CITYSCAPE and will be at the west end of the Jackson Street Entertainment district. It's potentially a very valuable piece of real estate. I applaud the new owner's plans to both upgrade the historic structures (the Luhrs Building and Tower) and develop the block with new buildings. That block is Phoenix history and is presently under utelized, but has fantastic potential.

[combusean]

^ The smaller, two-story Luhrs Central Building is also up on the demolition block. It is arguably a far better piece of architecture than the 1-story buildings in between the taller buildings in the Luhrs complex.

As for the W, I won't miss it. I think there was a chance to build something cool that would have respected the history of Sun Merc and not pissed everyone off as well. If it needed so much "flex space" on free city land, it shows one of two things: that they were so desperate to make it pencil out they absolutely had to build there, or, that they were so greedy as to not want to compromise in their design--two reasons alone to want something better, more real.

Something like Bruder's plans would have worked a lot better, and certainly make a longer impression than the overbuilt toilet that was the W. Good riddance.

[NIXPHX77]

Thanks Sean.
Yes, 2 historic bldgs threatened; a very unique block threatened.
perhaps the Luhrs Tower and Luhrs Bldg will be threatened next.
what's the point in designating them historic if they are not going to be preserved? when do we say enough is enough?
what will the new bldgs do to the views of and from the 2 taller Luhrs bldgs.
and the context within that block?
i welcome the renovation and restoration of the 2 taller ones, but i hate to see it at the cost of the smaller ones. quality, not quantity!

[JimInCal]

NIXPHX77, I think this is an over reaction. The Luhrs Building and Tower are too important to Phoenix' historic preservation interests. There would be an incredible outcry if they were threatened. I can't see anything adverse happening to them. The less vital components of the block, like the parking garage and the one and two-story components are up for debate IMO.

[PHX31]

It seems like they could/should be integrated into the design of any new construction. They should be rehabbed as they are, or I'd be happy to see at least only their facades integrated... complete 100% demolition/razing should never be allowed to happen.

[combusean]

OK... where's the room for debate?

The developer bought the building knowing its protections. And as far as old buildings go, the Luhrs Central Building dates to 1914--they barely get much older than this, especially for significant multistory structures. And this isn't just any building--it has special HP-Landmark status, extending the stay of demolition to three years.

The only room for debate is wherein various parties, so desperate for development downtown, actually start entertaining these kinds of ridiculous and offensive proposals. If they want compromise or debate, well, maybe they should be able to flatten the garage tomorrow despite its HP-L designation as well. Or maybe their design could actually incorporate the LCB in an appropriate way.

But the way it's going it looks like any entitle-and-flip case: sell the city council on the flashy renderings so they can override the HP commission, knock it down, and once it doesn't have that pesky Historic Preservation zoning anymore, it'll be a fresh vacant lot for the next flashy rendering. Blecch.

[NIXPHX77]

i agree Sean. i'd say almost all historic buildings in Phx are vulnerable.

should we move this to the historic phoenix thread?

[JimInCal]

:previous: So, are you guys saying there should be no new construction on that block? I have not gone around to the back of the block to see the parking garage. I've only seen aerial photos, looking straight down on it. It looks like something that was added in more modern times. I would like to know the garage history if you can enlighten me. If it's an add-on, I say it is up for debate. If it is original, along with the two towers, that is a different story.

I tried to make it very clear on my prior post that the two Luhrs towers were historic fixtures for Phoenix and thus should obviously be protected because of their tremendous significance. I kinda get the feeling that point was overlooked.

[HooverDam]

See I think this is disappointing, people already jumping to 'save' something, and we don't even have all the facts in yet. I think with historic preservation, its a cost-benefit analysis type situation. We don't know whats being proposed, what may or may not be knocked down, or how historically important it is, et cetera (unless I've missed those details).

Especially something like the parking garage should be happily knocked down, because if we ever get to the point where we are saving 'historic' parking garages, I'm going to poke my eye out.

I think the wise thing to do is to wait and see exactly whats being planned before jumping to support one side or the other.

[vwwolfe]

The lot where the W will never be. The Sun Merc building in the background.
http://inlinethumb48.webshots.com/16879/2756860620086534769S600x600Q85.jpg (http://good-times.webshots.com/photo/2756860620086534769dpcRRU)

Haven't been to the Arena in a while. What's the Toyota Club? Didn't this used to be an Italian Restaurant?
http://inlinethumb10.webshots.com/18377/2759542070086534769S600x600Q85.jpg (http://good-times.webshots.com/photo/2759542070086534769prdviq)

[combusean]

^ The last proposition floated through is to demolish the Luhrs Central Building and the garage. According to my contact, the new owners of the Luhrs block wanted to demolish the LCB and keep the garage first.

I'm pretty much convinced about the silliness of saving historic parking garages, tho for shits and giggles it'd be interesting to see that particular garage's history before Phoenix makes a decision. Historic Preservation could mean a materials sample, documenting its history, saving its old engineering diagrams and notes, making a 3D model, etc--all things that don't preclude its later demolition.

It is my understanding the taller buildings on the Luhrs complex would be thoroughly renovated as part of the whole project. I don't think there's ever been a question of whether they stay or not.

[andrewkfromaz]

]
I think the wise thing to do is to wait and see exactly whats being planned before jumping to support one side or the other.
You know what they say about "the best-laid plans of mice and men..."
I think we need to decide up-front that nothing is going to happen to certain structures, EVER, PERIOD, END OF STORY, and then come up with another designation for less historically significant structures, and then less, and so on.
Sean makes a good point that many times developers plan something, clear the lot, and then flip it and it sits vacant for years until people forget what was there before and are grateful for any generic, mediocre-quality development that comes along.

[SnyderBock]

It's unlikely that Chinese family built warehouse will be around in 200 years. However, if this new building were built over it (all while preserving the warehouse and facade at pedestrian level), then this building would be protected and under good maintainence. It could last 500-1,000 years. If they want to save this building, they should have supported this project, not killed it.

[NIXPHX77]

it seems that we usually have to be prepared defensively when it comes to historic bldgs in Phx. There were petitions and incredible outcries when Cine Capri, St Mary's School, Madison Sq. Garden, etc. were threatened. Sadly,
it didn't help save them.
personally, i would rather keep the block intact as is (w/ restoration, of course.) i dislike empty lots much more than short buildings, so being that this block is already "infilled", i would rather a vacant lot be utilized for this project if possible.
i also do like the 2 threatened, historic but short commercial buildings (Luhrs Central and Postal Annex) that are there now; i even like that garage with its neon signage. not sure when it was built, but it must be fairly old - anyone know? it's not very common to have an intact square block downtown of that vintage. i just wish developers would concentrate on vacant lots, imo.
ps - Good points Andrewk.

[HX_Guy]

Council may testify in hotel trial
Court to decide if conflicts existed in talks with developer

Jahna Berry
The Arizona Republic
Sept. 27, 2007 12:00 AM
Phoenix City Council members and their top aides may have to tell a court whether they had improper talks with the developer of a proposed $200 million W Hotel project.

Last week, a Maricopa County Superior Court judge ordered a trial to sort through conflicting accounts about how the developer tried to sway city leaders to build the project.

That means council members and top aides may have to testifyabout the behind-the-scenes lobbying tactics in the controversial project.
advertisement


Developer Suns Legacy Partners was poised last year to build a 39-story W Hotel near US Airways Center in downtown Phoenix. A key part of the project was an 11-story office and condo tower that would have been built on top of a historic warehouse, preserving it from being torn down.

Even if Phoenix wins the court case, litigation and other problems have effectively killed the hotel project for now. Legal wrangling has delayed the project, and the developer's deal with W Hotel expired because ground was not broken by June 30. In his four-page Sept. 18 ruling, Maricopa County Superior Court Judge Peter Swann wrote that a trial would have to sort out whether Mayor Phil Gordon, his council colleagues and their aides had improper talks with Suns Legacy Partners, the development group that includes Suns owner Robert Sarver and former Suns owner Jerry Colangelo.

The litigation is just about procedures; it's not about the City Council's decision to build a condo tower on top of a historic building, the mayor and the city attorney say.

The city is weighing its legal options, , City Attorney Gary Verburg says.

Gordon denies any wrongdoing.

"There was no influence behind the scenes or any type of nefarious-type discussions," Gordon said. "Everything was public."

The preservationists are prepping for trial, although no date has been set. They filed the lawsuit to protect the 1920s warehouse, the last vestige of Phoenix's old Chinatown.

"Phoenix can do better with its historic structures." said Barry Wong, a former state lawmaker who is a spokesman for the coalition of preservationists and Asian-American community groups.

The City Council was essentially sitting as a judge when it overruled the historic-preservation officials who didn't think the condo tower should be built on top of the historic warehouse, the coalition argued in court. When acting as judges, council members can't have outside talks with the parties in the dispute, the preservationists argued.

The warehouse, the Sun Mercantile Building, is owned by the city. Suns Legacy Partners has a long-term lease agreement. Lawyers for both sides agree that preservationists and the hotel developer lobbied the City Council. However, the preservationists argue that council members and their top aides - including the mayor's senior assistant, Bill Scheel, -- may have been swayed by undisclosed talks with the Suns Legacy developer.

The contacts included a Dec. 6 letter from the developer's lawyer. The preservationists also point to a form letter that Scheel used to respond to several people who e-mailed Gordon about the project.

In addition to replying on behalf of Gordon, Scheel lauded the project as a "reasonable and positive re-use" of the 1920s warehouse.

Scheel, who has helped run Gordon's election campaigns, downplayed the letter. Gordon said his staff gives him advice, but ultimately he and the rest of the council made the final call. In court, the city argued that council members were more aggressively lobbied by residents and groups that opposed the 11-story tower. The city's legal team also argued that the City Council avoided communicating with either side after it was clear that issue would be appealed to the full council.

Since council members are routinely lobbied on issues, it would have been impossible for them to know before the appeal that they should be careful about talking about the case, Verburg said.

In affidavits, council members said that they did not talk to the developer after Suns Legacy appealed the decision the historic-preservation decision.

Swann, however, ruled that any contact with parties in the hotel fight could fall under scrutiny.

[PHX31]

"Phoenix can do better with its historic structures." said Barry Wong

UH, please tell me how it is possible to do better than build a hugely popular hotel with condos and receive unending tax monies from everything from room taxes, sales taxes (bar/club), to property taxes, not to mention revive an abandoned building!

Seriously, what better could "Phoenix" do? Maybe his interests or a very select few could do better, but I guarantee you "Phoenix" cannot.