CITY OF TUCSON BUSINESS INCENTIVE PROGRAM

APPLICATION
(LA PLACITA TRANSIT ORIENTED MIXED USE PROJECT)
Owner and Applicant:
Current Owner is HSL La Placita LLC (Current
Owner). Applicant is HSL La Placita Apartments LLC, an Arizona limited liability
company (Applicant).
Prior to commencement of construction, title will be
transferred from the Current Owner to Applicant.
Required information:
1.

Project Description:

a.
Location:
17720016G

100 S. Church Ave. / Parcel Numbers 11720016F and

b.
New Development and Renovation. The residential component of
the Project will be new construction.
The retail component will involve the
renovation of the Flin Building and Samaniego House.
c.
Description: Current Owner is the owner of the La Placita office
complex. Applicant intends to acquire the property from Current Owner,
demolish the functionally obsolete complex, and redevelop the site into
approximately 246 market-rate, energy-efficient, and transit oriented residential
apartment units, with onsite underground parking, a clubhouse, 24 hour fitness
center, fiber optic wiring, movie theatre, rooftop pool and an upgraded unit
amenity package. The Project will be transit oriented, located adjacent to a stop on
the modern street car line, and within easy walking distance of the Tucson
Convention Center and downtown restaurants and theaters.
The currently contemplated unit mix includes 8% studio units, 24% one bedroom
units, 40% two bedroom units, 26% three bedroom units, and 2% four bedroom
units. There will be at least 1 underground parking space for each unit.
The Project will also involve the renovation of two existing historic structures (the
Flin building and Samaniego House) and the utilization of these structures for
restaurant, retail and project amenity uses. Another historic structure, The Stables,
will be preserved and utilized as an amenity for the apartment community.

d.

Square Footage and Estimated Cost of Construction/ Renovation:

Use

Estimated Sq. Ft.*

Residential
Retail
Garage
Total

336,305
9,725
104,470

Estimated Cost
Construction **
$37,700,000
$500,000
$4,000,000
$42,200,000

of

* The size of the Project will depend upon multiple factors, including historic
preservation requirements, other zoning requirements, design, and cost. Actual
square footage may vary
**Construction cost will vary depending upon density permitted and other design
and zoning issues.

2.

Incentives requested:

a.
Government Property Lease Excise Tax (GPLET).
abatement of real property taxes as permitted by ARS 42-6209;

Eight year

b.
Downtown Financial Incentive District: $10,000 building permit fee
waiver and construction sales tax credit for public improvements including the
Eckbo Fountainscape and La Placita City Park;
c.

Downtown Core Infill Incentive District.

3.
Details of other funding sources/financing: Private Equity will be used
for approximately 15% - 20% of Project Cost.
The balance of construction
financing will come from a traditional construction loan. However, Applicant intends
to explore possible financing and development options with the Rio Nuevo
District.
4.

Anticipated Capital Investment in Project and Sources and Uses

Sources:
Equity:
Debt
TOTAL SOURCES:

$7,400,000
$41,300,000
$48,700,000

Uses
Land Acquisition

$6,500,000

Design and Soft Construction Costs

$8,103,000

Hard Construction Costs

$30,397,000

Miscellaneous Project
Costs & Interest Reserve (legal, loan fees, etc):

$3,700,000

TOTAL USES AND CAPITAL INVESTMENT

$48,700,000

5.

Site control: Applicant will own fee title to the Project.

6.

Construction Timeline:

a.
Construction Start Date: Applicant
intends
to
commence
demolition of the site by approximately April 2017, with construction to commence
in May 2017.
b.
Construction Completion Date:
construction will take approximately 28 months.

Applicant estimates that

Commencement and/or completion of construction could be delayed by historic

preservation issues, the GPLET process, and/or by the permitting process.

7.
Organization/applicant capacity:
Owner is an affiliate of HSL
Properties, Inc., which was formed in approximately 1975. Since its inception,
HSL and its affiliates have acquired, owned, managed, operated, and sold
properties located in Arizona, California, New Mexico, Texas, Georgia and
Colorado. HSL and its affiliates currently own and manage over 10,000
apartment units in Arizona, and have developed four Class A apartment
communities in Pima County over the last four years, for a total project cost of over
$150 million. HSL has considerable experience owning and operating apartment
communities in urban areas and currently owns a 34-story, high rise residential
tower in downtown Phoenix (44 Monroe) and a 414 unit transit oriented
apartment development located at 4140 N. Central Avenue in Phoenix. HSL
affiliates have financed hundreds of properties, qualified for hundreds of millions of
dollars of real estate secured loans, and Applicant anticipates no problem obtaining
construction financing for the Project.

8.
Employment Impact of Project. During the construction phase, the
Project is anticipated to employ approximately 150 FTE local construction workers
on an average daily basis. Upon completion, the Project will require approximately
six full time management employees on-site in addition to jobs provided for
landscape and maintenance personnel. Full time post-completion jobs will include
a community director and leasing consultants. Salary ranges are estimated to be
between $30,000 and $65,000.
9.

10.

Revenue:
a.

Current Revenue: $608,000.

b.

Post completion revenue generated $5,150,000 (estimate).

Direct Benefit to City of Tucson.

A.

Current Tax Revenue to the City $7,600,

B.

Post Completion Tax Revenue to City $36,000 (estimate)

11.
Overall Economic Benefit to City of Tucson (including indirect
benefits).
The Project will generate the following economic benefits to the City of Tucson:
a.
Sales tax on construction to the extent Applicant is not permitted to
utilize construction sales tax to offset public improvement costs;
b.
c.
Project;

Permits and Fees;

Citys share of transaction privilege tax for retail components of

d.

Real Property taxes following GPLET Abatement, if approved;

e.

Project will create approximately 150 new FTE construction jobs;

f.
Project will add 246 market-rate unit apartments on the western
portion of downtown adjacent to the Tucson Convention Center which, along with
other planned residential projects, will create a critical resident mass that will
encourage the location of grocery stores, retail offerings, restaurants, corporate
headquarters and other tax generating businesses, and will enhance the
desirability of the TCC as a convention venue;
g.

Increases value of adjacent properties;

4

h.

Economic impact of 350+ new residents living downtown;

i.
Located adjacent to modern street car line- will increase ridership
and revenue;
j.

Creates quality, market rate (non-student) housing downtown; and

k.

Significant capital investment by the applicant.

12.
Benefit to Applicant.
Construction in an urban downtown core, and
particularly podium parking, is more expensive than construction outside the
urban core. Additionally, the reclamation and repositioning of an economically
obsolete office project necessitates costly demolition of the majority of the
improvements on the site. The economic incentives requested will help make the
Project economically viable. In the absence of the incentives, the Applicant would
not proceed with the Project in the same time, place or manner.
13.
Contractors.
Applicant will use a local general contractor and will use
local subcontractors in connection with construction of improvements for the
Project.
a.

Name of General Contractor:

HSL Construction Services LLC

b.
It is anticipated that over 70% of the construction workforce will be
Pima County residents.
14.
Summary: The Applicant has the experience and capacity to design,
finance, construct, and manage the Project. The site is currently owned by an
affiliate of the Applicant. The construction of 246 market rate new residential
apartment units will enable 350-500 new residents to move downtown, stimulate
new transit oriented development, make new restaurants and retail viable, and
enhance TCCs ability to attract visitors. Increased economic activity will
generate additional sales tax revenue and will increase the value of surrounding
properties, which in turn will increase the real property tax base. The addition of
246 high quality rental units will stimulate development of the west end of
downtown.
Finally, Applicant understands that Tucsons history and culture are important
factors in attracting residents to the Project. In addition to renovating and utilizing
the Flin building, the Samaniego House, and the Stables, Applicant is will work with
the City, interested civic organization including Los Descendientes del Presidio de
Tucson, the Tucson Historic Preservation Foundation and other stakeholders to
help improve existing public amenities and landmarks adjacent to the Project,
including the La Placita City Park and the Ekbo Fountainscape.

15.

Contact Information:
Applicant:
Omar Mireles
HSL Properties, Inc.
3901 E. Broadway Blvd.
Tucson, Arizona 85719
Phone: 520-322-6994
omar@hslproperties.com
Legal
Hinderaker Rauh & Weisman, PLC
Attention Ted Hinderaker
2401 E. Speedway Blvd.
Tucson, Arizona 85719
Phone: 520-881-6607
ted@hrtucson.com

Exhibits