More Photos (2):

Other articles by Rob O'dell:

Wider 22nd St., with alignment shifted, is OK'd Council to decide on proposal for realigned 22nd St. bridge City could appeal ruling on demolition Pima library contingent honored at White House Graffiti removal faces cut 'A' Mountain plan is aimed at restoring its natural splendor City Council agrees to create regulations on plastic shopping bags Passage of ordinance on demolition codes ruled illegal City quietly cuts services used by many residents City looks to put lid on plastic bags

Education
Yavapai College
Teachers Retail
TOTAL WINE & MORE
WINE TEAM MEMBERS, CASHIER & STOCK MEMEBERS Health Care
Freedom Manor
Caregivers General
Prestige Maintenance USA
Area Manager General
GROUNDS CONTROL
LANDCAPE FOREMAN & LABORERS Health Care
Carondelet Foothills Surgery
Pre-Op Nurse Technical
Yavapai College
Analyst Banner Programmer

Several key private-sector projects meant to be the backbone of Downtown redevelopment have been stung badly by the housing market downturn and won't be completed until at least 2009, stifling progress for Rio Nuevo.

The recent downturn is likely to push private-sector condominium projects back another two years, as at least four of the private residential projects counted on to revitalize Downtown are being delayed or substantially revamped because of the soft market.

In addition, two of the private projects already under construction are dealing with financial stresses threatening their viability to jump-start Rio Nuevo.

What's more, the City Manager's Office no longer expects three parking garages associated with three key residential projects to be built before 2009. As a result, the office recently abandoned plans to spin off its Parkwise department into a separate parking authority.

"That's really telling," said Downtown lawyer Roy Martin, a frequent Rio Nuevo critic, adding that the Parkwise decision contradicts the optimistic timetables given by developers, city officials and Downtown boosters.

Rio Nuevo Director Greg Shelko has said there would still be demand for high-priced condominiums Downtown despite the market downturn.

Councilwoman Nina Trasoff had said visible progress would be made on several private projects Downtown by mid-2007, none of which has materialized.

Trasoff said her comments that there would be four construction cranes Downtown by midyear reflected "naivete" that everything would go according to schedule.

But she said she still believes all the proposed projects will be built, adding, "It's just taking longer to happen."

To be sure, there has been some progress Downtown, including a strong response by developers and hotel chains for a publicly financed convention-center hotel. The city has also begun construction work on rebuilding and widening the Fourth Avenue underpass at the east end of Downtown.

In addition, one residential development — the redevelopment of the former Martin Luther King Jr. housing project — seems to be on track to begin construction in 2007. But the MLK is different from many other projects because Portland developer Williams and Dame is remodeling an existing building and is developing apartments instead of condominiums.

The theory that private residential development would jump-start other redevelopment Downtown hasn't panned out, said Jaret Barr, assistant to the city manager. "It's clear it's not happening," he said.

The builders have been buffeted with sky-high construction costs and a declining home market that lowers the amount they can sell for, he said.

Many builders have to charge as much as $400 a square foot — or $400,000 for a 1,000-square-foot condo — to make a profit, Barr said, adding there isn't much of a market for that price Downtown.

Barr said no developer wants to be the first to build. "The struggle for us has been to get the first one to go. Everyone wants to be the first in line to be the second person to develop after the first successful project."

At least one of the seven projects examined by the Arizona Daily Star seems to have fallen through:

● The renovation of the Santa Rita Hotel into a 66-room boutique hotel complemented with 150 condos and retail space is on hold, and has missed its goal to begin some demolition this summer. The city doesn't expect its parking garage to be built there before 2009.

Co-developer Michael Teufel of Pathway Development said the project is in a "holding pattern" and that he may soon drop out of the project.

Humberto S. Lopez, of HSL Properties, said he will likely buy out Teufel and start developing the project in 2008. He may renovate the hotel before building the condos, he said.

Three other projects are behind schedule or face uncertain futures:

● The Post, a five-story 40-unit condo and retail project being developed by Bourn Partners. Developers first said it would start construction in April and then later said it would start by July. Now developer Don Bourn said he would be "thrilled" to start construction by November, because the company still needs to finish obtaining its construction permits and get financing to build.

● El Mirador, an $85 million hotel, brewery and condominium project being built by Town West. It goes back and forth between dying and moving forward on a near-weekly basis, city officials say. Town West lawyer Bob Gugino said he couldn't give any timelines or specifics for the project that features a boutique hotel, 150 condos and retail space other than to say the company is negotiating with the city. The city is unsure if will need to build a parking garage there before 2009.

● Presidio Terrace, a $30 million project that includes 72 lofts, a cafe and neighborhood store. It missed its deadline to begin construction this summer. Developer Peggy Noonan said she expects to begin construction by March, and needs to obtain financing. The city doesn't expect to build a parking garage there before 2009.

And the path has become rocky for two projects already under way:

● The developers of the Rialto Block are "regrouping," said Doug Biggers, after he got a new partner to develop the block surrounding the Rialto Theater. Biggers and new partner Don Martin formed a new company to buy off the $1.56 million debt that Biggers owed his previous partner, Tom Powers, who put that debt up for sale. Biggers and Martin expect to complete their plans for retail, apartments and possibly a hotel there by mid-2009.

● Builders of the 14-acre Mercado at Menlo Park on the West Side recently asked the city to waive impact and permit fees and provide security for the Rio Nuevo site because some of the housing projects there are treading water. "We're almost at zero profit," developer Tom Wuelpern said two weeks ago. "We have to think about whether we can survive this storm." The project calls for 100 single-family homes, 160 condos, retail and offices.

Only one project seems on target to start in 2007:

● Developer Williams and Dame seems on target to begin restoration of the MLK housing project by the end of September, turning it into about 90 apartments and retail space. This project is also behind schedule, as last year Williams and Dame said construction would be finished by October 2007.

Developers may need to change to meet the market.

In their bottom lines, many of the financial plans for residential development Downtown assumed the high prices seen during the real estate boom would continue, said local developer Randi Dorman. "Some plans need to be recalibrated" to reflect changes in the marketplace, Dorman said.

Developers need to cut building heights and develop fewer units at lower costs to make the projects pencil out, she said. "They just have to scale back."

Dorman said she would also like to see the city give incentives to the first two to three developments to create the momentum for Downtown. She said incentives could include low-cost financing, waiving of fees or subsidies.

Barr said the development community is likely to move away from new construction because it costs so much more than redeveloping an existing building. That is highlighted by the recent sale of the historic Chase Bank Building at Congress Street and Stone Avenue for $80 a square foot, a price not at all possible for new construction, Barr said.

He said private developers may also embrace building apartments instead of condos because they can't sell 1,000-square-foot condos for $400,000.

"Just like we're missing the condos for sale, we're missing the apartments for rent (Downtown)," Barr said. "It may be that the rental comes first."

The city is looking for a pioneer to be the first to build, Barr said: "People don't seem eager to force it. Getting that first residential property Downtown and getting a private developer to move forward is going to be an exciting moment because no one has been willing to do that."

How much of an impact will the delay in private projects have on Downtown redevelopment? Participate in a poll at www.azstarnet.com/dailystar