A ‘Pride and Jewel’

Hotels, homes and hotspots aptly describe Rick Carpinelli’s plans for North Phoenix’s Desert Ridge master-planned community on the vacant land east of the marketplace.

Crown Realty & Development, for whom Carpinelli is senior vice president of acquisition and development, is essentially building a new city. The land surrounding High Street has been called the Valley’s most prized, undeveloped commercial property.

“The new City North project will include a residential core, office buildings from four to 10 stories, vibrant new restaurants, a full-service hotel and several select service hotels,” Carpinelli says.

Crown acquired the 96.5 acres of land through bankruptcy court and landed the master developer rights. The area Crown has acquired is zoned for about 2,500 residential units, 2 million square feet of office, 500 hotel rooms and 100,000 square feet of retail.

Crown—which developed the Montelucia Resort and redeveloped Mountain Shadows in Paradise Valley—is working with several major corporate users looking to locate their business at Desert Ridge, none of which Carpinelli was ready to reveal.

“Last year, Phoenix grew by 24,036 people, and ranked as the second-fastest growing city in the country,” Phoenix Mayor Kate Gallegos says.

“People come here not just for the weather, but for the robust job market. This new development will provide the opportunity for thousands more jobs to be brought to the Valley, not to mention other mixed-use amenities such as housing, hotel rooms and retail. The population growth in Phoenix shows no signs of slowing down and we must ensure we have the jobs and infrastructure in place to support this growth.”

Controversy

The property and rights have been the subject of active litigation and bankruptcy for a decade. Crown’s winning bid for the land was $54 million while the bankruptcy court previously valued the land as high as $121 million.  

“Unlocking this parcel from years of litigation now provides the opportunity to develop a 21st century urban community on the north side of Phoenix,” Crown CEO Robert Flaxman said last year in a press release.

“What Century City was to Los Angeles in the 1960s, the new City North project will be to Phoenix.”

As part of the judgment, Crown obtained master developer rights not only for its 100-acre site, but the entire 5,700 acres at Desert Ridge from the 51 Freeway to 64th Street and on both sides of the Loop 101.

City North was planned in the mid-2000s to be a significant retail development that was to include Bloomingdales, Nordstrom and Macy’s. The recession and years of litigation prevented the project from moving beyond High Street, which was finished in 2008.

“It’s impossible to grow new land but the slumbering status of this property for the last decade or more does exactly that, as the end of litigation means the start of development for what is unquestionably one of the best pieces of real estate in Arizona, and perhaps America,” Carpinelli says.

Carpinelli notes the greater Phoenix market is maturing with corporate headquarters for technology, health care and financial service companies moving to and expanding in the market. The majority of that growth has been centered in Tempe or the Southeast Valley where land and zoning has been plentiful to meet the demand.

Prior to the recession, significant commercial development did occur at Desert Ridge in the late 1990s and early 2000s with Desert Ridge Marketplace, Mayo Clinic, JW Marriott Resort, American Express and thousands of residences.  

The Crown’s closing, the city of Phoenix can capture pent-up demand in the Valley and create a second urban node for the city.

In late 2015 and early 2016 affiliates of Bruce Gray and Gray Development defaulted on Crown’s notes. One of the notes was secured by the 96.5 acres of land that surrounds the High Street property as well as the Desert Ridge master developer rights.

In the years Gray held these rights, development did not occur. Gray filed bankruptcy in May 2016 and it was resolved in March 2018 when the U.S. Bankruptcy Court ordered the sale of the Desert Ridge property through a court-appointed trustee. Beth Jo Zeitzer of ROI Properties acted as a trustee to oversee the marketing and sale of the property. Crown’s has the winning bid and closed on January 28.

Scholarship controversy

An affiliate of Crown Realty & Development, Flaxman was named in the college admissions investigation and made an early plea agreement. As a result of his cooperation, the U.S. Attorney has recommended sentencing at the low end of the guidelines. Sentencing will not occur until later this year, at the earliest.

Flaxman’s involvement in the investigation made national and state news, but it does not affect the company’s plans for City North, according to Carpinelli, who has been with Crown for nearly 15 years.

“Since resolving the bankruptcy and litigation uncertainty this year, the response from major office, retail, multifamily and hotel developers has been extraordinary,” Carpinelli says.

“Let me be clear. Robert has been integral to the company’s substantial success, but we also have many others. He has issued a statement on his matter and justice will now run its course. Meanwhile, we will be hard at work delivering a terrific new mix of uses for our neighbors, the city of Phoenix and state of Arizona.”

Carpinelli says Crown’s role as master developer is important to Arizona’s economic development and education initiatives.

“Those who have held these rights in the past have not always been cooperative, collaborative partners with Phoenix or the state. We are and will be,” he explains.

Grand plans

Crown is planning for a “small city,” Carpinelli says. The commercial buildings will range from four to 12 stories, with, most likely, three hotels.

“And then we’re bringing in really exciting restaurants and retail—100,000 square feet of retail,” Carpinelli says. “We’re talking to local, well-known concepts.”

Jobs are coming along with the project.

“It’s a very robust economic force with lots of jobs,” he says. “We will see very much an urban core in a ‘live, work, play’ environment. We’ll achieve it and beyond. We will also have plenty of quality places to live and all the amenities.”

Carpinelli describes this as a transformative project for the city of Phoenix and the North Valley.

“This project will shift the center of gravity to this area with lots of jobs,” he says. “It will become a wonderful place to live. We’re very excited to be part of this project.”

Technology will be aplenty, with Wi-Fi, roads that accommodate autonomous vehicles and a sustainable design.

“It’ll be on the heels of so much innovation we’ve had in the last 10 to 12 years,” Carpinelli says. “There are smartphones, clouds. It’s a great opportunity and honor to be able to help design this project.”

The first phase will have 160,000 square feet of office building on spec; a 250-unit apartment complex; and two “innovative,” local concept restaurants. The ground breaking is scheduled for early 2020.

“It certainly will add to the wonderful amenities it has in the area already. This will be a pride and jewel of the area,” Carpinelli says. “The goal here is to realize the original initiative set forth within the design document that the city envisioned in the late ’80s, early ’90s.”