Glendale building sale scrutinized

City sells structure for a fraction of what it paid

All eyes are on a drab brick building in the center of downtown Glendale.

The city sold the property, on 57th Avenue near Glendale Avenue, to a local business last month for $25,000 — a steal compared with the $735,000 the city paid for the property and a nearby parking lot in 2008.

The new owners, a Glendale couple that makes high-end custom furniture, promised the Glendale City Council not only that they would get the worn-down 7,000-square-foot building up to code within six months and then move their business in, but also that they would try to persuade some of their artsy friends to move from Roosevelt Row in Phoenix to struggling downtown Glendale.

The council, which voted nearly unanimously to sell the building, believes this could be the start of an art renaissance. Vacant buildings will fill up and money will start flowing in, they believe.

“We have to get a buzz going,” Mayor Jerry Weiers said when voting yes on the sale.

The sale’s low-dollar value, though, and the way it came about, is raising eyebrows in Glendale and elsewhere.

Councilman Bart Turner, the lone opposing vote, said the deal was a little too generous.

He and others say they wonder why the city didn’t have a more public process that garnered proposals from anyone interested in the building, and why the council found out about the city’s interest in selling the property just a month before the vote, when the city had been working on the deal for months.

During the meeting, Turner said it was a “package-in-a-bow deal” before

the council heard about it.

“It’s not always just about getting the highest dollar,” he said later in an interview with The Arizona Republic. “But we can have a process that is open, transparent and still accomplishes our vision.”

Goldwater Institute: Sale wasn’t legal

There’s also a question of whether the sale was legal.

When cities sell anything for less than what its worth — and it’s unclear whether Glendale did because no recent appraisal has been done — the state’s gift clause requires that they prove there’s a benefit to taxpayers, and that the city will get back from the deal at least what the property is worth.

The conservative Goldwater Institute, a Phoenix-based national think tank that watches out for violations of this law, is studying the Glendale deal.

Based on a review of the purchase agreement and other available information, the institute contends the arrangement violated the gift clause, said Jon Riches, the institute’s director of national litigation.

The institute plans to investigate the sale further; it often sues cities on taxpayers’ behalf.

The city believes the deal did not violate the gift clause, city spokeswoman Sue Breding said.

Separate from the legality question, Riches criticized the sale process. He said cities should go through a formal, public process to sell land as often as they can.

“That’s important to both protect taxpayers and ensure the process by which city property is purchased and sold is as open and transparent as possible,” he said.

Glendale says it has its reasons

Glendale’s is one of the most historically preserved downtowns in the Valley, but has seen little investment in recent years.

It’s a mix of longstanding specialty shops, restaurants, new ventures and vacant buildings. One in five storefronts is empty by the city’s count.

It’s been that way for a while, since many of the antique shops moved out and the recession dashed hopes of a major rebuild.

The city owns dozens of properties downtown and across the city, including many vacant buildings and lots. Since City Manager Kevin Phelps was appointed in 2015, the city has started selling off some key properties.

It hasn’t always been the most transparent process.

Last year, the council voted to sell a 14-acre city property to a real estate group that wanted to build a BMW dealership, and voted to sell city land at the northwest corner of Loop 101 and Bethany Home Road to Topgolf. Topgolf opened last month and Arrowhead BMW plans to open next month.

Many cities formally solicit proposals when looking to direct what kind of business comes to a key parcel of land, a process that inspires greater transparency. But Glendale chose not to do so on these deals and others.

Phelps said there’s a good reason for this: The city had secured interestof parties it thought was a good fit on those deals, and didn’t want them to walk away.

“A lot of it is timing,” he said.

The city has goals for certain areas, Phelps said, and needs to consider what will benefit the taxpayers long-term.

That’s his reasoning for the process on the downtown property sale, which the city sold to C Plus D Industry, owned by Chase and Dawn Albright.

Councilwoman Joyce Clark said at the meeting that it may seem, at face value, that Glendale was making a bad deal. Before voting, Clark said she expected “10,000 emails” from residents asking why the city sold the land so cheaply.

But Clark said the city believes this business will attract other avantgarde businesses that will feed off its success. She asked the council to “opt out of (their) comfort zone” and give the business “a shot.”

The city bought the brick building on 57th Avenue, which is maybe 60 years old, during a different era.

It was just before the recession hit and Glendale had been buying lots of properties downtown, aiming to use them for different purposes. It’s unclear why the city bought this one.

Brian Friedman, the city’s economic development manager, who worked for the city back then,said the purchase was for “future economic development.” The building is near, but not adjacent to, the Glendale Civic Center.

A city document states it was acquired for “future redevelopment.” Around that time, the city devised a grand plan called “Centerline” that would have rebuilt much the area around the property into a retail and residential center.

But the redevelopment never happened and the city never found a use for the building, other than leasing it back to the organization it bought it from, St. Vincent de Paul.

The building has been vacant since the nonprofit moved out in 2015.

That year, the city commissioned an outside report to examine the value of the property and other city-owned lots. The report found that, together with the nearby parking lot the city originally purchased with the building, it was worth $35 to $45 per square foot for a user and $20 per square foot for an investor.

During the council meeting, Friedman and Assistant City Manager Jack Friedline emphaed

sized that this report didn’t take into consideration the poor state of the building. The appraisal also included the parking lot, which was not included in the sale to the Albrights.

The city gave The Republic a report it commissioned from an outside group in 2017 that explains more about what’s wrong with the building. Although the structure is sound, the report states, the building needs a complete renovation with new flooring, a new roof, a new air heating and cooling system and aboveground plumbing.

The report said it would cost about $1.2 million to turn the space into offices. It didn’t give an estimate for retail, which the city thinks would be less.

The city hasn’t done a recent appraisal.

Research by the city’s real estate manager found that if the building was in good condition and the property had parking, it could be listed for $40 per square foot, or $280,000. If the building was demolished, the land could be offered for $10 per square foot, or $70,000.

Cheryl Kappes, who owns Country Maiden, a shop and market in downtown Glendale, said if she knew the city was offering its downtown land so cheap, she would have signaled her interest long ago.

“Please, give me a call,” she said. “I’ll buy two or three.”

Kappes said the sale lacked transparency, and wasn’t in taxpayers’ best interest. The sale was completed, she said, “in the dark of night, with zero opportunity for other offers to be presented, heard or even considered.”

Friedman mentioned during the council meeting that the Albrights came from Roosevelt Rowin downtown Phoenix, which Turner took to mean that they had a shop there. But it’s unclear whether they did, or whether they simply set up their products for sale on the street.

The business has always been registered at the couple’s home address in Glendale, and Dawn Albright told The

Republic after the council meeting that the business is operated out of Surprise.

The deal doesn’t demand much from the Albrights other than a requirement to get a certificate of occupancy within six months. The sale is not final until that occurs.

After that, the city gets the “right of first refusal” on the property for five years. That allows the city to have first dibs on the property if C Plus D Industry tries to sell the property.

The Albrights did not return emails and calls from The Republic seeking details about their business and their plan.

Friedman told the council that the city would collect about $30,000 in sales tax from the business in the first year it was in town. That figure was based on the business’ overall sales figure, but the business also takes wholesale orders and sells products online. Some of those sales may not create city sales tax revenue.

Generally, when a small business with no out-of-state locations sells something online to an out-of-state customer and ships the product out of state, the sale is exempt from sales tax, Arizona Department of Revenue spokesman Ed Greenberg said. Wholesale orders are also exempt, he said.

Councilman Jamie Aldama voted for the sale, seeing it as a way to boost downtown revitalization. But he said he almost immediately began to secondguess himself and has since has done more research.

During the council meeting, Friedman told the council members that the real estate manager had done a recent property analysis on the property, which Aldama took to mean a full report on the land’s value. The manager did not do a report, though. She simply sent the economic development team research she had done on land value in the area.

After receiving the document after the meeting, Aldama said, he realized the city hadn’t done a formal report on the building’s condition and value.

He now regrets voting to sell the building.

Aldama said the city should have a formal policy on selling buildings that provides a fair and equitable process for everyone.

“The city should be transparent in everything it does and everything it does should benefit the citizens,” Aldama said. “In hindsight, I don’t feel this sale benefits the citizens.”

State law requires cities and towns without charters to seek bids for public land before any sale. Notice also has to be posted about the offer in public places.

Because Glendale has a charter that mentions this topic, state law does not apply. Glendale’s charter gives the city manager discretion on how to make deals.