A multimillion dollar deal to develop an arts and entertainment district on the east side of downtown Tucson - including a return of noted chef Janos Wilder - is dead.

After the Tucson City Council voted unanimously on June 16 to delay approval of a revised agreement with the Downtown Tucson Development Company, the two partners said they were finished negotiating.

“I’m disappointed and relieved at the same time,” said Don Martin, one of the partners. He said he was disappointed over how the deal was misinterpreted, especially by the Arizona Daily Star, but then said, “I’m relieved because it really was a tough deal for us and the only way it was going to work was as a true partnership. We had been talking to the council constantly and nearly every day for the past two weeks then in the council meeting it sounded like we were starting all over again. They were bringing up things that had been resolved months ago.”

Print this story Email this story Post a Comment Joe Pangburn photo ADVERTISEMENT

Martin said the $4.28 million the developers would receive was inflated on the surface. He said $1.08 million in land credits were going to square up what was left due to the predevelopment agreement with the city.

The remaining $3.2 million was broken up into two $1.6 million portions.

“The first $1.6 million we would receive came from $1.6 million in cash, rent abatement and property given to the different organizations including the theatre,” Martin said. “That was dollar for dollar. And for that we would get the Volvo property outside the core. The other $1.6 million would come from 20,000 square feet of leases downtown and the first 4,000 square feet was going to cost us $400,000 out of pocket in improvements to bring Janos downtown.”

The deal came apart when the Rialto Theatre Foundation continued to voice its dissatisfaction with the new agreement despite the developers’ promise to give the Rio Nuevo Facilities District, which owns the theater, the area inside the Rialto used for bathrooms and concession stands.

Another 2,500 square-foot building separate from the theater but currently used by the Rialto for offices and a green room for performers was not included in the deal and that was the sticking point.

“The highest and best use for that property adjacent to the theater is for the theater to use it,” said Michael Crawford, president of the Rialto Theatre Foundation. “I think it is hard to believe they are walking away when we are so close to a deal. But if that’s the case and they are leaving without wanting to work out some simple, minor details that would protect the city and the theater then it just affirms to the city that this wasn’t a good deal for the city. We’re going to just have to wait and see what their next move is. If the city is really interested in protecting the theatre and they are unwilling to sell that property, it’s not popular, but there is always the option of condemning the building and taking it through eminent domain.”

Martin said the process was a learning experience for him.

“You’d think that if you were operating a business on property someone else owns and you are using it rent-free, you would say, how can we help you in this, what do you need?” Martin said. “That didn’t happen. From the beginning it was ‘this is what we want.’ And they killed the deal. I hope they’re happy with themselves, but I don’t see what their game plan was. Those were the weirdest negotiations I’ve ever been through in my life and I’ve been through a lot.”

Now Martin says he and Scott Stiteler will move into commercially viable agreements with businesses looking to locate into the renovated spaces once the work is complete. Martin didn’t give a timeframe for that work.

“We have a grant to finish the façade of the Rialto so we’re going to do that and make it look real nice,” he said.

Stiteler didn’t wish to comment on the deal but said he was going out of the country for two weeks as part of a group raising money for the Wounded Warrior Project by attempting to swim across the Sea of Cortez.

As a result of the delay, the city missed the June 17 deadline and is on the hook for up to $950,000 as a partial reimbursement to the Downtown Tucson Development Company for what has been invested already into the deal per the predevelopment agreement.

City Attorney Mike Rankin cautioned the council before the vote, the council could urge the developers to bring the deal back, but they are not obligated to comply.

“I feel it is my obligation to remind the council that if we pass this deadline, and there hasn’t been a breach by the developer, the city is exposed to paying damages up to $950,000,” Rankin said during the council meeting.

Councilwoman Shirley Scott asked how that clause was affected due to the partners that have dropped out of the Downtown Tucson Development Company.

Rankin replied he didn’t want to get into a legal analysis but that if the city lands in a dispute, those would be the core issues they would protest.

Councilwoman Nina Trasoff was the only council member to express concerns to a delay.

Contact reporter Joe Pangburn at jpangburn@azbiz.com or (520) 405-2419.