Kyrene land lease deal still not finalized The Chandler Arizonan

Kyrene land lease deal still not finalized

January 12th, 2021 Chandler Arizona Staff
Kyrene land lease deal still not finalized
City News


The 2018-20 Kyrene Governing Board went into the history books last December without locking in a lease for 28 acres of land it owns along I-10 in Ahwatukee.

Now it will be up to the reconstituted board, which adds new members Wanda Kolomyjec and Margaret Wright this month, to consider a lease that officials said could yield as much as $100 million for the district over 75 years.

The board last October authorized the district administration to negotiate the final details of the lease for the land with ViaWest Group, a Phoenix commercial real estate group.

The land, located between Chandler Boulevard and Ray Road, was originally purchased by the district in the 1990s as a possible site for a school. Instead, Kyrene del Milenio in Ahwatukee was built in 2000.

It was put on the market by the board in 2018 – 11 years after a previous Kyrene administration urged a different board not to sell it because the proceeds could only be used for capital expenditures and not day-to-day operations.

That restriction still applies to any district’s sale of land, although district General Counsel Jordan Ellel was to be conferring with the state Attorney General to see if a lease gave the district more flexibility on how it could spend the money.

It’s unclear why the Kyrene deal has not been inked yet.

“The new board will vote to approve the final ground lease,” district spokeswoman Erin Helm said. “That document is still under review, but it could potentially be ready for a vote in January.”

When it voted 4-0 to authorize negotiations, the board was in a celebratory mode.

“I’ve been hoping to get this done for the largest part of my tenure,” said now former member John King. Then board President Michael Myrick, who also is no longer on the board, abstained from voting because he is in the commercial land business.

Ellel said leasing the land would be more advantageous for the district because it provided a steady revenue stream for multiple years and Kyrene would get the land back at the end of the lease period.

According to the letter of intent approved by the board, whoever leases the land would pay nothing in the first year, $240,000 the second and $800,000 in the third year for the next three years.

After three years at $800,000, rent would increase every five years by 12.5 percent if the tenant pays no property taxes or by 7.5 percent if the tenant pays taxes. The land would then be subject to a reappraisal in the 23rd year of the lease.

The letter of intent indicates that a business park with three industrial buildings will be built on the parcel, similar to a development that ViaWest has on the Chandler side of I-10 parallel to the parcel.

Myrick noted that the fact the district would get the land back after the lease period means future school boards can determine whether to “sell or develop the land, depending on the district’s needs at that time.”

Ellel noted that this is the last piece of undeveloped land owned by the district so that flexibility provided by getting the parcel back in the future could be particularly advantageous.

Three years ago, former Kyrene board member Russ Robb, a real estate expert himself, told the board that leasing made more sense because of the steady revenue stream it provided.

He acknowledged that any sale or lease had advantages and disadvantages to both.

“There are lots of complexities in a ground lease,” Robb said. “It’s slightly riskier than a sale because you are relying on someone to make a payment year after year after year … but it could be very advantageous as opposed to a sale.”

When asked at that meeting about the impact of adverse neighborhood reaction to whatever ends up being built on the parcel, Robb told the board, “I think your motivation is likely to be less philanthropic. I think you probably need the revenue more than positive publicity.”

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