Bankruptcy outcome sets stage for redefinition of Phoenix real estate’s crown jewel

A map of north Phoenix showing the City North location where Crown Realty & Development have master developer rights that may usher the next generation of development to the northern region of the municipality. (Submitted map)

Crown Realty & Development appears likely to play an unprecedented role in how the future of economic development will unfold in the Valley of the Sun, the City of Phoenix — and perhaps the state of Arizona.

“To fund public education you have to make hay while the sun shines and what that means in Desert Ridge is let’s sell some state land,” said Crown Realty & Development CEO Robert Flaxman while enjoying a delightful combination of Florentine omelet and roasted new potatoes the morning of Friday, Feb. 1 at the Omni Scottsdale Resort & Spa at Montelucia in the Town of Paradise Valley.

Days earlier the California-based real estate firm announced Mr. Flaxman’s latest real estate entanglement had unfolded drastically in the favor of the accomplished developer.

Robert Flaxman

In all, Crown Realty won a $54 million bid — on land with an estimated value of $121 million — in United States Bankruptcy Court District of Arizona entitling the real estate firm to 96.5 acres and exclusive Master Developer Rights on nearly 6,000 acres of state trust land.

For nearly a decade the property and developer rights had been the subject of active litigation at Bankruptcy Court, but while Mr. Flaxman confirms the complexities of the case he also says, in a sense, he is drawn to the “gordion knots” of real estate development.

“We have a had a history of pursuing challenging situations that have great opportunity if we can work our way through the gordion knot that locks a property up from its full potential,” he explained of his pursuit.

“If you take a look at Mountain Shadows, that, too, was a gordion knot that needed to be unraveled in order for that property to be redeveloped. I think many people would agree today it is a lot better than what it was with a chain-link fence that sat around that property for the better part of a decade. When we look at Desert Ridge we saw a similar potential to use our skills and our capital to unlock Desert Ridge for its full potential.”

Over the last decade Mr. Flaxman has been an instrumental figure in Arizona resort redevelopment namely setting the stage for two beloved luxury resorts:

  • The Mountain Shadows Resort, 5445 E Lincoln Drive.
  • Omni Scottsdale Resort & Spa at Montelucia, 4949 E Lincoln Drive.

Each resort redevelopment project were complex — at times contentious — revitalization efforts playing out on several different stages from United States Bankruptcy Court to resident living rooms.

Officials at Crown Realty say as Desert Ridge will ultimately unfold the keystone envisioned for the second urban core of Phoenix and perhaps the future economic development of Arizona will finally be realized.

Mr. Flaxman is betting on it.

The scene in April 2013 when the deal was struck between Crown Realty & Development and the Town of Paradise Valley for the redevelopment of the Mountain Shadows Golf Resort. Shaking hands are former Paradise Valley Mayor Scott LeMarr and Rick Carpinelli of Crown Realty. (File Photo)

The next generation of development

Rick Carpinelli, Crown Realty & Development senior vice president of land acquisition and development, says the building potential surrounding and within what locals call, “Desert Ridge” could reshape the economic landscape of Phoenix, but also the state of Arizona.

Rick Carpinelli

The acreage acquired by Crown Realty through bankruptcy proceedings — where Todd Burgess of Phoenix-based Polsinelli Law firm represented the interests of Crown Realty —- comprises the majority of the vacant land east of the 1.2-million-square-foot Desert Ridge Market Place surrounding the existing High Street development.

For Mr. Burgess, the recent courtroom victories illustrated the largest bankruptcy chapter in recent Arizona history coming to resolution.

“Since 2010, there have not been a lot of big bankruptcies in Phoenix,” he noted. “This has been the biggest bankruptcy and the most contentious from a litigation standpoint. It was the most contentious set of hearings I have been involved in.”

The beginning of the case stretches back to early summer 2016 when Epicenter Partners LLC and Gray Meyer Fannin LLC, which are both headed by Bruce Gray, sought Chapter 11 protection for property now owned by Crown Realty.

Todd Burgess

“These debtors came out and filed this case with a litigation strategy,” Mr. Burgess said. “From May 2016 to July 2016 they filed three separate lawsuits against my client, CPF, Vaseo Associates LLC the entity, which is controlled by Crown Realty, that is the secured creditor.”

The litigation has finally come to a close, Mr. Burgess confirms.

“It was just non-stop litigation for almost three years and to a certain extent that litigation continues with appeals on file,” he said. “That was the case that started for Mr. Flaxman as they originally secured the debt in April 2016.”

The bankruptcy was resolved in March 2018 with a ruling from Bankruptcy Court that became a final and non-appealable order. The ruling ordered the sale of the Desert Ridge property through a court appointed trustee. The court appointed Beth Jo Zeitzer of ROI Properties to be the trustee to oversee the marketing and sale of the property.

Crown Realty closed on its bid Monday, Jan. 28, records show.

With a favorable judgment and bid recorded, Crown Realty officials are preparing to break ground in pursuit of:

  • More than 2,500 residential units.
  • 2 million square feet of office space.
  • 500 hotel rooms.
  • 100,000 square feet of retail space.

Furthermore, Crown Realty, through Bankruptcy proceedings is now the master developer for 5,700 acres at Desert Ridge from roughly State Route 51 to 64th Street and on both sides of Loop 101.

The Mountain Shadows resort in the Town of Paradise Valley offers unparalleled views in the Valley of the Sun. (Submitted photo)

“In relation to the 96.5 acres that we now own, we will start development of the property in April of this year,” Mr. Carpinelli said. “What that means is that we will start putting in all the infrastructure, from water to streets and landscaping. We will finish grade the property so vertical development can occur. Over the next year, we will be working on several different developments.”

Mr. Carpinelli estimates vertical development to commence, prior to year’s end.

Crown Realty officials say the first of five phases of development contemplated include:

  • A 300-unit multifamily condominium or apartment project;
  • A 150-unit age-restricted multifamily development;
  • A boutique hotel; and
  • A 320,000-square-foot, multi-use complex including a 50,000-square-foot office component anchored by two signature restaurants.

“We are hopeful to get all of these projects under way this year,” Mr. Carpinelli said. “There is significant interest for commercial activity to occur in and around the area including corporate headquarters. We would like to help foster that development into the area.”

Mr. Carpinelli says a keynote feature of pending development directly under the guise of Crown Realty will be the main thoroughfare into the master planned, mixed-use development.

“The main thoroughfare we are installing is a four-lane boulevard that will be bordered with landscaping and two 12-foot-wide, tree-lined multipurpose pedestrian paths,” he said pointing out autonomous and multi-modal transit options are being contemplated.

As technology evolves so will building construction, Mr. Carpinelli contends.

“That is part of our initial phase of putting in the infrastructure,” he said. “We have the opportunity to develop what many would call the city of the future. A city that has incorporated within it the technology that has just exploded over the last 8 to 12 years since the invention of the iPhone.”

A view of Omni Scottsdale Resort & Spa at Montelucia, 4949 E Lincoln Drive, which was made possible through Crown Realty & Development acquisition of property and zoning entitlements. (File photo)

A rare and unique opportunity

When asked if the development of Desert Ridge will ultimately become his legacy, Mr. Flaxman smiled, and replied, “My children are my legacy.”

For Mr. Flaxman, he sees the development of Desert Ridge and subsequent acreage as an unparalleled opportunity to fund public education — and further diversification of the Arizona economy — while building what he says could become to Phoenix what Century City once was to the City of Los Angeles.

“About 6,000 acres of land that has been shackled, chained up because of recession, litigation and bankruptcy and now for the first time in more than a decade in what appears to be one of the most robust economic times for the nation and the City of Phoenix, we have the perfect storm of alignment with a pro-active master developer, a pro-active city and a proactive state land department,” he said.

The Mountain Shadows resort in the Town of Paradise Valley offers unparalleled views in the Valley of the Sun. (Submitted photo)

“This is so important because one thing that everyone understands is the ability to realize the maximum value of state land is to fund public education that it is subject to economic cycles.”

In the late 19th Century, United States Congress granted about 8.4 million acres to common schools when Arizona became a territory and another two sections when Arizona became a state, according to the Arizona State Trust Land Department. Today, about 8 million acres remain in trust to help fund public education in Arizona.

Mr. Flaxman says the next 24 months could be critical in realizing full land value potential and as master developer of nearly 2,000 acres of state trust land in and around Desert Ridge he expects to lead the next generation of development in the area.

“The master developer is meant to be leader in development. We have no debt so regardless of the cycle, which means we have no mortgage payment to make, we bought into this position with a long view,” he said.

Furthermore, Mr. Flaxman explains the future topography of the area.

“Mayo Hospital, which sits on 250 acres and employs 5,000 people has just announced a $650 million expansion program that will ultimately result in another 5,000 employees. Now you have 10,000 employees in that campus. Right next door, Arizona State University has just broken ground on its medical teaching campus, which is 166,000-square-feet. That is ultimately going to grow to a 700,000- to 1-million-square-foot campus. That will be another 10,000 teachers and students.”

That is only a fraction of the contemplated development that will occur in and around the Desert Ridge Market Place, Mr. Flaxman reveals.

“Just in that 300 acres alone you are talking about 20,000 educator students and medical practitioners,” he said. “The 120 acres north of Mayo has been designated as the biomedical corridor. Two to 2.5 million-square feet of estimated build-out probably employing another 10 to 15,000 high paying jobs.”

In addition, American Express is also under construction on a new 300,000-square-foot building expanding its current employee base of 5,000 to 8,000.

Independent Newsmedia Arizona Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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