Mesa hears final terms for Cul de Sac ground lease and phased development of Site 17

Mesa City Council received a presentation Aug. 28 on proposed ground-lease and development agreements with Cul de Sac for the 19.14-acre Site 17 near University and Mesa Drive. City staff said the package uses a lease-with-options structure intended to phase development and protect city interests until public improvements are complete.

The proposal, presented by Jeff McVay, manager of Urban Transformation, Jimmy Turacio, Downtown Transformation project manager, and Ryan Johnson, Cul de Sac CEO and cofounder, would place the entire site under a single ground lease with phased purchase options. "The lease is gonna be for the entire 19.14 acres of the site all at 1 time," Turacio said, adding the lease term is 50 years but that "it's just the lease is a vehicle for the purchase," a point Legal Counsel Mr. Smith reiterated.

The nut of the arrangement is a staged pathway to sale: Cul de Sac would develop the site in three phases and must complete specified public infrastructure and start vertical construction before the city is obligated to sell each phase. Turacio described option mechanics: a $100,000 option payment for Phase 1 (applied to purchase) that expires after 36 months, with the city manager having authority to extend the option up to six months. Turacio said Phase 1 must include at least $3,200,000 of public improvements before the city must sell that portion.

Why this matters: the plan would convert a long-vacant city parcel into a mixed-use, mostly residential neighborhood the developer describes as car-light and walkable. The documents the council will consider tie land-sale proceeds to reimbursement of public improvements: 100% reimbursement from Phase 1 land sale proceeds, then 50% for Phase 2 and 35% for Phase 3. City staff said those proceeds would be reinvested in off-site and on-site public infrastructure, including connections to Main Street and the light rail.

Key terms and schedule - Site area and lease: 19.14 acres under a single ground lease with a 50-year term; the lease is structured to enable phased purchases. - Timing: Phase 1 has a 24-month outside window to commence public improvements; Phase 2, 48 months; Phase 3, 72 months. Once private (vertical) construction begins for a phase, the developer has 24 months to complete it; the city manager may extend some deadlines by 4.5 months. - Rents and contingencies: a flat rent of $15,000 for the total site during the first two years (and developer maintenance responsibilities), then $5,000 annually while construction is active. If lease terms are breached, the rent reverts to a market rate determined by arbitration/appraisal. - Purchase mechanics: City and developer appraisals informed pricing; the city appraisal is being used for Phase 1 at $13.44 per square foot. Phase-area estimates: Phase 1 roughly 5.5 acres; Phase 2 and 3 acreage to be determined (staff provided an approximate split for planning). The option payment for Phase 1 is $100,000 and expires after 36 months from lease signing unless extended. - Infrastructure thresholds: Phase 1 must complete approximately $3.2 million in public infrastructure (sewer, water, streets) before the city is required to sell that phase; later phases have lower percentages tied to sale proceeds (50% and 35% respectively).

Planned program and minimums - Total units: The project is structured to produce about 1,000 residential units across three phases (staff counted minimums that add to the 1,000-unit total). - Phase 1: minimum 140 for-sale townhomes (2–3 bedroom, 2–3 stories) with one dedicated off-street parking space per townhome and a minimum of 140 off-street parking spaces. - Phase 2: minimum 250 units (rental, studios–3BR), minimum 10,000 sq. ft. commercial, and 250 parking spaces; possible student housing or additional for-sale units if Phase 1 sales are strong. - Phase 3: up to 610 market-rate rental units, roughly 40,000 sq. ft. commercial space, and a minimum of 425 parking spaces. Overall project minimums include about 25,000 sq. ft. of retail and 25,000 sq. ft. of residential amenities and roughly 800 parking spaces.

Public infrastructure and reimbursements City staff described a prioritized list of off-site public improvements that could be funded from land-sale proceeds, such as streetscape work on Second Street and connections into adjacent neighborhoods. McVay said the city is not obligated to fund off-site improvements beyond the amount land-sale proceeds can cover. Council members repeatedly asked staff whether cost estimates for those off-site projects exist; staff said a list of prioritized improvements is included in the draft development agreements but that detailed cost estimating will require initial design work.

Debate and concerns Council members supported activating a long-vacant parcel and the for-sale townhome component, but several expressed caution about parking, timetable risks and developer capacity. Mayor and council members questioned whether Cul de Sac could build multiple phases concurrently while completing the Tempe project; Ryan Johnson said Cul de Sac "absolutely" has capacity and noted Tempe is entering its third phase. Vice Mayor Sommers and others pressed staff to ensure legal protections if the developer stalls; staff emphasized the lease contains termination rights and that sale obligations are triggered only after infrastructure benchmarks are met.

Mobility, design and neighborhood transition Cul de Sac and staff described "mobility hubs" throughout the project for pedestrians, bikes, scooters and autonomous vehicle pick-up/drop-off (Waymo was cited as a growing local mode). Staff and the developer said the plan includes lower-scale townhomes along the border with the Wilbur Historic neighborhood and green buffers to transition density.

What happened next Staff said the final documents were being finalized with attorneys and that the council would consider the ground lease and related development agreements at its Sept. 8 meeting. No Council vote on the agreements occurred during the Aug. 28 meeting.

Ending If approved on Sept. 8, the city would execute the ground lease and start the option periods (Phase 1 option period would begin on lease signing and run 36 months). City staff said the structure is designed to protect city assets while enabling Cul de Sac to proceed with phased construction and financing.