Mesa’s dream of refurbishing an empty five-story building downtown is in jeopardy because the developer can’t find a lender to finance the project.
A similar thing happened in Mesa about three years ago, when a Canadian developer — after numerous extensions and delays — walked away from a proposal to build a $100 million-plus resort hotel downtown because he couldn’t find a lender.
The City Council voted 5-1 Monday to give Tempe developer Outsource International another 75 days to line up the financial backing to fix up the former Bank One Building at 1 N. Macdonald. The original deadline was to be Dec. 8.
Mesa bought the 65,000-square -foot building for $1.5 million in August 1997, and several efforts to sell it have failed. The 41-year-old building was gutted during a city-financed $500,000 asbestos removal project.
Donavon Ostrom, managing director of Outsource, told the council Monday that most lenders won’t back the project unless 50 percent to 60 percent of the building lease commitments.
"Frankly, I’m disappointed," said Councilwoman Claudia Walters before voting for the extension. Walters said she originally voted for the project because Outsource officials said California-based McShane Corp. would finance the project. On Monday, Ostrom said McShane had pulled out of the deal.
Councilwoman Janie Thom cast the dissenting vote, saying the city should cancel the agreement with Outsource and sell the building to the highest bidder.
Last year, the City Council chose Outsource over several other firms to build offices on the top four stories and a finedining restaurant and coffee shop on the ground floor. The idea now is to locate a bank and sandwich shops on the ground floor, Ostrom said.
Outsource is asking to buy the building for $1 in exchange for refurbishing the structure — a project the city has estimated will cost between $4 million and $5 million.