Scottsdale proposed South bridge

The proposed Southbridge 2 development would feature ground-level retail, condominiums, a public market, two hotels and a 150-foot office building situated from Fifth Avenue and Goldwater Boulevard to Stetson Drive and Scottsdale Road.

Carter Unger is not your typical real estate developer, primarily because he has only been a developer for the past eight months.

But that hasn’t stopped him from pursuing an ambitious new development project, with a working title of Southbridge 2, that could change the landscape of Scottsdale’s 5th Avenue Shopping District.

From a bird’s eye view, it would be an expansive multiuse project with office, hotels and condos complete with ground-level retail throughout. All aspects of the project are meant to work collaboratively to increase the flow of pedestrians through downtown.

In total, the project will feature nearly 200,000 square feet of new Class A office space if constructed, making it one of the most significant office projects in downtown Scottsdale since the Galleria conversion.

Once fully built out, Southbridge 2 could generate over 1,700 direct jobs, including over 700 office jobs, according to an economic impact study performed by Elliott D. Pollack & Company.

The construction of the project alone is expected to create $1 billion in economic impact throughout the Valley, according to the Pollack report.

The report also estimated that once the development is completed and stabilized, it will generate over $383 million in annual output and directly contribute about $4 million in annual tax revenues to the city.

Before entering real estate, Unger’s life followed a decidedly different path.

He served for five years in the Army as an infantry officer and spent time in Afghanistan training the Afghan National Police. He then came home and worked for nearly six years in the Chandler Fire Department.

“I love the fire department,” Unger said. “I gave up being in the Army for my family and found the fire department as a new way to serve.”

So, how does a solider and firefighter become the face of one of the most ambitious redevelopment projects to hit downtown Scottsdale in recent memory?

For Unger, it is all about family and keeping a promise he made to his late father Fred Unger, who passed away from cancer in January.

“I spent my dad’s last month caring for him and talking to him about how this project could help improve the lives of others,” Carter Unger said.

He said that using the resources his father left him for the betterment of the Scottsdale community is the newest way he has found to serve the community.

Fred Unger’s name is a familiar one for many Scottsdale and Valley residents who recognize the longtime developer and his Spring Creek Development company for his contributions to revamping Royal Palms Resort and Hermosa Inn.

He may be more famous for playing a pivotal role in transforming the SRP canal running through Old Town Scottsdale from simply a utility to a public amenity with his Southbridge mixed-use project that is now home to popular shops and restaurants.

That development was always just a starting point for Fred Unger, who planned to extend the project further down the canal and into downtown Scottsdale to create a natural connection drawing more pedestrians and shoppers into the northern part of downtown, his son said.

Unger said his father spent nearly a quarter century acquiring properties in and around Fifth Avenue in preparation for the development.

Still uncomfortable being called a developer, Carter Unger said he is more of a problem solver and “a soldier until the day I die.”

“I’m not doing it how other developers would because I am not a developer. That is a promise I made to him,” Unger said.

So far, he has fulfilled that promise by sharing extensive plans for Southbridge 2 with the public well before he was required to make the documents public in a city presentation – a rare occurrence with a development of this size.

The Project

Since taking over the project following his father’s death, Carter Unger has moved at a breakneck speed and worked with architecture firm  Allen + Philp Partners to create a concrete vision of what Southbridge 2 would look like.

Current plans include a Class A office building, two hotels, a public market, two condominiums and lots of ground-level restaurant and retail space spread throughout the northern portion of downtown Scottsdale from Goldwater Boulevard and Fifth Avenue to Stetson Drive and Scottsdale Road.

Interspersed between the new buildings will be pedestrian-friendly walkways and pocket parks. The project will also feature pedestrian improvements along the canal similar to those that accompanied the original South Bridge development.

The project features two condominium sites that would flank Goldwater Boulevard at Fifth Avenue.

The developer already owns some of the land needed for this portion of the project but is in negotiations with the city to purchase the Rose Garden Parking lot adjacent to the canal on the west side of Goldwater.

The office space is a major component of the project and includes a 150-foot tall building at Stetson and Scottsdale Road and two stories of creative office space above a public market building planned on land currently occupied by shops along Fifth and Sixth avenues.

Two hotels – one geared towards business travelers and a high-end boutique – would sit adjacent to the office tower and open up onto Sixth Avenue. The hotels would be eight and ten stories, respectively.

The public market will sit across from the hotels and provide a connection for pedestrians between Fifth and Sixth Avenue and sit adjacent to a new pedestrian walkway between the two roads.

“The hardest part will be getting Fifth Avenue right,” Unger said.

Unger conceded that the public market, which would sit on Fifth Avenue just west of Scottsdale Road, and the condominiums further down the road will cause some pain for businesses displaced by construction and the new development.

He said his partner Jose Ramirez with Ox Urban Properties will work with tenants to find space in the new development or at other properties he represents throughout the Valley.

“Obviously, this is a very sensitive subject and an important subject,” Unger said, noting that Ramirez knows all of the tenants well and they have had redevelopment clauses built into their contracts.

“We will work to find new locations for them,” Unger said. “They can obviously do whatever they want, but we will try to open up space if it makes sense.”

All in on office

Unger said he did not make the decision to include an office component on a whim, especially considering he got plenty of advice – including from his own investors – to use the land to build apartments.

Investment in apartment projects throughout the Valley is a smart play for developers in the current market, as Valleywide vacancy rates remain below five percent and rents continue to rise, according to Marcus & Millichap’s Multifamily Research Market Report for the Phoenix Metro.

Southern Scottsdale has the highest average rents of any submarket in the Valley at $1,380, according to the report.

Unger added that “Every time an office user leaves, (owners) have to do tenant improvements. With an apartment, you build it once and sell (the property) and make a profit.”

However, Unger said he has no intentions to sell Southbridge 2 when it is completed and wants to create a lasting amenity for downtown.

“One of the reasons no one is doing Class A office (in downtown Scottsdale) is not only is there not good land left or sites, but there are the parking requirements,” Unger said. “Apartment towers are required to have one spot for every 1,000 square feet… I have to park it 4 spots for every 1000 square feet.”

Those spots can get expensive – to the tune of $50,000 per underground parking stall.

The Southbridge 2 proposal includes plans for over 1,500 parking spaces, most of which will be located underground. Southbridge 2 plans indicate that underground parking alone will cost about $57 million to build.

Unger has tried to offset some of that cost by proposing that the city buy out about 300 of the parking spots at the office building to be used as public parking on nights and weekends.

Thus far, he has been frustrated by the city’s response as the city staff question the need to invest in more parking downtown, he said.

A parking study conducted by the city in 2015 indicated there was sufficient parking downtown but noted that many were located long distances from popular destinations.

Assistant City Manager Brent Stockwell said that he could not comment on the parking issue because the city had not received the application for Southbridge 2 yet.

“It would be premature to consider partnering on any additional parking in this area before it’s seen how this proposed development will meet its own parking requirements,” Stockwell said.

For Unger, the cost of building office is worth the reward because it will provide a new source of daily shoppers and patrons for the retail and restaurants located throughout the rest of downtown.

As a landlord to many tenants along Fifth Avenue, Unger said he is saddened to see so many small businesses in the area fail for a lack of foot traffic during the off season in the summer.

He said his properties in the area offer affordable rents and run at a 95 to 100 percent occupancy but also have extremely high turnover.

“It is a great unique location and companies are always trying to start businesses here, but because the area has faded in the last decade there is not enough foot traffic,” Unger said. “These individuals put their heart and soul and money into it, and they fail for nothing else but a lack of foot traffic.”

Unger thinks his project – especially the office component – could help solve that problem by bringing more workers to the area that can support local businesses during typical off times during the day and in the summer.

Community Response

Unger’s willingness to share his plans for Southbridge 2 openly with the community early on betrays the fact that he is not your typical developer.

While most developers hesitate to share any specifics about a project until it has been presented to the city, he hosted an open house for local residents on Aug. 21, nearly a month before the project was even introduced to the Development Review Board.

The response was both inquisitive and largely positive.

Some residents voiced concerns that condominiums along the canal would develop a party-type atmosphere at its rooftop pool similar to the W Scottsdale hotel.

“I love the (entertainment) district, I just don’t want to live there,” local resident Chuck Vivian said.

However, Vivian seemed pleased with Unger’s explanation that the height of the condo buildings will scale down as the project moves south, and the price point of the condos will ensure a more residential feel.

“I am very impressed,” Vivian said. “This is the kind of project and commitment that makes Scottsdale a great place to live.”

Another resident, Penny Post, said, “I think this is great. It is about time Scottsdale had something going in the downtown area.”

She added, “You know the saying ‘If you build it, they will come’ – I think that will happen here.”

The project has also received some initial support from the city.

Stockwell, the assistant city manager, said that “we have been actively working with the Unger family to get this project ready for submittal – we also want a high-quality mixed-use development proposed for this important part of Old Town Scottsdale.”

Development Review Board Members Tammy Caputi and Joe Young both expressed excitement at the project’s potential following a presentation on Sept. 20.

Timeline

Southbridge 2 still has many gulfs to cross before it becomes a reality. The project was presented as a non-action item before the Development Review Board on Sept. 20 and will have to go back before that board, likely this fall, for a recommendation.

The project will also have to go before the Planning Commission and City Council for recommendation and approval of an eventual development agreement.

At his open house, Unger said he hoped to bring the project before the council by the end of 2018.

Even if that happens and the council approves, it will likely be years before any part of Southbridge 2 comes out of the ground.

Unger said that despite the eventual success of the original Southbridge development, the project financially devastated his family, as it opened at the height of the recession in 2008.

With the benefit of that hindsight, Unger said he wants to get his entitlements and city approvals out of the way well ahead of time so that he can remain cautious as he decides on the most opportune moment to bring the project on line.

Still, Unger wants to assure the public that money is not his primary motivating factor in pursuing this development – if that were the case, he would just build apartments and be done with it, he said.

While he said that the project does have to make money – his mother has underwritten a significant portion of the development – Unger said he is not interested in squeezing every last penny out of the properties his father accumulated.

He wants to build the development his father envisioned – a vast multi-use project that reshapes the waterfront and downtown to the benefit of everyone involved, from local shop owners and residents to the city itself.

Despite the risk inherent in shooting for such a lofty goal, Unger is all in on making that vision a reality.

After all, before anything else, Carter Unger – the soldier, firefighter and newly minted real estate developer – is Fred Unger’s son.