A Boutique Hotel May Join MLK, One North Fifth Apartments

October 15, 2012

By Teya Vitu

Back in 2006, the talk was about Depot Plaza – demolish the Martin Luther King Jr. Apartments and build three towers with a mix of affordable and market-rate housing in a plaza setting.

Scott Stiteler plans to build a a new 130-room boutique hotel on the pad in front of the Martin Luther King Jr. Apartments.

Depot Plaza is not a term heard much recently, even though two large structures and the underground Depot Plaza garage are in place: the new Martin Luther King Jr. Apartments and One North Fifth Apartments, which was a complete overhaul of the old MLK Apartments.

What about the third tower, though?

Since 2007, developer Scott Stiteler has had a development agreement with the city, originally to build a five-story tower with 80-100 market-rate condos.

Stiteler has had a constant presence on Congress Street, even though his designated pad – the paved patch in front of the new MLK Apartments – has seen more action as a street soccer pitch on 2nd Saturdays.

In the mean time, Stiteler has focused his attentions on the buildings at three of the four corners of Congress Street and Fifth Avenue, just a half block to the south of the third tower pad.

Stiteler owns the One North Fifth Apartments, which he converted from low-income senior housing into market-rate apartments, and he added the street retail, including Sparkroot and Sacred Machine. Stiteler also owns the Congress block across the street with Playground Lounge, HUB Restaurant & Ice Creamery and the soon-to-open Saint House.

In addition, Stiteler is a primary investor in the Rialto Block, now home to the University of Arizona Mars and Beyond exhibition, but next year will house Diablo Burger and Proper, restaurants by two highly regarded Flagstaff restaurateurs.

All that has kept Stiteler more than occupied. Stiteler now is ready to move forward on the Depot Plaza pad on which he has had an option all these years.

Out is the plan for market-rate condos. In is Stiteler’s intention to build a five-story, 130-room boutique hotel operated by a prominent international chain. He would not name the hotel chain because a deal is not in place yet but could be in a matter of weeks.

“Downtown needs a hotel. That’s the short answer,” Stiteler said about his shift away from condos.

He wants to start construction some time in 2013 and welcome the first guests somewhere around the end of 2014 or early 2015. Stiteler expects actual construction to take 18 months, but the start date depends on the city permitting process.

“We’re well positioned” to start construction as soon as city permits are issued, Stiteler said. “We’ll work hard to finish by the end of 2014.”

He said the boutique hotel chain he is negotiating with tailors each of its properties to the local setting. The rooms here will have murals of the local landscape in each of the room.

Stiteler is keeping all elements of the hotel close. The ownership team will be himself, his father-in-law and a local hotel development company. The hotel will be designed by  Swaim Associates and FORSarchitecture+interiors, whose office is literally around the corner in Stiteler’s One North Fifth commercial space.

The hotel would be operated by North Face Investments, a Tucson firm that has built five Arizona hotels: a Holiday Inn Express and Candlewood Suites in both Nogales and Sierra Vista and a Holiday Inn in Chandler.

“You’re looking at something upscale. It’s more personal attention and amenities,” said Rudy Dabdoub, North Face’s managing member. “You can stay at the hotel and walk to great restaurants and entertainment.”

Dabdoub, a Nogales native, lives in Tucson as does Christina Rosete, vice president of Cima Enterprises, which manages all of North Face’s hotels and will also manage Stiteler’s boutique hotel.

“It will be unique for Tucson,” said Rosete, a University of Arizona graduate who has worked in the hotel industry since 2001.

Stiteler turned to his father-in-law, Paul Chellgren, to bolster the ownership team. Chellgren was chairman and CEO of Fortune 500 company Ashland Petroleum from 1997 to 2002 and presided over the joint venture with Marathon Oil to create the nation’s fourth largest oil refinery.

Actually, Chellgren, these days in real estate, turned to Stiteler.

“I first started coming here with Scott three years ago,” Chellgren said. “Because of my own interest in investment and real estate, I’d love to tag along.”

Chellgren sees promise in Downtown. He said word is getting out about Tucson to decision makers and what he calls “influentials.”

“You can see the bones and skeleton of what’s progress,” said Chellgren, an operating partner at Snow Phillps, a New York private equity firm. “Clearly, we’re exposing Downtown to a lot of influentials.”