After 12 years of vacancy, the downtown Hotel Arizona will become a Hyatt Regency hotel under a new lease agreement with the city of Tucson.

The lease and tax abatement for the hotel with developers Pueblo Center Partners and HSL Circle Properties is an extension of a November 2019 agreement that expired in 2021 because work on the project was not yet completed.

“There is progress. It was slow after the pandemic, there were certainly some disruptions, but HSL is committed to moving this project forward,” said Barbra Coffee, the city’s director of economic initiatives, during Wednesday’s meeting.

The City Council and mayor approved lease extensions and tax abatements for the hotel — located near the Tucson Convention Center at 181 W. Broadway — and another property at 941 N. Stone, just south of Speedway Boulevard, that is slated for housing and some retail space.

Under the leases, the developers are required to “transfer the property to the city and lease it back from the city for a period of 8 years upon completion of the project.” In return, the city will waive property taxes for those eight years, according to memos presented at the meeting.

The properties’ eligibility for the tax credit depended on their expected positive impact on the local economy. Both projects underwent independent economic and tax analyses to determine whether they would be economically beneficial to the city.

The Hotel Arizona, built in 1973, is slated to become a Hyatt Regency. The hotel is estimated to cost $66.9 million to build over 18 months and will include 290 rooms, meeting space and a fitness center, according to a May 2024 economic analysis of the project by consulting firm Applied Economics. It also says the hotel could employ 200 people.

The development companies, Pueblo Center Partners and HSL Circle Properties, are both led by Humberto Lopez, a well-known local developer. The current owner of the property is Pueblo Center Partners, according to city records.

The Hotel Arizona closed in 2012. At the time, Lopez said in a press release that he was “exploring options that would allow it to reopen as a fully renovated, nationally licensed hotel that would serve the Convention Center and downtown Tucson,” according to a 2012 Arizona Daily Star article.

The hotel has been empty ever since.

Second District Councilman Paul Cunningham expressed frustration over the continued vacancy despite numerous previous plans by Lopez to make the building usable.

“With this building that has been vacant for so long and the possibility of actually converting it into a Hyatt Regency, it definitely raises concerns for me,” Cunningham told Arizona Luminaria.

Under the lease, the hotel’s developer would be exempt from $4.8 million in property taxes during the lease term, the analysis said. The report also lists September 2026 as the expected opening date, and the new lease states, “The developer has stated that it is fully committed to completing this project as soon as possible.”

According to the city manager, the city expects to generate $12.8 million in local tax revenue during the lease term. After that, “the project will continue to generate an estimated $2 million per year in direct property tax, sales tax and bed tax revenue for the City of Tucson.”

Lopez told Arizona Luminaria via email that the project is on hold as he waits for “interest rates to drop a little” before moving forward.

The Stone Avenue development project, led by Central Barrio Development, includes “the construction of 18 residential units and a small ground-floor retail space on a vacant lot on Stone Avenue south of the Speedway, as well as the conversion of a “warehouse building into two residential units and retail space.”

Over the eight-year period, the city expects the Stone Avenue project to generate “$327,592 in new direct and indirect local tax revenues,” according to meeting minutes.

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