City renews tax deal to redevelop downtown Tucson’s long-vacant Hotel Arizona as a Hyatt

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

The lease agreement and tax break on the hotel with developers Pueblo Center Partners and HSL Circle Properties is a renewal of an agreement from November 2019 that expired in 2021 because no work had been completed on the project.

“There’s progress. It’s been slow post pandemic, there were certainly some disruptions, but HSL is intent on moving this project forward,” Barbra Coffee, the director of economic initiatives for the city, said during the meeting Wednesday.

The city council and mayor voted to approve the lease renewal and tax break for the hotel — near the Tucson Convention Center at 181 W. Broadway — and another property at 941 N. Stone, just south of Speedway Boulevard, which is slated to become in-fill housing and some retail space.

Under the lease agreements, developers are required to “convey the property to the City and lease it back from the City for an 8-year period” upon completion of the project. In exchange, the city will abate property taxes for those eight years, according to memos presented at the meeting .

The properties’ qualification for the tax incentive hinged on their anticipated positive impact on the local economy. Both projects underwent independent economic and fiscal analyses to determine whether they’d be economically beneficial to the city.

The Hotel Arizona, built in 1973, is set to become a Hyatt Regency. The hotel’s construction will cost an estimated $66.9 million over 18 months and includes 290 rooms, meeting spaces and a fitness center, according to a May 2024 economic analysis of the project by consulting firm Applied Economics . It also states the hotel could employ 200 people.

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

The Hotel Arizona closed in 2012. At the time Lopez said in a news release that he was exploring “options that will enable it to reopen as a fully renovated, nationally franchised hotel that will service the Convention Center and downtown Tucson,” according to a 2012 Arizona Daily Star article.

The hotel has been vacant ever since.

Ward 2 councilmember Paul Cunningham expressed his frustration at the prolonged vacancy despite multiple previous plans by Lopez to make the building usable.

“That building, with how long it’s been vacant, and being able to actually be converted to a Hyatt Regency definitely raises some red flags for me,” Cunningham told Arizona Luminaria.

Under the lease agreement, the hotel’s developer would be exempt from $4.8 million in property taxes during the term of the lease, according to the analysis. The report also noted September 2026 as the anticipated opening date and the new lease states “the developer has indicated they are fully committed to the completion of this Project as quickly as possible.”

According to the City Manager’s Office, the city anticipates receiving $12.8 million in local tax revenue during the lease and after that says “the project would continue to generate an estimated $2 million per year in direct property, sales and bed tax revenues for the City of Tucson.”

Lopez told Arizona Luminaria over email that the project has been on hold as he’s “waiting for the interest rates to ease up a little” before moving forward.

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

Over the eight-year period, the city anticipates receiving “$327,592 in net new direct and indirect local tax revenues” from the Stone Avenue project, according to a meeting memo .

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