The Sedona City Council voted 5-1 on Jan. 28, with Councilwoman Kathy Kinsella opposed and Vice Mayor Holli Ploog absent, to approve a developer’s application to convert the Navajo Lofts project in West Sedona to condominium units for future sale. The application for a preliminary plat for the conversion was previously approved by the Planning and Zoning Commission on Dec. 17.

Planning Manager Cari Meyer told council that the existing development agreement between the city and the developer, M. Keith Holben of the MK Company of Scottsdale, which sets a minimum lease term of 90 days for any of the 60 units that are part of the project, “will carry forward whether they are for rent or for ownership.”

“What precipitated your desire now to have this plat approval to be able to sell as opposed to being strictly rental-focused?” Councilman Brian Fultz asked.

“We had actually always envisioned that we would like to process a plat on the property,” Holben said. “The reason we didn’t do it along with the original development plans was just a function of timing.”

Holben added that he has not yet decided how many of the units will be sold and how many will be rented.

“Even though we can’t offer them for sale at this point, we have received a lot of interest from purchasers,” Holben said. The units cannot be sold until the plat is recorded and a state disclosure report completed.

In response to questions from council, Holben said the condo units will be incorporated within a condominium association, which will have covenants prohibiting short-term rental use as well as an on-site manager.

“With the for-sale product we have more enforceability because there’s another layer with the covenants, conditions and restrictions,” Holben said. The state disclosure requirements would also “foretell to a potential purchaser, if they had any ideas if they wanted to engage in short-term rental, that they’re restricted from it.”

“The development agreement will always be enforceable,” City Attorney Kurt Christianson said. “If the CCRs, the HOA, the condominium association, decided they didn’t want to enforce it anymore, the city could sue for specific performance in the superior court.”

“The potential ability of this project to become condominiumized [sic] was envisioned in the development agreement,” Christianson added.

“The rental properties were very attractive to the city at the time,” Kinsella said when discussing the city’s reasons for having entered into a development agreement for the project.

“The housing units were attractive,” Meyer said. “The potential for condo conversion was always contemplated, but just housing in general in units that we could get the restrictions on, whether rental or ownership, was attractive.”

“I was excited for this project because there was a lack of rental housing available,” Kinsella said. “I think it’s harder for people to come up with purchasing than maybe some of our working folks that might be even in a roommate situation that would be sharing a rental property. I’m sad to see this go and not be available as a rental property. I think it’s a loss for the city, I think it’s a loss for the working population … I think this is really unfortunate.”

Project History

Holben’s MK Company filed a letter of intent for the Navajo Lofts project on April 12, 2021. On July 13, 2021, the City Council also voted to approve a development agreement with Holben’s Sunset Lofts LLC for construction of the Sunset Lofts project, which required that the project be constructed within 24 months.

The design for Navajo Lofts was subsequently approved by P&Z on Feb. 15, 2022, and City Council approved a development agreement for the project on June 27, 2023. Groundbreaking took place shortly thereafter and some of the units are nearing completion as of February 2025.

On Aug. 8, 2023, as Holben had not yet begun construction on Sunset Lofts, council extended the construction start deadline to April 1, 2024; construction had still not begun at that time and the land and project drawings reverted to the city, which has not yet contracted with a developer to construct Holben’s former project, although it hopes to do so on Tuesday, Feb. 25.

With regard to why the application was recommended for approval after Holben had not met earlier commitments to the city, Community Development Director Steve Mertes said, “Cari [Meyer] is bound by the requirements of the Land Development Code and the criteria laid out in the staff report.

“If the applicant meets those criteria, then it is her obligation to recommend approval.”