Here's how a plan for a fine dining restaurant in Old Town Scottsdale got controversial

Corrections & Clarifications: Attorney Tim La Sota's name was incorrect in an earlier version of this article.

One of Scottsdale's most prominent developers was able to box out competition from a newcomer in Old Town, killing an upscale restaurant proposal in its current form, even though the project won a majority of "yes" votes from officials, unanimous approval from the Scottsdale Planning Commission and support from city staff and the Coalition of Greater Scottsdale.

On one side of what Councilmember Betty Janik described as a “competition between David and Goliath” is former football player turned investor Aaron Wagner. He's a new face in the city's development scene who proposed a fine dining restaurant called Swags in March, which would have served caviar and A5 Wagyu steak.

Swags would have replaced the shuttered Three Wisemen bar on a 0.2-acre lot property that Wagner purchased for $4.5 million in 2021. That site can only have two-story-high buildings, one less than what Wagner said is needed to make Swags viable on such a tiny lot, so he asked city officials to make an exception for his project in October.

But one of Scottsdale's most prominent developers, Shawn Yari, filed a formal protest against the request that month. He said it was over concerns that Swags would create too much noise and take up limited parking nearby, which Yari feared would impact his $150 million Maya Hotel development across the street.

Yari was the only neighbor in opposition, more than 30 others were in support, but he owns more than a fifth of the properties around Swags. That means Swags needed five, rather than four, votes on the seven-person City Council to secure the height increase, in accordance with state law.

Wagner spent the next four months after his first pitch in October trying to appease his influential opponent. He nixed the rooftop bar, secured more parking than the 30 spaces required, promised to point all rooftop speakers away from the Maya hotel, and agreed to a noise limit that's about as loud as a conversation — something no other restaurant has in Old Town.

“Even though we’re located in the noisiest part of (the city), we’ve agreed to the strictest noise stipulation for a restaurant in Scottsdale,” said Swags' attorney Court Rich when he presented the third iteration of the project at Scottsdale's Jan. 9 City Council meeting. “I think we’ve done all that we can.”

That didn't cut it, however. Yari's team never withdrew its protest, fearing Swags could become a noisy nightclub or a bar. Both would still be subject to the 68-decibel noise limit, meaning even if that did happen, Swags couldn't be any louder than it would be as a fine dining restaurant.

Others like Rich believe nothing would have satisfied Yari because his real concern was competition, not noise.

Yari has a similar fine dining restaurant in the works just one block away from the Swags site, which will also have three floors with an open-patio roof, although it isn't subject to noise limits. Such sound restrictions also don't apply to Yari's bar located less than a quarter mile away from the Swags property.

Yari's attorney Tim La Sota rejected the idea that they are trying to block out competitors, saying he just didn't believe Swags' revised pitch "deals with the concerns we’ve brought up that this is just going to create too much noise. It’s going to negatively impact what we’re building and that’s the reason we oppose it."

Swags ultimately received only four 'yes' votes from the city council, one short of the supermajority it needed. The three officials who voted it down cited parking concerns, judgements that the project didn't warrant a height increase based on its public benefit and issues with Swags' request to build both higher and closer to the road.

Janik, who voted in support of Swags, summed up the rejection as the city bowing to Yari’s sizable influence in Scottsdale, which includes everything from sponsoring the State of the City event to hosting charity events where officials take pictures with five figure donation checks.

“I think that we’re splitting hairs and trying to come up with reasons why we don’t want this. I think the real reason is that there’s competition between David and Goliath and people are lining up with certain sides that they perceive to have more power. That bothers me a lot,” she said.

Swags would have directly competed with Yari’s businesses

Yari's fine dining restaurant, called Calle Rosa, is currently under construction less than 700 feet from where Swags would have been situated. It will have three levels like the Swags proposal, but it will have two open-air patios with music, one on the third and second floors.

And just two days after Scottsdale shot down Swags, Yari's company called Stockdale Capital Partners submitted a plan to the city for another raised outdoor bar that would be attached to Calle Rosa. It’s similar to the bar they pushed Swags to remove from its plan during negotiations.

But La Sota said Yari's opposition was not about "protecting our turf" from fine dining competition in Old Town, and that Calle Rosa didn't even factor into the equation. The core concern, he contends, was how the third floor on Swags could impact Yari's upcoming Maya Hotel project.

The hotel rooms were designed to face towards Wagner's property because it has historically been a quieter area in the entertainment district, so the fear is that guests could be disturbed or kept awake by the noise from Swags' rooftop, endangering Yari's $150 million investment in the building.

“We can’t move this hotel. It faces directly at the Swags restaurant. It’s been designed that way from its inception to avoid noise,” he said. “It’s a significant investment, it’s $150 million … We have lenders, it’s financed and we’re under pressure to keep the noise down so this hotel is successful.”

A fine dining restaurant without rooftop bar service is unlikely to create enough commotion to disrupt hotel guests, but La Sota wanted an extra guarantee that Swags wouldn't be turned into a nightclub down the line. The ask: a deed restriction that prevents Swags from getting a bar-level liquor license in the future.

That was a major sticking point in negotiations. Rich, Swags' attorney, said a deed restriction is "just not something that's done" because it would give Yari, a competitor, "rights over the property" similar to a homeowner's association.

Plus, Swags’ noise restriction would have solved that issue by keeping outside noise levels below that of a conversation, regardless of how the site was used. City staffers confirmed that even if Swags was sold down the line and converted into a nightclub or bar, the noise rule would have carried over to new the property owner.

That, in addition to the fact that no other nearby properties opposed Swags, fueled Court's view that competition was the crux of Yari's opposition.

La Sota argued that Yari's past behavior towards other nearby developments contradicts that accusation, pointing out that Yari never objected to nearby bars called the Goodwood Tavern and Casa Amigos.

Yari is a partial owner of the latter, and Goodwood is three times farther away from the Maya Hotel than Swags would have been.

Yari’s political sway and why officials voted 'no'

Yari has significant political connections inside Scottsdale. One of his companies called Riot Hospitality Group, which is behind the Maya Hotel, is a sponsor of Scottsdale’s State of the City event later this month.

And only a day after the vote on Swags, Scottsdale Mayor David Ortega — who voted ‘no’ — attended an event where Riot Hospitality presented $40,000 to local charities. He and Councilmember Tammy Caputi were pictured holding big checks on stage along with Lissa Druss, a company representative who spoke against Swags before the council vote.

Ortega maintains that his vote wasn’t influenced by anything other than concerns about the project itself, saying that “everyone who comes through the door with a project is given fair and complete consideration.”

The mayor objected to Swags' extra floor and another request it made to build closer to the street than is usually allowed, saying "the up-zoning requested amended standards, which did not conform, violated the up-zoning Itself."

The other two 'no' votes cam from Scottsdale's most development averse officials, Councilmembers Barry Graham and Kathy Littlefield.

Graham explained his decision by saying, “I carefully studied the application and closely listened to resident feedback, concluding that the rezoning and bonuses weren’t justified. Parking issues were also a factor.”

Littlefield's concerns also included the parking situation at Swags, even though Wagner had obtained nearly two-thirds more space than Scottsdale’s rules require.

Councilmember Solange Whitehead said that by rejecting Swags because of parking,  the city was not applying the “same rules to every applicant” and making it more difficult for Swags to get approval than other developments.

“I’m stunned. Do I think there’s a parking problem in the area? Sure. Actually I do … but that’s not pertinent to this case,” she said. “So, now we’re going to apply some strict rule to this little tiny lot that we didn’t apply to these large development projects.”

Reporter Sam Kmack covers Tempe, Scottsdale and Chandler. Follow him on X @KmackSam or reach him at sam.kmack@arizonarepublic.com.

This article originally appeared on Arizona Republic: Scottsdale snubs upscale Old Town restaurant. Why?