Author Archives: AZ Big Media

AZ Big Media

About AZ Big Media

AZ Big Media has grown to cover a multitude of niche topics and industries within its various publications, and become a host for a series of publication-related events and statewide expos.


You May Love Job, But What About Co-Worker?

Love is in the air, and sometimes those amorous feelings lead to claims of sexual harassment and discrimination in the workplace. As Valentine’s Day approaches, employers should be mindful about office romances in light of some interesting statistics:

  • More than 20 percent of married couples met at work, yet nearly half of those employees reported that they did not know if their company had a policy on office romances.
  • According to a recent survey, 59 percent of employees admitted that they have been involved in an office romance.
  • An additional 64 percent answered that they would be willing to do so if the opportunity arose.
  • This same survey reported that 75 percent of employers do not have a policy regarding workplace relationships.
  • (a dating site for married people looking to cheat – yikes!) reports that 46 percent of men and 37 percent of women have had an affair with a co-worker. Among these cheaters, 72 percent percent of women and 59 percent percent of men say that they had their first encounter with the affair partner at a company holiday party … which means now is the time for employers to pay attention!
  • A different 2013 survey indicates that 92 percent of employees feel they should not have to report their office romance to Human Resources.
  • That same survey shows that nearly 85 percent of surveyed workers believe work colleagues should be allowed to have sex and 90 percent admitted being (or having been) attracted to a co-worker.

It’s Only Love, What’s the Harm?

While consensual office relationships are more commonplace than in the past, they can trigger business and legal headaches for employers when the relationship fizzles or is no longer consensual. Moreover, fellow employees may feel resentful, jealous, uncomfortable, or intimidated (especially in relationships between a supervisor and a subordinate), leading to complaints of sexual harassment, discrimination, or retaliation.

Importantly, claims may be brought not only by the individuals in the relationship, but even by third parties. Complaints of “paramour favoritism” are on the rise and are being filed by employees who allege they are overlooked due to preferential treatment towards a co-worker who is engaged in a romantic relationship with the boss.  While courts differ on whether such claims are meritorious, turning a blind eye to such relationships may result in business interruption and liability.

In 2011, for example, the EEOC reported that 11,364 charges of sexual harassment were filed, and 16.3 percent of those were filed by men. The EEOC recovered more than $52 million in damages for sexual harassment claims in 2011. Employers might not be able to prevent love in the office, but they can take action to mitigate potential liability. An important initial measure is to draft a good policy depending on your company’s size, structure, business goals, and culture.  If you implement an office dating policy, you must enforce it uniformly and take appropriate and equal action for violations of the policy.

What Does Company Policy Say?

Now is a good time for employers to update or create a policy governing dating among workers.  While some policies prohibit romantic relationships altogether, many employers recognize that employees will date each other regardless of policy. In fact, they might “sneak around” to avoid violating the policy, which could create even more tension if the relationship is discovered or known only to a select few.  In addition, strict no-dating policies may be difficult to implement and enforce, as they may not clearly define the conduct that is forbidden (e.g., does the policy prohibit socializing, dating, romantic relationships, or something else?).

Some policies interdict dating among management and staff, while others specify that there is to be no fraternization with outside third parties to avoid conflicts of interest or the appearance of impropriety.  Still, other organizations mandate that employees who date one another voluntarily inform the company about their relationship.

In such cases, the notification policies direct employees to report their dating relationships to Human Resources, the EEO officer, or a member of management, and they ask employees to sign a written consent regarding the romantic relationship. While this type of policy may seem intrusive, these documents are drafted to protect employers from unwanted complaints of future sexual harassment or retaliation.

When asking employees to sign consents, you should again advise them about the company’s sexual harassment policy and remind them about ramifications of policy violations. Document that the employees entered into the relationship voluntarily, were counseled and – if/when the relationship ends – include a memo in their respective personnel records that the relationship ended, and the employees were reminded about the company’s sexual harassment policy.  You should require the dating parties to make certain written representations to shield the company from future claims:

  • The individuals have entered the relationship voluntarily and the relationship is consensual.
  • The employees will not engage in any conduct that makes others uncomfortable, intimidated, or creates a hostile work environment for other employees, guests, or third parties.
  • The employees do not and will not make any decisions that could impact each other’s terms and conditions of employment.
  • The employees will act professionally toward each other at all times, even after the relationship has ended.
  • The relationship will not cause unnecessary workplace disruptions or distractions or otherwise adversely impact productivity.
  • The employees will not retaliate against each other if/when the relationship ends.

Tips for Employers

Employers should prepare and implement a clear policy regarding office relationships or update an existing one, and be sure to disseminate it and obtain employees’ acknowledgements. The policy should address to extent to which office relationships are permissible, and, if appropriate, require employees to promptly disclose the existence (or termination) of a romantic or sexual relationship to a designated member of Human Resources, EEO officer or management.  When the employees involved are in a supervisor/subordinate relationship, disclosure is especially critical so that the employer may effectively address the impact of the relationship (e.g., evaluating if it is necessary to change job duties or reassign the employee(s)).

If harassment occurs despite an employer’s best efforts to prevent and stop it, you will have a strong defense if you can demonstrate that you have done the following:

  • Implement and enforce a sexual harassment and office romance policy that provides a clear reporting channel and prohibits retaliation for good faith complaints.
  • Train new and existing employees on the sexual harassment policy and document the training.
  • Train managers on what constitutes sexual harassment and how to handle complaints.
  • Train employees to report inappropriate behavior.
  • If a relationship develops between a manager and his/her subordinate, transfer one of them, if possible, to eliminate a direct reporting relationship.
  • Promptly and thoroughly investigate complaints.
  • Take appropriate corrective action to address prior incidents of sexual harassment.

Regardless of the type of policy your company adopts, be sure to customize it to the needs and actual practices of your business. Train employees and managers on expectations governing office romances. A well-drafted and uniformly enforced fraternization (or non-fraternization) policy will not prevent workplace relationships altogether, but it can protect you if you encounter office romances.


Mona M. Stone, of counsel, works in the Phoenix office of international law firm Greenberg Traurig.

7th Ave./Courtesy of DAVIS

Tenants Turn Right-Sized Up

As the market shifts, more retailers are trying to find the most efficient balance of inventory, staff and size, according to Anita Blackford, senior vice president of leasing for Carlyle Group’s Metrocenter Mall. She’s seeing the theory in practice as Metrocenter fills its voluminous 1.3 MSF.
“We’re seeing strong opportunities for local businesses to get a foothold in a mall environment,” she reports. “We’re seeing smaller stores, and that’s a reflection of lingering economic concerns.” For Metrocenter, this creates opportunities to more closely align with its changing market. The mall’s owner is also opening space to community groups and non-profit organizations. The changes in space demand helps facilitate this unique service.
Traffic in Metrocenter is up 10 percent over last year. “Our shoppers are different than some other areas of the metro,” Blackford says. “I’m seeing three generations of families coming into the mall together to shop and be entertained.”
“Right-sizing for efficiency” is what experts are calling the shift in store sizes working its way through shopping centers and malls across the nation.
“While retailers are cautiously optimistic about the coming year, their customers are still worried about jobs and the economy,” Blackford says she hears merchants say.
“The thing about ‘right-sizing,’ is that it doesn’t always mean ‘getting smaller,’” says Steve Helm, assistant vice president, property management for Macerich. Helm is responsible for managing Scottsdale Fashion Square. “Some stores are growing.”
Bath & Body Works and The Limited, Helm says, know space needs and customer demands. The stores reduced footage, which allowed Scottsdale Fashion Square to convert the space for another store. On the other hand, Victoria’s Secret moved its spin-off, Pink, into a space opening up when another store resized, then Victoria’s Secret grew to take over Pink’s former space. Other changes include Hugo Boss relocating across the mall into a flagship-sized store to make way for its women’s clothing line. Then, lulu lemon leased the former Hugo Boss store. A resized Ann Taylor store left a space for Pink and the new Johnny Was.
The right-sizing trend is something other shopping center managers and owners are seeing across the state.
In one extreme version, Kornwasser Shopping Center Properties LLC is going to tear down more than 200,000 SF of an obsolete enclosed Yuma mall.
“Southgate Mall will be more a valuable property in a smaller, reconfigured design,” says Gordon Keig, senior vice president for the mall’s owner.
Right now, Southgate has nearly 350,000 SF. After the demolition and new construction, Keig says the total square footage will be closer to 310,000 SF. Right-sizing for efficiency is so crucial in this effort that a new lease for the retained 50,000 SF former Dillard’s will not be signed until the old mall is gone.
Kornwasser’s Yuma tenants are not necessarily down-sizing in the conversion. A space holding a former J.C. Penney’s store is now home to an expanded Burlington Coat Factory.
“Reducing the square footage of a property is sometimes necessary to meet a changing market,” says Keig. “It actually makes the property more inviting and will generate more sales per square foot.”
“The future for shopping centers is shifting,” says Blackford. “We’re going to see different mixes of uses where once was once just shopping.”
She expects to see medical clinics taking space in malls and in the space around malls, residential or assisted living developments, possibly even hotels.
Jennifer Davis Lunt, president and managing partner of Davis Enterprises, has seen a different type of “right-sizing” trend.
“Some smaller businesses are coming back from working out of homes and garages with confidence to lease space,” she says.
However, she says that in many cases, the businesses are taking less space than they might have before the recession.
“The square footage a store leases is credit-driven,” she says. “Local businesses are leasing, but the size of the store is affected by equity—a number the recession impacted for many. On the corporate side, we’re not seeing down-sizing, but we are seeing additional locations leased.”
Just as Kornwasser sees more value from less space, Davis does as well.
“At our Seventh Avenue and McDowell Road (Phoenix) property, we had to demolish an old convenience store,” explains Lunt. “Even though the renovated historic building didn’t change its size, we needed additional parking for new tenants Starbucks, Pei Wei and Side Bar. Losing the footage from the other store made the project feasible and more valuable.”
Davis Enterprises has another example of right-sizing, an old fast food and floral shop at 4700 N. Central Ave. in Phoenix. The area wouldn’t support a casual-dining or fast food outlet in that configuration.
By adding new dining space in an addition — and maintaining historic character with its unique front window — the building was right-sized for a sit-down restaurant.
“The property had character, but its size and configuration were not usable in today’s market,” Lunt explains. “With the increased space, Hulu was able to open and has been quite successful. We fit the space to the tenant’s needs.”
The biggest impact of “right-sizing” comes from the excessive number of empty big boxes in Arizona — the national leader in big-store vacancies.
“Some big boxes are being divided,” explains Dave Cheatham, president of Velocity Retail Group. “But it can be difficult to divide a big box. The rent drives that decision. With per-foot rents still depressed, a landlord may do better renting less than the full space and leaving a portion of the building vacant.”
“We did that with a couple of Mervyn’s for Hobby Lobby,” says Cheatham. “At Paradise Village, for example, Hobby Lobby pays for 50,000 SF of the 73,000 SF space. It did not make economic sense to divide off the remaining space and lease it.”
This is causing creative uses for former boxes. Velocity sold an old Albertson’s in Gilbert to Leading Edge Academy, which is now constructing a second floor and converting the grocery into a charter school. In Tempe’s Emerald Center, a former furniture warehouse store is now a day spa on one side and a shooting range on the other.
“We’ve got to be creative with the big boxes,” says Cheatham. “And get them off the market.”
Creativity is the watchword for shopping center owners as store spaces are resized to the right fit for the post-recession tenants.

metrocenter, WEB

The Magic’s in the Makeup: The Shopping Centers of the Past Are the Future

From fresh paint to new market positions, shopping centers are pumping in deferred dollars to greet the returning retail dollars.

“When things stay the same, that’s scary,” says Stan Sanchez, president and partner of De Rito Partners, about the shift in the Arizona shopping center marketplace. “There’s no doubt that location, location, location is still most important for retail site selection. The difference is that the market for the location is shifting.”

Sanchez and his company recognized the shift in the markets surrounding properties they own and manage, and post-recession activity is freshening those properties.

“There’s two parts to all the activity going on,” says Dave Cheatham, president of Velocity Retail Group. “It’s not a wave of renovation; it’s a combination of catching up with deferred maintenance and updating properties for the market.”

Gordon Keig, senior vice president at Kornwasser Shopping Center Properties, LLC, agrees, but with a slightly different take.

“Building in a growth area ties up your money for as much as three years,” he says. “Finding a good value in an older property and turning it around is a lot more appealing because you are working with a current cash flow.”

Although the proverbial “location, location, location” is still good, the property’s market has changed. Demographics shifted in Arizona markets from the time many shopping centers were built. Throughout 2013, the media bemoaned the plight of aging shopping centers or predicted the scraping and redevelopment of obsolete retail corners.

“I don’t see that happening,” says Cheatham. “In the Phoenix and Tucson markets, we have challenges with empty big boxes, and those are being adapted to alternative uses. Shopping centers, even distressed centers, are changing to match the market.”

Kornwasser bought the  Southgate Mall late in 2012 and has plans to tear down the main building in the 346,000 SF mall then rebuild it with smaller, contemporary outward-facing stores.

“There is shrinking demand for retail space,” he says. “Even with the reduced square footage, we’ll have a more functional, efficient and valuable property.”
At the other end of the spectrum are looks.

“Lipstick,” chuckles Sanchez, “Some properties just need a little lipstick – painting, landscaping and a facelift.”

From De Rito’s platform, Sanchez is involved with upgrading its properties, overseeing enhancements of properties managed and in some cases, running the redevelopment efforts.

“It was more than lipstick for Pavilions (Loop 101, Indian Bend and Pima roads in Scottsdale),” he says. “It was a large-scale redevelopment of the property.”
Countering the downsizing trend, De Rito Partners took the center from 900,000 SF to 1.4 MSF.

“Redevelopment in this market requires innovation and creativity. We changed paving, landscaping and facades,” Sanchez lists the upgrades to the Valley’s original power center. “We’ve got a modern look and changed the property to fit the changing market.”

This may be the most important mantra for retail property owners for the second half of the decade: changing the property to fit the changing market. Keig, Sanchez and Cheatham all spoke of how the market has shifted in the past 10 years.

“We have an interesting situation in the market,” says Cheatham. Velocity is one of the largest retail brokerages in the state in terms of square footage represented. “We have more big box vacancies than anywhere else in the nation, and we’re the best place in the country for small-space leasing activity.”

Small store leasing is going to be very healthy in 2014, he says. Rental rates are still very competitive for lessees, but there are going to be fewer new retail spaces developing. Sanchez sees single-digit retail vacancy rates in 2014. For Keig, the investment is in already-developed neighborhoods.

“In-fill is finally beginning to happen,” he points out. “We’ve heard of it for years, but with financing challenges today, it’s easier to back a project where there is some existing cash flow from current tenants. The project moves faster.”

It’s not just the small shopping centers undergoing facelifts and cosmetic surgery. “We’re going to be re-shaping (Scottsdale Fashion Square)” reports Steve Helm, assistant vice present, property management for Macerich and manager of the 1.9 MSF tri-level Fashion Square. Once city approvals are locked down, Macerich plans construction of a nearly 100,000 SF addition that replaces the current, aging Harkins theaterplex on the lower level by raising a new 12-screen complex to the second level. About 50,000 SF of retail space will be opened up under the new theater.

“Redevelopment is exciting and rewarding,” concludes Keig. “It’s an opportunity to invest in neighborhoods, and the neighbors return the favor when you do it well.”

Transitional Leaders 2011

5 ways to be a more effective Project Manager

There is a wide range of abilities in the Project Management field. However, there are always ways to become better in our profession. So here are a few suggestions that may help in this endeavor.

No. 1 Be a Leader
While this should be pretty obvious, it is very easy to get caught up in personalities and the normal socialization of the workplace. Especially if the project is a long-term one, or one that the team needs to work long hours together on. As a project manager, the important thing to remember is that your only goal is the completion of the project. It is not to be friends with everyone or have them all like you. Projects can easily get into trouble if things start sliding due to the project manager not wanting to hold people accountable. Of course, if you can get the project completed and everyone still loves everyone, then you may be canonized at some point.

No. 2 Stop Multitasking
This may be the hardest one to do effectively. It has been proven by numerous researchers that multitasking is bad for everyone. Yet we still try and do more than we really are capable. So how do you control this? In a word: Delegate. You have a team of subject matter experts (SMEs) plus others on your team. So ask them to help or assign tasks to them that they should be doing versus you. Yes it is easier for you to do it, but what is the point of having a team if you are doing most of the work?

No. 3 Have Effective Meetings
As project managers a lot of time is spent in leading meetings. To make sure the time spent in these meeting is used efficiently, a key tool, which is underused, is a Team Charter. This is a simple one-to two-page document that details the protocol of the meetings that everyone agrees to. Items in the Charter, are everyone agreeing to be on time, no cell phone usage, etc. Here is one suggestion on how to create one. (there are many other examples online) Using something like this will not only help the existing team, but will also allow new people that join to know exactly what is expected rather than them having to guess on their own.

No. 4 Be an Agent for Change
Process and procedures are great for keeping everything running smoothly, especially on difficult projects. However, one thing the team should be doing is making sure that these are helping the project versus hurting it. If you or someone on your team can improve a process, then speak up and let it be known. Showcase how the change will make this project be done faster, cheaper, etc. The change that is proposed may actually impact multiple projects versus just yours (or even the entire company). However, if the change will only be a benefit to your team/project, be sure to explain that this is just an exception for this project and not a global one. If you can accomplish this, your team (and sponsors) will thank you.

No. 5 Breathe
An important thing that project managers sometimes forget is that the project(s) they are responsible for are not theirs. Project Managers normally do not ‘own’ projects, the sponsors do. Project Managers are only responsible (and most of the time that by itself is a huge task) for managing the project, not owning it. So if massive changes occur for the project, including canceling, it is not you it is them. So do not react or stress out as if this is something you or your team were doing wrong.

With the increasing need for Project Managers, we should all want to improve our skills and abilities as our projects become larger and more complex. Hopefully one of these suggestions will help you in becoming a better project Manager. If it does, then this article has done what it was intended to, help.

Russell Harley is a veteran project manager and PMO director, passionate about helping organizations embrace world-class project management practices and “climb out of the quicksand” in terms of gaining control over complex, ever-changing project portfolios. The best practices he advocates stem from key learning’s acquired from his M.S Degree in Project Management, combined with over 20 years of hands-on PM experience in the high technology, telecommunications, and clean energy sectors.


Webinar teaches you to utilize R&D tax credit

Arizona now offers the single most generous R&D credit in the nation. While most states have an R&D credit rate of about 5 percent, Arizona’s is at 24 percent, which even exceeds the maximum federal R&D credit rate of 20 percent. But Arizona holds another special distinction in the realm of R&D credits – it offers this benefit in the form of a refundable credit to qualifying businesses.

On Wednesday, January 15, Moss Adams will host a Webinar and discuss Arizona’s research and development tax credit and explain why the state offers the most generous R&D incentives in the nation. Most important, they will discuss if and how your company can take advantage of these lucrative incentives, which are within closer reach than most companies think.

The refundable credit presents a rare opportunity for companies that cannot currently utilize their full Arizona R&D credit because they are either in a loss position or their credit amount exceeds their Arizona tax liability.  In such situations, qualifying businesses may elect to receive this excess credit amount in the form of an immediate cash payment in lieu of carrying the credit forward, up to a maximum of 15 years, to offset future tax liabilities.  The refundable opportunity is limited to companies with fewer than 150 full-time-equivalent employees while the non-refundable credit has no such limit.

Timing is critical for the refundable credit.  While there is no annual cap on total non-refundable R&D credit claims, refundable claims are limited to $5 million per year. These funds are allocated on a first-come, first-serve basis until the $5 million is exhausted. Since the refundable credit option was first offered in 2010, the $5 million cap has been substantially depleted by the end of April each year.  However, it’s uncertain how quickly this reserve will go for the 2013 tax year.

Eligible refundable credit applicants must obtain preapproval by submitting an application prior to filing their tax return.  A full R&D credit calculation needs to be submitted with this application. Therefore, R&D studies must begin immediately to allow for timely completion and submission of the preapproval process.

It’s a common misconception that R&D tax credits are limited to large high-tech companies that perform cutting-edge development.  In actuality, the tax definition of R&D is far more expansive than most people assume. A wide range of businesses can qualify for the credit – from companies in the food and beverage, apparel, and agriculture industries to those involved in construction, manufacturing, and energy production. Both the refundable and non-refundable Arizona credits are available to individuals, corporations, and all types of pass-through entities.

Whether you’re interested in pursuing the refundable credit or the non-refundable credit, it is always helpful to consult a dedicated team of R&D credit specialists, such as those at Moss Adams, who can help you navigate the process.


Peter Henderson is manager, R&D tax credit team at Moss Adams. He is based in Irvine, Calif. and can be reached at Jose Tezanos is senior manager, state and local tax practice for Moss Adams. He is based in Phoenix and can be reached at


Essential facts about the ACA for small business

The new year is usually a very busy time for small businesses…new marketing plans, new merchandise or services, regulatory changes, and year-end reviews all add to our already busy agendas. This year our plates are even more full because of provisions of the Affordable Care Act (ACA) that are being phased in for 2014.

A law that is comprised of more than 2,700 pages and 30,000 pages of regulations cannot possibly be summarized in one short article, but there are several pressing issues that every small business (2 – 50 employees) must address, one of which applies whether you offer group health insurance or not:

1.     Mandatory Notices:

a. “New Health Insurance Marketplace Coverage Options and Your Health Coverage”

Every employer must provide all current employees and future new hires with this notice. It’s form No. OMB 1210-0149, The current version of the form states that it expires 12-31-2013 but it will be updated shortly. This notice informs your employees about the existence of the public marketplace and describes their options. There are two versions of the form, one for employers that provide group health insurance, one for those who do not.

b. “Summary of Benefits and Coverage (SBC)”

The SBC is an easy-to-understand, plain language document describing your health insurance plan that must be distributed to all participating employees. It is the employer’s responsibility to provide the SBC however nearly all insurance companies will provide this as a courtesy to the employer.

The summary must include the Coverage Period or plan year dates. The SBC must conform to the government’s guidelines. Each SBC must be accompanied by a uniform Glossary of Terms that provides clear definitions of plan features such as deductibles, copayments, and coinsurance. The SBC also includes examples of claims for commonly used services such as Having a Baby, and Managing Type 2 Diabetes. The claims examples illustrate the types of care usually provided for the medical condition, the costs of each type of service and then what the patient pays under the terms of the plan contained in the SBC.

2.   Maximum 90-day Probation Period for New Hires or Newly Eligible Workers

Prior to 2014 employers had the discretion to impose probation periods for new hires, requiring them to work for a period of time before becoming eligible for group health insurance benefits. The most commonly chosen probation period required group health insurance coverage to begin on the first day of the month following 90 days of employment. In certain, high turnover industries employers required probation periods of up to 12 months. Under the ACA, as of January 1, 2014 or the renewal date of an employer’s group health insurance plan in 2014, the maximum probation period is limited to 90 days. In other words, group health insurance benefits may begin no later than the 91st day of employment for all new hires or for part-time employees who were previously ineligible who have changed their status to full-time.

3.    Postponement of the SHOP Public Marketplace for One Year/Small Business Health Care   

        Tax Credit

The SHOP, or Small Business Health Options Program, was to be a public marketplace for small businesses to purchase group health insurance coverage, much as individuals and families began doing on October 1, 2013. The SHOP has been postponed for one year. However, small employers are able to work directly with agents, brokers, or participating insurance companies to purchase SHOP coverage as they were intended to be able to do through the public marketplace.

Unlike personal and family health insurance plans there are no enrollment deadlines for plans through SHOP. Employers may begin these plans at any time. One major reason to consider the SHOP is that business owners are eligible for the Small Business Health Care Tax Credit, which, if all conditions are met, is a 50% credit (up from 35%) in 2014. The tax credit is only available if coverage is purchased through the SHOP.

4.     If You Offer Group Health Insurance Coverage to Your Employees’ Families but do not                                                                                                                                            

        Contribute Toward the Cost Consider Changing your Group Plan to Employees Only

If you do not contribute to the cost of dependent coverage it will be much easier for your employees’ family members to qualify for subsidized health insurance premiums through the public marketplace if you amend your group plan to include employees only.

For additional information contact Health Insurance Express, Inc. at 480- 654-1200 or


Alan Leafman is a 25-year health insurance veteran and is the owner of Mesa-based Health Insurance Express, the Valley’s only health insurance superstore.

college graduates

As the Job Market Improves, College Enrollments Shift

Six years ago, the United States plunged into a recession that reshaped the economic, political and social landscape. Although the end of the recession was declared a year and a half after it began, the U.S. is still recovering from the long-lasting effects as we attempt to return to pre-recession levels of GDP and unemployment.

One of the most affected industries of the recession was higher education, as new regulations and laws were passed to help students pay for a college education in hard economic times. As the national unemployment rate reached 10 percent in 2009, enrollments increased rapidly as displaced workers returned to college and students stayed in school longer with hopes of finding a job in a more favorable market. As the unemployment rate drops to 7 percent, the lowest in years, enrollment decreases as students return to the job market.

At Higher Ed Growth, we witnessed significant shifts in higher education over the past years as we connected students with leading colleges and universities. By analyzing our unique data, we have identified key enrollment trends in Arizona for the last two years that indicate another shift in the education industry.

From 2012 to 2013, the percentage of Arizona enrollments from high school students dropped from 80 percent to 57 percent as more students with some college experience returned to continue their education. Of the 2012 enrollments, 72% were for Certificate level programs, which dropped to 54 percent as Associates and Bachelor’s degree program enrollments increased in 2013.

There were noticeable shifts in the healthcare fields this year, as Medical Assisting dropped from encompassing 28 percent of Arizona enrollments to 11.5 percent, while other programs such as Pharmacy Technology and Physical Therapy increased. There were also significant decreases in the Automotive/Vocational and Computers/IT programs as Business and Criminal Justice/Legal enrollments grew from 2012 to 2013.

These changes in Arizona enrollments suggest that as a result of the improving economy, students are starting to move away from two-year vocational programs to more traditional four year degrees. As the unemployment rate continues to decrease, people are returning to college to improve their career position rather than to obtain or change a career. We expect to see these trends to continue as the economy improves, moving students through degree programs into the workforce.


Frank Healy is the president/CEO of Higher Ed Growth, a full-service marketing agency specializing in post-secondary education. Visit for more information.

Money Tree, WEB

Economic development groups are bullish on Arizona

They are our sales representatives, those intrepid souls knocking on doors in California, China, Germany and New York. They are the smiling faces standing behind CEOs, mayors and the governor when a new business arrival is announced. They are the economic development organizations of Arizona.
It’s an alphabet soup of agencies, but they are working for one goal – if it’s good for one location in Arizona, it’s good for all of Arizona. Cities are not competing with each other, they are now a state competing against 49 others.
“People ask me if Tucson is competing with Phoenix for businesses,” points out Joe Snell, president and CEO of Tucson Regional Economy Opportunities (TREO). “I tell them, no, we are not. Tucson is a submarket of Phoenix. We’re both part of the Sun Corridor.”
The big guns in business attraction work together. TREO, the Arizona Commerce Authority (ACA) and Greater Phoenix Economic Council (GPEC) are collecting frequent flyer miles talking with businesses about doing business in Arizona.
Earlier in the summer, GPEC CEO Barry Broome said Arizona could expect a corporate headquarters relocation. “It’s getting closer to reality,” confirms Angela Talbot, GPEC vice president of business development. “Moving a headquarters is not like opening a satellite office; there is a lot involved.”
While trips to Germany and China make news for the organizations, the heavy action is next door.
“We’re doing a lot of direct recruiting,” says Talbot. “[Arizona] Commerce has offices in California and we’re with them talking to site selection consultants, brokers and heavily prospecting.”
What’s piquing interest among California companies is that Arizona has the workforce for business success and low costs of doing business. “Some California companies tell me they can no longer make an effective profit there,” she says.
Teri Drew looks at the regional picture for the Northern Arizona Council of Governments (NACOG). The immediate past AAED president, she serves as NACOG’s regional director and is responsible for economic development. “We’re encouraging new business and supporting business expansion in our 24 communities,” she says. “We’re heavily invested in supporting entrepreneurship with business incubators and assistance centers.”
NACOG’s efforts reflect its rural membership and the multitude of “home-preneurs” in its area. A flagship project ventured with the Northern Arizona Center for Entrepreneurship and Technology created the Flagstaff “Innovation Mesa.” Drew’s focus for NACOG reaches well into rural northern Arizona. Efforts are centered on growing the business infrastructure to make the area more appealing to recruitment efforts.
In southeastern Arizona, major efforts come out of the Sierra Vista Economic Development Foundation (SVEDF). Led by CEO Mignonne Hollis, the SVEDF uses its existing assets in aerospace and defense, healthcare and cyber security to draw smaller businesses that find synergy in the industries based there.
“Fort Huachuca gives us something to leverage,” says Hollis. “We are also an area with a lot of assets for Unmanned Aerospace Systems. We don’t call them ‘drones’ anymore,” she says. “Infrastructure is a challenge, but the military-related operations here give us a very strong workforce in place. We just rethink our resources and recruit businesses that fit our environment.”

Builders, WEB

Confidence Builds: Developers see aggressive optimism in marketplace

Investing in spec buildings may – or may not – be an anomaly in the marketplace. Dan Withers, president of D.L. Withers Construction says he’s seeing risk-taking entrepreneurs coming back into the market.
“It’s been difficult for people to assess the timing in this recession,” he says. “There is enough optimism out there that we are seeing projects starting.”
Kitchell Vice President Dick Crowley is less effusive but still optimistic.
“In our core markets, we’ve noticed limited appetite for our customers to build speculative projects,” he says. “Lenders are still holding on to more conservative underwriting strategies.”
“Developers are being cautious, but we’re seeing more activity,” echoes Bo Calbert, president of McCarthy Building Companies’ Southwest Division. “Some industries are being a little bolder than others, such as hospitality, higher education and renewable energy. We’re building three large hospitals, but most big healthcare projects seem to be in a holding pattern.”
On the design side of the market, Rebecca Timmer, a corporation relations representative for Dibble Engineering says a few companies have broken ground on large spec projects but not many.
“We’re seeing end users dictating the decision,” Timmer says. “If they find what they need in an existing building, it is cheaper to go that route.”
Michael Rauschenberger, DPR Construction corporate office leader for the Southwestern United States, has been asked to look at proposals for a number of large buildings, including office towers, over the past months.
“Maybe about half of those will be built, but even if it’s just half, add it to Hayden Ferry, State Farm, and the number of projects in the southeast Valley, and that’s a lot of big projects coming on the market,” he says.
Many builders kept afloat during the recession with smaller projects and tenant improvements. “By volume, they were a big part of the market,” says Timmer. “As things are improving, we’re starting to see increases in volume for projects of all sizes.”
McCarthy reports that its job order contracting business is busy. “We’ve expanded that division,” says Calbert. “It results in a significant incrase in the amount of work we can do for our longstanding and new clients on smaller projects. To make it work, we have to be efficient and bring personal expertise into the jobs.”
Withers agrees, “There is a definite upturn for small business expansion. The result is existing building expansion and infill of existing buildings. That fuels an overall expansion and optimism in the marketplace.”
Pulling out a proverbial crystal ball, Crowley says, “Kitchell is cautiously optimistic as we see the global and national economy improving. This will impact Arizona and lead to increased job creation. Arizona will be a top job growth market over the next five years.”
“The need has truly increased and, at this moment, it looks good out there,” forecasts Rauschenberger.
“I see continued optimism,” agrees Withers, adding, “Barring other negating factors like our Congress, and world politics and economics.”

Most Challenging Project 2011: Soleri Bridge

Utilities aim to provide infrastructure to meet Arizona’s continued growth and ensure a vibrant economy

When economic developers head into the marketplace to sell Arizona’s benefits to interested relocation prospects, one item on that list is plentiful: reliable and well-priced utilities. While some cities deliver electric power in addition to sewer and water, the power grid is essentially divided between Arizona Public Service, Salt River Project and Tucson Power & Electric.
With multiple agencies busy knocking on doors around the world to bring home the business, Arizona’s utilities plan to deliver that promise.

Alan Bunnell

Alan Bunnell

“APS is typically looking 15 to 20 years into the future to anticipate future power generating resources,” explains Alan Bunnell, external and media relations representative for APS. “We want to be sure we have the infrastructure to meet Arizona’s continued growth and ensure a vibrant economy.”
Over at SRP, Senior Economic Development Project Manager Ed Grant says, “SRP’s resource plan is designed to meet our peak demand requirements plus a 12 percent planning reserve. We use a mix of conventional resources, renewables, energy efficiency programs and market purchases.” SRP works with its various planning groups to maintain a long-term resource plan to meet growing needs.
Arizona’s economy is a roller-coaster ride over the decades. Each climb is higher than the last. As the economy exits the latest recession, Arizona looms as an economic powerhouse with new businesses coming into the market. As each peak rises higher, utilities planning efforts ensure the power is not a stumbling block.
“APS has experienced the full weight of Arizona’s economic recessions many times in the past,” Bunnell says. “We have a reasonable sense of how to meet future demands. We’re already working on the power generation of the future. We are prepared for how and when those supplies will be developed and delivered.”

Ed Grant

Ed Grant

SRP has responsibility for delivering power and water in its service area. Grant explains that the future is bright, “Extensive planning efforts at SRP ensure the region enjoys an abundant supply of water and power. Long-term planning for power means SRP is able to meet long-term area needs.”
Water for America’s sixth largest metro is a challenge SRP is well-prepared to handle. “SRP has a diverse water supply,” says Grant. “We’re obtaining water from the Colorado River, our own system and treated wastewater. Developers are required to demonstrate an assured, renewable water supply.”
Recently, SRP joint-ventured with the Gila River Indian Community for the Gila River Water Storage program. The program creates a system of Central Arizona Project water credits and storage credits covering more than 100 years of usage.

Charlie Duckworth

Charlie Duckworth

APS and SRP are among the co-owners of the Navajo Generation Station in the Four Corners Region. The coal-fired power plant has been operating under an EPA-generated regulatory cloud that may require unaffordable air quality improvements to the facility. The generator powers the CAP project and serves Arizona, the Navajo Nation and the metro area.
“NGS is one piece of a large and diverse generation portfolio,” says Charles Duckworth, SRP’s senior director of energy management reports. “SRP is working on steps necessary to affordably keep the Navajo Nation operating. However, we have a highly flexible resource plan that gives SRP confidence in its ability to meet long-term customer needs.”

Pillars, WEB

Pillars for the Future: AAED’s strategic plan strengthens its economic development role

Hear the word “pillars” and you envision strength, tall and straight.
There have been three pillars standing on the foundation of the Arizona Association for Economic Development. The association starts its next 40 years with a new strategic plan minted early last month by its board of directors. The timing meshes with Arizona’s exit from the dark days of the recession into recovery’s light.
“It’s a new chapter in AAED’s history,” says AAED president Eric Larson, who is also AVB Development Partners’ director of acquisitions. “We’ve invested a lot of thought into the process. This is going to move the organization forward by growing and broadening our position in Arizona.”
Larson is responsible for the first months of the plan’s implementation and is shepherding soft previews around the state this month. The association’s December 13 meeting is the formal deployment.

“What does AAED want to be when it grows up? The new strategic plan answers the question and sets out a plan for the next five years. We reinforced that our ‘three pillars’ are still what holds us up.” — Eric Larson, president, director of acquisitions, AVB Development Partners

“What does AAED want to be when it grows up? The new strategic plan answers the question and sets out a plan for the next five years. We reinforced that our ‘three pillars’ are still what holds us up.” — Eric Larson, president, director of acquisitions, AVB Development Partners

Firming AAED’s strategic plan as 2014 begins is fortuitous. Larson, and next year’s president Danielle Casey, economic development director for Scottsdale, envision the organization becoming the “go-to” source for economic development information and advocacy.
“The recession gave us a number of lessons about Arizona’s economy and an overdependence on home construction and real estate,” says Casey. “We need to share experience from across the state and use what we’ve learned to keep a stronger focus on a diverse and healthy economy.”
“What does AAED want to be when it grows up?” asks Larson rhetorically. “Using this as the foundation, we seriously looked at the relevancy and representativeness of our organization’s ‘pillars.’ The strategic plan answers those questions and sets out a plan for the next five years. We reinforced that our ‘three pillars’ are still what holds us up.”

The three pillars

“Local governments have to understand tax policy, effective incentives and business decision-making. AAED is the forum where all the players come together and share knowledge.” — Angela Tablot, board member, vice president of business development, GPEC

“Local governments have to understand tax policy, effective incentives and business decision-making. AAED is the forum where all the players come together and share knowledge.” — Angela Tablot, board member, vice president of business development, GPEC

Education, advocacy and collaboration are the three pillars raising AAED’s membership of public and private economic development professionals. The sum of the effort is improving Arizona’s economic competitiveness. While the economic development agencies — Arizona Commerce Authority, Greater Phoenix Economic Council and Tucson Regional Economic Opportunities and others — are the state’s sales representatives, AAED members are the faces of implementation.
“It’s a marriage in growing the economy,” emphasizes Angela Talbot, GPEC vice president of business development. “[ACA], GPEC and others go out and bring businesses into Arizona. It’s the collaboration that closes the deals. That impresses businesses thinking about an Arizona move.
“No matter how we represent the state to businesses in the U.S. and globally,” Talbot continues, “the local governments have to understand tax policy, effective incentives and business decision-making. AAED is the forum where all the players come together and share knowledge.”


“It’s not just that AAED puts on conferences and training seminars,” Casey says, “The members share knowledge. When I started in economic development, I had a steep learning curve. With AAED, I not only had training, but, more important, mentors. Members share experience and knowledge. We’re not competing in the AAED forum.”
“The collaboration and education is really important to my colleagues,” explains Mignonne

“Our plan is to ensure elected officials understand responsible economic development.” — Danielle Casey, president-elect, economic development director, Scottsdale

“Our plan is to ensure elected officials understand responsible economic development.” — Danielle Casey, president-elect, economic development director, Scottsdale

Hollis, executive director of the Sierra Vista Economic Development Foundation. Hollis chairs AAED’s rural committee. “AAED helps bring together rural and remote Arizona,” she says. “My markets don’t have the budgets to travel for training, AAED brings opportunities to learn to our area.” One size doesn’t fit all, she says, “but, all benefit when we bring everyone to high standards of professionalism.”
Getting training across the state is one of AAED’s major strategies. The International Economic Development Council (IEDC) is the major organization certifying economic development professionals. It offers continuing education programs certified economic developers (CEcD) are required to pass.
“IEDC is expensive, but we have to take courses every year,” says Casey. “With agency budget cuts, it’s a real burden. AAED now offers accredited courses in Arizona that are much more affordable. I can send my staff and keep the training budget under control.”
The new strategic plan puts an emphasis on more of those courses. Professional demand drives the topics as well. This fall, the association offers courses in infrastructure as economic development tools. “This teaches cities and developers how an effective incentive can be developed for project backbones,”
Larson says.

“It’s a very valuable tool for small economic development groups. We find AAED sharing best practices and keep us connected with trends.” — Joe Snell, president and CEO, TREO

“It’s a very valuable tool for small economic development groups. We find AAED sharing best practices and keep us connected with trends.” — Joe Snell, president and CEO, TREO


“AAED is a positive, valuable organization,” says Joe Snell, president and CEO of TREO. “Our organization participates and serves in the association. It’s a very valuable tool for small economic development groups. We find AAED shares best practices and keeps us connected with trends.”
“We used to say ‘networking’,” says Casey. “But it really is collaboration. You can see it at every level. I learn a lot, not only from my mentors, but sharing ideas with other members in all sectors. You can’t help but learn when we get together.”
With the variety of members on its rolls, AAED creates opportunities to bring parties with common challenges together. “For the first time, we have rural and tribal economic developers collaborating,” Hollis explains. “Although we sit on separate committees, we’re now jointly meeting to pool resources and opportunities. Without AAED, this couldn’t happen.”
“(Small markets) don’t have the ability to draw the types of businesses that Tucson and Phoenix pull in, but AAED collaboration helps us in two ways,” says Hollis. “It gives us a

Mignonne Hollis

Mignonne Hollis

voice at the table when economic development decisions are being made and it helps leverage stronger economic development tools.”
The organization is continuing its lunch meetings and quarterly roundtables. The strategic plan stretches the collaborative sessions further into the state with meetings slated in the various regions.
“The real value in AAED is the convening of members and sharing of ideas,” concludes Snell.


Talbot says AAED wants to strengthen its advocacy role.
“AAED is the dominant force and knowledgeable source of economic development education and collaboration,” she says. “We want to be the one place the legislature looks to when it needs information about economic development. The large cross-section of members means all voices are heard when it comes to policy.”
AAED was heavily involved in the governor’s policy changes for Arizona over the past few years. It was a major participant in legislation leading to the state’s new tax and incentive policies for business.
“We were very much in the loop with the governor’s Competitive Package in 2011,” says Larson. “That [$25-million closing cost] fund is paying off today for business recruitment.”
“Economic development and quality job growth is key to what we need to do for the next five years,” says Casey, who’ll be at the organization’s helm for its first full year of plan implementation. “We’re transcending the boundaries of individual agencies’ economic development with state-level toolkits. Our plan is to ensure elected officials understand responsible economic development.”

Michael Rauschenberger

Michael Rauschenberger

DPR’s Michael Rauschenberger views AAED as an advocate for more responsible development.
“Their involvement with the solar energy incentive made a difference with the legislature,” he says. The Renewable Energy Tax Incentive Program has added more than 6,300 jobs and close to $2 billion in capital investment, making Arizona a leader in solar energy opportunities.
“We’ve seen 14 new companies come into the market and stay as a result of the program,” Larson says.
“Our government affairs committee is really strong,” Casey says about AAED’s role in upcoming legislative year, “We want AAED to be in a position of providing the legislature with economic development information that they trust.”
AAED’s objectives for the coming legislative year were in front of its board on the same agenda with the strategic plan. Becoming the “go-to” group for economic development puts the government affairs committee in a crucial role this fall. The group sees advancing Arizona’s competitiveness as an important legislative focus. As economic developers, the vision is not only bringing in new jobs but growing Arizona’s export markets.
“We have a lot to sell to bring business in,” says Talbot. “However, the AAED program places as much importance on supporting current businesses — large and small.”
“There are a lot of diverse opportunities in the state,” echoes Hollis. “AAED’s legislative committee is tasked with looking at impacts for all regions.”
AAED works for legislation specific to helping the state’s economy and also provides the legislature with a sounding board at how other legislative issues may affect Arizona’s attractiveness to new companies.

Building on success

Larson has half his term remaining to kick the new strategic plan into effect. Casey will be accountable for making it the fundamental theme of her term next year.
“I’ll be rolling it out in December,” says Larson. “The board and I will need to reach our full membership to demonstrate how the three pillars are going to be part of everything AAED accomplishes. Then it’s Danielle’s (Casey) turn.”
It’s an ambitious agenda for the organization over the next five years. An extensive effort went into drafting the strategic plan. Being the ‘go-to’ organization is not a slogan for AAED, it’s the plan’s objective.
“The key to AAED’s future is keeping everything in focus,” says Snell. “It’s important we don’t spread our strategies beyond the capacity of our budget and members’ energy.”
“We’ve got a great staff working with Joyce (Grossman, AAED executive director). It makes a president’s role a lot simpler,” says Casey. “I’ve got to carry the standard a long line of strong leaders have passed to me. My job is to find ways to education leadership and community and stay within the resources we bring to economic development.” The AAED member experience and resources, Casey enumerates, are very formidable.


Getting an angel to open the checkbook

Governor Jan Brewer touts her policies and business regulatory climate as the reason Arizona is growing new businesses. That may be a factor, but it’s not the major reason Arizona topped the Kaufman Foundation Index of Entrepreneurial Activity in 2012. If it were the case, Arizona would have been on top again in 2013—instead of plummeting to 20th nationally.

“Just because there are a lot of startups,” observes Barry Broome, CEO of the Greater Phoenix Economic Council, “doesn’t provide a measure of the economic growth in the Valley.” A startup can be someone opening a consultancy, a contractor or the next Apple. Self-employment is a form of startup. The challenge is nurturing a startup so it grows with high value jobs.

Local governments and the Arizona Commerce Authority see major value with growing Arizona startups into enterprises. Chris Mackay, economic development director in Chandler says, “There’s staying power when a business is local. It’s connected to the local community and if the economy falters, the owners are more willing to keep going locally as opposed to closing up shop.” That local staying power is one reason Mackay says Chandler makes big investments in growing future enterprises.

Planting the seeds

Arizona’s new economy needs startups to scale up into enterprises. Those growing small businesses become hiring employers offering high value jobs paying home-buying income. Government policy supporting businesses that can scale up is based on simple economics.

Businesses with more than 20 employees, says the Small Business Administration, generate two of three Arizona paychecks. Those same businesses cut checks for more than 70 percent of Arizona’s private payrolls. The value in 2012 was over $100 billion.

All new businesses are “startups,” but not all startup businesses will be entrepreneurial enterprises. “There is no relation between starting a business and starting a company,” says Dr. Daniel Isenberg, Professor of Entrepreneurship Practice and founding executive director of the Babson College Entrepreneurship Ecosystem Project in Boston. “Ninety percent of companies formed don’t grow high value jobs.”

Isenberg says that the difference between a start-up and enterprise is a matter of scale. He is an international advocate for scaling a business to grow as opposed to opening a business. An entrepreneur, he points out, is a business founder with a large company that just happens to be small right now.

Arizona State University, as the new American university, is at the cutting edge of helping turn ideas into enterprise. Recently, the college joined the elite ranks of schools offering a stand-alone degree in entrepreneurship. It’s on that list with Harvard Business School, Babson, and University of Texas. Its goal is getting new businesses that can grow into the market.

Locally grown

ASU says more than 70 percent of its W.P. Carey School of Business MBA graduates remain in Arizona. Keeping these graduates in state provides the human resources necessary to building new enterprises fueling the future economy.

“Starting a company — as opposed to just starting a business — is hard work,” says Isenberg. “An entrepreneur looks at the business and sees it growing. It’s a time of sleep deprivation, hard work, and endless pitches.” Few startups achieve quality growth—less than ten percent, he believes. “The golden triangle of a growing enterprise,” he continues, “is cash, customers and people.”

“An entrepreneurial endeavor isn’t limited to startups,” Isenberg emphasizes. “University research, family businesses, mature companies, all can be turned into a growing enterprise. Most startups tend to stay small.” The key to the economic contribution of startups in Arizona is scalability. He is adamant about it, “Ambition is not a dirty word. A business founder without ambition does not significantly contribute to overall economic growth.”

“There are a number of entrepreneurial success stories arising from a new direction for an existing, mature business,” Isenberg reports. Sometimes it takes a new owner with a vision; sometimes the existing management team finds a new direction. It can be a license from a university, a new product, or an innovative use of an existing product. Entrepreneurship can occur anywhere in a business’ lifecycle.”

Bringing ideas to market

Arizona colleges are on that licensing bandwagon. Entrepreneurs complain that it takes years to license patents or transfer technology from most universities. In ASU’s Office of Knowledge and Enterprise Development, the Arizona Furnace Technology Transfer Accelerator — first project of its type in the world — slashes technology transfer time from years to months. The AZ Furnace is a joint venture of ASU, University of Arizona, Northern Arizona University and Dignity Health. Funding partners include the Arizona Commerce Authority, BioAccel, and additional support from Thunderbird School of Global Management.

“There are hundreds of patents sitting on shelves at universities that could be in the market earning money for creators, colleges and businesses,” enthuses Gordon McConnell, assistant vice president, Entrepreneurship & Innovation Group in OKED. “We started a program to get patents into the market quickly.” The startups selected for incubation in AZ Furnace are either entrepreneurs in search of an idea to market or idea-creators ready to market through a business entity. The fledgling enterprises are capital-ready in 12 months or less.

Enterprise starts with a leader and a vision. The scale of the vision is what makes the difference, says Isenberg. The vast majority of business owners are thinking of a model that gets them to the point that they’re putting money in the bank. He says, “Entrepreneurs are thinking of a model that finds smart people, willing customers and puts the cash to back into the enterprise.”

“Angels invest in businesses they understand or CEOs they respect,” says Broome. “There’s a need for more of that in the Valley. We’re just not seeing the next Apple or Google evolving here.”

Gaining visibility

“The biggest challenge about getting angel and venture money is visibility,” says Brandon Clark, region coordinator for Startup Arizona.  “If you’re a promising digital startup locally, it’s a little harder to get noticed nationally being from a region not known for its digital startups.  That’s starting to slowly shift.” National publications, FastCompany and Entrepreneur Magazine, have eyed Arizona as an emerging technology region.

The development opportunity for the small business is capital. Combine the “Broome Factor”—known businesses; known leaders—with the large number of startups, and there are too many funding requests heading towards too few checkbooks.

What makes early investors open pocketbooks to startup businesses is scalability. Businesses with potential to grow create the greatest return on investment for the angels. “It’s also makes a difference to the local economy,” says Isenberg. “Local policymakers need to change their focus from ‘startup’ to a ‘high value growth business’.”

Cities like helping scalable startups — and provide resources that build success. There’s a loyalty factor when the business grows; it typically remains in the hometown that helped it succeed. This is important to Chandler, Mesa, Peoria, Phoenix, Scottsdale, and Surprise. These five cities have specifically invested in incubators and accelerators to nurture and graduate businesses achieving market traction. Chandler, Phoenix and Tucson have involvement with collaborative workspaces — Gangplank and Co+Hoots — as well.

While an employee or two in a collaborative workspace works well for a while, the time comes when a move up is needed. Clairvoyant, an enterprise and analytics startup now in Chandler Innovations started with Gangplank. “We grew from four employees in March to 12 in April,” smiles Amber Anderson, a firm partner and its business developer. “We needed a place to meet with clients and work with a growing team.” Still self-funded, the growing entity plans to hit 20 employees by January.

Mackay explains, “We help a company like this grow and hope that as it expands it continues to locate in Chandler.” To that end, the city is working with landlords in its Price Corridor to offer “teenage” space that lets a business move from the heavily subsidized rents and back office support of the incubator into its own place—without too much sticker shock.

Support from cities

The difference by which startup is accepted into a city’s incubator is the ability to scale up from the garage to commercial space; from one employee to more than 20. Chandler and Mesa are looking for businesses with this capacity. Innovations gives lab and office space to businesses that have formed entities — LLCs, corporations, partnerships — and a business plan. Mesa’s new Technology Accelerator is planned with a similar focus, but is looking for businesses at an earlier stage. Surprise’s Arizona TechCelerator wants to shepherd a business to the angel investor stage.

In Surprise, scalability is one of the criteria to be accepted into Arizona’s oldest incubator. The TechCelerator is looking for businesses offering something outside the box or creating a new niche. “The company has to be started before we’ll consider them,” says Julie Neal, the economic development coordinator for the city’s enterprise. “They need a mentor, a plan and have to know where they are going.”

“Scaling up is difficult,” says Isenberg, “but doing it right defines the difference between the successful entrepreneur with a growth business and a startup that just stays small. Marketplaces are competitive. The startup has to acquire customers. That means overcoming inertia or changing buyer behavior. While established companies are cruising on their business platforms, the startup has to hire people, start a company, raise money, and all the while, it’s competing in the marketplace. That’s tough work.”

After incubation, the business must gain market traction. At this phase, the fledgling enterprise has product going out and customers paying for it. The kinks are being smoothed, and it’s time to move up to the next stage and grow. Isenberg says that the high growth criterion is simply 20 percent annual increases in sales or staff for five years.

Getting capital

To make this leap requires high levels of capital — the checks venture capitalists cut. The biggest challenge in Phoenix is that there are few sources for local venture capital. The venturists hang out in places like Silicon Valley, Boston, San Diego and Seattle. “There are even a couple of funds with deep ties to the Valley,” worries Clark, “but they have very little involvement in local startups.”

Clate Mask, CEO of Infusionsoft, had to travel out of town for his venture capital. “At one time, I was told that a fund wouldn’t cut a check for a firm in Phoenix because we didn’t have the workforce for success,” he says. “That’s no longer true; venture funds are seeing that there is a real climate for success in the Valley.”

Another resource for a growing business is the Arizona Commerce Authority’s “Growing Your Arizona Business” services. The quasi-public agency provides mentorship, regulatory assistance, access to incentive programs and site selection. It also works as a liaison connecting the growing business with other business resources. The agency mentors businesses in accessing federal procurement and grant opportunities as well as serving as an entrée to international trade.

Overall, the major resource in Arizona for start-up businesses is the universities. Anemic legislative funding for the schools causes their efforts to help to face the same struggles growing businesses face. Their efforts to improve Arizona’s long-term economy are stymied by a declining source of capital.

“ASU is underfunded,” complains Barry Broome. “The school has done an amazing job despite being financially crippled by budget cuts. It’s suffering from a lack of resources to take its programs to scale.” “Scalability” is applicable to the business-development programs at the universities and other public agencies just as it is for growing enterprises.

“Getting money for those programs is the top job for the next governor,” predicts Broome.
Opportunity in Arizona will come from the core of businesses growing today. They will create the jobs for the new economy and drive economic success for the next generation.


Renowned Bioinformatician Joins UA

Yves A. Lussier, MD, FAMCI, a professional engineer and physician-scientist who conducts research in translational bioinformatics and personal genomics, has joined the Arizona Health Sciences Center at the University of Arizona.

Dr. Lussier will serve as UA professor of medicine; associate vice president for health sciences and chief knowledge officer for AHSC; associate director for cancer informatics and precision health for the University of Arizona Cancer Center; and associate director, BIO5 informatics, for the UA BIO5 Institute. He assumed his new duties Dec. 2.

Dr. Lussier is an international expert in translational bioinformatics and a pioneer in research informatics techniques including systems biology, data representation through ontologies and high-throughput methods in personalized medicine. At the UA, he will lead efforts to fully develop novel programs in biomedical informatics, computational genomics and precision health. Dr. Lussier will provide critical leadership in efforts to advance precision health approaches to health outcomes and healthcare delivery and in the development of big data analytical tools and resource services in support of the University’s clinical research and service missions.

“I’m extremely pleased to have Yves join the University of Arizona,” said Joe G.N. “Skip” Garcia, MD, UA senior vice president for health sciences. “Yves and his team of computational specialists bring much needed expertise and program capacity in informatics, sequence analysis, genomic annotation and computational biology that will accelerate translational research activity across campus and throughout the state.”

Anne E. Cress, PhD, interim director of the UA Cancer Center, noted that “the integration of genomics with clinical information is the key to innovative approaches to provide ‘tomorrow’s medicine today’ for cancer patients. The addition of Dr. Lussier to the Cancer Center will greatly strengthen our clinical research efforts in cancer informatics and the delivery of personalized treatment plans.”

Fernando D. Martinez, MD, director of the UA BIO5 Institute, shared his enthusiasm for Dr. Lussier’s recruitment. “Informatics bridges the five core disciplines – agriculture, engineering, medicine, pharmacy and science – of BIO5. Dr. Lussier and his team will advance the Institute’s interdisciplinary, collaborative research efforts to successfully create solutions to the grand biological challenges.”

Dr. Lussier comes to UA from the University of Illinois at Chicago (UIC), where he was professor of medicine, bioengineering and biopharmaceutical sciences, and assistant vice president for health affairs and chief research information officer for the University of Illinois Hospital and Health Sciences System. Prior to his tenure at UIC, Dr. Lussier was associate director of informatics for the University of Chicago Comprehensive Cancer Center as well as co-director of biomedical informatics for the Clinical and Translational Science Award (CTSA)-funded Institute for Translational Medicine (2006-2011). From 2001-2006, Dr. Lussier was an assistant professor in the Departments of Biomedical Informatics and Medicine at Columbia University in New York.

Dr. Lussier’s research interests focus on the use of ontologies, knowledge technologies and genomic network model to accurately individualize the treatment of disease and to repurpose therapies. He has National Institutes of Health funding for a clinical trial that repositioned a combination therapy, he also bioinformatically predicted and obtained biological confirmation of several novel tumor suppressor microRNAs, including the first one underpinning the oligo- vs poly- metastasis development of cancer.

His research has been featured in the New York Times and the Wall Street Journal. He has authored 130 publications and delivered more than 100 invited presentations in precision medicine, systems medicine and translational bioinformatics, including 14 opening conference keynotes.

A Fellow of the American College of Medical Informatics, Dr. Lussier is a member of numerous governance, technology transfer, scientific and editorial boards, including the American Medical Informatics Association, International Society for Computational Biology, Society for Clinical and Translational Science, American Society for Cancer Research, Healthcare Information and Management Systems Society, American Association of Pharmaceutical Scientists, American Association for the Advancement of Science and American Society for Human Genetics.


Party like your lawyer, not like a rock star

’Tis (or ’twil soon be) the season for family gatherings, gift giving and, of course, the company holiday party. Since no good deed goes un-litigated, ’tis also the season to prepare for the employee claims that always seem to arrive shortly after the company holiday party.

In the midst of holiday merriment, companies should not lose sight of the regulations that continue to apply to company-sponsored events, even social events, in which no work is being performed. To avoid the pitfalls that can be created by company holiday parties, companies need to carefully plan out each detail, including the following:

Dress Up Your Policies Before the Big Event. Before the invitations go out, companies should take the opportunity to review their personnel policies to ensure that they are up to date. Given the increased number of claims that are filed after the holiday season, there is no time like the present to make sure that your company’s policies comply with the ever-changing guidance issued by agencies such as the United States Equal Employment Opportunity Commission and National Labor Relations Board. Companies should ensure that their policies prohibiting discrimination, harassment and retaliation are up-to-date. Employees should then receive a reminder that they are expected to conduct themselves at the party in a manner that complies with these policies. By setting the expectation that employees are expected to dress and act in a professional manner, the company can help minimize inappropriate behavior before it begins.

Pick the Right Theme. You’ve heard this before, but it’s something that can’t be taken for granted. Companies should characterize the event as a “Holiday Party” or “End of the Year Celebration” to avoid claims of discrimination. When a company holds a “Christmas Party,” those employees who are of no religious preference and/or who observe a religion that does not recognize Christmas, may find the party to be offensive and discriminatory.

When Facebook and Instagram Crash Your Party. Many companies, seeking to avoid bad press, may instruct employees not to post photos from the company holiday party on their personal social media accounts. Left unchecked, these instructions run the risk of creating a claim of unfair labor practices under the National Labor Relations Act – especially if the employee is posting about something that could be construed as his or her “working conditions.” While companies can certainly take measures to prevent the dissemination of legitimately confidential company information, companies should consult with counsel before prohibiting social media activity that could be protected under federal labor laws.

Avoid “Forced Fun.” Consider allowing attendance at the company holiday party to be optional. Otherwise, employees (especially hourly workers) could try to claim that attendance at the party constitutes “work” for which they are entitled to be compensated at their regular (or overtime) rate of pay. Similarly, an employee who suffers an injury on the dance floor may attempt to claim workers compensation benefits.  For the same reasons, companies should endeavor, as much as possible, to avoid discussing the business affairs of the company during the holiday party.

Getting Into the Spirits. While celebrating with a drink and toast is a fond tradition at many holiday events, companies should be wary of serving alcohol at company-sponsored holiday parties. Since alcohol frequently loosens inhibition, companies that serve alcohol risk the possibility of employees engaging in inappropriate, potentially sexually harassing behavior that might not occur if alcohol is left out of the equation.  Other risks, such as liability resulting from serving alcohol to minors, may also be present.  If alcohol must be served, consider taking precautionary measures, such as choosing a date, time and location that is likely to discourage excessive consumption, hiring a professional bartender who can assess intoxication levels, and limiting beverage selections. Companies may also want to consider providing employees with transportation after the party to limit the possibility of employees driving under the influence.

To Give or Not to Give. Many of us have witnessed the scene: A supervisor, trying to win favor by being funny, gives an employee a sexually explicit gift that seems funny to the supervisor, but makes the rest of the party uncomfortable. We have also witnessed when a colleague gives an employee, on whom the colleague has a not-so-secret crush, a lavish gift that makes the recipient feel that they’re being harassed through unwelcome romantic attention. The fact is, gifts often go awry and can become part of the basis of an employee’s claim of sexual or other harassment. Companies should be wary of holiday gifts: regardless of whether it’s the company, a supervisor or a colleague who is doing the gift giving, the company should insist (and instruct employees ahead of time) that all holiday gifts be nonoffensive, professional and appropriate.

Wear Your Best “HR” Hat. Companies are wise to instruct their salaried managers to keep a watchful eye throughout the company party. If at any point the company observes inappropriate conduct, designated managers should be prepared to intervene and put an end to the behavior.

Give Yourself a Gift, too. Last but not least, companies should give themselves the gift of ensuring that their workers’ compensation, employment practices liability, general liability, and/or other insurance policies are up to date, with premiums paid in full.

For advice concerning how to most effectively minimize liability during the holiday season, companies are advised to consult with experienced employment counsel.


Lori A. Higuera is a director and a co-chair of the employment and labor practice group at Fennemore Craig.  She represents employers in internal and external investigations, arbitration, mediation, litigation, and administrative proceedings.  Ms. Higuera also regularly provides employment training to employers of all sizes and frequently speaks on a variety of work-related topics before a wide range of professional organizations. Ms. Higuera can be reached at 602-916-5000 or Shannon Pierce practices in employment, trade secret and commercial litigation with Fennemore Craig Jones Vargas. Ms. Pierce has a decade of experience representing management in litigation concerning claims of discrimination, harassment, retaliation and other traditional employment law claims, as well as claims of predatory workforce raiding and trade secret misappropriation. Ms. Pierce can be reached at 775-788-2200 or

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Patience pays off for Tortas Paquime

Restaurants often use the word organic to describe their fresh food, but at Tortas Paquime, organic can also refer to the restaurant’s rapid growth in the valley over the last 11 years.

Tortas Paquime is a locally owned Mexican restaurant with five locations based in the busy Phoenix and west valley markets that are loaded with places for quick Hispanic-based foods. Despite the difficult Phoenix area, the restaurant has found success in the area with patience in a down economy and a distinct menu that focuses on maintaining Mexican authenticity.

“It’s not a menu that you find anywhere else,” said Omar Alvarez, president of Tortas Paquime. Alvarez said that the food on the menu stands apart due in large part to its origins from Mexican culture in Chihuahua and Juarez. “A lot of the things that we have are things that we used to eat at our house with our mom,” he said, referring to his own history growing up in Casas Grandes, Chihuahua in northern Mexico.

Alvarez said that he had no experience working with food and restaurants after moving to Phoenix 12 years ago with his family, but he chose to open a small restaurant with just three common items he ate in Mexico: The Torta Paquime, Tostada Paquime and a ham wrap. “Then we adapted into more products that are very typical and are very products that I used to eat when I was a kid, things that I like,” said Alvarez.

Despite a growth in the food that was served, Alvarez said the company wanted to continue the Mexican authenticity rather than serving Americanized products using heavy condiments and sides that are not general parts of Mexican culture.

Zach Plumb is a first-time customer of Tortas Paquime and he said that he enjoyed the food despite having no experience with products from that region of Mexico. “I thought it was different, but still very good,” said Plumb, adding that the clean and casual feel was more inviting than other restaurants in the area.

“The tortas in Chihuahua are a lot different from the tortas in Sonora and they captured the differences and the authenticities in a true Chihuahuan torta,” said Danny Honea, a Tortas Paquime customer. Honea said he has a lot of experience with eating this kind of food in Mexico and that the restaurant did well to completely bring the culture to Phoenix.

Faithful Mexican tastes were important, but Tortas Paquime may not have survived without patience for development in the crowded Phoenix area.

“I like to grow organically,” said Alvarez, referring to the plan of patience with the business and to take opportunities for growth only when they were available. “Let’s not rush things, lets take things as they come.”

Alvarez said that this business model was sometimes difficult when being pressed to expand to different locations and markets rather than choosing to wait for natural chances to appear. “We had the ability to grow a lot faster, and we haven’t done it,” said Alvarez.

This patience was possibly most difficult in the recent economic recession that endangered numerous locally owned businesses. “By the time it was down we were fortunate and we were still growing,” said Alvarez. He added that the company then used the changing market to gain new customers, focusing advertising to second and third generation Hispanics and modifying the menu to include customer favorites like tacos and salads.

These new markets have led to plans for expansion in the future to join Tortas Paquime catering and a Paquime style of street food for fast eating. According to Alvarez, the company has eyes set on possible enfranchisement and opening restaurants outside of Arizona. Alvarez reiterated that these plans are only feasible if the company can continue to naturally grow, although they are currently heading in the right direction for a big move in the future.

Velocity Retail Group

Stand Up For Small Business This Saturday

Have Americans lost hope?

The trust-deficit between them and their policymakers is distressingly large, with only 19 percent, according to an October Pew poll, who say that they have faith that the government will do what is right just about always or most of the time.

Thankfully, not all is lost.

Americans still have faith in some institutions, generally for those that truly protect freedoms and preserve livelihoods, like the military and small businesses. In fact, when it comes to job creation and the economy, Americans value the opinions of small-business owners more than any other institution, likely because small-business leaders across the nation have remained committed to hard-work, to job-creation and to building communities, while many in Washington have become preoccupied with less noble endeavors.

But the faith in the men and women of Main Street has remained consistently high for good reason. In the face of economic struggles, many small employers, instead of laying people off, have instead cut their own salaries to keep their full complement of employees. Others have dipped into savings or taken out second mortgages to keep their doors open or to avoid cutting back employee hours.

These are no small feats, but they largely go without acknowledgement or recognition. So when an opportunity to thank these men and women for their daily sacrifices arises, we should take it. We find such an opportunity coming up this weekend on Small Business Saturday.

The campaign to “shop small” on the Saturday after Thanksgiving started in 2010 as little more than an effort to give small businesses—many struggling to get out of the red after a long recession—a much needed shot in the arm. But in the three years since its inception, Small Business Saturday has become a powerful movement to give back to the brick-and-mortar establishments that line our Main Streets and keep our communities vibrant.

The concept is simple: Instead of sitting at home and ordering online or one-stop-shopping at the nearest big-box store, put on your boots and coat and take a walk through the small and independent establishments in your community. Make Main Street ground zero for your holiday shopping. Many local businesses around the county will be offering special deals and discounts throughout the day to encourage shoppers and to commemorate the day, so the incentive to “shop small” is all the greater.

It’s strange to think that doing something so modest—shopping at an independent business—can have such a big impact, but research on last year’s event showed that consumers who were aware of Small Business Saturday spent a total of $5.5 billion with independent merchants that day—higher than earlier estimates of anticipated spending. Indeed, even the President and his family did their part last year, patronizing a local bookstore and giving its holidays sales a boost.

The biggest incentive to “shop small,” is that in doing so, you are not only helping to keep small businesses operating, you are making your community stronger. It’s likely when you purchase a product or service at a local store or restaurant, you are helping to pay the salary of a neighbor, a friend or a family member. You are helping to keep the people in your town or city employed so that they can support their families. Most importantly, you are demonstrating the value that you place on the small-business people who, by providing you and your community with unparalleled products and services, work hard to keep your trust each and every day.

During times like these, we could all benefit from a boost in our faith—faith in the future, faith in our country, faith in our economy. Show your faith in America by starting your holiday season in a small business and “shop small” on Small Business Saturday.

Farrell Quinlan is Arizona state director for the National Federation of Independent Business.

Jump Rope, SL ONLINE

Workout Wednesday: Jump Rope Your Way to a VS Angel's Bod

It’s that time of year, and, no, I’m not talking about the holiday season. I’m talking about the one night when millions of women endure moments of self-loathing as Victoria’s Secret models strut down the runway.

What if I told you, the secret ingredient to having an angel’s body is a jump rope? Yes, a jump rope!

You may not have picked one up since grade school, but jump rope is one of the best methods of cardio. Jumping rope burns more than 10 calories a minute while toning your legs, arms and rear-end. Not only is it a quick way to burn calories, but it’s also a great way to squeeze a cardio session into your day.

With some serious dedication, this 25-minute workout will have you looking like an angel. Just throw the rope in your bag and hop to it!

  • 5 minutes: double-leg jumps
  • Jump continuously at a steady pace, tucking your legs close to your chest. Keep your chest lifted and swing the rope with your wrists.
  • 45 seconds: plank
  • Bring elbows under shoulders and place your feet shoulder width apart. Draw your belly button up and in.
  • 2 minutes: single-leg jumps
  • Jump continuously on one leg for 30 seconds, then switch legs. Do this twice on each leg for 30 seconds without stopping in between.
  • 2 minutes: double-leg jumps
  • Jump as fast as you can while keeping your chest lifted.
  • 45 seconds: opposite arm and leg extensions

On your hands and knees extend left leg up to the hip while extending the right arm up next to your ear, then extend your right leg as you raise your left arm to your ear.

Repeat the entire circuit two times through.

Photo by Gregg Mastorakos

Healthy Side Effect: ACA's impact on CRE, sustainability

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" width="200" height="301" /> Mark Stapp, professor of real estate practice and executive director of Arizona State University’s Master of Real Estate Development program.

There’s another trend growing out of the Affordable Care Act’s (ACA) emphasis on wellness. Mark Stapp, a professor of real estate practice and executive director of Arizona State University’s Master of Real Estate Development program at the W.P. Carey School of Business, says the trend can benefit Arizona’s economic development efforts.
“You say sustainability, and people think about energy, green building and conservation,” he says. “In reality, sustainability also includes a healthy workforce. When the workforce is healthy, productivity increases.”
Stapp says a combination of Millennials’ lifestyles combined with an aging boomer population means changes in development patterns. “Improved healthcare and an emphasis on wellness shifts where and what space is in demand. The population wants healthy places to live.”
Stapp sees the trends as drivers bringing populations closer to city centers. He also believes a healthy community is a big economic development selling point.
“The movement (in the Affordable Care Act) is to maintain and improve health rather than fix it,” he says. “This is crucial with the shortage in primary care physicians. It also means that healthy living is going to become integrated in other areas of the community.”
Stapp sees new business models developing around the ideals of healthy living. “As (the ACA) evolves, its policies will change and encompass a broader range of health care and wellness options. Integrative healthcare will become far more important,” he says.
What this means to economic development, Stapp explains, is that healthy cities are more productive.
“Supporting healthy lifestyle choices becomes a competitive advantage,” he says. “This is a direct shift of a portion of healthcare responsibility from insurance companies to communities.”
Changing the types of medical practices and patterns will also change building design and usability. “Real estate has value to support an activity,” he says. “If an activity goes, so does building value.”
Stapp sees a gradual change in office environments. “There is a shrinking demand for space. Can medical campuses withstand the test of time?” he asks. The bigger pie, in terms of health care and wellness, he says, is to look ahead to rapidly emerging trends that may make today’s medical office infrastructure useless.
“People are capital,” says Stapp. “Businesses are going to protect capital, and that is going to lead to adaptation when the demand creates new opportunities with different office uses.”

Banner MD Anderson Cancer Center in Phoenix.  Photo / Gregg Mastorakos

Healthy Outlook: Affordable Care Act means new healthcare opportunities in CRE

“Tastes great!”
“Less filling!”
The old beer adage flavors trends in healthcare commercial real estate entering the Age of Affordable Care Act (ACA). There are tasty opportunities for new types of healthcare real estate and a glut of less-filled medical office buildings (MOB) that may result from consolidations.
Healthcare providers are looking for patient-luring, high technology facilities and they want to pay less for the capital development. Facilities will be smaller, more flexible and expandable. Look for an airline-style hub-and-spoke system.
The new law and changes in healthcare delivery are also going to affect real estate — building sales and leasing, and the value of physician practices and clinics. Many existing medical office buildings will have to re-adapt. Some older facilities may be destined for scraping and redevelopment into other uses.
Deadline on evolving trends

Healthcare has been evolving over the past decade and ACA merely deploys previously evolving trends. All healthcare providers are now implementing change. To understand the future trends in healthcare, the ACA backend effect has to be understood.
Cars and people both run better with 5,000 mile oil changes and 25,000 mile tune-ups — for people, it’s periodic blood tests and annual physicals. It costs significantly less to deal with preventive healthcare for people than treating preventable illnesses.
“The top five illnesses in terms of cost and numbers are lifestyle-related and preventable,” says Mark Stapp, professor of real estate practice and the director of the Master of Real Estate Development programs at the W.P. Carey School of Business at Arizona State University. Stapp says ACA’s focus on wellness is going to have “profound effects on medical real estate and economic development.”
While most political and public discourse focus on the consumer side of the law, healthcare providers are gearing up for what the law means in terms of delivering healthcare and the facilities required for delivery. ACA deploys three fundamental healthcare delivery changes:

1. Creation of Accountable Care Organizations (ACO)
2. Emphasis on keeping people healthy
3. Using hospitals for only the most acutely ill

Meeting the standards of care financially rewards healthcare providers; failing to meet the new standards results in financial penalties. The solution is a model deployed by Banner Health in the Valley — deliver healthcare into neighborhoods using a hub-and-spoke system. This is one reason Banner has built six health centers across the Valley.
Private sector healthcare organizations are not the only ones affected by the law. The Maricopa Integrated Health Service is considering a bond issue to fund its strategic plan. If passed, resulting construction and renovations will enhance its already-existing hub-and-spoke healthcare delivery system.
With thousands of Arizonans obtaining health insurance for the first time, there is an increased demand for healthcare providers. That component of ACA alone would seem to make MOBs an ideal real estate investment. The reality is, to obtain efficiencies, older buildings may not work.
“There are a lot of medical office buildings and clinics that are going to be functionally obsolete; and not just old ones,” reports Tom Weinhold, managing director of Cassidy Turley’s healthcare practices group. “Owners are going to have adapt to general office use or possibly tear offices down and replace them with other uses. Medical infrastructure has requirements today that some buildings cannot accommodate.”
Stapp says it could be a double-whammy in an already over-built office market.
“General demand for office space is decreasing,” he says. “Real estate has value from supporting an activity. If that activity goes, so does the value. The changes in medical care are driving changes in building design.”
Stapp says there are prospects because of ACA, too.
“Much of the public discourse is focused on the healthcare delivery, but there are rippling opportunities,” he says. “The emphasis on wellness is going to more broadly open that field. Community design, how and where people live, transportation options will all change development patterns. The population wants a healthy environment and business will find opportunities in that demand.”

Development opportunities

“The days of the ‘build it and they will come’ hospital towers are over,” suggests Layton Construction’s Steve Brecker, executive vice president-healthcare. “Owners large and small are looking at their dollars much more carefully than before. There is a bigger analytical process in the decision to build or renovate a facility.”
Brecker’s comment, which comes from the firm’s nationwide perspective, is that no healthcare organization is overbuilding. Everything is right-sized for staff efficiency. “Interiors are the focus today. Unlike the ‘70s and ‘80s, a lot of forethought goes into everything from the lobby design to the comfort of the waiting areas,” he says.
At McCarthy Building Companies, Vice President of Business Development Chris Jacobson has a similar observation. “It’s a lot less expensive to build a clinic in an outlying area and bring healthcare to the patients as opposed to forcing patients to drive a long distance to a medical center,” he says. “The outlying clinics capture market share for a provider, and feed more acutely ill patients into the central medical center.”
This is the gist of the hub-and-spoke system deployed by Banner.
“Banner is the trendsetter,” Jacobson says. “They are using an accountable care model (as an ACO) and emphasizing wellness to save money.”
Banner’s Vice President of Development and Construction Kip Edwards says, “We’re going to deliver care at the most convenient and accessible level to our patients. This means not only clinics, but online, telemedicine and other support and educational services.
“What we’re doing is putting physicians, PAs and nurses into a neighborhood setting, so that a patient does not have to wait to see a doctor. In the current system, you’re sick today. You call the doctor and can be seen in three days or next week. You’re not sick next week, you’re sick today. Banner is developing the facilities so a patient can get into the doctor today at the place where all his records are located. Then, if he needs x-rays, prescriptions and a lab test, it’s all in one place; no more running all over town.”
“What all this means for designers and builders is that owners are cautious and we’re not seeing new mega projects,” says Steve Whitworth, healthcare division manager for Kitchell Development. “Most projects these days are in the $5M to $10M range. We’re seeing outpatient space expansion, practices combining and technical upgrades.”

Clinics are being absorbed

Banner, along with Vanguard, Cigna and other major providers, are buying up medical practices to be those family clinics.
“Some of the practices are going to stay in their office condo or leased space,” reports Weinhold. “We’re seeing the big providers saying to doctors, ‘We’ll take your debt and administration, give you some up-front money, and you can work for us.’ Sometimes, there will be an agreement to keep current space for three to five years.”
The consolidations and acquisitions have completely chilled the market for medical practice sales. Although not CRE, many physicians and groups used to plan on a practice buy-out — with or without real estate — that would fund retirement.
“That’s just not the case anymore. No one wants to buy a medical practice except the accountable care organizations,” Dave Peterson says. The owner and designated broker of Arizona Business Intermediaries, LLC, has seen the market grind to a near halt, “It used to be I could take on a practice listing, send it out to a direct marketing list of other physicians and close a deal. Small physician practices used to value at two- to three-times earnings. Now, it’s sometimes less than one times earnings.”
Peterson says that the big healthcare organizations are buying practices on set formulas and with some upfront money. In the end, he says, the now-employee doctors will move into a neighborhood or community clinic.
“There are two impacts on the value of practices and the interest of physicians being their own boss,” he adds. “The first is [ACA]. It’s putting practices in the position of only one interested buyer — large healthcare organizations. The second, which a lot of people don’t consider, is the cost of medical school and its related debt. All of this makes working for a healthcare organization on salary appealing.”
It also causes medical practice values to plummet — dental clinics, cosmetic surgeons and other discretionary practices are not affected by ACA.

New opportunities

“With the emphasis on efficiency and limited dollars, today’s builder is a construction manager and trusted advisor,” observes Layton Construction’s Brecker. “We’re not waiting for plans and giving estimates, we’re involved in the design to use our experience to help the owner and architect design a project that delivers what’s needed for the dollars available. It’s different than just a few years ago.”
Hamilton Espinosa at DPR talks about ROI and efficiency, “As providers are pushing healthcare into the neighborhoods, they are going to spending less to build or remodel. At the hospitals and medical centers, major renovations are not going to be funded unless there is a return on investment.”
Espinosa says full-time equivalent employees and energy are the biggest operating costs for a healthcare system.
“If we can show that a renovation is going to increase staff efficiency and cut energy cost, the owner is going to be willing to put more capital into the project,” he adds.
This is another example of the builder becoming part of the overall design team early in the process. Builders may have an opportunity for more development money if offsetting operational savings are part of the construction project.
Following the Banner model opens other opportunities.
“John C. Lincoln is developing a freestanding emergency department (off Carefree Highway and I-17, Phoenix). Scottsdale Healthcare is building neighborhood clinics and urgent care centers,” points out Kitchell’s Whitworth. “The freestanding (emergency department) is the seed of a future hospital. Dignity (Health) is doing the same thing in Glendale.”
Kitchell is also using new construction techniques to build medical facilities. “It started with the Chandler Regional (Medical Center),” Whitworth explains. “We’re building modules in a warehouse and then bringing them to the site for installation. There’s a safety factor by cutting the number of people interacting onsite. Because healthcare organizations are almost using the same template for interior work, there is a cost savings building offsite.”
Kitchell does not have its own facility, but uses partner warehouse space or on occasion, leases space, for the offsite panel construction.
“We’re constantly looking for new ways to do things to reduce costs and increase quality,” he says.

New moves for service delivery

Other healthcare providers are getting ready to implement ACA strategies. Rather than acquiring practices and building all its own clinics, the Mayo Clinic seeks to affiliate and partner. This move is not at the exclusion of building its own clinics, but in addition to greenfield facilities. Mayo has affiliations with the new cancer center at Yuma Regional Medical Center and the Sierra Vista Regional Health Center is developing a Mayo telemedicine connection.

John C. Lincoln Health Network North Mountain Hospital in Phoenix. Greg Mastorakos

John C. Lincoln Health Network North Mountain Hospital in Phoenix. Greg Mastorakos

“We’re putting less focus in inpatient services,” reports Cheryl Lisiewski, director of facilities project management for Mayo Clinic. “Our remodeling and expansion are creating a better environment for outpatient services and increased examination space.”
Mayo is undergoing a nearly $350 million expansion on the Phoenix campus with a proton beam therapy facility and new cancer center.
“We’re looking to develop new clinical offices, but primarily, the expansion allows us to renovate and backfill offices for departments that are now in compressed spaces,” she says. The expansion does generate some new inpatient beds, but it’s almost exclusively designed to meet outpatient needs.
The investment on campus is not preventing Mayo from reaching into the community. “We may develop stand-alone and primary care facilities,” explains Lisiewski. “We’re also interested in strategic partnerships for the Mayo Care Network. It’s similar to what we’ve done in Minnesota and Wisconsin.”
Mayo Clinic expects to announce its first primary care clinic in an outlying community in the near future. Negotiations were not completed at press time. Mayo’s model is good news for MOB leasing, but on a small scale compared to the number of facilities. Its partnerships mean working with existing practices or newly consolidated groups.
“There isn’t a relationship between MOB office space that will be delivered and population growth,” cautions Weinhold. “Well-located space is being snapped up by REITs at premium prices. Outlying MOBs are seeing values decline. It’s not just a simple conversion to switch an MOB to a general office.”
“There are a lot of different vehicles being used,” he adds. “Walgreens, CVS and Walmart are developing in-store mini-clinics. The urgent care centers, FastMed and NextCare, are going into retail center end caps. NextCare has started building on retail pads.”
These options are not good news for owners of Class-B and -C office space.
“I had physicians who were buying medical office buildings before and during the recession,” recollects Arizona Business Intermediaries’ Peterson. “Now they want to get out, but they’ll be lucky to recoup the purchase price on some of those properties. It’s not just recession-pricing, it’s that the buildings are going to be empty under [ACA].”
“The big problem, too,” explains Cassidy Turley’s Weinhold, “is that a medical office is not

Banner Estrella Hospital, in Phoenix, during construction phase. Courtesy of McCarthy

Banner Estrella Hospital, in Phoenix, during construction phase. Courtesy of McCarthy

adaptable to a general office. Owners are going to need to come into these office condos and gut the place. It’s unlikely once vacated there are enough small practices to take up the space that’s going to be available.”

New buildings, new opportunities

“New businesses are going to model around the new ideas that come out of [ACA],” projects Stapp at the W.P. Carey School of Business. “There’s a huge impact from wellness, because healthy people reduce healthcare costs. This is going to create opportunities for wellness business — and these businesses are going to need facilities. For example, there is a shortage of primary care physicians. This increases opportunities for complementary integrative medicine. That opens the door to small niche practices not impacted by ACA.”
“Our marketing is going to change for healthcare,” McCarthy’s Jacobson advises. “Without the big projects, we need to adapt to smaller projects and facility upgrades. Cost is going to be a big driver in the process.”
Jacobson say smaller facilities provide opportunities for builders to take on multiple projects using big medical center experience: “The materials and systems are the same for the health centers. Redundancies are not required, but the electrical and HVAC still function the same way as a hospital.”
Jacobson sees opportunities with delivering healthcare into rural areas, “Telemedicine, robotics and web services may not means anything more than a room in a rural clinic, but the backbone is going to require central facilities like call centers and data centers.”
Whitworth echoes that comment, “We have a benefit at Kitchell that we can call a medical professional any time, 24/7, and they’ll tell us whether to take two aspirin, get to an emergency department or make an appointment for a doctor. That medical professional has to be located in a facility somewhere.”
“Banner is going to spend $15B over the next 10 years renovating its medical centers and building clinics,” concludes Banner’s Edwards. “Sometimes, we might find a facility we can renovate or repurpose. Other times, we might have a greenfield building. Occasionally, we might lease space.”
Multiply that by the number of healthcare organizations in Arizona, and the future of healthcare CRE has some potential.
“I just don’t see it happening next year,” says Espinosa.

Eric Jay Toll is a freelance writer based in Scottsdale. He covers CRE, development and construction, business, medical and travel news for a variety of publications. His work appears in AZRE, Az Business, USA Today, CardioSource World News, and Toll is the senior correspondent for Arizona Builder’s Exchange. Toll spent three decades as a land planner, including 17 years in public agency development and economic development department management. He lives in Phoenix.

Luxury Home - AZ Business Magazine November 2008

Sales for $800,000+ homes increase 69%

This summary looks at single family homes over $500,000 in all areas of the Northeast Valley, including Scottsdale, Paradise Valley, Fountain Hills, Rio Verde, Arcadia, Biltmore, Cave Creek and Carefree.

Supply has increased sharply over the last month. The number of active listings offered for sale as of November 1 is 2,314, up 20% from 1,935 last month and comprising 2,234 normal, 64 short sales and 16 lender-owned. Last year on the same date we had 1,864, with 1,713 normal, 122 short sales and 29 lender-owned. Supply is 24% higher than last year and showing the largest increase in several years. However there are relatively few homes in distress, no longer enough to have a significant effect on the market. Short sales are down by 48% and lender-owned homes down by 45% compared with a year ago. We certainly have enough luxury home listings to satisfy the present number of buyers and the market has become more favorable to buyers as a result. For homes priced over $2,000,000 there are 477 active listings, 21% more than last month. Supply in the range $800,000 to $1,000,000 has increased the least, up 12% from 308 to 344. There are now 5 lender-owned home and 8 short sales over $2,000,000, up from 4 and 3 last month.

There were 233 sales closed though ARMLS in October, the same as last month, and up 2% from the 229 we saw in October 2012. Since last December sales numbers have been impressive and this was the strongest October for sales over $500,000 that we have seen since 2006, when there were 278. There were 6 sales over $3,000,000 and 9 sales between $2,000,000 and $3,000,000. Sales were particularly strong for the $800,000 to $1,000,000 price range where sales were up 69% year on year to the highest level since 2005. 96% of sales were normal in October 2013 compared with only 82% last year.

Due to relatively low volumes and a wide range of price points, the Northeast Valley luxury market can display a lot of volatility if measured on a monthly basis. We therefore prefer to measure over a longer period in order to identify trends more accurately. The 12 month moving average hit a low point on two occasions in August 2011 and in February 2012, both around $219 per sq. ft. For the last 12 months we have seen a steady move upwards to around $245 per sq. ft. which is an increase of around 9% over the year and 12% above the low point. The six month moving average hit its low point of $215 in December 2011 and has now risen 16% since that point to $249. The three month moving average has moved from $213 in August 2011 to reach $252 in October 2013, a rise of 19%. These confirm a strong upward trend in luxury home prices over the last year, although there had been little movement during the summer.

The pricing for homes under contract was at a low point of $165 per sq. ft. in September 2011. Since then it has advanced to a peak of $232 as of May 1, but retreated during the summer. We usually see this price weakness during the heat of the summer. As of November 1 it is still standing at $232. The average under contract price for normal listings is $245 per sq. ft. The average for lender owned homes is $237 per sq. ft and short sales average $179.


JCL Surgery

Partnership Creates New Valley Medical Resources

At a time when healthcare dominates the national news, Midwestern University in Glendale and John C. Lincoln Hospitals, Phoenix, are working together to augment local medical resources by creating a general surgery training program for osteopathic medical school graduates.

The new osteopathic general surgery residency program, accredited by the American Osteopathic Association, was jointly developed by Midwestern and John C. Lincoln. The program was approved for two residents to begin each year, for a total of 10 residents in the program.

Residents will be trained at both John C. Lincoln North Mountain Hospital, 250 East Dunlap, Phoenix, and John C. Lincoln Deer Valley Hospital, 19829 N. 27th Ave., Phoenix. John C. Lincoln Hospitals are not-for-profit acute care community medical centers that have been nationally recognized for their quality of patient care and medical technology.

“Midwestern University is committed to the development of quality postdoctoral residency programs in the State of Arizona and around the country,” said Kathleen H. Goeppinger, Ph.D., President and Chief Executive Officer of Midwestern University. “Our mission is to provide our communities with well-trained physicians and other much-needed healthcare providers both now and in the future.”

“John C. Lincoln brings a vast array of surgical experience to this program,” noted Alicia Mangram, M.D., FACS, Medical Director of the Level 1 Trauma Services program at John C. Lincoln North Mountain Hospital and Program Director of the new General Surgery Residency Program. “We have 20 general surgeons who will be associated with the residency program with experience in trauma surgery, advanced laparoscopic, and robotic procedures.”

Projected physician shortages have made establishing new Arizona-based osteopathic surgical residency opportunities a top priority for Midwestern University’s Arizona College of Osteopathic Medicine (AZCOM) and the University’s Osteopathic Postdoctoral Training Institute (MWU/OPTI). According to Midwestern statistics, 97 percent of Arizona-native AZCOM students who receive postdoctoral training in-state remain in Arizona to practice, reducing the state’s physician shortage.

Any graduate of an accredited osteopathic medical school may apply to participate in the surgical residency program, Dr. Mangram explained. Residents selected to participate in the program will complete training in basic general surgery, advanced laparoscopic, robotic, colorectal, trauma, surgical critical care, endoscopy, vascular, and cardiothoracic procedures. Training in burns and pediatrics will be provided offsite.


Economy’s Q3 Growth Boosts Local Businesses

The U.S. economy grew faster than expected in the third quarter as businesses restocked shelves, and Arizona businesses are noticing the uptick. A 2.8% boost from July to September has Valley business owners optimistic about the holiday season and the first quarter of 2014. Local restaurants, retail, real estate and even purveyors of luxury goods and services report a steady incline of consumer spending, some even reaching pre-economic downturn levels.

Dr. Daniel Shapiro, a Scottsdale-based plastic surgeon reports nearly 35% growth in 2013 over 2012. “As a board-certified sugeon that’s been practicing for 22 years, my schedule stayed busy despite the economic downturn…but over the last few months we’ve been forced to reinstate a waiting list that spans several months for surgery as well as a consult fee,” he said. “It’s evident that people have more money to spend now, and are more confident spending it,” he said.

Shapiro is just one Valley business owner that says the economy is on the upswing. Restaurant owners, many hit hard by the economic downturn are also saying that business is booming again. “Having owned restaurants in Arizona over the last 20 years, it’s easy to spot a trend when it’s happening,” said Dave Andrea, owner of Brat Haus in Old Town Scottsdale. “First it’s small things like patrons adding another round of drinks, or ordering dessert, when before they’d forgo those things in an effort to save money,” he said,

Both Andrea and Shapiro agree that people are splurging on themselves a little more now, whether it’s a long awaited nip and tuck or just a well-deserved dessert.

What’s fueling the Valley’s economic stability? The labor market continued to improve, but at a snail’s pace, government data showed. Across the country, gross domestic product expanded at a 2.8 percent annual rate, the quickest pace since the third quarter of 2012, the Commerce Department said on Thursday. It was an acceleration from a 2.5 percent clip in the second quarter and beat economists’ expectations for a 2.0 percent rate.

DECO Communities, a Scottsdale-based real estate development company just announced completion of two new urban renewal projects which transform infill properties into stylish and modern apartment homes called Cabana Modern Apartment Homes. With 4 properties completed in the last 16 months, the company says real estate is on the upswing as well. “There is a high demand for the kind of development we are doing,” said Rob Lyles, partner for DECO Communities, “And the outlook for real estate development and growth in Arizona next year is exceptionally promising,” he said.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, expanded at a 1.5 percent rate, slowest pace since the second quarter of 2011. It grew at a 1.8 percent rate in the April-June period.  With the news of economic growth at the start of the holiday season and the ‘high-season’ for Valley tourism, business owners are exceptionally optimistic about the Q1 2014 economic reports as well.


UA Study Targets Latinas with Breast Cancer

Breast cancer is the most commonly diagnosed cancer in Latinas, but patients often have limited access to resources to help them cope psychologically.

A research study to evaluate the impact of low cost telephone-delivered counseling on quality of life for Latinas with breast cancer and their supporters is being led by Terry A. Badger, PhD, RN, PMHCNS-BC, FAAN, professor and division director of community and systems health science at the University of Arizona College of Nursing and a member of the UA Cancer Center.

Dr. Badger received funding from the American Cancer Society to conduct the Telephone Health Education and Support Project, which is open nationwide to eligible participants and their supporters, who can include spouses, family members or friends.

“Latinas are a growing and particularly vulnerable population with regard to breast cancer, because they tend to be diagnosed at later stages, to be sicker, and, in particular, have fewer easily accessible resources to deal with their psychological distress,” said Dr. Badger. “Untreated distress is associated with poorer health outcomes, so we designed a study to offer support for this distress that could easily be accessed by these patients.”

The study is comparing two groups, each composed of women and their designated supporters. One group of women and their supporters receives a counseling-focused intervention and the other receives an educationally-focused intervention. The interventions are delivered by specially trained professionals in a 30 to 40 minute telephone call once a week for eight weeks.

“In our research, we have found over and over that the supporter has as much if not more psychological distress than the survivor themselves,” said Dr. Badger. “This makes it critical that we provide services to both the Latina and her supporter.”

Christina Castro, a 58-year-old mother of three from Tucson, decided to participate in the study with her husband after she was diagnosed with breast cancer seven months ago.

“The call once a week was something to look forward to,” said Castro. “It was really easy to talk to someone who wasn’t a family member, but someone who would just listen to me. Being at home really helped make it comfortable, and it was set up at a time that was convenient for us. The calls were both comforting and empowering. I would definitely encourage others to do it.”

“We have participants from all over, including Yuma, New Mexico, Colorado and Nevada,” said Dr. Badger. “Research team members call participants in the evenings or on weekends, whenever it’s convenient for the patient and their partner. We can deliver this intervention anywhere as long as participants have access to a telephone.”

To learn more, call 1-866-218-6641 or email Maria Figueroa at or Dr. Badger at


China: A Land of Paradoxes

I was born in a small village near Shanghai, a year before the Communist government took over in 1949. My village was roughly 10 miles from the city center, where the famous Yu Garden is still located. And while the Yu Garden remains one of the main attractions of Shanghai today, my small village is now at the heart of Shanghai, similar to Times Square in New York City, but with the most expensive real estate and the most luxurious designer shops you may also find in London, Paris, or Beverly Hills, California. Hundreds of skyscrapers fill the former farmlands in the Pudong area (literally means “east of the river bank”). Shanghai has surpassed its glory in the 1930s, when it was known as the Paris of Asia.

Up north in Beijing, wide boulevards run past the Imperial Palace and Tiananmen Square with around-the-clock bumper-to-bumper traffic on four of the six ring roads. Porsches, Mercedes, Rolls-Royces and Hummers are not rarities. At the other extreme, in both cities and in Guangzhou in the south, governments build special quarters for the millions of migrant workers who contribute to the growth of the economy in their diligent, silent manners.

After sleeping for three decades, the “Kung Fu Panda” woke up, and in less than 40 years, China transformed from one of the poorest countries in the world to the second-largest economy, projected to pass the United States in the next few years, but this growth is happening at the expense of an ever-increasing discrepancy between the rich and the poor.

Privately owned entrepreneurial firms make up the fastest growing sector in the Chinese economy. Though the State sector has some of the largest firms in the nation, it contributes less than a third of China’s gross domestic product (GDP). The remaining portion is contributed by private and foreign firms.

In 2012, 95 of the Fortune Global 500 were Chinese firms, and among those, only three are from Hong Kong and three from Taiwan.  Among the other 89 Chinese firms, seven are privately owned. On the Forbes’ World’s Billionaires list, 122 are Chinese. It has been observed that foreigners go to China to buy fake Gucci, Dior, Louis Vuitton, or Rolex, while Chinese people go overseas to buy the real ones.

Private-firm philanthropy in China reached US$4.6 billion in 2012. Total donations by both State and privately owned firms or individuals in 2009 to the Guangcai (Glorious) Program, which aims to eliminate poverty in the western and other poor, isolated regions in China, reached US$25 billion.

In the summer of 2009, my daughter volunteered for relief-and-development organization World Vision International in a mountain village in Yunnan. The villagers live in mud quarters with about 50 families sharing two public outhouses. Some outhouses are built on the mountainside with a 15-foot drop below. A few families may have a color television with a few channels, and children often have to walk to school for up to two hours.

China is a land of paradoxes, between the city and the countryside, between the rich and the poor, between modernity and traditionalism, between the most advanced technologies and the most primitive conditions. Even living there for almost a lifetime, like Joseph Needham (a British scientist who visited China numerous times, known for his scientific work and history of Chinese science) or Matteo Ricci (an Italian Jesuit priest who lived in China for 32 years, known for his mathematics, cartography, and mastery of Classical Chinese), may not prepare one to know China. Since 2000, I have been going every year for two to six months each year, and I barely know China.

How does one prepare to visit China for the first time, whether for business or for pleasure? I would recommend two books as a start: Scott Seligman’s Chinese Business Etiquette (1999) still has the most relevant and useful tips for positive everyday encounters at both the professional and personal levels. Simon Winchester wrote a highly readable account about the life of Joseph Needham, whose unconventional marriage led him to China to discover Chinese scientists’ inventions in every field over five centuries. This book called The Man Who Loved China, written in the most welcoming manner, is a good start to learning about the roots of Chinese civilization and the foundation of modern Chinese thoughts and mindset. Also, China Daily –an English newspaper for foreigners living in China – is a quick source for updates on the latest news.

China is both deeply embedded in its 5,000-year history and also evolving at the speed of light in its modern life. It is a land of paradoxes, and the best way to learn it is to keep an open mind, open eyes, open ears and open hearts, with an attitude of appreciation and respect. Don’t be surprised by anything. Nothing should be seen as strange, just different.

Here is a simple example: If you ask for a glass of water during dinner, it means warm (or even hot) water in China. Warm water helps digest the fat in food, and this old Chinese tradition is still widely believed and practiced by Chinese people today. Is it strange, or is it wisdom?

Some preparation is highly recommended for a fruitful visit, whether you are going there to meet some potential business partners, to explore some potential opportunities, or even just to expand your horizon. Chinese people appreciate your demonstration of a genuine interest in the country’s culture and people. A little knowledge or a few phrases of warm greetings will go a long way in establishing a good rapport. Total ignorance or cultural blunders will be taken as insults, but Chinese people are forgiving if you show you are eager to learn. Respect for any custom (e.g., toasting every time before you take a sip of your wine, beer or white spirit – equivalent of strong vodka) and willingness to try something new (e.g., ox tongue or sandworms) will be pleasing to your host. If something were going to upset your stomach (e.g., spicy or raw food), your host would understand a polite decline. The golden rule works everywhere, China included.

The news about China has mostly been about pollution, corruption and counterfeiting. This is all true, but we also have to put this in perspective. The Chinese government is working hard to make improvements in all aspects. There are new regulations regarding carbon emission; efforts have been stepped up to combat corruption in government, and entrepreneurs discovered to have produced adulterated products (notorious in food and pharmaceutical products) could receive capital punishment.

The fact is that Chinese people are disgusted with these problems as much as the government and consumers. Chinese people have strong national and ethnic pride. They are eager for the country to produce high-quality products, have clean water and air, and increase the standard of living for everyone.

Like the United States from the 1940s to the ‘60s, massive industrialization and rapid development are providing opportunities for everyone, making many rich and leaving many more behind. The level of energy and determination to become one of the strongest nations in the world is not to be underestimated. If you are well-prepared before you get there, you will learn more about China than you can imagine. You may come home with some unexpected friendships and possibly a profound change in your perspective about this land of paradoxes.

Anne Tsui , professor emeritus at the W. P. Carey School of Business at Arizona State University, is at the forefront of lessons about business collaborations with China. She focuses on bringing related knowledge to the classroom and spreading it throughout the business world. She came to the United States from Hong Kong, China as an undergraduate student in 1970. She later became founding president of the International Association for Chinese Management Research, a professional and academic organization targeted at scholars, students, managers and consultants interested in advancing knowledge on managing organizations within the Chinese context. She also taught a W. P. Carey MBA class called “Doing Business in China.”