Tag Archives: commercial real estate

1951 W Grant Rd, WEB

CBRE releases Tucson transaction report

CBRE’s Tucson office has released the following recent transactions for the greater Tucson area:

 

Life Energy Wellness, LLC has leased 1,627 square feet of office space at 5232 E. Pima Street in Tucson. The local chiropractic practice led by Dr. Jaime Sanchez was represented by Bruce Suppes with CBRE’s Tucson office. The landlord, 2030 East, LLC was represented by Aubrey Finklestein with Vast Commercial.

 

TP3 Global has leased 3,929 square feet of industrial space at 1951 W. Grant Road in Tucson. The landlord, Wright and Case Holdings, was represented by Bill Di Vito and Jesse Blum with CBRE’s Tucson office. The tenant, a global provider of protection products for cold chain and temperature sensitive goods, was represented by Ron Zimmerman with Picor.

 

Hope, Inc. has leased 6,950 square feet of office space at Sunbelt Business Center located at 1671 W. Grant Road in Tucson. The local provider of Peer-and Family-Run behavioral health and substance abuse services was represented by CBRE’s Buzz Isaacson. The landlord, Sunbelt, LLC, was represented by Bruce Suppes, Tim Healy and Bob DeLaney, also with CBRE.

 

The Rodney D. Young Insurance Agency has leased 1,512 square feet of retail space at Flowing Wells Plaza located at 1320 W. Prince Road in Tucson. The landlord, the Orchards at Arizona II, LLC, was represented by CBRE’s David Dutson. The tenant was represented by Don Lieberman with KW Commercial.

 

Wing Factory has leased 2,297 square feet of retail space at Campbell Plaza Shopping Center located at 2800 N. Campbell Ave. in Tucson. The landlord, San Francisco, Calif.-based Campbell Plaza Two, LLC, was represented by Nancy McClure and Michael Laatsch with CBRE’s Tucson office. The tenant was self-represented. This lease marks the second Tucson location for the fast-casual restaurant.

 

Revolution Elite Cheer & Tumbling has leased 6,000 square feet of industrial space at Gymnastics World located at 6985 N. Camino Martin in Tucson. The landlord, an organization consisting of Don Gutzler, Lupita Murillo, Yoichi Tomita and Setsuko Tomita, was represented by John Ash with CBRE’s Tucson office. The tenant was self-represented.

Millennium Health and Balance has leased 1,488 square feet of medical office space at 6524 E. Carondolet Dr. in Tucson. The landlord, Michael and Debbie Lennon, was represented by Jeff Casper and David Montijo with CBRE’s Tucson office. The tenant was represented by Kevin Volk with Volk Co.

Bright Star Healthcare has leased 1,414 square feet of office space at 2330 N. Tucson Blvd. in Tucson. The home health provider, which provides the full continuum of home care services, including adult, elder and child care (including newborn care, babysitter and nanny services) in addition to medical staffing services for individuals, families and healthcare facilities, was represented by Bruce Suppes with CBRE’s Tucson office. The landlord, Grand and Tucson Blvd, LLC was represented by Melissa Lal with Larsen Baker.

Photon Engineering has leased 4,486 square feet of office space at 310 S. Williams Blvd. in Tucson. The landlord, DHS Property Investments, was represented by David Montijo and Jeff Casper. The tenant, a software consulting and development firm based in Tucson, was represented by David Montijo and Damian Wilkinson with CBRE, Inc.

 

Lawlytics has leased 4,263 square feet of office space at 310 S. Williams Blvd. in Tucson. The landlord, DHS Property Investments, was represented by CBRE’s David Montijo and Jeff Casper. The tenant, a successful, Tucson-based attorney website marketing company, was represented by Tom Hunt with Rein Grossoehme.

Desert Dance LLC has leased 3,485 square feet of retail space at Crossroads Festival Shopping Center located at 4811 E. Grant Rd. in Tucson. The tenant was represented by David Blanchette, Nancy McClure and Michael Laatsch with CBRE’s Tucson office. The landlord, Crossroads Canada, LLC, was represented by Andy Seleznov with Larsen Baker.

 

The Key To The Corner Office

Jeannie Nguyen is a vice president and relationship manager with National Bank of Arizona’s real estate banking group in Tucson, Ariz. She specializes in investor and developer commercial real estate relationships exceeding $5M. Jeannie is the 2014 president of Tucson CREW. She is also involved with National Bank’s Women’s Financial Group and Angel Charity for Children, Inc.

Jeannie Nguyen

Jeannie Nguyen

One of AZCREW’S main objectives is to champion success of women in commercial real estate through leadership, relationships, education and excellence. What kind of movement toward leadership roles are you seeing among the Tucson chapter’s members? How does this compare to the industry five, 10 or even 20 years ago?

Tucson CREW is dedicated to the advancement of women in commercial real estate and we are certainly seeing evidence of such. We have members in senior positions such as senior/managing partner, principal, senior vice president and CEO. Growth is happening. Twenty years ago, one would have walked into a board room and probably witnessed 25 percent, or less, representation by women. That gap is closing but does still exist at some levels of senor leadership.

Tucson CREW, in unison with CREW Network chapters nationwide, have put forth focus to assist women in empowering themselves to attain greater levels of leadership and personal and professional confidence. At the chapter level, we provide opportunities to assist individuals with this through multi-faceted opportunities including involvement in chapter leadership roles, structured luncheons offering programs designed to increase marketplace and subject matter knowledge, ability to build networks and foster relationships. Participation in CREW, and CREW-related activities affords an additional level of individual and company visibility as well.

How does Tucson crew make an effort to affect gender inequality among leadership in the CRE industry? Are there any other obstacles or challenges Tucson crew is working to overcome?

At the national level, CREW Network performed a benchmark study which addressed gender inequality among leadership in CRE. Based on the research, between 2005 and 2010, women at the SVP/VP/managing director/partner level increased from 20 percent to 24 percent. In 2010, male counterparts were noted at 27 percent, versus 25 percent in 2005. However, the greatest inequality remains at the C-suite level (president, CEO, CFO, COO). Of women surveyed in the 2010 benchmark study, only 9 percent of women respondents held C-suite positions compared to 22 percent of their male counterparts.

In answering one question of how to increase women leadership at the highest level, CREW Network has deployed a mentoring program known as “Bridging the C-Suite Gap.” This executive mentoring program allows mentees to work with mentors to create executive development and action plans to achieve development and career goals. The ultimate goal will be to see more women attain the top tier of leadership. In Tucson CREW, we have one member as a current participant in the national-level program and a second member who is a recent graduate.

Locally, Tucson CREW is working to make an impact not only with its members but also the next generation of young professionals. While our chapter has had a long history of reaching out to both high school and college students, through an annual event intended to introduce them to areas of commercial real estate, we recently elevated this approach to the next level. Through our partnership with University of Arizona’s Eller College of Management and College of Architecture, Tucson CREW members have dedicated additional time and energy to become increasingly involved with students through panel participation and networking events.

This year, Tucson CREW began its first formal mentoring program. Seven Tucson CREW mentors are mentoring six students for a one-year period. Through these different touch-points, it is our chapter’s goal to not only cultivate professional and leadership development but also to expose students to the many career possibilities within commercial real estate.

What is the most important thing people need to understand about Tucson crew?

We are a vast resource of knowledge and talent. Further, our chapter is one small part of a larger 9,000-member base that encourages networking, deal making and cultivating of ideas and resources.

The New Crew: AZCREW

Vicki Williams is the senior vice president of commercial real estate at Alliance Bank of Arizona, where she has worked since 2004. She is the 2014 president of AZCREW, the Phoenix chapter of CREW Network, and former chair of AZCREW’s programs committee. Williams has been the vice president on the board of trustees for Childsplay, Inc., a professional theater company that produces plays for young audiences.

Vicki Williams AZCREW

Vicki Williams

What kind of movement toward leadership roles are you seeing among the phoenix chapter’s members? How does this compare to the industry when AZCREW was founded 30 years ago?

Having been a part of AZCREW in the late 1980s and early 1990s, I am honored to have witnessed firsthand the evolution of both the local commercial real estate industry and also AZCREW’s evolution into a highly professional and more mature organization. In the early years, our membership was dominated by women in the fields of title and lending. Today, AZCREW is a well-known and respected part of the metro Phoenix real estate scene. We now have many more members involved in brokerage, law, architecture, asset management, construction and development. Moreover, a good number of these women are in senior leadership positions, including some who have founded and currently own businesses. That was certainly not common 20 years ago.

The quality of both our programs and networking events is phenomenal. Attracted by our high caliber speakers and timely topics that include development case studies, industry updates, financial market panels, and other topics impacting commercial real estate in the Valley, non-members and guests are coming to our luncheons in larger numbers than ever before. When we ask respected members of our local real estate community to speak, we receive enthusiastic responses. They know who we are and support our mission. I find it gratifying that we are able to have more female speakers, which is indicative of women’s increased leadership within the industry. Incidentally, other industry groups are also including women on their panels, which is great to see.

Our monthly special events are also in high demand as they include mixers at popular venues, brown bag networking lunches and an annual golf tournament where a portion of the proceeds benefit a local charity.

How does AZCREW make an effort to affect gender inequality among leadership in the CRE industry?

We champion the advancement and success of women in commercial real estate industry through four key areas: leadership, professional relationships, education and excellence. CREW Network, our parent organization, funds research into women’s representation in the commercial real estate industry nationally, including representation in leadership and managerial positions. Paid for in part through our local dues, CREW Network produces highly respected white papers that are now being referenced by other commercial real estate industry groups who are also seeking more participation by women in their own organizations. AZCREW and CREW Network also raise funds to provide scholarships for young women looking for careers in commercial real estate. Specifically, we have an annual signature Black & White event in November to raise funds for local scholarships and for CREW Foundation, which is our parent’s arm that provides scholarships at a national level.

Clearly there are challenges in attracting a younger membership to get involved and also to help them advance their careers in real estate. We continue to strive to close the gender gap by leveraging the talented and successful women leadership in our own ranks.

What is the most important thing people need to understand about AZCREW?

What people need to know most is that AZCREW is part of a national and dynamic organization with more than 75 chapters and 9,000 members in the U.S. and Canada, whose resources and influence have a significant impact locally and nationally. For example, CREW Network’s annual national convention held each fall features five-star national speakers presenting important market trends and is a great platform for building relationships and sharing ideas with women from other metropolitan areas. Open to all CREW Network members, this convention is truly an inspiring experience even for those whose business is primarily local. Last year, there were close to 1,000 in attendance. Simply promoting the benefits of our parent network to both our members and prospective members is an opportunity to increase engagement.

What was a memorable mentoring experience?

I didn’t have a mentor in the field of commercial real estate, per se, but did have a formal mentor when I got my first banking job in Arizona, fresh from NYC. My mentor was president of the bank, who provided a great example by being professional, thoughtful and respectful in his dealings with everyone equally. I was fortunate to never have felt I was being treated differently or underestimated because of my gender at a time when there were certainly other male managers with less progressive attitudes toward women in business, much less real estate. He was very patient and encouraged me to ask questions and, so long as I had done my research, to make recommendations despite my lack of experience. I felt I could ask him the “dumb” questions as to why things worked a certain way. The best thing I learned was that big, critical decisions should not be made in a rush, no matter what pressure you may feel. Looking back, I wish I had followed that advice a little more often.

Commercial Real Estate Market - AZRE Magazine March/April 2011

NAIOP: Commercial real estate strongest since economic recovery

The commercial real estate development industry grew at the strongest pace since the economic recovery began in 2011, according to an annual report on the state of the industry released today by the NAIOP Research Foundation.  The report, entitled “The Economic Impacts of Commercial Real Estate,” determined that the economic impact realized by the development process rose a significant 24.06 percent over the previous year, the largest gain since the market began to recover in 2011. Direct expenditures for 2013 totaled $124 billion, up from $100 billion the year before, and resulted in the following economic contributions to the U.S. economy:

·       Total contribution to U.S. GDP reached $376.35 billion, up from $303.36 billion in 2012;
·       Personal earnings (or wages and salaries paid) totaled $120.02 billion, up from $96.75 billion in 2012; and
·       Jobs supported (a measure of both new and existing jobs) reached 2.81 million in 2013, up from 2.27 million the year before.

The report says that the outlook for the remainder of 2014 and into 2015 is that the figures will continue to rise, with year-over-year growth expected in the range of 8-15 percent.

Commercial real estate development has an immense ripple effect in the economy, providing wages and jobs that quickly roll over into increased consumer spending.

“Commercial development’s economic impact is tremendous; simply put, a healthy development industry is critical to a prosperous U.S. economy,” said Thomas J. Bisacquino, NAIOP president and CEO. “As the uneven pace of the nation’s economic recovery continues, the industry seeks public policy certainty that bolsters investors’ and developers’ confidence. Despite this lack of assurance, we see positive indicators of a rebounding industry, but believe the industry could be more robust.”

Industrial, Warehousing, Office and Retail Show Strong Gains:

·       Industrial development posted a year-over-year gain of 48.5 percent due mainly to groundbreaking of energy-processing facilities.
·       Warehouse construction registered a third strong year of increased expenditures in 2013, gaining 38.1 percent in 2013. This is on top of 2012 growth of 28.4 percent and 2011 growth of 17.8 percent, showing a sustained increase in demand for warehousing space.
·       Office construction expenditures rose for a second year in 2013, up 23.3 percent from 2012.
·       Retail construction expenditures rose modestly for a third year in 2013, up 4.8 percent from 2012.

Operations and Maintenance Surge Even As Building Owners Cut Costs With Energy Efficiencies and New Technologies:

Through increased energy efficiency and advanced technology, building owners cut the average per-square-foot cost of operating building space in the U.S. by 14  cents, from $3.20/square foot to $3.06/square foot. Still, maintaining and operating the existing 43.9 billion square feet of commercial real estate space resulted in $134.3 billion of direct expenditures, and resulted in the following economic contributions to the U.S economy:

·       Total contribution to GDP in 2013 $370.9 billion;
·       Personal earnings (wages and salaries) totaled $116.8 billion; and
·       Jobs supported, 2.9 million.

Top 10 States by Construction Value for Office, Industrial, Warehouse and Retail:

1.     Texas
2.     Louisiana
3.     New York
4.     California
5.     Iowa
6.     Florida
7.     Maryland
8.     Georgia
9.     West Virginia
10.  Oregon

Four new states joined the list: Louisiana at No. 2, Maryland at No. 7; West Virginia at No. 9, and Georgia at No. 10. These states made the top ten list due predominantly to development of highly specialized and expensive energy-related processing facilities.

Illinois, Ohio, Massachusetts and North Carolina dropped off the top 10 list, slipping to Nos. 11, 14, 15 and 18 respectively. The report includes detailed data on commercial real estate development activity in all 50 states, and also ranks the top 10 states specifically according to office, industrial, warehouse and retail categories.

The report is authored by Dr. Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University, and funded by the NAIOP Research Foundation.

Where Arizona ranks nationally in terms of value of construction:

>> Office……………………………… 10
>> Industrial………………………… 41
>> Warehouse ……………………… 8
>> Retail/entertainment ……..22

>> Overall..…………………………..22

Arizona School Choice Trust

Boys Hope Girls Hope Elects New Board Members

John Eldean, Senior Vice President of Commercial Real Estate at Alliance Bank of Arizona, Sentari Minor, Arizona Humane Society Development Officer, and Paul Mulligan, CEO of Catholic Education Arizona, have been elected to three-year terms on the Boys Hope Girls Hope Board of Directors.

Boys Hope Girls Hope helps academically capable and motivated children-in-need to meet their full potential by providing value-centered, family-like homes, opportunities and education through college.  Since 1991, 100 percent of Boys Hope Girls Hope graduates have gone on to post-secondary education and have maintained a college-retention rate between 89 and 94 percent.  The national average is 66 percent.

Eldean has ten years experience in commercial real estate banking with Alliance Bank and JP Morgan Chase. He also served a two-year term on the Kingman City Council, a community where he also coached youth hockey and soccer teams.

Sentari oversees fund development initiatives and programs at the Arizona Humane Society.  Previously, he was a program specialist at the Rodel Foundation of Arizona.  He currently serves on the boards of Social Venture Partners, the Welcome to America Project, Phoenix Collegiate Academy, Young Nonprofit Professionals Network and handles communications and marketing for Seattle-based nonprofit Community Arts Create.

Mulligan, a Phoenix native and Brophy Prep alum, earned a Master’s in Theological Studies from John Paul II Institute for Studies on Marriage and Family in Washington, D.C.  Since 2007, he has directed Catholic Education Arizona, the state’s largest school tuition organization.  Since its inception, Catholic Education Arizona has provided more than $110 million in needs-based funding to low-income families at 40 Diocese of Phoenix Catholic schools and to Boys Hope Girls Hope scholars.

For more information about Boys Hope Girls Hope, visit www.bhghaz.org.

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Office/Industrial: Money in the Market

As recent as two years ago, commercial foreclosures were affecting the markets and underlying property values. Then talk surfaced that the “blue blood” money was back and looking to make deals.
Fast forward to 2013: Is this still the case?
“In regards to office and industrial, the ‘blue blood’ is very active in the marketplace,” says Todd Jarman, senior vice president Commercial Real Estate for BBVA Compass. “The recent announcement of joint ventures with Clarion Partners (and Wentworth Property) and Walton Street Capital (and Everest Holdings) continue a string of similar headlines we have seen more for many months now.
Values are holding very well, Jarman says, and in many cases appreciating nicely. He adds the market has not seen the wave of commercial foreclosures that were expected a number of years ago. Given the strong demand for good product, he adds, lenders holding distressed properties have instead opted to either entertain short-sales, note sales or direct borrower negotiations.
“In regards to the current lending environment, our local banks are very hungry for stabilized product (both office and industrial), and we are beginning to see lenders take market/leasing risk on industrial buildings (big box /West side) — as several speculative developments are underway,” Jarman says. “Lenders continue to be hesitant on market/leasing risk on office, unless a very ‘special story’ exists. I would suspect that any new office development would require substantial pre-leasing — at least 50% or a number that could provide break even DSCR.”
According to Scott Holland, managing partner, Keystone Commercial Capital, foreclosures have tailed off to a point that they are not having the downward pressure on values that they did over the past few years.
“I believe the market has found a floor and while there are still good values to be found in the market, the increasing transaction activity is bringing buyers back into the market as they can begin to feel comfortable with where the floor is and can focus on creating value as the market begin to resurge.
“As for money, I believe there is a significant amount of various equity capital (institutional, wealthy private and true entrepreneurial investors) in the market looking for value creation opportunities,” he says, “These markets appear to be in the early stages of recovery and everyone is trying to get an investment stake in the ground in order to enjoy the market lift that traditionally follows a significant down market — and what a down market it was.
But just as with the abundance of equity capital, there is an abundance of debt capital.  While the sheer volume of both equity and debt capital can’t be disputed, their adherence to fundamentals at this stage of the recovery is also clear.
“The not-so-distant memory of bad buys and bad loans will continue to keep both of these capital sources disciplined in their approach to the business for the reasonable foreseeable future, Holland says.
Commercial foreclosures are waning and CMBS special servicers have the bulk of what is available, says Jaclyn Noel, senior VP and private banker at Wells Fargo.
“The process with these groups takes longer because of the layers of legality,” she says. “Bank inventories are down and the economy is improving. Capitalization rates for these property types are normalizing.
Capital is flowing from different sources both locally and internationally, especially from Canadian investors.
“All the usual suspects are active again: banks, CMBS, life companies, pension funds, finance companies, private placements. Our Private Bank is actively providing commercial real estate investor financing.”
The Metro Phoenix office market remains very soft due to over-supply and weak absorption, says Vicki Williams, senior VP Commercial Real Estate at Alliance Bank of Arizona. Leasing activity, she says, consists primarily of tenants moving from one submarket to another and/or moving up from Class B properties to Class A properties.
“Institutional capital is available to acquire trophy, stabilized Class A properties only, which trade at low cap rates,” Williams says.
The market for Class B properties is the most active, according to Williams. Buyers for stabilized — or relatively stabilized —  Class B properties include investment funds and private REITs who partner with pension funds. These assets are selling at higher cap rates, which is reflective of those investors looking for risk adjusted returns.
“They do not anticipate rents to trend upwards in the short term and therefore plan on a longer hold strategy of 7 years or more,” she says. “Truly value-ad, distressed, multi-tenant office properties are being acquired by buyers willing to take more risk for a higher potential return. These investors are Canadian investors, individual investors and opportunity funds.
“Financing for these properties continues to be difficult to find due to the higher risk and lack of cash flow, as these value-ad properties have significant vacancy and may also need some rehab work. They are being acquired at very favorable prices, often from a lender.”
These investors’ strategy, Williams adds, is to lease up the properties at the current, low rental rates and then sell them at lower cap rate within a 3-year time frame. Multi-tenant medical office is the favored property type, though well located multi-tenant office properties in the Southeast Valley, the Camelback corridor and North Scottsdale are also trading.
“While the office market is expected to remain soft for the next several years, the industrial market has been strengthening,” Williams says. “Institutional investors continue to prefer big box, single-tenant properties.  Life insurance companies are starting to invest in new, speculative construction of big box space based on the strong absorption in this segment seen in the past couple of years.
“Multi-tenant, small bay industrial properties are being acquired by private investment companies consisting of ‘friends and family investors.’ This Class B market is the most active.”

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Power of the Press: Making The Most Of The Media

 

I had coffee with an editor recently and we were discussing how the commercial real estate market seems to be showing true signs of improvement and that firms are busy, more optimistic and actually working on completing deals and projects.

This is great news and the details of these are exactly what publications are looking for as they fill the news pages. And yet, we also agreed, that firms typically do not know how to go about “getting press.”

I would like to flash back about 15 years to my days as an editor and give you a peek into my then-editor mind. While I proofed large film flats of the publications and marked up “bluelines” instead of digital reviews and PDFs that are used today, there are many simple, and yet essential, principles that hold as true today as they did when I hung out in a dark room developing the magazine photographs, dipping my hands in developer and stop bath.

The publication’s job is not to provide your firm publicity — by submitting press releases and pitching feature topics, you are informing the editor of potential news they can use. If there is an angle they want to pursue from your press release, they may use a part of your press release or cover the topic and not even mention your firm. This is the chance you take, however there are some easy ways to decrease these odds:

>> Be newsworthy: Every single transaction you do, every person you hire and every groundbreaking you have is NOT news to most editors. Face it, this is a big city and while they appreciate the information, they value knowing that you are discerning the relevancy of the information you are sending them. If an editor senses self-promotion over newsworthiness, that is a negative.

>> Be timely: Publications and editors/reporters like to report the news, not reflect on it. If it happened in the past it is simply less relevant. If it is significant but you missed their deadline, it is worthy of an email or a call to ask them their thoughts.

>> Be aware of deadlines: Know your publications and when the deadlines are. If an editor is on deadline, it is not the time to try to meet with them, keep them on the phone long or tarry when they call you requesting information for a story.

>> Editorial calendars: Most publications have editorial calendars that guide you in advance as to the topics they are going to be focusing on. Take the time to educate yourself and your firm on these topics and see how you can help the editor become aware of emerging trends, projects, unique aspects, etc. on that subject. You will get much more coverage by positioning your firm as the expert in that field than in trying to promote the firm directly.

>> Be accurate: If editors are going to use and run your information you must not have misspelled names, incorrect information and claim information as fact that is not confirmed. The editor’s job is to verify facts, yes, but they are working on deadlines daily/weekly/monthly and need to depend on sources. If there is a misspelling, for example, and that person contacts them to complain that they got it wrong, you are no longer a trusted source.

>> Be reasonable: When I was an editor, there was a man named Steve who called like clockwork the day the publication came out each month to yell at me for the press releases I didn’t run and wanted a full explanation as to why. Telling him that he sent me on average five a week and that I could not run all of his company happenings did not seem to suffice. Don’t be a Steve.

>> Think like an editor: If you provide relevant information, in the format that makes it easy for them and deliver it in their preferred method, you have made an editor your ally fairly easily. Follow these simple rules:

>> Embrace the AP Stylebook: This is the Bible for journalist, it is the reference book for writing in journalistic style. As simple as it seems, if you are writing in a similar style, they appreciate your efforts and are more receptive to the information being presented.

>> Take a lesson on writing a press release: Just because Word offers press release templates, this does not mean it’s written correctly. Know what a dateline is, a lead paragraph, proper end marks, objective tone, etc. This goes a long way because if your press release can truly be virtually cut and pasted into the publication versus rewriting, calling for missing or inaccurate information and generally cleaning up sloppy work, who do you think will get more press?

>> Got art?: If you have a photograph or table/chart, attach it. Publications are always looking for art. PS — don’t forget to give it a short sentence descriptor (a cutline) and credit the photographer.

>> Delivery: Contact the editor and ask them the best way for them to receive and hear of information. If it’s email, email it; social media, tweet it, etc. Whatever they prefer is what you want to do.

>> Format: Make sure the information sent electronically is easy to copy or edit, like a Word document and that the images are high resolution, generally 300 dpi is your best bet.

By putting yourself in the shoes of a typically overworked, underpaid editor, you can provide better news and more compelling information that will be better read and provide the greatest media benefit to your firm. If you have any comments or additional questions, please email me at Danielle@smallgiantsonline.com.

 

volunteer

Valley Real Estate Brokers Compete in Raising Money for Kids

This winter, brokers from the local commercial real estate industry will unite and compete in raising money to help at risk children in Arizona. Brokers for Kids is a year-long fundraising effort, hosted by the Scottsdale 20/30, involving teams created by Valley commercial real estate market. The effort culminates with the Brokers for Kids annual event which will be held this year on Friday, February 15, 2013 at Tempe Beach Park at Tempe Town Lake.

Throughout the year, brokers along with other industry professionals raise money through various fundraising efforts for Boys Hope Girls Hope. Boys Hope Girls Hope is non-profit that provides scholarships to underprivileged kids in both community-based and residency-based programs, ensuring a good education and a start towards a college education.

“It’s truly an amazing charity that helps academically capable and motivated children in need to meet their full potential,” said Brokers for Kids Chariman Ben Hawkins. “We help these children succeed by providing value-centered family-like homes, better opportunities and education through college.”

Last year, Brokers for Kids raised more than $242,000 for Boys Hope Girls Hope. Their goal is to raise $300,000 in 2013. A percentage of the fundraising dollars is also donated to the charity of choice of the Broker’s Cup winner.

On February 15, the coveted Broker’s Cup is awarded to the top fundraising team. The teams will also participate in the Olympiad Championship, a fun day of games and spirited competitions at Tempe Town Lake. They will compete in a quarterback challenge, volleyball, basketball, baggo, and bocce games. Sponsorship opportunities are available for this day-long event.

The Scottsdale 20-30 partnered with Valley Toyota Dealers and is raffling a 2013 vehicle to drive fundraising efforts leading up to the event. Raffle tickets are now on sale and the drawing for the Toyota will occur during the Olympiad on February 15 which is open to the public.

“Every dollar counts and without the tremendous support of the commercial real estate community, this event would never have become what it is today,” said Hawkins.

For more information on Brokers for Kids, the Scottsdale 20/30 organization, sponsorship opportunities or to purchase raffles tickets, visit www.scottsdale2030.org/brokersforkids.html

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Fiscal Cliff: Impact Scenarios for the Commercial Real Estate Industry

 

Cassidy Turley released research examining the impending “fiscal cliff’s” impact on commercial real estate markets across the country.

The fiscal cliff refers to the combination of tax increases and spending cuts that will take effect in January 2013, assuming no change to the current law. Economists’ general consensus is that if the fiscal cliff is allowed to occur, the U.S. economy will slide back into recession in the first half of 2013.

Cassidy Turley’s report summarizes the various scenarios related to fiscal policy and then draws the link to commercial real estate.

Cassidy Turley’s research reveals that Metro Phoenix is the 13th most exposed U.S. market to potential fiscal cliff cuts and would relapse into recession in the worst-case scenario, which research projects at a 30% probability.

In fact, 18% of Metro Phoenix’s Gross Metropolitan Product (GMP) is exposed to sequestration cuts, and those potential cuts would lead to 8,300 job losses, 7.5% unemployment and 1.45% GMP growth. Sequestration also would yield 348,000 SF of negative net absorption, 27.3% vacancy and rent declines of 2.5% for Metro Phoenix’s office market.

Cassidy Turley places the most probable scenario, which involves a short-term deal between Congress and the president, at 70%, and that scenario is much more favorable to metro Phoenix – 3.9%% GMP growth, 42,200 new jobs, 1.7 MSF of office net absorption, 24.9% vacancy and unemployment at 7.1% in 2013.

“The Phoenix metro area is well on its way to an accelerating recovery, and will do so exponentially if policymakers come to an agreement,” said Chris Jantz, Vice President Research of Cassidy Turley Arizona. “It’s imperative that Congress and the president resolve this fiscal crisis with a long-term solution, reduce the federal deficit and create an environment where businesses in Phoenix, Arizona and the U.S. can achieve robust, sustainable growth.”

For U.S. commercial real estate markets, especially cities and regions with clusters of federal contractors, going over the fiscal cliff poses dire consequences.

“Going over the fiscal cliff, and continuing to free-fall is an unlikely scenario, but from a real estate perspective, it’s potentially a devastating scenario,” said Kevin Thorpe, Cassidy Turley’s Chief Economist.

“When you examine our study’s details, you quickly realize how damaging the fiscal cliff will be for so many markets across the country. Washington, D.C., has an obvious bulls-eye on its back, but our study finds that the majority of metros – 23 out of the 30 metros tracked – will experience a recession in 2013 if the tax hikes and spending cuts are not scaled back significantly.”

Cassidy Turley’s report finds that the spending cut’s impact on government contractors will have a direct, adverse correlation on commercial real estate and demand for office space. Sequestration in 2013 would result in actual spending cuts, meaning discretionary defense spending and non-defense spending would be reduced by 9% in 2013 from 2012 levels.

According to the study, the top 100 government contractors occupy a total of 208 MSF of office space in the U.S. – equal to the total office inventory of the entire Dallas metro area. Under the sequestration scenario, the top 100 government contractors would potentially shed 18.7 MSF of office space across the U.S. as the government is forced to tighten its belt on various projects.

“Government contractors are a major tenant in many office markets across the country,”  Thorpe said. “Sequestration is essentially an immediate 9% drop in revenues for the government contracting world. Contractors would invariably need to cut staff, which would create numerous holes in many real estate markets.”

According to Cassidy Turley’s Fiscal Cliff report, the most likely scenario assumes that lawmakers will sign a short-term budget resolution in late December that will extend the Bush administration’s tax cuts for most and resume similar federal spending levels for three to four months. A short-term deal will set the framework for a longer-term budget agreement, and even if an agreement is not reached by the end of 2012, Congress may return in January 2013 and change policies retroactively.

The stalemate still leaves Congress and the President to address the debt ceiling limit, but the Treasury will run out of accounting gimmicks in 1Q or 2Q 2013, again forcing the government’s hand to either finally deliver a “grand plan,” slash spending or default on certain debt obligations.

Despite current uncertainty, resolution would propel the U.S. economy and office market in 2013 and 2014 as 2012 closes relatively strongly. Third-quarter GDP was revised upward to 2.7%, and the U.S. economy has created 173,000 net new jobs per month on average since the summer slowdown.

In November, the Conference Board’s Consumer Confidence Index rose to its highest level in five years, and home-price increases delivered similarly, with increases in 100 out of 132 metros tracked.

“There is a positive script buried in here,” Thorpe said. “If lawmakers can work it out, the U.S. economy appears poised to take the recovery the rest of the way. Real GDP of 2.5% for 2013 is attainable, and 3% or 4% in 2014 is not a stretch given the latest trends in the U.S. economy. Against such a backdrop, demand for office space could be 30% to 40% higher than it has been throughout this recovery. We just need policymakers to get it done.”

 

Larry Downey

Larry Downey Named Vice Chairman at Cushman & Wakefield

Cushman & Wakefield announced Larry Downey has been named Vice Chairman, a title reserved for an elite few throughout the firm’s worldwide offices.

The distinction marks the first time in the 25-year history of the company’s Phoenix office that an individual has been assigned that designation.

“The Vice Chairman title honors Cushman & Wakefield professionals who stand out as top performers, both in production and fulfilling the core values of our firm,” says Tom Johnston, senior managing director of Cushman & Wakefield of Arizona, Inc.

“In order to be considered for this distinction, professionals must not only be perennial top producers, but exhibit leadership, a genuine commitment to collaboration, mentorship of our future leaders, exemplary client reviews, and a strong history of dedication to charitable causes. Over the years, Larry has excelled in each category and elevated the importance of the Phoenix market to the firm.”

Larry Downey is a 28-year veteran of the commercial real estate industry. He represents both tenants and building owners.

Lisa Alberti - Small Business

Paving The Way For Phoenix Small Business Growth

Foreshadowing federal reports of an uptick in demand for commercial real estate and small business lending, CDC Small Business Finance recently funded two loans to help a local company purchase three commercial buildings in Phoenix.

We wanted to take advantage of lower property values and low financing rates to purchase the buildings,” said Todd Franklin, owner of Arizona Sun Supply, a wholesaler/distributor of solar screen products. “The additional square footage we gained will give us the space we need to warehouse all of our raw materials and give us more room to grow.”

Franklin benefited from using the Small Business Administration 504 loan program, designed to help small businesses purchase commercial real estate at below-market fixed rates and minimal down payment. The anticipated result is that small businesses expand and are able to create new jobs.

CDC Small Business Finance teamed up with Bank of America on the Arizona Sun Supply loans. CDC provided the SBA-504 fixed-rate loan to finance 40% of the total purchase, Bank of America provided 50% with a conventional loan and the small business needed only to contribute a 10% down payment. Arizona Sun Supply’s commercial real estate loans totaled just less than $1M.

Typically, small businesses are unable to tap into the long-term capital market, but can do so with a SBA 504 loan. Business owners of growing companies usually come to a crossroads of whether they should buy a facility or lease. An SBA-504 loan makes purchasing attractive because the cash down payment required by the owner is minimal, allowing the small business to preserve its cash for ongoing operations. Plus, long-term tax benefits are often realized.

Arizona Sun Supply, Inc. (AZSUN) operates as a niche supplier with a focus on specialty products that reduce the negative impact of the sun. As the top supplier of Textilene products, a durable mesh fabric made from PVC resin that is specifically designed to block the sun’s harmful rays, the company sells at wholesale prices to the general public across the U.S. In Arizona, they only work directly with sunscreen and shade structure businesses.

“The window shade business can be cyclical based on housing growth rates in the market,” Franklin said. “However, we’ve been growing at a steady rate because we continue to add new products to sell across the country and have not been reliant on sales in one or two markets.”

The primary areas of growth have been in shade fabric installed in parks, schools and other outdoor venues. Arizona Sun Supply’s general product line includes solar, screen fabrics, sliding and swinging doors, aluminum screen frames, sail and structure fabric, insect and pet screen and Textilene outdoor fabric enhanced with fire rated performance.

Over the past six months Small Business Finance has funded 21 SBA-504 loans, partnering with banks to provide $39M in financing to Arizona small businesses.

“Like Arizona Sun Supply, small businesses are taking advantage of lower property values to purchase new facilities for expansion,” said Lisa Alberti, loan officer for CDC Small Business Finance.

Alberti added that other Arizona small businesses are taking advantage of a refinance program revamped by the SBA and available through September. This program is designed to help small business owners facing balloon payments on conventional commercial property mortgages. The current refinance rate through this program is 4.95%. (For more information, http://tiny.cc/SBA504refi).

The 504-loan program was created by the SBA for the specific purpose of financing long-term fixed assets such as commercial real estate and equipment with economic life of 10 years or greater.

CDC Small Business Finance’s office is located at 2575 East Camelback Road, Suite 450. For more information, contact Lisa Alberti (602-635-8413 or lalberti@cdcloans www.cdcloans.com)

Financing

Arizona Commercial Real Estate Financing Nearly Doubles

Commercial real estate financing in Arizona via the Small Business Administration (SBA) 504 loan program nearly doubled for the first half of the SBA’s fiscal year compared to the same six-month period a year ago, according to CDC Small Business Finance.

DC reported that SBA-504 loan approvals totaled $105M for the Oct. 2011 – March 2012 period compared to $56M approved for the same period a year prior – Oct. 2010 – March 2011.

“The market continues to rebound after a couple down years,” said Lisa Alberti, loan officer for CDC Small Business Finance. “Small businesses are taking advantage of lower property values and also capitalizing on refinancing currently owned properties.”

Close to 650 new jobs are projected to be created in Arizona as a result of SBA-504 financing approved over the last six months.

CDC Small Business Finance itself approved 21 SBA-504 loans for the six-month period, partnering with banks to provide $39M in financing to Arizona small businesses.

In addition to the traditional 504 program, a new SBA refinance program is now available to small businesses facing balloon payments on commercial property mortgages.  The current refinance rate through this program is 4.95%.

The 504 loan program was created by the SBA for the specific purpose of financing long-term fixed assets such as commercial real estate and equipment with economic life of 10 years or greater. This refinance program is only available through September 27, 2012.

For more information on financing through CDC Small Business Finance, visit CDC Small Business Finance’s website at cdcloans.com.

red-awards-2012

2012 RED Awards: Winners & Honorable Mentions

Kitchell, DAVIS and Banner Health captured top honors Thursday night as Arizona Commercial Real Estate Magazine held the 7th Annual, 2012 RED Awards (Real Estate and Development) to recognize the biggest, best and most notable commercial real estate projects and transactions of 2011.

The event drew more than 400 CRE professionals to the Arizona Biltmore as winners and honorable mentions were selected from a record 116 nominations received in 12 project categories and individual and team broker categories.

Kitchell was named General Contractor of the Year; DAVIS was Architect of the Year; and Banner Health won Developer of the Year.

2012 RED Awards category winners:

Best Education Project: Grand Canyon University Arena; Best Hospitality Project: Westin Downtown Phoenix; Best Industrial Project: Dunn-Edwards Phoenix; Best Healthcare Project: Phoenix Children’s Hospital; Best Multi-Family Project: Devine Legacy on Central; Best Office Project: Fountainhead Office Plaza; Best Public Project: Virginia G. Piper Sports & Fitness Center for Persons with Disabilities; Best Redevelopment Project: Adelante Healthcare Surprise; Best Retail Project: iPic Theater/Tanzy/Salt; Most Challenging Project: Salt River Fields at Talking Stick; Most Sustainable Project: DPR Construction Phoenix Headquarters; and Best Tenant Improvement Project: Limelight Networks.

Merit Award winners were OASIS Hospital (Healthcare) and P.L. Julian Elementary School (Education).

Broker of the Year honors went to Jay Hoselton, Cushman & Wakefield, Individual Leasing; Ken Elmer, Commercial Properties Inc., Individual Sales; Bo Mills and Mark Detmer, Cushman & Wakefield, Team Leasing; and Tyler Anderson and Sean Cunningham, CBRE, Team Sales.

2012 RED Awards honorable mentions:

Education: NAU Health & Learning Center; Healthcare: Banner MD Anderson Cancer Center; Hospitality: Casino Del Sol Hotel Convention Center and Parking Structure Expansion; Industrial: Crescent Crown Distribution; Most Challenging: Arizona Science Center Phase III Remodification; Multi-Family: Phoenix Towers Terrace; Office: UniSource Energy Corporate Office; Public: Maricopa County Downtown Court Tower; Redevelopment: The Q Building at Paradise Valley Community College; Retail: American Sports Complex-Retail Center; Most Sustainable: Phoenix Children’s Hospital; and Tenant Improvement: Gap Fulfillment Center.


View photos from the 2012 RED Awards on our Facebook!


2012 winners can order Awards, Plaques & Reprints


Economic Forecast

Economic Forecast: Arizona, U.S. to Show Improvement in 2012

Improvement in both the Arizona and U.S. economies can be expected next year, but full recovery is still a few years away. That’s according to experts who spoke Wednesday at the 48th Annual Economic Forecast Luncheon, co-sponsored by ASU’s W.P. Carey School of Business and JPMorgan Chase.

 More than 1,000 people packed into the Phoenix Convention Center to hear the outlook for 2012. The experts say that though U.S. economic growth was actually slower this year than last year, conditions for 2012 are looking up for the nation and state.

“Although the Arizona recovery is tepid at best, every key indicator is expected to improve in 2012 as compared to 2011, including jobs, incomes, sales and even housing,” said Research Professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business. “Still, no indicator will be sharply better until the national economy moves onto a faster growth path.”

McPheters says Arizona hasn’t been rebounding with the same vigor seen in previous recovery periods. The state lost 324,000 jobs from 2007 to 2010. By the end of this year, only about 20 percent of those will be restored. However, Arizona did move from No. 49 among the states for job creation in 2010 all the way up to a Top 10 growth state this year.

“After three consecutive years of lost employment, about 23,800 jobs were added in 2011,” said McPheters, editor of the prestigious Arizona and Western Blue Chip Forecast publications. “Arizona employment is expected to increase by 45,000 jobs in 2012. However, we’re now at about 9 percent unemployment in the state and expect unemployment to continue to be a problem next year, dropping to around 8.5 percent. Healthcare and manufacturing are among the sectors doing relatively well.”

McPheters also expects Arizona’s population to grow by 1.5 percent in 2012, faster than the national average of about 1 percent, but slower than Texas and Colorado. Personal income is expected to go up 6 percent in Arizona. Retail sales are projected to rise by 8 percent. Cautious consumers have largely been putting off non-essential spending, but may relieve some pent-up demand next year.

In the hard-hit housing market, McPheters predicts 20-percent growth in single-family housing permits. However, Elliott D. Pollack, president of highly regarded economic and real estate consulting firm Elliott D. Pollack and Company, explained that even a large percentage growth in this area doesn’t mean much.

“Permits have bottomed out, but they are still down 89 percent from the peak,” Pollack said. “About 50,000 to 55,000 excess housing units remain in the Greater Phoenix area.”

Foreclosures and short sales have been dragging down existing-home prices. Pollack says, in the third quarter of this year, 25 percent of the existing-home transactions were foreclosures, and another 29 percent were short sales. Also, more than 40 percent of the homes being sold are going to investors and other owners who won’t actually live there.

“On the positive side, the number of units going into foreclosure is declining, and housing prices appear to have stabilized,” said Pollack. “Depending on population growth, job growth and other factors, we could see full housing recovery in three to four years.”

Pollack says the apartment market is already looking good, as many people switch to renting. Vacancy rates in industrial space have started to decline, and an increasing number of companies are looking at the Phoenix area as an alternative to California. Still, about one out of every four square feet of office space in the metro area is vacant.

At the national level, experts expect 2012 to bring an increase in gross domestic product (GDP) of somewhere between just under 2 percent to 3 percent. Professor John B. Taylor, the George P. Schultz Senior Fellow in Economics at Stanford University’s Hoover Institution, talked about what needs to be done in this area.

“The economy wasn’t nearly this weak in the 1980s, following an equally deep recession when unemployment rose to even higher levels,” said Taylor, who served as Undersecretary of the Treasury during President George W. Bush’s first term and on the President’s Council of Economic Advisers for President George H. W. Bush. “Recently, we have seen a return toward more government intervention for fiscal, monetary, regulatory and tax policy. These swings have had enormous consequences for the American economy.”

Taylor says the country needs a predictable government policy framework based on law with strong incentives derived from the market system and a clearly limited role for government.

Anthony Chan, chief economist for private wealth management at JPMorgan Chase & Co., specifically addressed the future of the financial markets. He said many stocks are a bargain now.

“We currently face oversized volatility and uncertainty; for this reason, we believe stocks are attractively priced from a historic perspective,” said Chan, who served as an economist at the Federal Reserve Bank of New York, appears monthly on CNBC, and is a member of the Reuters, Bloomberg and Dow Jones weekly economic indicator panels. “Prices should gravitate toward fairer values when the outsized degree of uncertainty lifts.”

Chan added corporations are sitting on “huge amounts of cash,” while paying out low dividends. When business sentiment improves and uncertainty is reduced, he expects faster employment and economic growth. He also believes high-yield and municipal bonds will remain a good investment as long as the country doesn’t fall into recession. Still, he is concerned the United States may be losing some control over its long-term destiny, noting that China and Japan hold a combined 46 percent of U.S. Treasuries.

“It is hard to believe the U.S. influence will remain as dominant as it once was, if this trend persists,” said Chan. “Meantime, emerging markets are becoming more attractive. Consider a diversified portfolio.”

For more details and analysis on the 2012 economic forecast, including the presentation slides, go to knowwpcarey.com.

 

People to Know 2011 Reception & Awards Ceremony

People To Know 2011 Industry Leaders And Photos

AZRE Magazine’s People to Know 2011 reception and awards ceremony was held on November 10, 2011 at the Scottsdale Waterfront. In attendance was Arizona’s largest local and national real estate audience, including the following People to Know recipients: attorneys, accountants, city planners, property managers, economic developers and brokers.

Throughout the night, we also announced the top 11 industry leaders. Congratulations to our finalists and winners!

People to Know 2011 Industry Leaders

Architects & Engineers

Michael Medici, AIA
President

People to Know 2011 Industry LeadersSmithGroup
455 N. 3rd St., #250, Phoenix
www.smithgroup.com · (602) 265-2200

Responsibilities: Managing director and member of the firm’s board of directors, architectural management and design
Years at Company: 30
Years in CRE: 32
Accomplishments: Medici has been with SmithGroup since 1980 and has remained active in managing several of its key projects including TGen, Arizona Biomedical Collaborative, Freeport McMoRan Center, National Renewable Energy Laboratory’s Energy Systems Integration Facility, and the POW/MIA Forensic Laboratory at Hickam AFB in Honolulu. He is active in the the community and has served as event chairman of the Annual Cystic Fibrosis Stair Climb & Firefighter Challenge; as a member of St. Joseph’s Hospital Foundation Board; and as past president of ASU Council for Design Excellence. His leadership enables SmithGroup’s Phoenix office to achieve success in the Valley, Arizona and the Southwest.


Attorneys

Michael E. Tiffany
Managing Attorney

People to Know 2011 Industry LeadersTiffany & Bosco PA
2525 E. Camelback Rd., 3rd Floor, Phoenix
www.tblaw.com · (602) 255-6000

Responsibilities: Managing attorney and head of the real estate practice group
Years at Company: 40+
Years in CRE:
30+
Accomplishments: In addition to his duties as managing attorney, Tiffany concentrates in the area of commercial transactions, primarily in strategic planning, business solutions, real estate and finance. His accomplishments include closing HUD insured loans for more than 170 multi-family housing projects on behalf of borrowers, for an aggregate loan amount in excess of $2.2M; and preparing a development agreement between a landowner and the Town of Buckeye as a form for future development agreements. He is a member of the State Bar of Arizona and Maricopa County Bar Association. He is active in with the Thunderbirds and the Sheriff’s Mounted Posse of Maricopa County.

Don J. Miner
Director

People to Know 2011 Industry LeadersFennemore Craig PC
3003 N. Central Ave., #2600, Phoenix
www.fclaw.com · (602) 916-5000

Responsibilities: Focuses on various aspects of commercial real estate
Years at Company: 14
Years in CRE: 32
Accomplishments: Miner was the buyer’s counsel in sale of a portfolio of $101M of loans secured by residential real estate mortgages, and the seller’s counsel in the sale of an 832-acre farm for development of a master-planned community. He was the landlord’s counsel in negotiation and documentation of a 115,000 SF office lease, and tenant’s counsel in negotiation of a 130,000 SF office lease. He represented the ground lessee and developer in the negotiation and drafting of a 65-year ground lease covering 37.5 acres of Native American reservation land for purposes of the development of a commercial sea water aquarium, a butterfly pavilion and related entertainment and restaurant uses. Miner is listed in Best Lawyers in America, Real Estate Law, 2003-2011.


Brokers

Anthony J. Lydon
Managing Director – Industrial/Supply Chain Logistics Solution

People to Know 2011 Industry LeadersJones Lang LaSalle
3131 E. Camelback Rd., # 400, Phoenix
www.us.joneslanglasalle.com · (602) 282-6300

Responsibilities: Manages and directs the industrial supply chain marketing for institutional property owner clients and serves as an advocate for corporate occupiers of space
Years at Company: 1
Years in CRE: 30
Accomplishments: Lydon has spent his 30-year career focused on the industrial commercial real estate sector. In that time, he has become one of Phoenix’s most accomplished industrial brokers. In the last 18 months alone, Lydon has directed some of Phoenix’s top industrial transactions, bringing jobs and capital to the market via deals like the 1.4 MSF Amazon.com lease and the long-term, 153,000 SF Schoeller Arca Systems lease. Lydon has been recognized as a Top Industrial Broker by the Greater Phoenix Economic Council (GPEC), named a CoStar “Power Broker” and a NAIOP Industrial Broker of the Year. He is a 25-year SIOR Designee, as well as a member of the Jones Lang LaSalle Global Supply Chain Group. On a personal note, Lydon is part owner of a Michigan-based Class A minor league baseball team.


Developers

Kurt Rosene
Senior VP

People to Know 2011 Industry LeadersAlter Group
7500 N. Dobson Rd., #151, Scottsdale
www.altergroup.com · (480) 302-6600

Responsibilities: Manage development, leasing and acquisitions for the Western Region
Years at Company: 20
Years in CRE: 24
Accomplishments: Rosene has led The Alter Group to accomplish remarkable things in Phoenix during the past 10 years. After opening the office a decade ago, he has helped solidify the company as one of the premier developers in the Valley. Nationally, Rosene has been able to develop more than $1B worth of real estate in 24 states. His expertise and level of customer service have led to numerous repeat clients. He’s earned the respect of the entire industry and made friendships throughout the country. Recently The Alter Group and John F. Long Properties of Phoenix announced a joint development of three major business parks in the West Valley totaling in excess of 1,500 acres. It is expected to create an estimated 65,000 jobs.


Economic Developers

Christine Mackay
Economic Development Director

People to Know 2011 Industry LeadersCity of Chandler
P.O. Box 4008, Chandler
www.chandleraz.gov/ed · (480) 782-3030

Responsibilities: Directs economic development division, implementing programs to increase and diversify City’s economic base
Years at Company: 14
Years in CRE: 19
Accomplishments: Mackay has been with the City of Chandler for 14 years. During the past five years, she has helped locate or expand more than 145 companies in Chandler, and brought more than $8.9B in capital investment into the community. She was instrumental in helping land the $5B Intel Fab 42 chip manufacturing facility. In 2007, she was named the Economic Developer of the Year, Large Community, for the State of Arizona by the Arizona Association for Economic Development (AAED). In 2010, Mackay was named Leader of the Year in Economic Development-Public Policy by the Arizona Capital Times. She has spent most of her career in commercial real estate. Before coming to Chandler, she was in private sector commercial real estate where she was the research director for a commercial brokerage firm.


Financiers & Accountants

William L. Spart
Senior Vice President

People to Know 2011 Industry LeadersWells Fargo Bank – Real Estate
8601 N. Scottsdale Rd., #200, Phoenix
www.wellsfargo.com · (480) 348-5333

Responsibilities: Business development for Wells Fargo
Years at Company: 21
Years in CRE: 30
Accomplishments: Spart, a 30-year veteran of commercial real estate finance, has witnessed the ups and downs of the industry firsthand. Perhaps that’s why he has taken a leadership role. During his tenure at Wells Fargo, Spart has been active with NAIOP (as a board member), Valley Partnership, Urban Land Institute and the International Council of Shopping Centers (as a member). Spart is a regular speaker at public forums around the Valley and was a member of the 2010 NAIOP roundtable in AZRE Magazine. In his position at Wells Fargo, he manages a diverse portfolio of commercial real estate loans and lenders.


General Contractors

Hamilton Espinosa
National Healthcare Leader

People to Know 2011 Industry LeadersDPR Construction
222 N. 44th St., Phoenix
www.dpr.com · (602) 808-0500

Responsibilities: Developing DPR’s strategic healthcare vision
Years at Company: 13
Years in CRE: 21
Accomplishments: Espinosa, LEED AP, brings more than 20 years of construction industry experience to DPR. Based in Arizona, Espinosa is key to building the company’s healthcare experience locally and nationally. Instrumental in building more then $3B in healthcare projects, including the Banner MD Anderson Cancer Center in Gilbert, his reputation of producing results and developing long-term working partnerships is acknowledged throughout the industry. DPR is one the country’s top technical builders and has been ranked among the Top 50 general contractors in the U.S. for the past 10 years. Espinosa serves as vice chair of the St. Joseph’s Foundation board and is a member of the Arizona Diamondbacks Foundation board.


Property Managers

Mark Stromgren, RPA
Vice President, General Manager of Real Estate Services

People to Know 2011 Industry LeadersNorthMarq
1110 W. Washington St., #110, Phoenix
www.northmarq.com · (602) 254-5790

Responsibilities: Oversees 600,000 SF of Class A office space, including three buildings which are 100% occupied
Years at Company: 4
Years in CRE: 25
Accomplishments: Stromgren joined NorthMarq when the organization acquired his previous employer, Opus Property Services, a move that doubled its portfolio to 60 MSF. For nearly 10 years, Stromgren served as a senior property manager with Opus West Management. Prior to that, he was a general manager with LaSalle Partners. He is an active member of BOMA and NAIOP. He was recently elected to serve as president of BOMA Greater Phoenix for the 2011-2012 board year. He is also a past president of the chapter and has served on the board of directors for 13 years. In addition, he has earned the organization’s RPA designation. He is aso a LEED AP and holds real estate brokerage licenses in Arizona and Colorado. He earned a BS degree from UCLA.


Subcontractors

Daniel Puente
Founder & President

People to Know 2011 Industry LeadersD.P. Electric Inc.
6002 S. Ash Ave., Tempe
www.dpelectric.com · (480) 858-9070

Responsibilities: Provides the necessary planning, organization, direction, coordination and control to meet company growth
Years at Company: 20
Years in CRE: 30
Accomplishments: Big events lit up the offices at D.P. Electric. Puente, founder and president, was awarded the W.P. Carey Spirit of Enterprise Gary L. Trujillo Minority Enterprise Award, and the company celebrated its 20th Anniversary — growing from a firm with four electricians in a garage to a multi-million dollar local success story. Puente is a strong supporter of education and training aimed at fostering personal and professional growth within his organization. He acts as a mentor to educate small minority-owned businesses within the community. He oversees all aspects of the company, including profitability, staffing, marketing efforts, and customer and vendor relations.


Up and Comers

Kimberly Mickelson
Marketing Associate

People to Know 2011 Industry Leaders

Small Giants
4531 N 16th St #124, Phoenix
www.smallgiantsonline.com · (602) 314-5549

Responsibilities: Social media, proposal development and website management for clients
Years at Company: 2
Years in CRE: 8
Accomplishments: Not only is Mickelson one of just three Certified Social Marketing Specialists in the Arizona, she is also heavily involved in the commercial real estate industry. With SMPS Arizona, she is an active member, programs committee member, publicity committee member and social media chair. She is also moderator for the SMPS Twitter account and is in charge of blog submissions for the Building Arizona blog. She is an active affiliate member of AIA Arizona, and an active young leaders group member of ULI. She has coached and trained many organizations and individuals on valuable emerging marketing practices. She recently received the 2010 SMPS Arizona Chapter Rising Star Award. Her desire to make an impact goes beyond personal accomplishments or within her work with Small Giants.


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finance

Buying Commercial Property Through Commercial Mortgages

Buying Commercial Property Through Commercial Mortgages

As we’ve all heard; the sky is falling, everyone is unemployed and the there will be no more small business. OK, maybe I’m exaggerating a bit, but I can walk away from a local news broadcast feeling like I’ve been diagnosed with a fatal disease and have only three days to live.

Moments later I’m back in my office grinding out phone calls to existing clients and prospects that are looking to buy a commercial building with the right frontage and signage opportunities, but of course, they want to buy the building at 50% off. So no, the sky isn’t falling, small business is strong and growing and the commercial buildings with the right amenities are all but gone or have multiple offers on them.

This is my favorite question from clients: “What percentage does a seller typically expect to reduce their price by when they list their property with you?” Of course I tell them that the seller would most likely expect to get what they are asking for the property. Clearly, we are beginning to see the commercial real estate market become more of a seller’s market than a buyer’s market.

If a seller has a great piece of commercial real estate in a good neighborhood with C Class zoning or better it’s like having a rare coin – everyone wants it and buyers are seemingly willing to pay extra for it. I am speaking of Scottsdale and the areas of close proximity. Vandalism, theft, burglary and simple external obsolescence are just a few of the reasons other areas lose value and simply don’t come back for years until the entire area is redeveloped.

How did we get where we are today? As historical trends show and continue to show decade after decade; commercial real estate ebbs and flows follow residential free falls. We see this happen about every 8 to 12 years depending on the economic health and vitality of the country and world. We knew that property values here in Arizona eventually had to slow down but we didn’t expect the significant drop that we had. The great news – the Scottsdale real estate market hit bottom 17 months ago and we are slowly creeping back up; with very little inventory currently available.

Let’s not forget how this mess started; Mortgage Backed Securities, including but not limited to Residential and Commercial Mortgage Backed Securities. First, a quick definition of a commercial mortgage backed security – A mortgage-backed security (MBS) is an asset-backed security that represents a specific claim on cash flows that originates from mortgage loans through a process known as securitization.

The process of securitization can be complicated and convoluted, and is highly dependent on the jurisdiction within which the process is conducted. The basics are this: Mortgage loans or notes are purchased from banks and other lenders and assigned/sold to a trust, then the trust assembles these notes into pools. The trust then securitizes the pools of notes by issuing a mortgage backed security. Residential mortgage backed securities are backed by single family to quad-plex or four family housing units. Commercial mortgage-backed security (CMBS) are secured by commercial and multifamily properties, such as apartment buildings, retail or office, hotels, schools, industrial properties, commercial sites, etc. A CMBS is usually structured as a different type of security than an RMBS.

Fannie Mae and Freddie Mac are the most common securitization trusts in the United States. So what happened? It’s been suggested that the inherent complexity surrounding the securitization of commercially backed mortgages can suffer from and are highly prone to steep and quick changes in underwriting standards. It’s believed that the U.S. subprime mortgage crisis was in large part created by competitive private mortgage securitization. Additionally, there was a lot of securitizing that was “not on the books,” so a lot of the securitizing firms’ balance sheets were less transparent.

What does this mean for us here in the Phoenix and Scottsdale areas? Keep your eye on both the residential and commercial markets in your area; these provide excellent indicators of your ‘local market’. Are new small businesses opening up? Are rents getting more expensive? What I’ve found is that landlords and owners are charging more for rent and getting more when selling. This is a good thing and means that particular market is on the rise.

I always recommend retaining a professional commercial real estate broker familiar with the area you are interested in. Make sure your broker provides demographics, current sales and rental information and understands your needs.

Frank Lloyd Wright, AZRE Magazine May/June 2011

Del E. Webb: A Pioneer In Arizona's Construction Industry

From high school dropout to New York Yankees owner to renowned construction mogul, Del E. Webb created a company that evolved into one of the largest developers in the state and the U.S., thus earning him the crown as the most influential person in Arizona’s commercial real estate history over the past 100 years.

Born in Fresno, Calif., Webb cut his academic career short in 1915, taking an interest in carpentry and baseball. For nearly 13 years, Webb worked as a carpenter strictly for companies with baseball teams in order to make his living and stay close to his sports passion. In 1927, at the age of 28, Webb moved to Phoenix after contracting typhoid fever. The next year, he began focusing solely on construction.

Del E. Webb, AZRE Magazine May/June 2011His first projects included rebuilding a Sears store, local grocery markets and public sector projects, especially schools. With these jobs, Webb was able to stay afloat during the Great Depression and keep his company moving forward.

After a combined project with The White Miller Construction Company, the Del E. Webb Construction Company was well on its way to being one of the top contractors in Arizona. He became so successful that in 1945 Webb and two other partners purchased the New York Yankees for about $3M. Webb was a co-owner until 1964.

During World War II, Webb was contracted to build air bases and military installations in Arizona and Southern California, but it wasn’t until 1960 that Webb’s construction would truly take the housing industry by storm.

Webb’s Sun City housing project addressed the need for senior communities and prospered well into the 1990s. With a shopping and recreation center, golf course and five house models, Sun City truly put Webb on the real estate map and even landed him on the cover of Time Magazine. Today, Webb’s Sun Cities continue to grow.

In 2001, the Del Webb Corp. was purchased by Pulte Homes, which has since merged with Centex Corp. to become the PulteGroup.

Webb died at age 75 in Rochester, Minn., following surgery for lung cancer, but his legacy lives on. There is the Del E. Webb School of Construction at Arizona State University, the Banner Del E. Webb Medical Center in Sun City, the Del E. Webb Center for the Performing Arts in Wickenburg, and the Del E. Webb Outpatient Center in Prescott Valley, just to name a few.

For more information about Del E. Webb’s PulteGroup, visit pultegroupinc.com.

AZRE Magazine May/June 2011

Mindy Korth, Valley Partnership - AZRE Magazine May/June 2011

Valley Partnership: Mindy Korth

Mindy Korth has served in a variety of capacities during her 26-year commercial real estate career and has been on the front lines of an up-and-down industry. Korth, an executive vice president at CB Richard Ellis and this year’s Valley Partnership chair, says the advocacy role Valley Partnership plays is crucial to its members in the current recession.

A graduate of Arizona State University with a bachelor’s degree in business administration, Korth is Valley Partnership’s first chair who is an active real estate broker as a capital markets sales professional for the past 14 years. She has been on the Valley Partnership board of directors since 2007, serving as vice chair in 2010. Korth serves on boards for several other organizations, including Social Venture Partners, Channel Eight/KAET Public Television and the Discovery Triangle Development Corporation. She is also a member of Soroptimists and Arizona Commercial Real Estate Women (AZCREW), where she is a past board member.

Q: What does it mean to be an advocate for the commercial real estate industry?

Valley Partnership works to stay in touch with its real estate industry partners’ needs and to understand how local, regional, state and federal policy will affect their ability to thrive in this metropolitan area. We support those public-sector initiatives that promote the health of our industry.

Q: How important is that advocacy during these tough economic times?

Advocacy is important in all economic times. Valley Partnership was established to pool the resources of many in the real estate industry, and to address and bring awareness to the myriad of real estate-related issues that impact our community.

Q: Valley Partnership’s 2011 goals?

The board has set goals that include partner retention, new partner recruitment, outstanding programs that inform and inspire our partners, fun events, community service and most importantly, working closely with our municipal partners to support their initiatives.

Q: How will you achieve these goals?

Our board has engaged in strategic planning sessions through which we created definitive action items and a scorecard to track our progress. Our board is comprised of very talented real estate professionals who have great vision on what is needed and how Valley Partnership can serve our community. Our City/County Committee has a goal to form task forces as needed and already has created three to address and provide input on proposed policy changes. Legislative proposals are reviewed by members of our State Legislative Committee, which then forms recommendations for further action.

Q: What are the biggest challenges in 2011?

There are many controversial issues being discussed within city, county, state and federal chambers. Our role is to be the steady sounding board, bridging and partnering to promote responsible growth. We have found ourselves often asking the question “Should we take a position?” If we say “Yes,” then we ask, “How can we do this in a balanced manner?”

Q: Any advice for partners?

Get involved. Attend our events. Have fun. Create relationships and promote business-to-business among your fellow partners. If you are not familiar with advocacy and want to learn, participate in one of our advocacy committees. You may not be adept the first year, might start feeling comfortable the second and by the third year you will be surprised at what you can do.

For more information about Mindy Korth and Valley Partnership, visit www.valleypartnership.org.

AZRE Magazine May/June 2011

Medical Marijuana Where Will The Dispensaries Go

Arizona’s Medical Marijuana Proposition Passes, But Where Will The Dispensaries Go?

Arizona voters made history again this month, narrowly approving Proposition 203, the ballot initiative allowing one medical marijuana dispensary for every 10 pharmacies in the state (which translates to about 120 statewide). Under Prop. 203, patients suffering from a wide range of painful medical conditions will be able to buy small amounts of marijuana from state-approved dispensaries with a doctor’s prescription. Those living more than 25 miles from an outlet will be allowed to grow their own.

Needless to say, residents, cities and landlords are facing some interesting dilemmas before the first outlets potentially open in March 2011 … in a neighborhood near you.

Under the approved Prop. 203, the Arizona Department of Health Services must issue licenses to the so-called “medical marijuana clinics,” but it’s the local municipalities that must adopt zoning restrictions that regulate the size and location of such clinics. Cities are expressly forbidden under Prop. 203 from prohibiting them outright.

So who will ultimately win the “Not In My Back Yard” tug-of-war? Cities such as Phoenix, Tucson and Mesa, are grappling with commercial landlords, their constituents and zoning restrictions to keep the centers away from schools, churches and residential areas.

On the commercial real estate front, with the marketplace hard hit by the recession and Phoenix retail vacancy rates at 13 percent, many landlords are looking to fill empty space. But tenants such as medical marijuana clinics would cause some considerable controversy with residential neighbors and fellow commercial tenants.

“There are some landlords that will definitely have an issue with it,” said Pete Bolton, executive vice president and managing director of the commercial real estate brokerage firm Grubb & Ellis in Phoenix.

He expects dispensary operators to seek retail center locations with public exposure and easy parking. But, he added that some commercial landlords are hesitant to sign a marijuana outlet, especially if they have other tenants that cater to families or conservative customers.

Prior to the ballot passing, a number of nonprofit groups already were eying Phoenix-area shopping centers as possible dispensary locations. Even before the election earlier this month, more than 14 medical marijuana groups had reserved business names with the Arizona Corporation Commission. Some others were incorporating and looking for investors, dispensary locations and even growing sites.

Marketing manager for Medical Marijuana Dispensaries of Arizona Inc., Allan Sobol, says that like any other business, location is key.

“I want to be at a high-exposure location. I envision them just being like a CVS or Walgreens,” Sobol said.

He expects most marijuana outlets will be located in strip malls and other high-traffic locations near hospitals and medical centers. But with the dispensaries intermingled with other more conservative businesses, there could be some concerns.

So landlords will have some choices to make, and for Arizona cities facing these same dilemmas, the clock is ticking. Mesa, like Phoenix, will likely vote on where to locate the dispensaries by the end of the year.

This is likely the first time in history that a Mesa mayor has ever joked about collecting sales taxes on bongs or marijuana paraphernalia. But then, it’s probably also the first time in history that Mesa has come face-to-face with the prospect of stores legally selling marijuana. Given its size, Mesa could land between eight and 10 of the 120 dispensaries.

“This is not something we can prohibit,” Mesa Mayor Scott Smith said during a city council study session last month.

Under its proposed zoning regulations, Mesa would limit the dispensaries from residential, industrial and employment areas. Also, they could not locate within 2,400 feet of other medicinal marijuana shops and drug/alcohol rehab facilities. They would have to stay 1,200 feet away from churches, parks, open spaces in homeowner associations and libraries. They could be no closer than 500 feet from schools or group homes for the handicapped.

Arizona Department of Health Services Director Will Humble says cities need to act fast.

“Cities can’t wait,” he said. “If they don’t get it done in time, I’ve got no choice but to approve a dispensary if they don’t have a zoning restriction in place.”

In other words, the state bureaucrats will act if the mayors and councils haven’t.

So, while a razor thin majority celebrates the approval of Prop. 203, mayors and city councils around the state not only must act fast, but also wrestle with moral, political and economic issues before the first medical marijuana clinic opens on a corner — possibly in your neighborhood.

Empire Power Systems

Largest Commercial Solar Rooftop System in Arizona Unveiled

Empire Power Systems this week completed the installation of an $11.5 million, 2.4 megawatt SunPower solar rooftop system on the Cowley Industrial Park building in South Phoenix. The project is the largest commercial solar rooftop system in Arizona and the second largest in U.S.

Cowley Companies, a Phoenix-based real estate investment firm, decided to install the solar system on this 850,000-square-foot warehouse because it houses food-service tenants that require large refrigerator and freezer units, which translate into high electricity bills. This was the company’s second solar undertaking; last year, Cowley added a 40kW, 188-module fixed mount system to the parking structure at its headquarters on Jackson Street in downtown Phoenix.

“We wanted to provide our tenants with a source of renewable energy that would reduce the property’s electric bills by approximately 40 percent annually,” said Mike Cowley, president of Cowley Companies. “When you consider that last year’s total electric bills for this property exceeded $1 million, you begin to understand how over time this solar system will realize significant cost savings that we can eventually pass on to our tenants.”

Since the system was commissioned Aug. 18, it has produced more than 600,000-kilowatt hours of electric power. It is expected to produce more than 4 million kilowatt hours per year, enough to completely power 340 homes. Additionally, it will offset 3,900 tons of carbon dioxide each year – the equivalent of taking nearly 700 cars off the road.

“This solar system will provide Cowley Companies with a competitive edge in today’s challenging commercial real estate market,” said Brett Burns, Empire Power Systems general manager. “Now the company has a performing asset on its rooftop that is making a positive impact on our environment. The company has a real opportunity to attract new tenants to the space who may not have previously considered it.”

The solar rooftop system features 7,872 ballasted SunPower T-5 panels, the industry’s first non-penetrating rooftop product, which are connected to an above-grade electrical conduit that runs into the inverter room, where four 500kW SatCon inverters convert the direct current energy into usable commercial electricity. Tilted at a five-degree angle, the T5 solar roof tile system approximately doubles the energy generated per square meter compared to systems that are mounted flat to commercial rooftops.

Empire Power Systems, a division of Mesa-based Empire Southwest LLC, served as the solar integrator for this project. Subcontractors (all of which are Arizona-based) include Buehler Brothers Electric, Cannon-Wendt Electrical, Progressive Roofing, Phasor Energy and Fifer Design. The installation was facilitated, in part, by the APS Renewable Energy Incentive Program.

office building

Tucson Office Market Sector Remains Consistent

Uncertain whether the market has bottomed out, buyers and tenants continue to be hesitant whether they should take advantage of attractive sale and lease opportunities.

That’s the word on the street as the 3Q Tucson office market report was released today by Picor Commercial Real Estate Services, a Cushman & Wakefield Alliance member.

For the most part, Tucson office market activity has remained fairly consistent throughout the year, with no exception in 3Q 2010. Consistency is a positive sign, however, it is still unclear whether this is a sign of more activity to come, or simply where the market is going to stay for some time.

Despite this consistency, landlords are still willing to offer attractive rental rates, concessions, and generous tenant improvement allowances. This practice will likely continue until the air of uncertainty clears. Savvy general office and medial tenants are taking advantage by locking in very attractive rental rates.

Purchase activity is still virtually nil because of the difficulty to secure commercial financing. The occasional investment sale is due to the seller’s agreement to provide short-term financing thereby enabling the buyer to weather the drought in the conventional credit market.

Valuation methods show a large difference between pricing of office and medical properties from an owner/user perspective and those evaluated from an investor perspective. Per square foot purchase prices for users still remain fairly high, while numbers for investment sales are much lower due to a market wide drop in rental rates and an increase in cap rates. These two valuation methods will likely equalize in the future, with the likely result being the reduction in per-square-foot user pricing.

Industrial market

Economic slowing persists in the Tucson industrial sector. Tenants and buyers recognize the opportunity to apply leverage in this environment, resulting in continued pressure on lease rates and sales prices. While market-wide vacancy dipped from 11.4% to 10.9% in 3Q, positive absorption is expected to be reversed before the end of 2010.

Sales activity increased in 3Q, equaling the first two quarters combined, with nearly all owner/user purchases using SBA and seller financing due to scarce availability of institutional capital at favorable terms.

Valley Commercial, Real Estate Sales Dip

Valley Residential, Commercial Real Estate Markets Still Struggling, ASU Report Shows

Residential and commercial real estate prices in Metro Phoenix  are still suffering in the rough economy, a report from the W. P. Carey School of Business at Arizona State University show.

Valley home prices are going negative for the first time in months, and commercial real estate prices are about 30-percent lower than at the same time last year, according to the report.

On the residential side, the ASU-Repeat Sales Index (ASU-RSI) measures annual changes in average Phoenix-area home prices. The latest index shows a 0.2 percent drop from August 2009 to August 2010. Previous reports revealed no change from July 2009 to July 2010 and small annual increases in June, May and April. The index hasn’t been in negative territory since March.

“This is the first overall decline since March, but it is consistent with the small ups and downs associated with relatively stable housing prices,” assures the report’s author, Professor Karl Guntermann, the Fred E. Taylor Professor of Real Estate, who is assisted by Research Associate Adam Nowak. “The ASU-RSI has been relatively stable for more than a year, which suggests that changes in house prices will be moderate going forward unless there are dramatic changes in the Phoenix economy or housing market.”

Foreclosed homes have been one of the stronger segments of the market in recent months, according to Guntermann. However, the price index in that segment declined 4 percent in August after five straight months of increases.

“The weakness in prices may mean there finally is insufficient demand to absorb the steady stream of foreclosures that enter the market each month. However, it is too early to tell if the decline is the start of a new trend or reflects just a temporary slowdown,”  Guntermann says. “The data also doesn’t provide a basis for optimism when it comes to non-foreclosure homes, which showed a 9 percent annual drop in August. That’s the segment of the market of interest to most homeowners either waiting to sell or just wanting to know when their equity will stop shrinking.”

Median home prices in the Valley have also fallen out of the $125,000-$135,000 range where they had been for almost a year. The preliminary median figure for August is just $122,000.

The preliminary median price of a townhouse/condominium in the Phoenix area for August was just $65,000, down from $77,100 in July.

“This is a continuation of a downward trend that began in June,”  Guntermann explains. “Townhouse/condo prices seem to periodically take a step down in price and then stabilize for several months before starting the next decline.”

On the commercial side of Phoenix-area real estate, the first two quarters of 2010 show somewhat of a leveling off. Guntermann says commercial prices peaked at an annual rate of 28 percent in the third quarter of 2006. The commercial index began to decline dramatically by the end of 2008, and the decline sped up throughout 2009.

“By the end of 2009, the annual decline reached 40 percent,”  Guntermann says. “Commercial prices in 2010 remain about 30 percent lower than the corresponding quarters in 2009, reflecting a market with significant problems. The good news is that the commercial market appears to be showing signs of stability rather than worsening declines.”

Both the commercial and residential indices are based on repeat sales, the most reliable way to estimate price changes in the real estate market. Repeat sales compare the prices of a single property against itself at different points in time, instead of comparing different homes and commercial properties with different quality factors.

The new ASU-RSI reports can be found at http://wpcarey.asu.edu/realestate/housing-market-reports.cfm and http://wpcarey.asu.edu/realestate/commercial-market-reports.cfm.

E012850

Greater Phoenix Economic Forecast 2011: “Painfully Slow”

The economy may be better in 2011 than it was in 2010, but the road to full recovery will remain long and full of potholes. But hey, it could be worse. It could be 2009.

That’s according to economist Elliott D. Pollack, CEO of Elliot D. Pollack & Company. Pollack was speaking at the Greater Phoenix Chamber of Commerce’s Economic Outlook 2011 breakfast today at the Arizona Biltmore Resort & Spa.

Pollack said population growth in the Valley should settle at 1 percent this year and rise to 2 percent in 2011. Net job growth will contract by 1 percent in 2010 and climb by 2 percent in 2011. Retail sales will increase 1 percent this year and rise by 8 percent next year. Building permits will increase by 20 percent in 2010 before jumping 50 percent in 2011.

In summarizing his 2011 forecast for the Valley, Pollack read a laundry list of good news and bad news:

  • The housing market is at or past bottom, but there are many negatives still trumping a full recovery, most notably slower migration flows.
  • The commercial real estate market is at or past bottom, but recovery will be slow and “take a long time.”
  • Sales tax revenues are no longer falling, but they aren’t growing quickly enough to fix the state’s battered budget.
  • Retail sales have past bottom and there is pent-up demand among consumers, however, those same consumers are still so worried about personal debt that they will continue to curb spending, thus thwarting a big recovery.

While Pollack said the Valley’s economic recovery will be “painfully slow,” he points out that a recovery is indeed underway. For example, the state’s standing in employment growth compared to the rest of the nation is gradually improving — but only after a precipitous decline. In 2006, Arizona ranked second in the nation in job growth; that dropped to 22nd in 2007; 47th in 2008; and 49th in 2009. Up to July of this year, the state had moved up to 42nd in job growth.

Another indication that the Valley’s economy is showing improvement is in the number of economic sectors that have shown net job gains. Of the state’s 12 major economic sectors, five have shown net job gains so far this year (education and health services; trade; leisure and hospitality; professional and business services; other services). That compares to the same time last year, when no economic sectors reported net job gains.

But, Pollack pointed out again, the Valley and state can’t expect the robust and recoveries that have accompanied past recessions.

He says the Valley’s housing market continues to be weighed down by:

  • Weak job growth
  • Tough underwriting standards
  • Negative home equity
  • Loan modification failures
  • High foreclosures
  • Option ARMs (adjustable rate mortgages) peaking in 2011

In terms of equity, 51 percent of houses in the state have negative equity. The national average is 23 percent. Such negative equity severely curtails people’s ability to buy and sell homes. In addition, supply still outstrips demand in the single-family home market, with an excess inventory of houses somewhere between 40,000 to 50,000 units, Pollack said. A balance between supply and demand will not be fully achieved until about 2014, he added.

The picture is bleaker for the commercial real estate market, with delinquencies on loans still very high. In the office market, Pollack cited forecasts from CB Richard Ellis that said vacancy rates would peak at 25.6 percent in 2010 before dropping to 23.9 percent in 2011. As Pollack pointed out, there currently is no multi-tenant office space under construction in the Valley. In fact, he expects “no significant office building in Greater Phoenix for the next five years.”

Industrial space vacancy rates are faring only slightly better, with CB Richard Ellis predicting year-end vacancy rates of 16.4 percent for 2010 before falling to 15.2 percent in 2011. As for the retail market, the vacancy rate will rise to 12.3 percent in 2010 and hit 12.9 percent in 2011.

For office, industrial and retail commercial real estate, Pollack said he did not expect vacancy rates to reach normal levels until 2014-2015.

Still, Pollack maintained that the economic outlook for the Valley “remains favorable,” thanks to the recovering national economy, increased affordable housing in the Valley, a rise in single-family home building permits, unemployment bottoming out, consumer spending improving and continued problems in California.

retail space avaialble sign in a window of a building

Arizona’s Local And Regional Banks Are Facing More Distressed RE Loans

The recent New West Era of Arizona’s fast-growth economy from 2004 through 2007 is now expansion-cycle history. Having faced the Great Recession and what Alan Greenspan called a “once-in-a-century credit tsunami,” we now plan to resume positive economic growth in 2010.

Since late 2008, Arizona has lost more than 200,000 jobs. Commercial real estate (CRE) loan delinquencies are programmed to accelerate, with some distressed loan exposures exceeding 200 percent of total equity for smaller financial institutions. Given the scale of pending defaults, key decision-maker questions revolve around ideas such as “Who is too big to fail?” and “Who will benefit and who will pay in loan restructuring?”

Since rents and property values rapidly declined last year, banks’ loan delinquencies have been widely reported. Borrower defaults are increasing due to the inability to make timely debt service payments on existing notes. Rent concessions abound, and some recent short-term leases have been negotiated as break-even deals that just cover operating expenses, a preferred choice over the cost of holding vacant space. Many existing tenants are attempting to renegotiate contract rents as record high vacancy rates are underreported, especially in cases where leases are intact but the tenant is in default. The credit freeze has taken a toll on loan refinancing, especially when funding loans of more than $1 million with lower loan-to-value constraints. Costar Analytics recently reported commercial property price declines from 15 percent to 35 percent since 2007 peaks.

Negative commercial space absorption has given back the early gains of a few years ago, as new construction deliveries wind down and building permit activity is off dramatically in Arizona. Commercial space demand is driven by jobs, and employment is expected to be weak through the middle of this year. Positive business growth and a boost in hiring are essential for large-scale investment in the built environment. Considering employment as a lagging economic indicator and consumer spending as a prime driver in economic activity, commercial real estate vacancy rates are problematic.

Since March 2009, Bloomberg reported a five-fold increase in Phoenix-area loan delinquencies backed by office, industrial, retail and apartments. Recently, Deutsche Bank projected price declines from 35 percent to 45 percent as necessary to maintain return-on-investment requirements in a declining rent environment. Over the next 24-plus months, delinquency rates are expected to exceed the results posted in the savings-and-loan bailout days of the early 1990s.

Non-performance is two-fold: initially as term default risk where debt repayment cannot be met, and later as maturity default risk where the loan cannot be repaid or refinanced due to value declines and higher borrower down-payment requirements. Perhaps two-thirds of loans do not qualify to refinance at maturity, mostly recent (2004-2007) originations.

The fall 2009 Greater Phoenix Real Estate Consensus Forecast, a quarterly consensus on general economic indicators and key construction measures from economists, real estate analysts and executives, shows only “marginally better” commercial real estate market results expected through 2011. With office vacancy so high, it is likely there will be no new office building construction for the next five years. Retail sales are tied to rooftops. While housing markets are expected to improve through 2011, improvement in single-family residential activity is expected to be slow by historic standards. Industrial demand will be end-user driven and also likely to be slower than historical trends.

Economist Elliott D. Pollack, CEO of Elliott D. Pollack and Company in Scottsdale and co-editor of the Greater Phoenix Blue Chip Economic Forecast, states, “Now is the time for banks to raise capital in order for them to workout their loans.”

He says many banks believe the best way to handle the loan workout is to deal with the current borrowers. The difference between now and the 1989-1992 real estate crisis is bank regulators are not currently forcing banks to immediately liquidate loans. Given the events of late 2008, regulators are reluctant to force financial institution closures and seem to be more willing to let institutions work out their problem loans. The idea is to rebuild confidence in America’s financial system.

In positive terms, the Mortgage Bankers Association forecast calls for Real Gross Domestic Product growth in 2010, the first GDP gain in two years. Clearly, widespread hope exists for a rebound in local commercial real estate prices. In the near term, investors are closely monitoring federal government bank policies that privatize profits, nationalize losses and buffer the banks against failure.

Fundamentally, real estate market performance will follow the time pattern when Arizona’s primary economic activity rebounds with measurable employment gains. Without recognizable fundamentals focused at the property level, end-user demand is missing, and commercial real estate performance is likely to remain speculative through 2011 and beyond.