Tag Archives: developers

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Steptoe hosts Construction Industry Tax Seminar

Contractors, developers, construction managers, and homebuilders are invited to attend Steptoe & Johnson’s 10th Annual Construction Industry Tax Seminar co-sponsored by the AzBusiness Magazine. Steptoe’s tax lawyers will bring participants an annual update on the latest developments in Arizona’s sales and property taxation.

The seminar will take place September 27, 2013 and the Arizona Biltmore Resort.
The program will focus on new legislation, which if passed and signed by the Governor, will turn the sales taxation of contracting upside down–from taxing the prime contractor to taxing the sale of building materials, except for road and bridge construction where the prime contractor will still be taxed (H.B. 2111). In addition, seminar leaders will bring you up to date on legislation (already signed by the Governor) that does away with the “permanent attachment” test under the exemption for installing exempt machinery and equipment (H.B. 2535).

Speakers include Pat Derdenger, Dawn Gabel, Frank Crociata and Ben Gardner, all members of Steptoe’s Tax Group in Phoenix. Steptoe’s tax lawyers bring to clients decades of consulting, transactional, and advocacy experience in all substantive areas of federal and state taxation.

The luncheon speaker will be Hon. John Shadegg, partner in Steptoe’s Phoenix office and former US Congressman. He will give his perspective on the Affordable Care Act and how it will impact Arizona businesses.

For more information, call 602-257-7708. Register online at www.steptoe.com.

Tax Consequences

Steptoe hosts Construction Industry Tax Seminar

Contractors, developers, construction managers, and homebuilders are invited to attend Steptoe & Johnson’s 10th Annual Construction Industry Tax Seminar co-sponsored by the AzBusiness Magazine. Steptoe’s tax lawyers will bring participants an annual update on the latest developments in Arizona’s sales and property taxation.

The seminar will take place June 13, 2013 and the Arizona Biltmore Resort.

The program will focus on new legislation, which if passed and signed by the Governor in the coming weeks, will turn the sales taxation of contracting upside down–from taxing the prime contractor to taxing the sale of building materials, except for road and bridge construction where the prime contractor will still be taxed (H.B. 2111). In addition, seminar leaders will bring you up to date on legislation (already signed by the Governor) that does away with the “permanent attachment” test under the exemption for installing exempt machinery and equipment (H.B. 2535).

Speakers include Pat Derdenger, Dawn Gabel, Frank Crociata and Ben Gardner, all members of Steptoe’s Tax Group in Phoenix. Steptoe’s tax lawyers bring to clients decades of consulting, transactional, and advocacy experience in all substantive areas of federal and state taxation.

The luncheon speaker will be Hon. John Shadegg, partner in Steptoe’s Phoenix office and former US Congressman. He will give his perspective on the Affordable Care Act and how it will impact Arizona businesses.

For more information, call 602-257-7708. Register online at www.steptoe.com.

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Tiffany & Bosco Adds Zoning and Land Use Group

The law firm of Tiffany & Bosco P.A. announced that zoning attorney William E. Lally, and AICP certified land use planners Kurt A. Jones and Benjamin J. Patton have joined the firm.  Tiffany & Bosco’s Land Use and Zoning practice is dedicated to working closely with builders, developers, brokers, banks and design consultants; focused in the areas of land use, zoning and permitting throughout Maricopa County and the State of Arizona.  They are experienced in all aspects of land use entitlements which includes general and comprehensive plan amendments, rezoning, conditional use permits, site planning, subdivision planning, civil improvement plans, landscaping design, transportation, , drainage, utilities and any municipal, county or state permitting.

Michael E. Tiffany, Managing Partner and Shareholder of Tiffany & Bosco stated, “With the addition of the Zoning Practice to our distinguished core of real estate, banking and commercial legal professionals, the firm is well positioned to serve the growing needs of the real estate clients. The trio brings over 50 years of zoning experience to the firm, and we are most pleased they have decided to join our firm as we grow and expand our real estate services.”

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Tiffany & Bosco Adds Zoning and Land Use Group

The law firm of Tiffany & Bosco P.A. announced that zoning attorney William E. Lally, and AICP certified land use planners Kurt A. Jones and Benjamin J. Patton have joined the firm.  Tiffany & Bosco’s Land Use and Zoning practice is dedicated to working closely with builders, developers, brokers, banks and design consultants; focused in the areas of land use, zoning and permitting throughout Maricopa County and the State of Arizona.  They are experienced in all aspects of land use entitlements which includes general and comprehensive plan amendments, rezoning, conditional use permits, site planning, subdivision planning, civil improvement plans, landscaping design, transportation, , drainage, utilities and any municipal, county or state permitting.

Michael E. Tiffany, Managing Partner and Shareholder of Tiffany & Bosco stated, “With the addition of the Zoning Practice to our distinguished core of real estate, banking and commercial legal professionals, the firm is well positioned to serve the growing needs of the real estate clients. The trio brings over 50 years of zoning experience to the firm, and we are most pleased they have decided to join our firm as we grow and expand our real estate services.”

Local neighborhood

Can Sustainable Housing Really Be A Part of Arizona’s Future?

Perched on the threshold of economic recovery, cities whose housing markets crashed and burned during the Great Recession are struggling like modern-day Phoenix birds to rise from the ashes.

While rebirth comes naturally for some, others seem caught between a trap labeled “sprawl” and a wide-open window tagged “sustainability.”

The question is, can cities that once embraced policies favoring sprawl over density buy into a new vision calling for a more sustainable, livable and socially just way of life? The shift required may be dramatic, but it’s not impossible.

The sprawl trap is certainly familiar territory for Phoenix, a post-WWII boom town where production builders John F. Long and Del Webb are hailed as the Godfathers of Post-Modern Development. Using innovations like simple, mass-production construction techniques, Long and Webb delivered Phoenix’s first work force housing to an eager middle-class audience.

Now, a half-century later, sprawl and the suburbs are being blamed for everything from global warming to social segregation. High suburban-growth states like Arizona, California, Nevada and Florida felt the busted housing bubble like a sock to the gut two years ago. And, faced with aging infrastructure and higher maintenance costs, fringe communities are now home to the country’s largest and fastest growing poor population, according to a report by the Brookings Institution. Between 2000 and 2008, the country’s largest metro areas saw their poor population grow by 25 percent, almost five times faster than either primary cities or rural areas, the report states.

Many economists believe the country’s latest economic pause presents the opportunity for a massive do-over; a chance for cities to end their love affair with the automobile and hook up, instead, with development practices that create more dense, walkable neighborhoods.

The Obama administration evidently agrees.

“The days where we’re just building sprawl forever, those days are over,” President Obama declared shortly after taking office. He followed up those remarks earlier this year by telling the U.S. Conference of Mayors, “When it comes to development, it’s time to throw out old policies that encouraged sprawl and congestion, pollution, and ended up isolating our communities in the process.”

The President’s willingness to back up his convictions with $1.5 billion in TIGER (Transportation Investment Generating Economic Recovery) grants and $1 million set aside for regional integrated planning initiatives is further proof that the suburban landscape is indeed changing. So is the federal government’s new Partnership for Sustainable Communities, an all-hands-on-deck approach to smart growth by the Department of Transportation, the Department of Housing and Urban Development and the Environmental Protection Agency. It — along with the government’s “Smart Growth Guidelines for Sustainable Design & Development” — presents a radical new perspective on how future growth is handled, and offers a lifeline to municipalities looking to turn over a new and greener leaf.

But, for cities like Phoenix, where density has traditionally been considered a dirty word, the challenge is not so much where the money is coming from, as it is how to change public perception. Will Phoenix, with its Wild West sensibilities and traditionally renegade attitude, take kindly to federal intervention intended to help wean itself from a dependence on sprawling development?

In all honesty, it’s likely to be a tough sell. True, infill development takes advantage of current infrastructure and services and produces a measurably smaller environmental impact than does its conventional counterpart. True, higher-density building creates additional living options for homeowners in the way of row houses, walk-ups and brownstones. And true, Phoenicians, like many Americans, acknowledge they would rather walk than drive, or at the very least, have access to more transit-oriented housing, making it easier and more convenient for them to utilize public transportation.

The first step forward, however, will have to come from developers and municipal leaders willing to reach out a hand and grab the support line being offered in the way of these new smart-growth initiatives and incentives.

“Successfully addressing the challenges and opportunities of growing smarter and building greener will require that communities collaborate with each other, as well as with regional, state and federal agencies and organizations,” write the authors of Smart Growth Guidelines for Sustainable Design & Development. The end reward, they say, is decisions that benefit households in the form of greater choice, lower combined housing and transportation costs and healthier communities, thereby producing stronger local economies.

Isn’t that what communities like Phoenix, that are battling their way out of the recession, really need? Shelley Poticha, a transportation reformer and Partnership for Sustainable Communities senior adviser, thinks so.

“To me this is about helping to rebuild our economy, about growing jobs in terms of making housing more energy-efficient,” she said in a grist.org interview. “It’s also about helping places and regions really understand where their economic future is going and how they can use that to be more sustainable.”

Vacancy Rising in Phoenix

Vacancy Rising In Phoenix Despite Construction Pullback

Though employment growth will stimulate an increase in retail sales in 2010, the job additions will not be sufficient to prevent the vacancy rate in Phoenix from rising for the fifth consecutive year, according to the latest Retail Research market update from Marcus & Millichap.

Unlike previous years when excessive construction drove vacancy increases, lagging demand has become the anchor on the market. The pace of store closures clearly has slowed, but too few retailers have emerged to open new locations in the vacant space that has amassed. With the vacancy rate nearing its highest level in 20 years, rents continue to fall as tenants exercise the upper hand in discussions with owners.

Rents have yet to settle at a new, lower market level and may not reach their low point until late next year. The upside of reduced rents, however, has been a sharp decline in construction, as many projects simply no longer pencil for developers. After deliveries averaged 5.5 million square feet of new space each year during the past decade, a fraction of that total will come online in 2010.

Although the slowdown in construction represents a positive trend in a market with frequent overbuilding spells, the lack of properties under construction will restrain sales of new single-tenant, net-leased assets. As in other markets around the country, single-tenant properties net-leased to top-rated corporate tenants generate intense bidding when listed. In fact, cap rates for nationally branded drugstores and fast-food properties have fallen about 50 basis points since early this year to around 7 percent, with ground leases commanding even lower first-year returns.

In the multi-tenant segment, buyers have intensified searches for suitable listings, but the ongoing reduction in rents continues to present challenges to arriving at valuations upon which owners and prospective buyers can agree. Current underwriting assumes additional increases in vacancy and further rent reductions, such that cap rates must vary from 10 percent to 11 percent to generate bids. Among specific properties, those with tenants that signed leases at the peak of the market
in 2006 and 2007 invariably face the prospect of re-leasing space at substantially lower rents when leases expire.

2010 Annual Retail Forecast

Employment: Government employment will decline over the second half due to the termination of census jobs and budget constraints at the state and local levels, while private
sector employers will hire conservatively. As a result, total employment will expand 0.8 percent in 2010, or by 13,700 jobs. Last year, 116,000 positions were cut.
Construction: Developers will complete 500,000 square feet of space this year, the lowest annual total in 30 years. In 2009, approximately 2.9 million square feet came online. Planned projects total 28 million square feet, although none has a scheduled start date.
Vacancy: The vacancy rate will increase 70 basis points this year to 12.6 percent, as store closures and a lack of new demand will result in negative net absorption of 721,000 square feet. Vacancy spiked 260 basis points last year and most recently surpassed 12 percent, a level last reached in 1991.
Rents: This year, asking rents will decrease 1.3 percent to $18.11 per square foot, following a 5.5 percent dip in 2009. Effective rents will slide 2.6 percent to $15.13 per square foot, compared with a 9.1 percent drop last year.

Green Trash Can

Effective Ways To Go Green, High-Tech Trash Bins And More

Here’s some green bits from around the web. This week we’ve gathered stories about tattletale trashcans costing their owners big bucks, effective ways to go green that may surprise you, a possible “feed-in tariff” to encourage solar power growth in Arizona, test driving electric cars and others.

Feed-in Tariff to Aid Solar Weighed
Arizona officials are considering a “feed-in tariff” to encourage more solar power usage and to guarantee profits for solar developers. The tariff would require power companies to buy electricity from solar developers at prearranged prices, since they are required to get 15 percent of their power from renewable sources by 2015. Similar tariffs are in place in Germany, the world’s leader in solar power, and in many states and cities across the United States.

Most Americans Unsure of Most Effective Ways to Save Energy
Researchers have discovered through surprising survey results that most Americans have vast misconceptions regarding the best ways to save energy. In general, the public thinks that curtailing energy use, by turning off the lights, for example, is the most effective way to save energy. In reality, using more energy-efficient equipment, such as compact fluorescent light bulbs, can be just as, if not more, effective. There are a lot of surprising facts like that in this article and in the survey, found the results of which can be found here.

High-Tech Trash Bins Rat Out Residents Who Refuse to Recycle
Don’t recycle? Better start before your trashcan starts tattling and slaps you with a fee. In Cleveland, trash bins are being embedded with microchips that will prompt the collector to go through the bin if the recycling can isn’t brought to the curb regularly. If the bin is more than 10 percent recyclables, you get stuck with a $100 fee – all because your trashcan ratted you out. How embarrassing.

Study Finds 40% of U.S. Consumers Likely to Test Drive EVs
Despite the fact that most consumers have concerns preventing them from buying electric cars, a new study finds that at least 42 percent would be willing to consider and test drive an EV (electric vehicle). Concerns consumers face include the possibility of running out of battery power on the road and limited mileage, but the benefits, such as the positive environmental impact and potential cost savings, may soon outweigh the negatives.

Employees Losing Confidence in Companies’ Green Commitments
Americans’ confidence in their employers’ commitment to environmental responsibility has reached an all-time low, likely as a result of high unemployment and increased workflows. Meanwhile, local governments have inspired their highest level of confidence yet. These are based on the Green Confidence Index, a monthly online survey.

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The Future Of Shopping Centers

In the U.S. and around the world, the recession is forcing shopping center developers and retailers to re-think the design of the places where we spend our money. Some say the very nature of shopping has changed. Recently the International Council of Shopping Centers held a meeting of its North America Research Advisory Task Force in Phoenix. Mark Stapp, director of the W. P. Carey School’s Master of Real Estate Development program caught up with Michael Niemira, ICSC’s director of research, after the meeting. Listen as Stapp poses the key question. (22:06)

Mixed Use Development

Mixed-Use Developers Urged To Plan For Defect Claims Before Signing Contract

Developers of mixed-use projects can reduce the likelihood of costly construction defect litigation by anticipating risk and allocating responsibility at the time of contract. Unfortunately, developers often assume that the standard industry forms provide sufficient protection.

These forms, however, rely heavily on good faith for resolution of issues in the future. There are certain approaches developers can take to protect them, prevent construction defects and resolve issues arising from them.

Determine project function and likely defects prior to contract
The developer’s contracts with contractors and designers are best structured after the developer has arrived at a clear “big picture” understanding of how the project will function. Gaining this understanding includes consideration of regulations, financing, insurance and marketing plans specific to the development. It would behoove the developer to conduct a “what if” analysis to determine the defects most likely to result from failures in the design or construction.

Knowing how the project will function and what defects are most likely to arise places the developer in the best position to craft project-specific core objectives for negotiation of the contract.

These core objectives related to defects should include:
A clear allocation of responsibility and accountability for preventing critical defects.

A determination of comprehensive insurance and bonding requirements based on an assessment of which risks can and should be covered.
A clear statement of how disputes will be triggered and resolved during and after completion of the project.

Resolution of disputes deserves particular attention given the implications of technical issues and the possible need to involve numerous categories of potentially responsible parties. The solution will differ from project to project.

Beware of the economic loss rule
Developers sued for construction defects invariably look to the designers and contractors for indemnification. If the designer or contractor is not held financially responsible however, the developer may remain on the hook even if subcontractors are truly at fault. Subcontractors can be immune from liability for construction defects under a principle known as the “economic loss rule,” which provides that a party whose claim is based upon a financial loss caused by construction defects is only entitled to recover under contract theories against those with whom it has a direct agreement. To the extent the economic loss rule applies, it prevents the developer from suing the responsible subcontractor, unless the subcontract provides otherwise.

Developers concerned about the economic loss rule typically require in the prime contract that each subcontract include text specifically indemnifying the developer from suits for construction defects caused by the subcontractor, and names the developer as an “intended third-party beneficiary” of the subcontract with the right to directly sue the subcontractor.

Require indemnification and defense
Developers typically do not cause construction defects, and assume the insurance furnished by the designer or contractor should be the primary source of payment for all related costs, including defense costs. Yet, under the standard industry form indemnity, the primary responsible party does not provide for defense. To address this gap, developers can explicitly require a defense obligation in addition to indemnity.

Nip the issue of warranty claims in the bud
There is the potential for confusion and discord in efficiently responding to warranty claims, given there will likely be multiple parties potentially responsible for the design and construction. Developers concerned with this concept should negotiate contract provisions for a “warranty response contractor” to ensure warranty/defect claims from third-parties are responded to and accommodated promptly, with allocation of responsibility being addressed later.

If the developer envisions the project to be above average in quality of design or construction — which is normally the case in upper-end developments where quality of construction administration is considered important to minimizing defects — the contract should memorialize that expectation. Otherwise, the enforceable measure of performance could be the minimum standard, which may make it more difficult for the developer to prove a breach of the standard of care and increase the likelihood of defects due to lower performance standards. To avoid disputes, the contract should reflect any understanding that performance will exceed minimum standards.

Contractual language dealing with any or all of these concepts is only as effective as the effort given to integrate them with the other contract provisions, as well as the core objectives, so that the entire contract clearly addresses the parties’ expectations for the specific project.