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When Visions Diverge

When Visions Diverge: What Happens When Property Owners and Cities Want Different Land Use

The crack of the gavel thunders through the room over the buzz of hushed whispers. Alone at the podium, the property owner stands stunned by the city council action denying the vision for a property. The investment in preplanned designs, attorneys, consultants and engineering circles the drain.

Hanging above it all is the “vision.” A parcel of land, lines on a drawing, colors on a map and the ghost of a citywide vote. A document, called a general plan, presses down on the hope, the plan and the decision, “Motion to deny the development proposal passes. The council finds the project is not consistent with the general plan.”

Jordan Rose, founder of Rose Law Group

Jordan Rose, founder of Rose Law Group.

“During the recession, some investors looked at bargains and not zoning,” says Scottsdale land use attorney Jordan Rose, founder of Rose Law Group. “There was less diligence, and some acquired land without regard to what the general plan said about the property.”

Development plans have been stalled or blocked by recent Valley city zoning actions. Several cases―primarily in the East Valley―have brought the issue into greater focus. The recovery-driven interest in turning properties or resurrecting old plans causes some of the conflict.

In many ways, local governments are market-driven, but driven by a different market than commercial real estate. The Arizona legislature forces towns and cities to depend on sales tax for general fund revenues―the basic operating income for key community services. This in turn drives local governments to create retail and employment site opportunities through the general plan. Without revenue-generating undeveloped land, a city council is not going to have the wherewithal to fund future growth and the requisite public safety, parks and libraries.

The sales-tax dependence led to cities to be very protective of revenue-generating land set aside in the general plan. Retail business has significantly changed over the past decade, but local government funding mechanisms continue to use 20th century revenue models for a 21st century economy.

The General Plan
In Arizona, every city and county needs a general or comprehensive plan to provide a long-range blueprint of development patterns within current and future boundaries. Plans are supposed to be updated every decade and ratified by the voters. Several plans are slated for ratification this year―including Tempe, Scottsdale and Mesa.

“A general plan is a large and complex document, it carries a lot of implications that are not apparent when voting for ratification,” says Ralph Pew, member and manager, Pew & Lake, PLC, Mesa.

The comment “the plan can’t be changed because voters approved it” is often raised during a project hearing when there are proposals to amend the land use map. Pew says, “The plan itself contains the standards for approving major and minor amendments. Change is a planned part of the process.”

John Berry, founder of Berry Riddell & Rosensteel LLC, Scottsdale, says that preparation is the key, “When a client comes to us, we start with the staff, listen to neighbors and talk with elected officials to try to foresee any major issues. It’s incumbent on the developer to give the city the facts to support the project. Opinions and project economics alone are not going to gain an approval.”

Rose agrees, “We’ve seen clients with plans that just don’t fit with the general plan. This means a lot of work up front to move the project forward, but sometimes, we have to tell them, ‘it isn’t going to be approved.’”

Before the recession, development was moving so quickly that a zone change or general plan amendment denial just meant the developer moved on. “We don’t have a lot of land use litigation in Arizona,” says Pew. “Pre-recession, the pace of development and number of opportunities, made it possible for the developer to shrug off a denial and move on to the next project.”

It’s different in the planning pipeline now. “When the recession ended, we were tickled to get applications once again,” reminisces Mesa Planning Director John Wesley. “There was an appetite to make things happen, and most projects were approved. That’s different now.”

Developers are seeing the difference during the hearing process.

“Councils are busy and they don’t like controversy,” says Berry. “The key to success is to listen closely to any objections early in the process and eliminate as many issues up front. When I go before a city council, I want to be able to say we have many points of agreement and just a few points of disagreement, if any.”

Pew emphasizes that getting an approval requires more work on the facts up front, “The more information we can give a city with the application showing the need for change, the easier it is for the city council to ultimately say ‘yes.’”

All three attorneys say that they will provide economic analysis, traffic reports and other empirical facts to back up an application.

Wesley says that he’s seeing more of that too, “It used to be developers would come in and say the project doesn’t pencil without the changes being approved. That doesn’t show any benefit to the city, and today, the council is less likely to be persuaded.”

Converging Goals
Cities and developers are looking more closely at project and city objectives to see how the divergent goals can be brought closer together. “In Mesa, we had a pattern of putting commercial development on every major street corner. Recently, an owner showed us that the area was barely supporting existing commercial on two of the corners, and a third corner still had undeveloped commercial zoning. Their argument made sense and the city approved a residential rezone.”

Even with numbers and well-reasoned arguments, sometimes visions are irreconcilable. “There are some properties in cities where general plan amendments are just not going to be approved,” cautions Rose. “We see cities with long range plans for an area, and the council is not going to change their vision on a piece-by-piece basis.”

“In Mesa, we have some neighborhoods where there is flexibility, if an owner makes a case,” points out Wesley. “But there are some areas where we need to protect the city’s plans even if the land remains vacant for a while.”

A Need for Change
Some point to the success of the Price Corridor in Chandler where the city held firm on keeping land use for large corporate and single-tenant users. That is changing this year following a report by The Maguire Group the city commissioned. Changing economics and use patterns opened the door to maintaining the same corporate center feel, but now permitting smaller users and multi-tenant buildings. As soon as the amendment’s approval was imminent, the Douglas Allred Company filed plans for a hotel and mid-rise office on the Park Place campus.

Allred Park Place building five shell.

Allred Park Place building five shell.

“We’re starting to see cities, like Queen Creek, take a look at actual absorption rates and land use needs when considering general plan amendments,” says Pew. “Policy is starting to move away from the pre-recession rigidity that all commercial and employment lands needed to be preserved.”

Before the economy plunged, it was common for land owners to seek highest-and-best use zoning in order to better position the land for sale. The convergence of Internet shopping, the housing crisis and a push for infill development changed land use demand and affected patterns.

“Cities are becoming aware that we’re starting to run out of land area,” explains Wesley. “We’re looking more carefully at changes, because there is generally no going back.”

“As long as land remains undeveloped, it is possible and sometimes reasonable to change zoning again,” says Pew. “With the real estate market shift, owners start looking at what’s going to work. It’s possible cities are going to see requests to shift zoning to match market demand rather than market value.”

Finding Balance
Wesley talks about listening to developer ideas and goals, “Sometimes what’s wanted isn’t a perfect fit, but we’ve worked with owners to try and accomplish their objectives. We had a recent project where we mixed land uses so that both (Mesa) and developer goals were mostly achieved.”

“A lot of the time, the public is wed to the general plan,” reflects Rose. “The general plan is a vision for a community, it can’t just be simply dismissed. There are a lot of moving parts.”

In conversation with each of the three attorneys, one word is in their comments again and again: “understand.”

“Listen and understand what the neighborhood expects from a development,” Berry says.

Rose advises, “Understand what’s expected and be creative to bring ideas to the table.”

“Understanding the stakeholders and the project neighborhood is a big key to success,” counsels Pew.

Understanding city expectations can be the first step on the road to meeting an owner’s property objectives.

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Douglas Allred Company Breaks Ground On 100,622 SF Office Building In Chandler

Douglas Allred Company has started construction on another office building at Allred Park Place, a 100,622 SF, 2-story office building east of Price and Willis roads in Chandler.

The structure, which broke ground July 29, is the sixth speculative office building at Allred Park Place.

Mark Krison, Brad Anderson and Bryan Taute of CBRE’s Phoenix office will handle leasing the new Class A office building for the San Diego-based developer. Krison’s team also has the marketing assignment for the balance of Allred Park Place’s office buildings.

“Our Park Place project is at the center of where companies want to be,” says David Allred, executive vice president of the Douglas Allred Company. “Our product is cutting edge and future focused.”

Douglas Allred Company completed a 92,109 SF office building at Allred Park Place in December of 2012, which was leased to Infusionsoft, creator of a web-based, all-in-one sales and marketing software for small businesses.

Other major tenants at Park Place include Healthways, the largest independent global provider of well-being improvement solutions; and International Rectifier, a world leader in power management technology.

Completion of this newest office building is anticipated by 3Q 2014. Balmer Architectural Group of Phoenix is the architect and Willmeng Construction of Mesa is the contractor.

“The Douglas Allred Company has done an excellent job of meeting the market with business-ready buildings,” Krison said. “Our ability to be so flexible with companies has really contributed to the project’s success.”

Allred Park Place is a mixed-use business park consisting of office product, hotels and retail space along the Price Corridor. It has freeway access to the Loops 101 and 202, offering tenants an easy commute from virtually any location in the Valley.

The development also offers a wide array of amenities with its proximity to Chandler Fashion Center, as well as a short drive to Phoenix Sky Harbor International Airport.

Future plans for Allred Park Place include the construction of a campus of office buildings exceeding 2 MSF.

 

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Douglas Allred Company Breaks Ground on 68,867 SF Chandler Office Building

 

Douglas Allred Company started construction on another office building at Allred Park Place, a 68,867 SF, 2-story office building east of the NEC of Price and Willis roads in Chandler.

The building, which broke ground in early August, is the second speculative office construction to take place in Metro Phoenix this year.

Mark Krison and Scott German of CBRE’s Phoenix office will handle leasing the new Class A office building for the San Diego-based developer. Krison and German also have the marketing assignment for the balance of Allred Park Place, which includes four additional Class A office buildings totaling 353,969 SF, with 34,495 SF of space available.

“We are extremely pleased with the market’s reception to our new product,” said David Allred, the firm’s executive vice president. “With strong demand and the immediate lease up of our earlier construction, another building at Allred Park Place is warranted.”

Douglas Allred Company broke ground on a 92,109 SF office building at Allred Park Place earlier in the year, which has been leased to Infusionsoft, creator of a web-based, all-in-one sales and marketing software for small businesses. That building is scheduled for completion at the end of the year.

Completion of the newest office building is anticipated by May 2013. Balmer Architectural Group of Phoenix is the architect and Willmeng Construction of Mesa is the contractor.

“The Southeast Valley leads the market in terms of absorption, with nearly 350,000 SF through mid-year,” Krison said. “While demand and supply are high, there are very few new, class A office projects available in the area. Allred Park Place will fill the void, offering exactly what the market demands.”

Allred Park Place, in addition to its location in the highly desirable Price Corridor, has convenient freeway access to the Loops 101 and 202, offering tenants an easy commute from virtually any location in the Valley. The development also offers a wide array of retail and restaurant services with its proximity to Chandler Fashion Center, Chandler Gateway, Chandler Festival Mall and Chandler Pavilions.

Future plans for Allred Park Place include construction of several additional office buildings, which will eventually exceed 1 MSF.

 

Allred Park Place - AZRE May/June 2010

Office: Allred Park Place, Ph. II


ALLRED PARK PLACE, PH. II

Developer: Douglas Allred Company
General contractor: Hardison/Downey
Architect: Balmer Architectural Group
Location: NEC Price & Willis roads, Chandler
Size: 261,597 SF

Allred Park Place is a proposed $55M master-planned business park. Phase II is slated to include 261,597 SF of Class A office space within 3 buildings. Brokerage firm is CB Richard Ellis.

AZRE May/June 2010