Tag Archives: January 2009

rsz_countryclubgreens

68-Unit Apartment Community in Mesa Sells for $4M

 

 

Cassidy Turley completed the sale of Country Club Greens, a 68-unit apartment community on 2.4 acres at 350 W. 13th Place in Mesa for $4M.

The buyer was Clear Sky Capital CCG L.P. of  Phoenix and the seller was California Bank & Trust. Executive Vice Presidents David Fogler and Steven Nicoluzakis with Cassidy Turley Arizona’s Multi-Family Group brokered the transaction.

Built in 1986, the property has nine one bed/one bath and 59 two bed/two bath fully remodeled rental units that include new energy efficient appliances and upgraded kitchen and bathroom cabinets.

The complex also has a swimming pool and spa and on-site leasing office. Country Club Greens is located one mile south of the Loop 202 on Country Club.

In other news, Cassidy Turley completed a 2,800 SF lease for Voxpop, the shopper marketing radio network, at 2141 E. Camelback Rd.. Justin Himelstein and Jason France with Cassidy Turley Arizona’s Office Tenant Representation group represented Voxpop.

The marketing company relocated from an office at University and 35th St. to the Camelback Corridor submarket. Judith Tucker with Camroad Properties represented the landlord, Two Corners Financial Group, LLC.

Voxpop began in 2003 in Mexico and is the largest in-store marketing radio network reaching more than 40M people in more than 1,800 stores. In 2009 the company expanded its operations in the U.S.

The company currently has partnerships with retailers in Arizona, Texas and California, including Arizona-based Bashas’, AJ’s Fine Foods and Food City locations. Voxpop is a strategic messaging company that started by providing background music for stores and grew into providing targeted advertising and marketing messages for grocery customers.

The client list includes national companies such as Nestle, Coca-Cola, Tyson, General Mills and Kraft.

Charles Miscio, a senior vice president at Colliers International

Could The Current Real Estate Mess In Arizona Have Been Prevented?

A few short years ago, when Arizona’s residential market was really cooking, Charles Miscio was getting his teeth cleaned when his dental hygienist made an ominous comment: She owned eight houses and was renting them out to investors, speculators and anyone in between.

“It seems like everyone got caught up in that irrational thinking,” says Miscio, a senior vice president at Colliers International, who has more than 20 years of experience in the Arizona real estate market. “The train had left the station and no one thought it would stop. Well, it took some major missteps by Wall Street, but I think everyone can agree that money train has stopped.”

Fortunately, Miscio adds, Arizona did learn some lessons from past real estate market cycles, and things, especially in the commercial sector, should begin to look better following another nine to 12 months of uncertainty.

“Mid-2010 is what we as brokers are looking toward for recovery,” he says.
Right now, real estate executives and economic experts concede, a credit crunch, plummeting home values and corporate uncertainty have consumer confidence at historic lows. Companies aren’t expanding, leasing or buying more office space or hiring workers. Consumers, in turn, are wary about their jobs and have resisted spending on everything from new cars to health care.

It begs the question, though: Could anything have been done to prevent the current malaise?

Miscio says perhaps those with business ties to real estate (finance, mortgage, brokers, developers, etc.) should have watched the indicators better and kept a skeptical eye on the ever-outreaching building patterns. Developments continually moved to the periphery of the desert, making long commutes a norm for many and impacting the quality of life for many more. Exotic financial structures, which seemed too good to be true, also emerged. As it turns out, reality eventually set in.

“We just need to pinch ourselves once in a while,” the Colliers executive says.
Pat Feeney joined CBRE in 1985, and has ridden many waves in the market. Today, he is a senior vice president dealing mostly with industrial projects. He says current action in all sectors is down, and like, Miscio, he believes any improvement is closely tied to the replenishment of consumer confidence. That could take a while, as the Conference Board’s Consumer Confidence Index, a widely watched gauge of consumer spending, continues to fall to all-time lows. Currently, confidence in the economy is the lowest on record.

Feeney has seen these cyclical patterns before and believes, in the end, this too shall pass; it’s just a matter of time, although there are a few caveats in this current cycle.

“Historically, cycles come and go — the wounds heal and everyone goes back into battle,” he says, adding that past cycles were always followed with an “oomph factor.” That “oomph” was the Internet and tech boom earlier this decade, and the housing boom of the mid-2000s.

“Where is that next oomph?” Feeney asks, citing comments made by an economic analyst at a national economic strategy session.

“…it took some major missteps by Wall Street, but I think everyone can agree that money train has stopped.” — Charles Miscio, Colliers International

“This dramatic improvement also needs to be worldwide, since all of our economies are tied together. I agree with the cyclical thought process; I just think this one will take longer. I just don’t know how long.”

Several things from past booms are playing a huge role in the current bust. A run-up in the cost of land over the past decade held the lid on the market, as did escalating construction and material costs. Some key zoning changes, mostly around Sky Harbor International Airport, have also equated to a real estate industry that could be much worse off.

“This time around, there wasn’t unbridled and uncontrolled activity,” Feeney says. “This was more economically controlled and driven.”

Like many, Feeney remains bullish on Phoenix. People will always want to escape the inclement areas of the U.S. and the congested and strange factor of California. Arizona is a great place to live and affordable housing, one way oranother, will return.

Jerry Noble, a first vice president at CBRE agrees: “Phoenix continues to grow and be a leader in U.S. growth. We have always seen dynamic employers looking for space in quality locations with an affordable work force. Our fundamentals just need to stabilize and we’ll get back to where we need to be.”


www.cbre.com
www.colliers.com

Jeff Roberts Opus West

Jeff Roberts – Vice President Of Real Estate Development At Opus West

About 10 years after its Phoenix headquarters opened in 1979, Opus West came up against a major recession in the Valley. It survived that test and is weathering today’s economic downturn with the same tactics.

A division of the Minneapolis-based Opus Group real estate development company, Opus West is going head-to-head with Arizona’s moribund economy with its corporate structure, diverse product base and a development philosophy that has served it well.

“We are vertically integrated and that allows us to react quickly in good times and bad,” says Jeff Roberts, vice president of real estate development.

Opus West has in-house property management, construction, design and development services. Presently, the company’s design-build staff is opening new revenue streams by offering its services to outside clients, such as corporations and governments.

The company still looks for opportunities and is more likely to find them within its broad line of products — retail, industrial, office and residential, including condos, apartments and senior housing.

As part of its approach to development, Opus West does not hinder its flexibility with a sizeable property portfolio and keeps its land inventory low, Roberts says.

“In the late ’80s and early ’90s (recession), many companies accumulated a large portfolio and were much more affected, while we had built our buildings and sold them for a profit,” he says. “That makes us much less subject to market cycles.”

In these tough times, Opus West is again focused on finishing existing projects to get new tenants moved in, taking care of existing tenants and keeping the door open to build-to-suit projects for tenants that are willing to commit, Roberts says. Projects on its plate include the 263,000-square-foot mixed-use Tempe Gateway building in downtown Tempe and the 170,000-square-foot Mill Crossing shopping center in Chandler.

One bit of good news Roberts sees in today’s economy is a “reasonably strong amount of large tenant activity” as companies move for economic reasons or to take advantage of a down market and upgrade to nicer space. Roberts expects little new construction in 2009.

“I don’t look at it as a year where there will be any major projects,” he says. “It will be a year of people working through leasing up what they’ve got and, hopefully, a year we hit bottom and see things heading back up. The big question is whether the economy picks up enough where we can get some significant net absorption.”

Roberts has more than 17 years of real estate experience in eight different cities. Prior to joining Opus West, he was an asset manager for Beta West in Denver. Roberts holds a bachelor of science degree in real estate from Arizona State University.

www.opuscorp.com

Workers' compensation laws for injured employees/employers

Workers’ Compensation Laws Provide Protection For Employers And Employees

Workers’ compensation insurance is like an old sweater — it’s there when you need it, but you may not think about it much until that time comes. However, it’s not a bad idea to pull it out every now and then to make sure it still fits.

Here are some points to keep in mind as you look in the mirror.
Workers’ compensation laws in Arizona are designed to protect both the employer and the employee when the latter is injured on the job. The most important thing to know about workers’ compensation in Arizona is that insurance is mandatory for every business — public and private — that has one or more employees.

It also is important to understand that workers’ compensation is a “no fault” system, meaning that insurance benefits generally are made available no matter who is to blame for the employee’s injury. Injured employees are entitled to full-medical benefits and lost-wage compensation while they are unable to work, with no cost or time limits. Job retraining benefits are sometimes provided, as well.

Although workers’ compensation insurance is mandatory for employers, Arizona law allows an individual employee to opt out of the system.

Those who choose to remain covered by an employer’s insurance — and the vast majority of workers do — generally give up the right to sue their employer or co-workers for their injury in exchange for the security of receiving insurance benefits as provided by workers’ compensation laws.

Those who opt out retain the power to sue their employer for damages resulting from on-the-job injuries. However, they are required to prove negligence, which can be a difficult task.

Arizona businesses have three options for obtaining workers’ compensation insurance: they can purchase coverage through a private insurance carrier, they can self-insure or they can be part of a competitive state fund, such as the privately operated State Compensation Fund, or SCF.

Small businesses also may have the option of joining with others in related fields to purchase a group insurance plan.

The most important thing to keep in mind if an employee is injured on the job is that a claim with the workers’ compensation insurer must be filed as soon after the incident as possible. Thus, employees should be trained to notify their supervisors as soon as they are injured to ensure timely claims reporting.

Workers suffering temporary or permanent total disability receive payments determined by a percentage of their wages with a maximum weekly pay out. Benefits continue for as long as the employee is disabled. In the event of an on-the-job death, benefits based on a percentage of the worker’s wages are paid to his or her survivors.

Although workers’ compensation laws are designed to curtail lawsuits, there are situations where employers or insurance carriers may face legal action by an employee and will require legal counsel.

The most obvious case of liability exposure is when an employer fails to carry workers’ compensation insurance and a worker is injured on the job.

Another legally hazardous situation is when there are multiple employers on a single job site. A construction site is a good example of this, as is an office setting with an independently operated print shop or snack bar. If a person employed by one company is injured by an employee of another company, the injured worker may be allowed to sue the company that does not employ him or her for damages. An employer is only protected against suit by its own employee, not someone else’s employee. Therefore, it is important to make sure the work site is as safe and hazard-free as possible to prevent on-the-job injuries.


Those who opt out retain the power to sue their employer for damages resulting from on-the-job injuries. However, they are required to prove negligence, which can be a difficult task.


Finally, when a workers’ compensation claim is denied and the employee appeals, the case works its way through the Industrial Commission of Arizona and, eventually, into the courthouse. At that stage, we recommend the employer seek assistance from an employment law specialist.

Thankfully, most of the time, the system runs as it should, the old sweater still fits, and it stays on the shelf, waiting for that rare bad-weather day.

Greg Coulter and Steve Biddle are shareholders in the Phoenix office of Littler Mendelson, an employment and labor law firm representing management. They can be reached at (602) 474-3600, or GCoulter@littler.com or SBiddle@littler.com

Craig Jackson of Barrett Jackson

Craig Jackson – CEO Of Barrett-Jackson

When Craig Jackson took control of his family’s business, Barrett-Jackson, following the death of his father and brother in 1993 and 1995, respectively, he inherited a company that took in $15 million from one automobile auction. He was ready for the challenge, however, having grown up in the business and working in various roles. Today, the company has grown to three auctions — one in Scottsdale, one in Palm Beach, Fla., and one in Las Vegas — and made roughly $135 million at its 2008 auctions. But to achieve that growth, Jackson had to make several changes.

“My goal was to make it more inclusive and more of a family-oriented lifestyle event, whereas before, you’d call it the boys club,” Jackson says. “(It wasn’t) something the wives felt like they had their own place.”

Live television coverage on the SPEED Network, an active Web presence, myriad vendors of food, clothing and accessories, and a fashion show were all among the auction’s new image. Jackson also broadened the core of the auction — its selection of automobiles.

“Car collecting now isn’t just classics,” he says. “It’s everything that’s got collectability and uniqueness to it. It’s a much broader hobby and industry.

“To have sustainability in this business, you need to have new collectors and a much broader assortment because some things are hot one year and some things are cold another,” he continues. “We’re like the New York Stock Exchange — we sell commodities from all sorts of different types of cars to all sorts of different types of buyers in an open arms-like transaction.”

The current economy, Jackson says, has not had too much of an impact on the business as of yet. The auctions are still garnering a lot of attention. The 2008 Scottsdale auction alone had an attendance of 286,000 people, 30 percent of whom flew in from out of state. However, he is planning some cutbacks in regard to logistics for the auction, including ending the auction earlier than usual. This year’s Scottsdale auction runs from Jan. 11-18 at WestWorld of Scottsdale.

The tourism industry in Arizona is heading in the right direction during this time, Jackson says, but it needs everyone to work together in order to make it stronger.

“Tourism is one of those things that needs constant looking after,” he explains. “There’s constantly a game plan by other states and cities to whittle away at it; this one should have a game plan how not to allow that to happen and not take it for granted. … There are other communities that are very aggressive and their job is to come steal what we have here, and if there’s nobody making sure we’re all getting the support we need, then all of the sudden (moving an event) seems pretty attractive.”

It’s especially important that Arizona municipalities work together, considering that other destinations don’t consider the state a threat, Jackson says. He attended a meeting in Las Vegas when the city government was voting on funding for a new convention center, and while there he saw a chart that listed other cities considered to be their competition — and Phoenix wasn’t listed.

“They’ve already discounted us,” he says, “and that was pretty telling. … It’s in Scottsdale’s best interest, it’s in Phoenix’s, it’s in Paradise Valley’s, it’s in everybody’s to work together collaboratively. … I think it’s turning in the right direction. We’ve let it atrophy for a while, but it needs, actually, an infusion of capital and attention.”

www.barrett-jackson.com

Ensemble DevMan

Ensemble DevMan Of Arizona Aims To Benefit Medical-Office Clients

Medical real estate developers Ensemble Real Estate Services and DevMan Company have joined forces to become Ensemble DevMan of Arizona. The union was official Nov. 1.

Ensemble DevMan specializes in medical office development, management, leasing and brokerage — a combination of each firm’s services before the merger. The new company has 110 employees and the combined portfolio includes 124 properties totaling more than 5.4 million square feet of space in four states. Since neither company’s location is big enough to house the new firm under one roof, the Ensemble building on 24th Street and Camelback has been dubbed the south office and the DevMan building a block away on East Missouri Avenue is the north office. Accounting, property management and development services are located in the south building and brokerage operations are in the north office.

Michael Moskowitz of Ensemble Real Estate Services says no money changed hands when the companies merged — they simply combined the two businesses. Ensemble was founded in 1989 by Moskowitz and partners Kambiz Babaoff and Randy McGrane. The company’s focus is developing, leasing and operating medical facilities on hospital campuses.Michael Moskowitz of Ensemble Real Estate Services

“This wasn’t a Wall Street-type merger,” says Moskowitz, Ensemble DevMan’s managing director. “Randy, Bill (Molloy) and I have known each other for a long time, so it was a decision that evolved from casual to serious over time. Earlier this year, we talked about doing a specific deal together and then we talked about it again over the summer and questioned whether we should put the businesses together. In the end, we all decided it made sense. Merging allows us to provide our clients with more talent and resources, a bigger knowledge base and more solutions.”

DevMan founder Bill Molloy described the merger as comfortable because both companies share the same culture and values. He also considers it a wonderful opportunity to enhance services for clients and explore new projects. Molloy started DevMan Company in 1981 to provide brokerage and management services to the medical real estate community and to develop physician-owned medical office buildings.

“As a result of the merger, we are now a stronger company with a bigger platform for projects,” Molloy says. “We also have a bigger resource team, so Randy, Michael and I can truly act as managing members and sponsor the business and identify new opportunities in Arizona and outside the states we currently work in.”

Sheila Gerry, senior vice president of John C. Lincoln Health Network, has done business with Ensemble and DevMan in the past and considers both outstanding organizations.

“Ensemble and DevMan have slightly different areas of strength, so this merger is going to bring a full array of diverse services to their clients,” she says. “It’s going to be great for physician-owners and tenants, as well as for our community.”

Tracy Altemus, a member of DevMan’s staff since 1987, admits that initially she was cautiously optimistic about the concept of a merger, but then quickly changed her mind.Bill Molloy

“There are always concerns with change, but I couldn’t have thought of a better fit for our two companies,” says Altemus, brokerage service manager for Ensemble DevMan. “I’ve known the principals of Ensemble for several years and always had a very high regard for them. I’ve also worked for years with their key brokerage employees, Sharon Cinadr, Marina Hammersmith and Murray Gares, and I always knew they were a class act. I also knew that their property-management philosophy was similar to ours: The tenant is ‘all important.’ In fact, when one of our clients moved from our building to theirs, I felt good knowing that they were in excellent hands and would be well taken care of.

“Ensemble and DevMan have similar cultures and are a natural fit,” she continues. “We all feel energized by the change and are looking forward to building a better mousetrap to provide excellent development, brokerage, asset and property management services to our clients, while having fun and feeling rewarded as part of a quality-centric organization.”

As a result of the merger, Ensemble DevMan has eight projects in the pipeline for development, totaling 369,000 square feet. The projected value of the projects is $170,537,000.

The projects include:

  • The Medical Plaza at THE CITY, a 104,400-square-foot medical office building in Surprise. Project cost is $26 million and it is scheduled to break ground this month.
  • Summit Medical Plaza, a 45,000-square-foot physician-owned medical office building on the campus of Summit Regional Medical Center in Show Low. The $11 million project is scheduled to break ground in either March or April.
  • A 42,000-square-foot medical office building on the campus of Auburn Regional Medical Center in Auburn, Wash.
  • Banner Gateway Medical Center, a 36,000-square-foot medical office building on the campus of Banner Ironwood Medical Center in Pinal County.
  • Canyon Crossings, a $9 million, 31,000-square-foot retail and professional plaza across from Banner Gateway Medical Center in Gilbert. Construction on this project kicks off in April and will be complete by the end of the year.
  • Phoenix Children’s Hospital’s West Valley Specialty & Urgent Care Center and an adjacent medical office building totaling 72,000 square feet in Avondale. The $19 million project will break ground sometime in February or March.

“The merger of Ensemble and DevMan will ultimately provide Phoenix Children’s Hospital with access to the expertise from both firms,” says Robert Meyer, president and CEO, Phoenix Children’s Hospital. “As a client, this merger will increase the number of important relationships needed in the medical real estate community and will give Phoenix Children’s Hospital a broader reach in the Greater Phoenix market. Having existing relationships with both companies, I see this merger as very positive.”

www.mayoclinic.org

Susie Baldwin of Arizona Greens

Arizona Greens Brings Artificial Turf To Arizona

Arizona Greens
Don Baldwin, founder and president
Susie Baldwin, founder and COO
Est. 2005

Taking the plunge to open your own business is always a difficult endeavor, but for Don and Susie Baldwin, the leap turned into a wildly successful venture with Arizona Greens. In fact, in 2005, only three months after launching their synthetic turf and putting greens business from their home, the couple had so many appointments that artificial turf was stored in the rafters of their garage.

“The phone rang so much we could not even answer it fast enough,” Susie Baldwin says.

Arizona Greens specializes in complete landscaping and hardscaping with an emphasis on low-maintenance, low-water synthetic turf for both residential and commercial properties.

Lifelong Arizona residents, Don and Susie have witnessed the dramatic changes to the state first hand. They realize water conservation is more important than ever, making synthetic grass a wise alternative for many.

“In this day and age of trying to be green and trying to conserve, this is just such an easy way to accomplish all those issues at one time,” Susie says.

In addition, due to numerous landscaping requests from customers, the Baldwins added a dual commercial and residential general contractor’s license to the company’s resume.

With the incredible success of Arizona Greens, one would never guess that the Baldwins previous careers were miles away from the landscaping industry. Don had worked as a long-distance truck driver and Susie was in corporate banking.

“The subtotal of our experiences was taking care of our yard,” she laughs.

Yet, they persevered and quickly learned the ins and outs of owning a landscaping business. The rapid growth of the company forced them to address numerous issues, including problems with adequate staffing and maintaining positive customer relations during delayed installations.

Now, with the tough economic times, the Baldwins are facing their next big hurdle in entrepreneurship.

“The first three years we were in business was cash flow heaven … then things changed virtually overnight,” Susie says. “In light of what has happened with the economy, it is imperative to look as forward as possible.”

Though the nonstop action of the early days of the business has slowed significantly, Don and Susie are positive that Arizona Greens will weather the storm and learn a very valuable lesson along the way. The energetic couple has learned to balance their personal and professional lives without a hitch, and they look to the future to forge ahead with their work.

“We just want to continue to make an impact on our environment and keep it as pure as possible,” she says.

Susan Edwards - Banner Health

Susan Edwards – President Of The Arizona Region At Banner Health Systems

The health care industry remains a bright spot in Arizona’s dismal economic landscape, with Banner Health shining among the very brightest.

Headquartered in Phoenix, the not-for-profit health system has 12 hospitals in the Valley and is the second-largest employer in Arizona behind Wal-Mart with more than 26,000 full-time employees.

Banner’s Arizona region President Susan Edwards says the state’s growing population has enabled the company to expand and provide high-quality medical services to communities throughout the Valley. Since 2002, Banner has opened two new hospitals, started construction on a third, expanded a number of current facilities and purchased land for future growth.

“Banner has been in a growth mode for quite some time,” Edwards says. “And even though the population growth in Arizona has slowed down, we are committed to completing the projects on the table. We are a strong company and we run our hospitals very effectively. It’s not just about getting bigger and growing. It’s about continually improving how we structure our facilities and providing excellent patient care.”

Edwards maintains she is very optimistic about the future of the health care industry, despite the increasing costs of doing business, lack of health care workers and the government lowering reimbursements to health care providers.

“When the industry is challenged, we have to make major changes and adapt,” she says. “We also have to keep a close eye on operations so we get through the tough times.”

Banner is currently scrutinizing business practices at all levels of its hospitals to see where it can make improvements on the company’s bottom line. Employees working on the front lines were asked to provide feedback on making business practices more efficient, and in twoweeks Banner officials received 412 suggestions. A suggestion that has already been implemented is going to save Banner $100,000 annually, Edwards says.

Edwards, 52, has been president of Banner’s Arizona region since 2002. Prior to Banner, she served as both executive vicepresident and chief operating officer of St. John’s Health System in Detroit, and interim president and chief executive officer of St. John’s Hospital, a 600-plus bed tertiary hospital. Before that, she held health care leadership roles in Pennsylvania, Michigan and Ohio.

Edwards was born and raised in Sparta, N.C. She holds a bachelor’s degree in biology from Emory and Henry College, a master’s of health administration degree from Duke University, and a law degree from Wayne State University.

www.bannerhealth.com

Tucson, Arizona

Southern Arizona Trying To Set The Stage For A Post-Recession Surge

Like the rest of the state, Southern Arizona has been in a recession since 2007, and at least one prominent economist says the situation won’t be getting better anytime soon.

“My forecast is that it’s going to take a while to get (credit markets) straightened out again and functioning as they should,” says Marshall Vest, director of the Economic and Business Research Center at the University of Arizona’s Eller College of Management. “I think that takes up most of 2009. Then we have all the excess housing that needs to be absorbed. That’s going to take some time and we’re not really absorbing the housing right now because credit markets have been essentially frozen. So, I think it’s the end of 2009 before the economy really regains its footing. I think we’ll start to move up in 2010. By move up, I mean the economy will once again begin to expand and enter a recovery phase.”

Joe Snell, president and CEO of Tucson Regional Economic Opportunities (TREO), says that despite the already deteriorating economic conditions, Tucson still managed to draw new companies and expansions in 2008.

“We’re definitely seeing a slow down in a lot of ways, both in the recruitment of companies and the expansion of companies, but not a massive downtick,” he says. “Our pipeline is as full as it’s ever been. But what we are seeing are companies that may have been ready to announce a $100 million expansion in November saying, ‘We’re going to wait on that until January, we’re cautious, we want to see what’s going to happen in the next three months.’ ”

Last year, the region still saw growth in the health care, bioscience, alternative energy and aerospace industries. Of particular note was the purchase of Ventana Medical Systems in Oro Valley by Swiss drug maker Roche for $3.4 billion. Roche also announced plans for a $100 million expansion at Ventana that would increase employment from 750 to about 1,000. In addition, Roche purchased more than 17 acres of land around the Ventana site to expand the location.

“Possibly the most significant thing we can point to though, is that 57 percent of the successful projects were in our targeted industries, and that’s important because those targeted industries represent quality rather than quantity, meaning, closing the wage gap,” Snell says. “Historically, Tucson has ranked somewhat below both the state and the national average in wages. So we’re rapidly moving in the right direction to close that gap. To me, that’s a big takeaway.”

Southern Arizona has not been immune to the effects of the housing market collapse and its devastating impact on the construction industry. For example, one of the first companies TREO recruited, window and doormaker Pella Corp., announced in November 2008 that it was idling its Tucson plant, affecting 65 workers. When Pella first located to Tucson in 2005, company officials said it had plans to employ more than 400 people at its facility.

Still, as Vest points out, since the construction boom was not as great in Southern Arizona as it was in the Phoenix area, the drop has been less precipitous. For example, year-over-year job losses in the construction industry in October 2008 stood at 4,000 in the Tucson metro area, according to figures from the Arizona Department of Commerce. In the Phoenix-Scottsdale-Mesa area, 30,000 construction industry jobs were lost during the same period.

“Commercial (construction) is still in relatively good shape. Vacancy rates are moving up, but they are still fairly low. Tucson didn’t see the construction boom in commercial that you saw in Phoenix, so, commercial construction here in Tucson doesn’t have as far to fall,” Vest says. “For residential, the indicators that I see are pretty comparable to Phoenix, except for the housing price data. I don’t think the declines have been quite as large (in Southern Arizona).”

Snell says that so far, Southern Arizona has managed to hold its own on employment.

“We have losses in construction, but we’re gaining it on biotech, we’re gaining it on solar, we’re gaining it in logistics companies. I think right now we’re sort of a wash,” he says.

Vest, however, expects more job losses across the state as the recession drags on through 2009. In fact, comparisons of unemployment rates from 2007 and 2008 already are startlingly eye opening.

In October 2008, the unemployment rate for the state, the Phoenix metro and the Tucson metro stood at 6.1 percent, 5.5 percent and 5.8 percent, respectively. In October 2007, the state’s unemployment rate was 3.9 percent, Phoenix’s was at 3.4 percent, and Tucson came in at 3.9 percent.

“I think the unemployment rate will likely reach 8 percent before we’re through,” Vest says.

Vest adds that rate is in line with the jobless figures of the last major recession of the early 1980s. Back then, unemployment peaked at 13 percent in the state, 8.9 percent in Phoenix and 10.5 percent in Tucson.

Fortunately for Southern Arizona, Vest says, the region’s economy is considerably more diverse than it was in the early ’80s. But with credit still tight and the housing market stuck in freefall, Vest cautions about being too optimistic on the strength of a recovery.

“I really think this recovery is probably going to be muted. I don’t see us rebounding very strongly. The process is going to take awhile,” he says. “This recession is going to be longer than the recessions of the early ’80s or mid ’70s. If it stretches through 2009 and the recession began in the fourth quarter of 2007, we’re talking about a two-year-long recession. Nationwide, the longest recession has been 16 months.

“It’s been a very long time in this country since we have encountered a very severe recession. The recessions of 2001 and 1991 were both very short and shallow. They barely qualified as recessions, rather than a growth slowdown. It’s only the gray hairs that remember what a severe recession is like,” Vest adds. “This is scary. This is messy. But we’ve been through this before. If you are a business and you can hang on and remain solvent and get through this, there will be plenty of opportunities on the other side. I would also say that it’s during times like this that the seeds are sown for fortunes to be made. Savvy investors will take positions in markets where assets are cheap and will benefit handsomely as the economy recovers —as surely it will. And the deep pockets know that and there is a lot of money on the sidelines waiting for the right opportunity.”

Snell agrees, adding that now is the time for Southern Arizona to stake a claim in future growth and prosperity.

“We’re not going to ride out the recession. I’m a big believer that now is the time to get aggressive,” he says. “I think we have a good head of steam. At this point, I would say Tucson is as competitive as any major city in the country, including Phoenix. That’s a first for us. Are we going to get cooled off by the national economy? Yes, absolutely. But I think we’re in as good a position as anyone coming out of this recession to capitalize, and maybe within this recession to capitalize.”

www.arizona.edu
www.treoaz.org
www.azcommerce.com

Globe, International Business Growth in Arizona

New Group Aims To Boost International Business Growth In Arizona

Most Arizona legislators and business leaders now recognize the value of international commerce to the state. It hasn’t always been that way, but today there is broad agreement that exports from Arizona and foreign direct investment into Arizona from around the world create jobs and community growth. After all, 95 percent of the world’s population is outside the U.S., along with 70 percent of the world’s purchasing power. Why not tap into that power?

Arizona has made relatively slow progress with international trade compared to states such as California and Texas. Those states have each made greater per capita investments to encourage local companies to export and foreign companies to invest locally. Arizona is ranked in the bottom of U.S. states for foreign direct investment — No. 31 — according to the U.S. Department of Commerce. This creates an excellent opportunity for improvement.

With exports, the picture is a little better. Arizona businesses have done a reasonably good job of selling their products overseas. Exports from Arizona-based companies increased to $19.2 billion in 2007, contributing to good job and tax revenue growth. These figures rank Arizona as the 17th leading state for exports.

People all over the world know about the Grand Canyon, but few know about businesses within Arizona. Exports can help build global awareness of Arizona businesses, making the state a more viable candidate for foreign investment. That’s important because foreign companies investing in Arizona pay higher wages than local companies, and with today’s sputtering economy, the state’s economy needs all the help it can get.

According to the Greater Phoenix Economic Council (GPEC), if Arizona could increase foreign direct investment to be the 17th ranked state as it is with exports, it would attract 84,000 more jobs and $12.5 billion more in capital investment. How’s that for an economic shot in the arm?

“We need investment to capture strategic industry growth for Arizona, like Germany-based solar companies,” says Rod Miller, vice president of international economic development for GPEC. “In the current environment, increasing our investment in economic development initiatives will support a quicker and stronger economic recovery.”

Miller’s data shows a return in capital spending and taxes of as much as $110 for every dollar spent attracting companies to Arizona. GPEC is making progress despite Arizona’s low per capita investment. The good news is that many know what’s needed. The bad news is that Arizona, like other states, faces a challenging budget crisis.

It has been against this backdrop of both opportunity and challenge that the Arizona International Growth Group (AZIGG) was founded in 2007. AZIGG was created to provide a place for Arizona-based business owners to gain all the international information and connections they need to be successful overseas. Each of the existing business-support organizations has a piece of the international puzzle, but none has a full view of importing, exporting, international company attraction and international company retention. AZIGG brings it all together, including forums to attract and retain foreign companies.

AZIGG has quickly attracted more than 1,000 members from the Arizona business and business-support community. The group meets monthly to hear international business speakers and discuss ways to help Arizona-based businesses to export or to attract foreign direct investment.

AZIGG encourages cooperation between local international business and cultural groups, including the consulates, the Department of Commerce, GPEC, other city economic development resources, the Phoenix Committee on Foreign Relations, the World Affairs Council of Arizona, financial institutions working with the U.S. Export-Import Bank, trade associations such as the Arizona Technology Council, and international business service providers such as accounting, insurance, marketing and legal firms. AZIGG allows each resource to address the group monthly to keep business owners aware of the most recent ideas, news and opportunities.

In the same spirit of cooperation, the global law firm Squire, Sanders & Dempsey is stepping forward as the first business sponsor for AZIGG. This month, the firm is hosting the AZIGG International Business Fair at its law offices in Downtown Phoenix in order to make local businesses aware of all the services available for companies to grow internationally. Arizona and Arizona-based businesses need to be especially creative to compete against other states for opportunity dollars.

AZIGG encourages both government and private business actions to grow international development. Monthly meetings feature Arizona-based entrepreneurs such as Lee Knowlton of Kahala Corporation (which owns Cold Stone Creamery), Colin Christie of MX Secure and Omar Sayed of Succeed Corporation, all of whom are pioneers for Arizona in connecting their companies to the global market place. Similarly, global service firms such Squire, Sanders & Dempsey show leadership to help others succeed internationally.

Business owners now have more choices with less risk to grow their businesses internationally. Their success ultimately will result in a more balanced and sustainable economy for Arizona. Besides AZIGG, the U.S. Commercial Service’s Export Council and foreign consulates are available as resources to Arizona-based business owners. Additional resources are available on the AZIGG Web site, in AZIGG monthly meetings and as part ofthe AZIGG International Business Fair.

Besides international sales growth, there are other initiatives that all residents of Arizona can support to create a more level playing field for companies based in Arizona. They include:

  • More direct international flights to Sky Harbor International Airport.
  • Sending a clear message that Arizona is a state open to legal immigration.
  • Improving education from below average to above average in the U.S.
  • Providing tax incentives to attract capital-intensive industries.
  • Supporting international sales with education and infrastructure to increase exports.


Doug Bruhnke is president and founder of the Arizona International Growth Group (AZIGG) and CEO and founder of Growth Nation. For more information, visit www.azigg.com

Bob McGee Southwestern Business Financing Corporation

Bob McGee – President And CEO, Southwestern Business Financing Corporation

Fourth generation banker Bob McGee, president and CEO of Southwestern Business Financing Corporation, sees a rough year ahead for small businesses in Arizona. When McGee says rough, he means rough compared to Arizona’s customary booming economy.

“We may only have 2 to 3 percent growth in the state, but as long as we have water and electricity to run air conditioners, people are going to keep moving here from Chicago and Minnesota,” he says. “Yes, businesses are going to have a tough time, but I still do not think it will be anywhere near as bad as the past couple of bad times we’ve been through.”

McGee, whose firm is a nonprofit Certified Development Company approved by the Small Business Administration to make low-risk 504 loans for fixed-asset projects, says the downturn has hit home. Southwestern loaned $90 million for projects in 2007, but SBA approvals are down 40 percent, while the actual loans he funded are off by 10 percent.

Surprisingly, McGee sees small businesses becoming more attractive in today’s economy.

“When times get tough, that’s when people start thinking about owning their own business,” McGee says.

Businesses with fewer than 20 employees comprise more than 90 percent of Arizona’s economic landscape, but they provide more than jobs.

“It’s the way people achieve a dream,” McGee says, “because many people are happy in their job, but their real dream is to own their own business and be their own boss.”

During his career with Southwestern, McGee has helped create more than 7,000 jobs through the funding of SBA 504 loans. Since its founding in 1981, the company has funded the purchase or construction of more than $1.4 billion of buildings for businesses. Most of his deals involve construction, which today is funded by a commercial bank.

“I don’t fund until the building is finished,” McGee says.

McGee cites three factors for current market conditions. One is a complete lack of secondary financing, as potential investors poured $4 trillionintomoney markets.

“That puts a crimp in my kind of lending, and more important, the banks I work with,” McGee says.

A second factor is that banks are reluctant to make any loans, and the third reason, he says, is that a large percentage of business owners considering the purchase of a building are “terrified” by what they see on the evening news and are waiting for the market to hit bottom.

“You can’t out-time the market,” McGee says. “The way I know when it bottoms is I look back a year later and say, ‘Oh, that’s where it was.’ ”

www.swbfc.com

Steven Lockhard TPI Composites

Steven Lockard – President And CEO, TPI Composites

When the goal is to carve out a spot on the cutting edge of green-energy technology, it helps to be in the business of making blades.

That’s the case with TPI Composites Inc., a privately held company now headquartered in Scottsdale that devotes a significant portion of its business to manufacturing massive wind-turbine blades used by such clients as Mitsubishi Power Systems and GE Energy. TPI Composites, which is also involved in the transportation and military vehicle markets, employs about 2,800 worldwide and operates facilities that house about 1.1 million square feet of manufacturing floor space in the United States, Mexico and China.

“Wind energy is our largest business,” says Steven Lockard, president and CEO. “It’s the business that is expanding at the most rapid pace.”

That expansion, which represents around 80 percent of the company’s annual sales, is indicative of an industry that has experienced unprecedented growth in recent years.

Lockard sees wind energy as a clean, reliable source of electricity and job creation, two areas addressed frequently in recent election campaigns.

“Three or four years ago when we had meetings in Washington, oftentimes we were trying to convince people that wind could become big enough to matter one day,” he says. “And that’s no longer the case.”

It matters now. In 2007, the domestic wind-energy industry expanded its power-generating capacity by 45 percent, installing 5,244 megawatts of wind power, according to the American Wind Energy Association. That accounted for about 30 percent of the nation’s new power-producing capacity and represented $9 billion injected into the economy. Through three quarters of 2008, wind power was on pace to add 7,500 megawatts by year’s end.

And when it comes to job creation, TPI Composites plays a vital role. A newly opened 316,000-square-foot manufacturing plant in Newton, Iowa, is expected to employ about 500 workers when it reaches full capacity. That is a welcomed development in a town hit hard by job losses when its Maytag Corp. plant closed down in 2007.

Although Lockard is optimistic about the long-term prospects for wind energy, he is also realistic about the short term, suggesting the industry may continue to be impacted by the capital crisis through, at least, the first part of 2009. His observations are exclusive to wind energy, an industryenjoying record gains of late, but there may be a warning here for other high-tech businesses dealing with current financial conditions.

“We would expect to see perhaps more modest growth (in 2009) … not the same degree of growth that we’ve been experiencing the last few years,” Lockard says.

www.tpicomposites.com

Cloud Computing

Cloud Computing: Better, Faster, Cheaper?

Cloud computing is the latest buzzword in information technology (IT), and depending on who you talk to, you will get a different answer as to what exactly cloud computing really means.

Some refer to cloud computing as SaaS (Software as a Service), utility computing, managed services, Web services, outsourcing, etc. The term is so hot as a marketing tool that every business wants to somehow be associated with it, making it that much harder to define. While a popular buzzword, cloud computing also has very real and beneficial practical applications.

Cloud computing is not the first and it will not be the last buzzword used in IT. The one constant in IT is change and it occurs at a rate much faster than in most other industries. Ultimately, the drive behind the spread of cloud computing as both a marketing term and practical business application is the bottom line. Better, faster, cheaper is always something that technology providers and consumers want.

Efficiency and performance are touted with cloud computing because they are two of the key metrics in every business decision. They are critical measurements of success in any process/technology improvement or investment. No organization should invest in a project if it does not measurably improve the status quo, and efficiency and performance are two quantifiable ways to track this. In IT, servers, disk (storage), memory, space and power consumption are all easily quantified, and gains or declines in efficiency and performance can be measured down to the second.

Historically, many organizations have failed to look at these IT components individually or even at an aggregate level to measure the true cost of their IT infrastructure. Now, organizations large and small are determining that building, owning and operating their IT infrastructure is one of the most significant operating expenses they have. A principal reason for this is that most organizations operate their IT infrastructure very inefficiently, as IT is not their core competency. This inefficiency can be tracked from their internal data center (typically a small space in their office) through their individual servers. The data center is the heart of an IT infrastructure providing power, conditioned air, and telco connectivity, all to support the server and associated infrastructure. Independent studies have shown that the average server utilization is less than 20 percent. Even if the server is only using 20 percent of the resources, it is using 100 percent of the power. This type of inefficiency is very common.

Directly associated with cloud computing and its expanding recognition is virtualization. Virtualization, like cloud computing, has many definitions depending on who you are talking to, but the simplest explanation is that virtualization allows the resources of various types of hardware to be shared.

Virtualization has exploded in no small part due to VMware’s ESX software. ESX is software that allows organizations to run multiple different operating systems on the same computer. These operating systems run separately and securely from the others, but allow for utilization of the same memory, processor, storage and power, based on the individual operating system needs. This is an example of how increased efficiencies and performance can be gained with virtualization and, by proxy, cloud computing. No longer is there a one-to-one relationship between an operating system and a server. Individual servers running on a server with virtualization software can run optimally, utilizing resources from the pool as needed and giving them back when they are not.

So what is cloud computing, and is it truly better, cheaper and faster than a traditional architecture? Cloud computing is so nebulous at this time there is no clear answer.

The answer to the second part of the question is a little more straightforward, and that answer is yes — but a qualified yes. Consumers need to be aware of the “pretenders” that are offering cloud computing services and also be aware of the level of service they can expect. Whether they are working with a large provider that is trying to sell subscriptions to their unused space or a small cloud computing provider that is pushing very poorinfrastructure, they need to understand exactly what they are getting. Consumers need to know that they are receiving better efficiency and performance per dollar spent. It is beneficial to work with providers that are exclusively operating in this segment who do one thing extremely well.

Dark Days: Recession in Arizona

The Recession In Arizona And The Nation Could Drag On For Another Year

Winters in Arizona may be sunnier than other places, but the economy in the Grand Canyon State has cooled faster than almost every state. Analysts expect 2009 to bring even more bad economic news, and it is likely that the monthly reports on job growth and unemployment will be downright chilling for some time to come.

As in all downturns in the past 50 years, Arizona’s economy will track the national business cycle. There are no forces inherent in the makeup of the state’s economy that would propel Arizona into an independent turnaround. Arizona will recover at approximately the same time as the country as a whole.

And, entering 2009, a rebound for the national economy is nowhere in sight. The National Bureau of Economic Research recently decreed that we have been in recession since the end of 2007. Now that a start date has been identified, it is only natural to wonder how long recessions typically last. The answer is that the average post-World War II recession has been 10 months from peak to trough. This information is perhaps useful for trivia buffs, but in the current environment, the 10-month average is not much of a guideline. This recession has already persisted past 10 months, and may be well on its way to setting a post-war record for length. The recession will certainly be 18 months at a minimum, and could persist for as long as 24 months. Or more.

The list of economic problems facing the country and Arizona continues to grow. Until recently, exports and non-residential building were actually expanding at a double-digit pace, keeping the Gross Domestic Product growth figures in the positive region. As the global economy slows, exports will decrease, probably early in 2009. Arizona has important manufacturing exports, especially in high technology, that will be affected.

Non-residential building (commercial, office, and warehousing) will grind to a halt in 2009 as current projects are completed. When the economy is losing jobs and sales are falling, there is no need for additional offices, retail space or warehouses.

During the first half of 2008, consumers in Arizona and the nation continued to spend, and that bolstered growth. New unemployment claims were mounting during this period, but conditions would have been worse if consumers were not contributing to the economy. The credit crunch hit in the second half of 2008. Combined with a chaotic stock market and continually falling home values, consumer willingness — and ability — to spend hit the breaking point. Arizona retail sales were down sharply in 2008, with auto sales and restaurant and bar sales both off by 25 percent. Consumer spending is expected to fall more during the early months of 2009.

Compared to other states, Arizona’s labor markets are in the deep freeze. Employment in the state is down by more than 75,000 jobs compared to last year at this time. Arizona is just one of 37 states now losing jobs, but conditions are worse here. Arizona ranks 49th among all states in job growth. Only Rhode Island is losing jobs more rapidly. Unemployment rates nationally and in Arizona are destined to increase into the 7 percent or possibly 8 percent range before recovery begins.

And recovery will come, as it always does in business cycles, although this one will be deeper and longer than has been seen since the 1930s. Housing inventory will eventually be worked off, and foreclosures will begin to slow. Home prices will stabilize. The nation adds three million new residents per year, and the pent-up demand created by family formation and population growth will start to translate into new sales.

Arizona benefits from high levels of domestic migration. Even if migration slows temporarily in the down period, the basic attractions of Arizona remain powerful in the longer term.

One of these attractions for many decades has been affordable housing. During the housing boom, home prices in Phoenix increased faster than in many peer metropolitan areas, and Phoenix became less competitive to relocators. Although falling values have caused dismay to Arizona home owners, the resulting new lower prices actually create an environment for ultimate growth.

The table shows housing affordability as measured by the National Association of Homebuilders. Higher numbers indicate housing is more affordable. At the end of the previous recession (third quarter of 2001) Phoenix had an affordability value of 70, which means 70 percent of homes were affordable to families at the median Phoenix income. Phoenix housing was more affordable than the nation and the peer metro areas shown. Two years later, at the peak of the boom, Phoenix was less affordable than Denver, Riverside, Calif., and the nation as a whole. But the most recent values, for third quarter 2008, show Phoenix affordability up by 75 percent over the 2005 figure, and more affordable than the other metro areasandthe nation. The Phoenix housing advantage has been restored.

There is one final optimistic observation to be made, one which is familiar to Arizona economy-watchers. When recovery does begin, Arizona invariably rebounds much stronger than the nation, and more vigorously than most other states. What analysts are still debating is whether this rebound will come in 2009 or is delayed until early in 2010.

Generation Y

The Me Gen: How The Bad Economy Could Affect Gen Y In The Workplace

Like it or not, the future is in the hands of Generation Y, and in this turbulent economy, an increasing number of companies are trying to find productive ways to work with a generation that has been raised on technology, the Internet, and ushered through their younger years on a velvet pillow.

Chris Elliott, senior manager of recruiting for the Phoenix office of The Capital Group, a worldwide firm that manages corporate and individual investments through mutual funds, says Gen Y poses some intriguing issues that companies must meet head-on. Like its investments, companies take the long-term view on employees, and this can be perplexing to the instant-gratification mentality of Gen Y.

“The recent change in market conditions seems to be best understood by people who consume a lot of news — whether through the newspaper, online or on television,” Elliott says. “Those people have heard about many companies that are reducing staff or decreasing benefits and they recognize that this has an impact on job offers in our market. However, some of Gen Y does not tend to follow the news closely and, not having experienced an economic downturn in their adult lives, they do not recognize the impact it could have on the overall job market.”

Mike Seiden, president and CEO of Western International University, believes Gen Y, even in this economy, is much more savvy than some might believe.

“Don’t be fooled into thinking that the Yer is less concerned about money than previous generations,” he says. “They want to earn as much as they can and are more than willing to play prospective employers against each other. We’ve all seen employees who accepted a job offer and were scheduled to start on Monday, but didn’t show up because they got a better offer over the weekend. It’s really too early to tell how the current economic situation will pan out, but I don’t expect that too many new employees will lower their salary expectations because the economy is having problems.”

The changing economic winds have educators evaluating their methodology, as well.

“We need to recognize and integrate the needs of business with the innate skills of this generation,” says Ajay Vinze, the Davis Distinguished Professor of Business and director of the Executive MBA Program at the W.P. Carey School of Business at Arizona State University. “With Gen Y, technology is part-and-parcel with their existence. They see their cell phones and the Internet, and see the world and how they can make an impact.”

The education experience remains key to ensuring Gen Yers — no matter the economy — are ready to hit the ground running when they enter the work force. Gen Y is adept at working in a team environment and likes clear expectations and goals outlined for them.

“Our task is to keep track of the characteristics and skill sets of what employers are looking for and translate that into our teaching,” says Barbara Keats, an associate professor of management at W.P. Carey. Keats adds that the school continues to see Gen Y students struggling with some fundamental communications skills.

“They have the knowledge, they just need to be shown some strategies to communicate,” she says.

Still, what remains are some underlining factors employers should think about with Gen Y.

“I believe there is absolutely more of a sense of entitlement in this generation than in older generations,” Seiden says. “They expect they will be treated with respect, rewarded whenever they do a good job, have opportunities to advance as rapidly as they think they deserve to and will have the flexibility to live as they choose with little or no interference from the company in their lifestyles.”

While some, like Seiden, say Gen Y has a strong sense of entitlement, Vinze isn’t so sure that’s really the case. In fact, he says, the eagerness and hyper-urge to get things done can make Millennials productive workers from day one. They like to create new titles as a sense of empowerment, such as chief knowledge officer or chief innovator. This shouldn’t be taken as entitlement, Vinze says.

What could be a big plus in this economic slowdown is Gen Y’s ability to multitask and seek creative solutions to everyday problems, adds Julie Smith David, an associate professor at W.P. Carey.

Gen Y is also interested in working with older employees who can serve as mentors and foster the capabilities of this future generation of leaders.

“My take-away is both older workers and Gen Y have a lot to learn from each other,” Smith David says. Seiden addsthat companies should remain flexible with this “new gen” and realize the old thinking of yesterday does not necessarily apply today.

“This may include such things as flexible work hours and telecommuting,” he says. “Gen Yers want to be challenged. They want assignments that will allow them to ‘show their stuff’ and gain recognition, so providing job opportunities that allow them to do so are important. They want assignments that are challenging, but they want to be trained and provided the tools with which to complete those assignments. Company image is important to them. There appears to be more of an emphasis on working for a good, socially responsible corporate citizen.”

wpcarey.asu.edu
www.wiu.edu