Tag Archives: mixed-use

Cityscape2-srp-azbigmedia2014-023

Mix Things Up

Jeff Molosnik

Jeff Molosnik

Mike Ripp

Mike Ripp

Howard Weiss

Howard Weiss

Too many cooks in the kitchen can spoil a soup, but with the right mix of experience, demand and legal advice, mixed-use developments can turn into a wildly successful, complementary group of projects.

Mixed-use developments are on the rise in Phoenix Metro as office buildings see the benefit of offering employees a place to work, shop, eat and seek entertainment in thriving community environments. To get one off the ground, though, requires a lot of collaboration and the clearing of many potential legal hurdles.

“The homeowner, the office tenant, the shopkeeper and the restaurant owner – each have concerns involving the layout, structure, location and function generally, including issues dealing with hours of operation, access (both pedestrian and vehicular), noise, security, costs, landscaping, utilities, insurance and so forth,” says James Connor, shareholder at Gallagher & Kennedy, P.A. “The various interests of the users may not always be aligned, and in fact, often may be in conflict.

“Creating the fundamental governing and controlling development agreements to serve all interests of the various users, while not undermining the value as an investment nor impeding the ability to obtain financing, is challenging,” Connor adds. “These agreements must deal with not only the development and construction periods, but of course, the indefinite life of the project for decades (if not longer) in duration.”

While drafting agreements that make everyone happy (enough) is key to the success of a mixed-use development. The financing is perhaps one of the biggest non-starters.

“Because most developers have a goal of selling the project upon realization of stabilized cash flow, care must be provided to allow for each component to be able to be defined and conveyed, in order to market parcels to the strategic investors,” Connor says. “Put another way, a REIT which invests solely in office projects will have little appetite to acquire a parcel which includes retail, residential or other uses.”

Experts note that mixed-use projects are increasingly a response to less available land for new development in dense metropolitan areas.

“What makes a given mixed-use project unique depends to a significant extent on whether you are dealing with a ‘vertical’ or a ‘horizontal’ mixed-use project, and whether the project is being developed by a single developer or multiple developers,” says Mike Ripp, an attorney at Ryley Carlock & Applewhite.

Vertical projects, he says, are the most complicated type of mixed-use development.

“The uses are more physically interdependent on each other and that components on the lower floors may need to be in use before the upper floors are complete,” he says.
“The reason these projects are becoming more popular is because people like to live, work and play all in the same area. People like having access to these types of things,” says Nussbaum, Gillis & Dinner attorney Howard Weiss.

From a consumer standpoint, mixed-use developments make life easier. That said, it’s a long journey to the “parcelization scheme” that will grab investors, developers and tenants.

“As mixed-use projects become more prevalent nationally, it is likely that standard ways of handling the more common mixed-use project issues will evolve and gain acceptance,” says Ripp.
“Some lenders find mixed-use projects difficult to evaluate because of the lack of real comparables,” Ripp says, adding that underwriting the many components of development and being able to judge whether a developer has sufficient experience all the product types are also of concern to lenders.

Every single use at CityScape was financed independently of the others. It built a hotel, occupied it and then built apartments above. Instead of phases expanding horizontally, CityScape expanded vertically.

“The idea of having to vertically finance the phasing of a mixed-use project has been one of the most complicated things we’ve had to do here,” says Jeff Moloznik, general manager of CityScape. “That part of it was far and away one of the most interesting and intricate elements of what happened,” says Moloznik of the design and engineering work as well as the financing of the CityScape phases, which happened over a seven-year span.

Additionally, Weiss points out, discrepancy between parking ratios for the different components can sometimes occur. Another issue, he says, comes to leasing. As a tenant, he says, you may not have as much control over eliminating competition — for instance, being the only sub shop in the complex. Operating expenses, too, are important to define for the respective uses.

The expenses for elevators, cleaning and janitorial services or security are not always shared by all the tenants in a mixed-use development, he adds, citing the vertical and disjointed CityScape as an example.

“There’s always an issue with the allocation of these expenses,” says Weiss.

It is easier, he says, for projects such as Kierland or Scottsdale Waterfront, which have different components in different buildings — spread horizontally. “In that type, from a legal perspective, you’ll deal with reciprocal easement (REAs) and operational agreements,” says Weiss.

That means that during development, if different components are owned or developed by separate companies, they can sign an agreement that allows for the most beneficial coexistence through contractual obligation.

“There are a lot of commercial leases out there, but at the end of the day a landlord wants a lease that specifically works with their project,” says Weiss. “Because each one has a unique component, and depending on the developer, I would say this would be handled more on a case by case basis.”

Zen Class Travel product

Mixed-use project becomes largest crowd-funded real estate transaction in Phoenix

7th Gate Center, a 43,426 square foot mixed-use project located at 1601 North 7th Street in Phoenix, closed for $5,025,000 on June 17. Braxton Glass, Vice President of ORION Investment Real Estate in Scottsdale, facilitated the transaction purchased by Cole Valley Partners, a boutique commercial real estate investment firm based in San Francisco. Harnessing an innovative trend in the real estate capital market, Crowdfunding platform RealtyShares, Inc.n assisted Cole Valley Partners in sourcing equity for the transaction.

The project is located on the northeast corner of 7th Street and McDowell Road, one of the highest traffic dual artery intersections in metropolitan Phoenix. The property consists of approximately 39,000 square feet of multi-tenant office space over two levels of underground parking, along with a ground floor Chase bank branch, drive through lanes and associated surface parking. 7th Gate Center is the second Phoenix area purchase for Cole Valley Partners. This also marks the second transaction closed through a Cole Valley/RealtyShares collaboration, as well as the largest crowdfunded commercial real estate transaction to date in metropolitan Phoenix.

“7th Gate Center represented a rare opportunity to acquire an attractive and highly visible asset at a discount to replacement cost, within a tightly supply constrained submarket. ORION is very excited to have participated in this groundbreaking transaction, the largest of its kind thus far in this market,” said Glass.

Crowdfunding emerged in 2012 from the JOBS Act and may have a transformative effect on how commercial real estate properties are transacted.

“Crowdfunding is one of the most revolutionary industry events in recent years and is a great way to diversify and broaden our equity base,” stated Zach Bonsall, Managing Partner of Cole Valley Partners.

Nav Athwal, Co-Founder and CEO of RealtyShares, remarked that, “RealtyShares provides an online platform that pools accredited investors into funds that hold an interest in a pre-identified private real estate investment. Investors can invest as little as $5,000 into any one property. We have been very pleased with the response from both investors and sponsors such as Cole Valley Partners and are excited for the future of crowdfunded real estate investments.”

“We have enjoyed our association with ORION and RealtyShares, and look forward to continuing to acquire property in Arizona and throughout the Western United States,” concluded Bonsall.

high_street

Offices on High Street adds two new tenants

Portland-based real estate private equity firm ScanlanKemperBard Companies and Wayzata Investment Partners announced today that Alliance Financial Resources and Yeager North have chosen to relocate to The Offices On High Street (www.HighStreetAZ.com).

“It is always exciting when high-caliber businesses choose to relocate to The Offices On High Street,” explains Leslie Himley, vice president of marketing for the property. “We are thrilled to welcome both Alliance Financial Resources and Yeager North to the property as we continue to make significant capital improvements and leasing activity is flourishing. We have no doubt that our new tenants will appreciate our new look and amenities.”

Alliance Financial Resources
Home loan industry leader, Alliance Financial Resources, is relocating from its Deer Valley, Phoenix location on November 1. Its multi-year, 25,000 square-foot lease agreement is for the entire second floor of the A5 building on High Street. Alliance will bring 110 employees to the north Phoenix development and while not immediately hiring, its growth pattern and ability to forge long-term relationships with clients should sustain hiring in the near future.

“Our beautiful new offices on High Street reflect the company culture we work so hard to preserve,” said Jaime Korus, president of Alliance Financial Resources. “The stunning views from our second floor office, the fantastic restaurants and scenic streetscape will welcome our employees and clients while assuring them of their importance in our thriving business.”

Alliance Financial Resources LLC was represented by Dave Carder of CBRE.

Yeager North
Integrated marketing firm Yeager North recently signed a multi-year lease on 4,000 square-feet of office space on High Street. The growing company is relocating from the Scottsdale Quarter and plans to move in July of this year. The firm, which specializes in streamlining customer acquisition and accelerating growth for the world’s leading B2B technology companies, is currently looking to hire two additional employees.

“It was important for us to find a new location that could grow with us,” said Renee Yeager, founding partner of Yeager North. “We feel the new direction on High Street aligns with our own brand and identity, and we’re excited to be part of the community.”

Yeager North was represented by Keith Lammersen and Trevor Pratt of Jones Lang LaSalle.

Kimpton's Hotel Palomar

Kimpton’s Hotel Palomar Phoenix At CityScape Opens This Summer

Kimpton’s Hotel Palomar Phoenix at CityScape will open its doors on June 5 in the heart of downtown Phoenix, marking the completion of the highly-anticipated development project, CityScape Phoenix. The hotel, just steps from major sports arenas, entertainment venues and cultural attractions, will add 242 spacious and contemporary guest rooms and suites and more than 10,000 square feet of stylish, flexible meeting space to the city’s lineup and will bring even more energy to the downtown Phoenix area.

Situated at the heart of CityScape, a $500 million mixed-used development of shops, restaurants, bars, entertainment venues and offices, the completion of Hotel Palomar Phoenix will be the final step in the six-year process undertaken by Phoenix-based RED Development in partnership with the City of Phoenix.

“We’re excited to introduce Kimpton’s signature hospitality to this new and vibrant downtown Phoenix,” said Jim Hollister, general manager of Hotel Palomar Phoenix. “We think it’s a perfect complement to the energy of the area and we know our guests will enjoy the warm welcome, modern amenities, and a sleek and artful aesthetic of the hotel, not to mention the easy access to incredible entertainment venues, restaurants and bars and shops.”

Inspired by the contemporary vibe of the surrounding urban landscape, Hotel Palomar Phoenix is the second hotel in the Greater Phoenix area for Kimpton Hotels & Restaurants, which entered the market in 2005 with the FireSky Resort & Spa in Scottsdale. Located in the mixed-use development of CityScape, the newly built Hotel Palomar Phoenix enjoys a prime location across from Chase Field (home of the Arizona Diamondbacks) and US Airways Center (event hub and home of the Phoenix Suns), proximity to the light rail and much more.

Entering from the ground-floor entrance, Hotel Palomar Phoenix guests will leave the world behind as they ascend to the second-floor living room lobby. There, they can relax in the casual, conversational seating beside the fireplace — an ideal atmosphere for working, lounging and enjoying Kimpton’s signature daily hosted wine hour.

The destination’s interior design scheme — from the public and event spaces to the guest rooms and suites — embodies a relaxed sophistication that is modern while reflecting Arizona’s casual approach. Design and décor elements that use bright spots of color, lines that create a sense of movement and light-hearted artistic touches also help to bring the hotel’s ‘Art in Motion’ theme to life.

Adjacent to the hotel lobby, The Blue Hound Kitchen & Cocktails features contemporary American gastro lounge cuisine for lunch, dinner and late-night bites, and a blazing cocktail program that raises the bar for drink culture in the city’s urban core. Additionally, guests will be drawn to the hotel’s third-floor terrace with its open-air swimming pool and al fresco Lustre Bar, which provides a spectacular perch above the bustle of the city, perfect for admiring views of the downtown.

Hotel Palomar Phoenix’s third floor also includes a stretch of more than 10,000 square feet of art-infused meeting space across 10 event rooms, each offering picture windows that usher light in and capture city and mountain views. Event rooms range from the 3,100-square-foot Dreamcatcher Ballroom, which can accommodate up to 250 guests, to the 600-square-foot Rangoli Board Room, designed for up to 10 guests. State-of-the-art connectivity provided through wireless Internet access and comprehensive multi-media and audio-visual support make meetings and events hassle-free.

On the higher floors, 242 well-appointed guest rooms, including 16 suites, are washed in warm, earthy shades of Arizona and accented by small, thoughtful bursts of color. Whimsy finds its place with signature artwork such as Phoenix artist John Randall Nelson’s acrylic on canvas featuring a vibrant blue face of a long-horned steer or the green felt bird sculpture perched on the bedroom wall. All rooms offer a wide range of modern amenities including 37-inch flat-screen TVs, complimentary wireless Internet access, an honor bar with locally inspired and organic items, custom Etro designer bath products, in-room yoga and On Demand fitness classes, and Kimpton’s signature animal print robes.

Jeff Moloznik, general manager of CityScape, has seen the city’s excitement grow as Hotel Palomar Phoenix nears completion.

“I can’t overemphasize the profound impact this hotel will have on CityScape, our retailers and the downtown traffic generators like US Airways, Chase Field and the Convention Center,” Moloznik said. “Palomar will ignite a 24-hour energy into CityScape and offer hotel guests a never-before-experienced proximity to the area’s sporting, cultural and music venues along with dining, nightlife, shopping and entertainment — all within steps of their hotel room door.”

Hotel Palomar Phoenix at CityScape was designed by global architecture and design firm Callison. Interiors have been created by Los Angeles-based KNA Design and the project is being built by Hunt Construction Group. Hotel Palomar Phoenix is located at 2 E. Jefferson Street, Phoenix, Ariz. 85004. To learn more, visit www.hotelpalomar-phoenix.com.

RED Awards Banner

Best Mixed-Use Project 2011

CityScape

Best Mixed-Use 2011: CityScape, RED DevelopmentDeveloper: RED Development
Contractor:
The Weitz Company
Architect:
Callison Architecture
Broker:
CB Richard Ellis
Size:
1.12M SF
Location:
One E. Washington St., Phoenix
Completed:
April 2010

CityScape is Downtown Phoenix’s newest, urban mixed-use development. CityScape added needed (and desired) retail uses and jobs in the downtown core and linkages to development on adjacent blocks. The project addresses the significant lack of retail/commercial space in Downtown Phoenix. That need was met through the completion of 200,000 SF of new retail shops. Retail and office space is more than 90% leased in the 28-story building. Tenants include Lucky Strike Lanes, Gold’s Gym, UnitedHealthcare of Arizona, Alliance Bank, Urban Outfitters and Squire, Sanders & Dempsey. Rounding out the mix is the 242-room, 4-Star Kimpton Palomar Hotel, which is scheduled to open later this year. CityScape’s construction includes the use of high-efficiency glass.




Honorable Mention: Gila River Indian Community, District One Service Center

Honorable Mention: Gila River Indian Community, District One Service CenterDeveloper: Gila River Indian Community
Contractor:
W.E. O’Neil Construction
Architect:
DLR Group-KKE
Size:
30,347 SF
Location:
15722 N. Toki Rd., Coolidge
Completed:
June 2010