Tag Archives: naiop-az

low flying aircraft

Caution: Low-Flying Aircraft Policies

Tim Lawless President NAIOP - Arizona

Tim Lawless
President
NAIOP – Arizona


The Federal Aviation Administration (FAA) is considering a significant reduction in the maximum height limit of buildings near U.S. airports to ensure aircraft have clearance to continue an ascent in the unlikely event that an engine fails at takeoff.

The proposed policy would limit building heights of new commercial projects within 10,000 feet of the end of the runway to no more than 160 feet tall. As a result, NAIOP-AZ has submitted a letter to strongly advocate that the FAA retract the proposed One Engine Inoperative (OEI) Procedures in the Obstruction Evaluation Studies published in the Federal Register on April 28.

While NAIOP-AZ fully supports the FAA’s role to oversee aviation safety, it opposes this proposed OEI policy, note that it does not address safety, does not contain adequate justification, penalizes unfairly communities surrounding airports by impeding much needed economic development, and lacks rigorous cost-benefit analyses.

NAIOP-AZ especially has a keen interest around one of the largest airports in the U.S., Sky Harbor International Airport in Phoenix where a number of its members have existing and planned buildings in multiple communities in relatively close proximity to the airport.

NAIOP-AZ is of the belief that if the policy determination outlined recently in the Federal Register is driven by economic considerations, it will have a chilling effect on developers constructing new facilities and on firms and tenants who may want to own existing facilities for investment purposes should a facility be close to or exceed the lower height requirements.

Should the FAA move forward, any OEI policy should, at a minimum, provide for certainty to developers and communities who engage in long-term planning, take into account the impacts and views of all stakeholders – not just in the aviation community, and be subjected to robust legislative rule-making requirements of the Administrative Procedures Act, including a full cost- benefit and Federalism analysis.

Toward this end, NAIOP-AZ support HR 4623, pending in the US House of Representatives, which would mandate that the FAA follow normal rule-making procedures for a policy change of this magnitude that would include such an economic cost-benefit analysis.

Arizona Health Care Cuts, AHCCCS

NAIOP Arizona announces opposition to Prop 480

The NAIOP Arizona board of directors has unanimously opposed Prop 480, an item on the Nov. 4 general election ballot that asks Maricopa County voters to approve a $1.4 billion general obligation bond over 27 years for the Maricopa Integrated Health System (MIHS).

If passed, Prop 480 would be the third largest bond issuance in Arizona history, according to the Arizona Tax Research Association (ATRA), the group spearheading the effort to defeat the proposition.

The NAIOP board could have supported a narrower bond request focused more on the behavioral health component and replacement of the Level One Trauma Center and Arizona Burn Center, NAIOP-AZ President Tim Lawless said.

However, it is opposed to the bond issuance, which would pit a taxpayer supported institution against a number of private healthcare systems where there is much duplication of services and excess hospital beds that private payers must support within a relatively small geographic radius of about five miles.

“We are especially concerned about duplication and unfair competition with taxpayer money,” Lawless said. “While the proponents claim there are three discrete funding components, the wording of the ballot proposal seems far more open-ended regarding the purposes the monies can be used.

“The timing of the bond issuance is also troubling as there was a massive property tax shift from residents to businesses during the Great Recession and these same businesses are still struggling to recover,” Lawless added.

From fiscal year 2010 to fiscal year 2014, there was a 30 percent increase in property tax rates for businesses. If the bond passes, a typical small business with assessed valuation of $1 million will be paying $7,800 more over time in property taxes.

“We also believe patience is the watchword as we still are not certain of all the impacts of the Affordable Care Act, which was allegedly created to better meet the needs of the uninsured yet who are cited as the primary reason for the bond,” Lawless said. “Related to this, the state expanded Medicaid insurance to the poor to draw down more federal dollars and there appears to be an equity issue that only Maricopa County residents are being asked to pay for the MIHS services when these same taxpayers already pay $65 million per year.”

The point that proponents make where interest rates are near or at historic lows thereby decreasing overall costs seems valid until it is realized that the total cost of the bond ($935 million is the actual amount) with principal and interest will exceed $1.4 billion over 27 years.

The NAIOP board says it needs the Affordable Care Act provisions to be understood with all of the attendant costs associated with its implementation before Arizona embarks on the bond issuance where a new hospital and multiple clinics financed by taxpayer money are constructed only to compete against private hospital systems in an area that already has excess bed capacity and duplication of services. The costs will be shouldered by the same private payers.

“Our board has also set aside some level of funding for the opposition campaign formed by ATRA,” Lawless said of a $10,000 contribution to be made by NAIOP Arizona to the opposition campaign.

Tim Lawless Discusses HB 2001 - AZRE Magazine September/October 2011

Q&A With NAIOP-AZ President Tim Lawless: The Impact Of HB 2001

Q&A with NAIOP-AZ President Tim Lawless who discusses HB 2001,  commercial property tax and how the commercial real estate industry is affected by these tax cuts

Recently, the Arizona State Legislature passed the most sweeping economic development/job recovery bill in years (HB 2001). It included a number of phased tax cuts and tax credits for businesses along with a deal-closing fund to attract high wage firms to Arizona.

Q: WHAT WERE THE SPECIFICS?

Specifically, the corporate assessment ratio used to calculate commercial property taxes will be reduced from 20% to 19.5% in 2013, 19% in 2014, 18.5% in 2015, and 18% in 2016. Moreover, the current corporate income tax rate of 6.968% will be reduced over four years to 4.9%. The $25M “deal-closing fund” (the Arizona Competes Fund) partially derived from lottery revenues will also give the privatized Arizona Commerce Authority (ACA) a key tool in landing firms that may need a nudge in deciding between finalist states for relocation or regional expansion decisions.

Q: WHAT DOES IT MEAN FOR THE COMMERCIAL REAL ESTATE INDUSTRY?

Significantly, NAIOP-AZ’s top three priorities to: 1) reform our uncompetitive commercial property tax system; 2) to lower our corporate income tax rate; and 3) to enact a deal-closing fund to attract new firms to the state are all contained in the law. This is a remarkable turn of events for our industry. NAIOP-AZ helped lead the fight six years ago to begin lowering the property tax assessment ratio from 25% to 20%, which resulted in more than a billion dollars in property tax savings to businesses over this time. More needs to be done but we have successfully addressed the single biggest impediment to job creation in our state — high uncompetitive property taxes for commercial real estate.

Q: WHERE WILL WE RANK NOW COMPARED TO OTHER STATES?

The corporate income tax rate reduction down to 4.9% will bring us more in line with our Western state competitors (some of whom who do not have a corporate income tax) and give us the fifth lowest rate in the nation. We also are now seeing the fruits of our labor as we have moved from having among the top five worst business property tax burdens in the U.S. to currently 15th and with these changes we expect to move to the middle of the pack by 2016, which is more where we should have been all along.

Q: WON’T THE DECREASE IN BUSINESS PROPERTY TAXES BE SHIFTED TO HOMEOWNERS?

No, this was not the intent of the legislation. In order to address the issue of perceived shifts in taxation to residents, legislators agreed to toggle the “Homeowners Rebate” upward in the future per calculations from the Dept. of Revenue and to help finance this impact to the State General Fund by reforming the Homeowners Rebate for those that illegally take it on multiple homes that are not their primary residence and those homes that are vacant and in foreclosure. In short, those who are most deserving get a bump and those that are abusing the credit get dumped.

Q: WHAT BIG ISSUES ARE ON THE HORIZON FOR COMMERCIAL REAL ESTATE?”

The eventual sunset of the recent sales tax increase will exacerbate a structural budget deficit for our state should it prove politically untenable to cut base spending levels more than they have already. As a result, the spending lobby will be looking to raise almost a billion dollars, especially for K-12 education, at the ballot next year. Initial ideas are to either make permanent the temporary sales tax rate increase; to increase the sales tax to currently exempt goods and services; and/or to institute a new statewide property tax. Because commercial property tax rates are still considerably more than what residents pay, NAIOP-AZ would certainly fight the specific alternative to raise a new statewide property tax. This would erase all the progress we have made the last six years in making our state more competitive for job creation. The proposed expansion of the sales tax base to exempt goods and services would also bear close watching as some proposals may make commercial lease sales subject to state taxation again which would be a hindrance to economic recovery for our industry and in turn for the state.

Q: HOW WOULD YOU SUM UP THE ACCOMPLISHMENTS THIS SESSION?

Hopefully, the measures passed in the recent “Jobs Bill” will give your readers, our members and businesses in general the confidence that Arizona is a great state to locate, invest, and expand.

AZRE Magazine September/October 2011

 

 

Mike Haenel, Chairman, NAIOP - AZRE Magazine September/October 2011

NAIOP-AZ Mike Haenel A Major Player In Future Of State's CRE Industry

NAIOP-AZ chairman Mike Haenel a major player in the organization and in the future of state’s CRE industry

For 26 years, Mike Haenel, executive vice president for Cassidy Turley/BRE Commercial Industrial Group, has been successful marketing industrial and back-office land and building space in Arizona.

In the early 1990s, he even did a brief stint in the development side of the business.
Since 2003, Haenel has completed 300-plus deals worth a combined $740M. He also has collected several industry awards along the way.

But Haenel said he couldn’t have achieved these significant accomplishments without his partner, Andy Markham, and the support of Cassidy Turley.

They have been able to close transactions during the good and bad times.

So for more than two decades, he has been an active member of NAIOP — the organization he considers a must for anyone hoping to be a major player in Arizona’s commercial real estate future.

Now as NAIOP Arizona chairman, Haenel gets to set the course for the organization.

It’s a challenging time to be at the helm.

Arizona’s commercial real estate industry, like that of much of the country, is adrift in turbulent waters.

In Arizona, the industrial segment has hit bottom and is slowly heading back into better times, Haenel said.

The Phoenix metro area absorbed 3 MSF of industrial space in 2010, and, with the new Amazon warehouse deal, already surpassed 4 MSF by mid-year 2011.

“There are several large build-to-suits looking in the marketplace, and we expect to exceed 5.5 million square feet (absorbed by year-end),” he says.

But the office market, NAIOP’s other purview, is still foundering with too-high vacancy rates and too low rents.

Still, Haenel offers tempered optimism for that segment going forward.

Office rental rates “showed some stabilization” in second quarter, he says, and that is a hopeful sign.

“If we continue to absorb industrial space as we have for the last 18 months, I see speculative development again within the next three years,” Haenel says. “Clearly, office would be longer.”

NAIOP will be essential for charting a clear course through the still-choppy seas ahead, he adds.

Industry professionals banding together, exercising their combined clout and sharing knowledge and experience, helps them survive the difficult times and prosper when the storm clouds dissipate, Haenel says.

“NAIOP is such a great networking organization,” Haenel says. “It shows how important relationships are especially in a period like this. The relationships you create, nurture and foster help as the market recovers, but help (especially) when the market is as tough as it’s been.”

Haenel said while it’s a rough time for Arizona’s commercial real estate industry, it’s really not so bad sitting in NAIOP’s pilot seat.

The previous chairman, Todd Holzer of Ryan Companies US, and NAIOP Arizona president Tim Lawless, have set so many fruitful programs in motion, Haenel just has to hold the wheel steady, he says.

“I am grateful for the past chairmen and current/past board members who have built the organization to what it is today,” Haenel says.

But he has his own pet programs, too.

Member education, developing the industry’s future leaders and fostering positive public policy, are top focuses for the new chairman. He sees them as the keys not just for his organization, but for the future of Arizona’s commercial real estate industry.

Providing networking events, information sessions, and education opportunities for more than 540 members is so important for fostering relationships and keeping industry pros abreast of issues and concerns that impact their business, he says.

The Arizona chapter’s Market Leader Series, quarterly events that feature small panels of experts on such important local topics as job growth, distressed real estate and the like, has garnered standing- room-only attendance, he says.

This year, local members also get to share with their peers from around the country and showcase their own state’s attributes as Phoenix hosts NAIOP’s annual meeting in October.

Other key strategies for Haenel as he steers the NAIOP ship forward are mentoring and encouraging the next generation of local commercial real estate leaders to ensure the industry remains vital for the short- and long-term future.

“As we continue to get older, we are blessed to have some great young people coming up in the ranks,” he says. And Haenel is determined to indoctrinate them with the importance of his “build relationships” mantra.

He is a big backer of NAIOP’s Developing Leaders program, aimed at the under-35 up-and-comers, and the Arizona chapter’s DL Mentor Program, a new initiative that has been a year in development and has just launched.

Along with continuing education for all members and developing and nurturing the young members, the third leg of Haenel’s stool of NAIOP initiatives aimed at nursing the state’s commercial real estate industry back to health, is influencing public policy.

The group lobbied hard for HB2001, dubbed “the jobs bill,” which has several elements including tax incentives and the new Arizona Commerce Authority to proffer those enticements to businesses looking to expand or relocate. Haenel hopes the new legislation will reinforce Arizona’s image as business-friendly and provide a big lure for new or growing businesses and their commercial real estate needs.

Haenel says NAIOP will continue to pressure the legislature on issues that the organization feels could make Arizona more competitive for any type of businesses, and to educate members on the legal ramifications of any new or proposed bills and clarify why they should care.

His assessment of the local commercial real estate industry’s short-term future is that Arizona has all the right elements to take advantage of the recovery as it gains ground, and, long-term, to grow and prosper.

“Arizona is considered a top-tier commercial real estate community,” Haenel says. “We are so lucky to have the quality of professionals in Arizona to create and develop first-class commercial real estate projects. And that allows us to attract, compete and win high quality jobs.”NAIOP-AZ Chairman Mike Haenel

For more information about NAIOP-AZ and chairman Mike Haenel, visit www.naiop-az.org.

AZRE Magazine September/October 2011

 

Todd Holzer, NAIOP-AZ - AZRE Magazine September/October 2010

NAIOP-AZ Chairman Todd Holzer Provides Leadership At Crucial Time

After more than a quarter century in commercial real estate, Todd Holzer, chairman of NAIOP-AZ, has been witness to many industry ups and downs.

Holzer began his career with Opus Southwest in Phoenix and San Diego. After 12 years at Opus, he moved on to DeRito Partners, where he spent eight years developing retail projects. Now in his sixth year at Ryan Companies US Inc., specializing in office and industrial projects and overall marketing for its Southwest regional operation, Holzer says market conditions in Arizona make for some intriguing times.

“Two things that I find interesting about our local market: First, the volatility of the Metro Phoenix market has to be among the greatest of all major U.S. markets,” Holzer says. “It seems that in my career, the overall market conditions for office and industrial have either been on fire or in the dumps. There are days I wish we were a little more steady, like some other Ryan offices in the Midwest. The feast-or-famine scenario we have can be an emotional and economic roller coaster for those in the business.

“Secondly, and again unfortunately, I always think about what could have been a very cool, relevant Downtown Phoenix. Despite some good vision out of the City of Phoenix political leaders, we are still a metro area that has grown outward with sprawl. I wonder if true urbanism can happen here. Most people live here to take advantage of activities that are suburban in nature: golf, hiking and other outdoor activities that don’t occur in a downtown setting.”

Holzer takes the reins at NAIOP-AZ during rocky economic times, but he says he is up to the challenge. When he started at Opus, he joined NAIOP-AZ mainly for networking purposes.

“When I moved into retail development, I spent more time and energy in other organizations such as ICSC, Valley Partnership and ULI,” he says. “But when I came to Ryan with an office and industrial focus, I decided that I needed to get back into NAIOP and take on a leadership role.”

Holzer has been on NAIOP’s local board of directors for five years and on the national board for three. After about two years on the local board, he was asked to take on the time and challenge of training for his eventual role as chairman.

“I have served under a few visionary and hard-working chairmen that have given me the experience to run the local chapter in what are very challenging times,” he says.

Holzer is not one to dwell on the negative. Instead, he says focus should be put on the quality of projects being built today, including NAIOP-member LEED certification initiatives.

“I take my hat off to some developers in our market that build with quality and with vision,” he says. “RED Development building CityScape and SunCor building Hayden Ferry are great projects that went to a level that most developers would not go.

“In my opinion, there has not been an increase in the quality of office projects over the last 15 to 20 years. The granite exterior projects built in the ’80s and early ’90s have stood the test of time. Most developers don’t build true quality because they are building to the level requested by the tenant and user market, and tenant and user groups have been fixed upon cost rather than quality and amenities.

“On the other hand, industrial projects have been built in the last cycle to a much higher standard of function than in the past.”

Among those higher standards is building to LEED specifications and the move toward more energy-efficient projects. Nationally, Holzer says, NAIOP has become fully engaged in LEED initiatives by having educational events tied around the green movement, with the major event being an annual conference dedicated to energy-efficient development. Phoenix hosted the conference a few years ago.

“Locally, we are giving awards to the best energy efficient new development each year at our Best of NAIOP event,” he says.

Examples of recent projects, Holzer cites, are Liberty Property Trust and its Scottsdale building for Vanguard; Lincoln Property Company and the Arizona Game and Fish Department building; Ryan’s 3900 E. Camelback building; and Hines’ office building at 24th Street and Camelback. There also are numerous local municipal and higher-education projects that have been built to LEED standards.

For those in the commercial real estate industry preparing for the future, Holzer offers this advice:

“At the present time, our industry is going through a monumental change,” he says.

“Speculative development will not re-appear for approximately five years in the Valley, so new development will be way down and that side of the business will not be hiring. People and companies will need to reinvent themselves. Take your strengths and use them in different ways within our industry.

“We are still the fifth-largest city in the country and our role as a major place of commerce in the Western U.S. will continue to grow.”

Holzer predicts 2011 will be a sequel of 2009 and 2010; users and tenants are price sensitive and looking for deals.

“We are in a period where land, rents and construction costs are on sale,” he says. “Those with a long-term approach and sufficient funding can solve real estate needs at very attractive costs.”

Some of the biggest challenges Holzer sees in 2011 are lack of capital and nominal job growth. The industrial sector needs capital to be available to companies for expansion and purchasing of inventories and equipment, he says, and the office sector is tied to job creation.

“Unless we can get local and national job creation to pick up dramatically, high-vacancy rates and shadow space inventory will continue with us,” Holzer explains. “The main challenge facing most sectors of commercial real estate is the national political scene and the decisions coming out of Washington, D.C. There is too much uncertainty currently for small business owners to make real estate decisions.”

For more information about NAIOP-AZ and Todd Holzer, visit naiop-az.org.

AZRE Magazine September/October 2010

Tim Lawless, AZRE Magazine September/October 2010

Q&A with NAIOP-AZ President Tim Lawless

Q&A with NAIOP-AZ President Tim Lawless

Q: A year ago you cited several factors that needed to occur for the regional economy to get going again. Have those changes occurred and what impact have they made, if any, in regard to the outlook of local commercial real estate?

Last year, I said that four things needed to occur before we could get on our feet again as an industry. They were:

1) credit markets need to act more normally;

2) job losses need to stabilize;

3) the glut of housing inventory needs to be absorbed so folks can sell their homes in the Midwest and California and continue to migrate here; and

4) we need a more competitive state tax code and to enact policies that diversify the economy in order to attract the flight of capital and brainpower, especially from California.

The credit market is not yet normal. People are still hoarding cash and there is an expectation that hundreds of banks nationwide will still fail when they take further haircuts on distressed properties that have yet to move into the barber’s chair.

We have stabilized job losses, but the rebound is much slower than hoped and few think we will replace all the jobs lost even after 5 years in our state. Nationally, many of these jobs will never come back. They are in India and other countries.

Regarding the glut of homes available, we are seeing some activity that gives hope, but I wouldn’t “bet the house” on it recovering just yet.

And finally, we have done little to nothing regarding the tax code besides talk about privatizing a Department of Commerce and enacting a solar tax credit that only helps on the far periphery. If anything, we have gone backwards as business has had to absorb two major tax increases with the prospect of more coming.

Of the four things, the job losses and housing are the most improved, while we are still waiting for the brunt of commercial property foreclosures to move through the system. Once the foreclosure “pig” is digested in the “python,” the credit markets will be more normal. This digestion, however, is soon upon us, which becomes necessary for recovery.

The factor that holds the least optimism is the prospect of changing our uncompetitive business tax code, especially as it relates to high commercial property taxes. Perhaps this can only be accomplished in tandem with yet another tax increase as the political courage to further cut spending has waned.

The silver lining about all of this is that properties are fast becoming a bargain and a lot of cash on the sidelines may soon come in.

Using a baseball analogy, we are in the late innings regarding a residential property recovery, and perhaps only in the mid-innings regarding a commercial property recovery. What we all hope to avoid is the prospect of extra innings through a double dip.

Q: What are some of the new challenges you see facing the industry in 2011?

While it was anticipated that at least one major tax increase would occur (two in fact occurred, the reinstitution of the $250M per year state equalization property tax and the $1B per year sales tax increase) the prospect of multiple tax increases at either the federal, state or local levels is the new challenge.

The feds seem intent on taxing commercial partnerships more like ordinary income rather than the lower capital gains tax treatment, while the state’s structural budget deficit will be more than a billion dollars beyond 2014. The locals will also be eying ways to raise revenue, most likely via the property tax rates.

Multiple tax increases on small businesses that are tenants in our buildings and at financial risk will only result in more potential vacancies if not more rent concessions. Further tax burden increases will also harm our ability to attract more firms to our state.

Q: How do you envision NAIOP-AZ helping to address those challenges?

NAIOP-AZ will continue to advocate at the state Capitol for a more competitive tax code that creates more high-paying jobs for our economy. Besides advocating for property tax reform, we also are now advocating a corporate income tax rate reduction and a deal-closing fund for the governor in order to attract more firms and allow existing firms to expand.

Q: What are some opportunities you foresee in the industry in 2011?

As the foreclosures and the sale of distressed properties mount, this creates the opportunity for more out-of-state entrants to become active in our community. In other words, the companies that were well known before will be replaced by new firms that may re-charge our communities and have the potential to provide new perspectives.

This is the essence of the rising Phoenix myth and the image of Arizona that most Americans have — that it is an egalitarian state where one rises and falls on their merits and where even a desert can be remade into an oasis.

Q: What are some NAIOP-AZ initiatives for the coming year?

During an economic downturn, the key is to do more with less. Our trade association is not immune, as many of our members have lost their job or taken new jobs for less pay in the last year. As a result, we are trying to offer more networking and educational opportunities.

A key example is the institution of a Market Leaders Sunrise Series. We invite our membership to hear from industry panels that are experts in certain fields such as lending, economic development, brokerage or “green” initiatives.

We also have attempted to pursue strategic alliances with other trade associations, where we can co-leverage resources toward more bang for the membership buck. An example is we plan to co-sponsor ULI’s Trends Day in January, where our members may get a reduced fee for attending. We also have partnered with BOMA-AZ in offering multiple continuing education courses.

Internally, we are looking at pursuing a mentoring program, where individual board members would partner with commercial real estate professionals 35 years of age and under from our Developing Leaders Committee.

In closing, we would be remiss in not thanking our corporate sponsors and members who have made our trade association a relevant force in public policy advocacy and in providing a platform for education, networking and philanthropic involvement.

For more information about NAIOP-AZ and Tim Lawless, visit naiop-az.org.

AZRE Magazine September/October 2010