Political and economic uncertainty has defined the past year.
With Arizona’s economy showing signs of growth amid low inflation, it seems like a crane casts a shadow over every intersection in downtown Phoenix.
But we are still dealing with an evolving and distressed retail segment and most pencil-pushers are still struggling to understand the implications of President Donald Trump’s changes to the tax laws.
But that’s not the only legal issue we need to be watching. AZRE spoke with some of the great legal minds in commercial real estate to find out what trends and issues they say we should look at before making that next deal.
Real estate leader: Don Miner, director
History of success: Fennemore Craig’s real estate practice group is one of the largest in the Mountain West and encompasses all aspects of real estate, from acquisition and finance through development, leasing and sale. The firm represents a diverse contingent of clients, including developers of master-planned communities, condominiums, apartment complexes, hotels, resorts, clubs, office buildings, industrial parks, shopping centers golf courses, and other residential and commercial projects. Fennemore Craig’s client representation extends to large landowners, including transactions involving federal and state agencies.
Trend to watch: “Technology,” Miner says. “The need to adapt to and keep abreast of new technologies is vital so as to prepare today’s real estate professionals to more efficiently and effectively assist their clients, manage deals and generate new business.”
Recent project of note: A state-of-the-art, 700,000-square-foot, oceanic and freshwater aquarium containing two levels and holding 2 million gallons of water, located on the Salt River Pima-Maricopa Indian Community. The facility can accommodate 10,000 visitors daily and opened to the public Labor Day weekend of 2016 to throngs of people. The OdySea Aquarium is the largest aquarium in the Southwest and is believed to be among the five biggest in the United States.
Gammage & Burnham
Real estate leader: Grady Gammage, Jr., founding member
History of success: Gammage & Burnham has the unique combination of a large land use group and a large real estate and financial transactions group that work together as one team of highly talented lawyers. While Gammage & Burnham is very efficient at routine matters, the firm is also known for being the firm to hire when a project has unique challenges or requires special skills.
Trend to watch: “One big issue we see facing commercial development is the disconnect between the price a user can pay and the rising costs of land and development. Another issue we see is the rise in opposition to entitlements, particularly through the use of social media, which requires an experienced team to help create an effective outreach and communications strategy as part of a successful entitlement process.”
Recent project of note: Mirabella at ASU is just one good example of how Gammage & Burnham’s land use, real estate and financing teams work together to bring a client’s vision to reality. Mirabella at ASU is an innovative “Life Plan Continuing Care Retirement Community” on Arizona State University’s Tempe Campus. Gammage & Burnham represented Mirabella at ASU through the zoning, transactional and financing process, which included $250 million in tax-exempt bond financing for the construction of this 20-story residential building.
Real estate leader: Scott J. Stein, attorney
History of success: Stein Law’s practice is focused entirely on commercial real estate transactions, but what makes the firm unique is that it regularly plays on both sides of the contractual field and represents a variety of both landlords and tenants, buyers and sellers, lenders and borrowers, and developers and end users. Stein Law also issues legal opinions. By wearing these different hats, Stein Law stays on top of the latest trends and maintains a clear understanding as to the full scope of competing interests in a given transaction to serve as the best advocate for its clients.
Trend to watch: “The pace of commercial lending is picking up,” Stein says. “Today, funds seem to be flying in a way reminiscent of some lending practices in place prior to the Great Recession’s collapse. Lenders and equity partners, however, have not forgotten about their losses suffered from the last market devastation and the result has been ever-expanding attempts to make a loan while minimizing downside risk. Consequently, borrowers and developers are forced to keep up and also grapple with these new approaches and face deeper underwriting, tougher construction loan terms, further reaching covenants and broader non-recourse carveouts on personal guarantees.”
Recent project of note: Stein Law considers itself privileged to have worked on a number of landmark deals for various clients. However, one that is particularly noteworthy is its representation of Irwin Pasternack in connection with the 60-plus-acre Estrella Vista Commerce Center and its development, leasing — including the leasing to Living Spaces, signage, the financing of the property and sale of the Living Spaces distribution center, as well as other pads within the center.
Real estate leader: Jason Morris, partner
History of success: Withey Morris focuses on a very narrow area of zoning and land use entitlements which has allowed the firm to assemble the most experienced and qualified team in that space. Although Withey Morris is a boutique firm, it prides itself on its sophisticated clientele and variety of significant projects.
Trend to watch: “From our perspective in land use and zoning, the greatest risk lies in community opposition and governmental obstacles to development,” Morris says. “While Phoenix has enjoyed some incredible infill development over the past decade, the amount of resistance to additional development in the city’s core and in existing neighborhoods may force developers back out onto the fringes, which is far less efficient.”
Recent project of note: Block 23, Red Development. “We were fortunate to be selected by Red Development to assist in the continuation of CityScape downtown through the development of Block 23,” Morris says. “From a zoning and land use perspective, this project was one of the most exciting and intricate projects of 2017. Logistically, it brings together the first downtown full-service Fry’s grocery store as well as luxury residential units and creative office space.”