AZRE magazine May/June 2015

MAY-JUNE 2015

Two by Two Healthcare real estate comes together

Inside:

Valley Partnership p. 41

Green Building p. 34

Finance p. 36 30 YEARS OF EXCELLENCE

Two to tango

I

t’s a spring tradition for me to read “Leaves of Grass” by Walt Whitman. For those who have never read it — or haven’t read it since college — it’s a book of poetry that, among many things, frame themes of EDITOR AMANDA VENTURA AT THE 2014 transition and symbiosis VALLEY PARTNERSHIP COMMUNITY PROJECT. PHOTO SHAVON ROSE, AZ BIG MEDIA between people and their cities. I found this a rather fitting theme for this issue, which contains stories that echo such ideas of transcending.

In the AZRE Source, you’ll find an article about architect and designer Bill Tonnesen and his partner Gabriel Saia who bought an office complex next door to a strip club and incorporated the neighboring business into the design of their mixed use center in a beautiful, modern way (page 6).

This issue of AZRE also looks at the transition of the Phoenix Warehouse District into a vibrant Millennial magnet and speaks to a few of the people who are leading that charge (page 8).

The healthcare section in this issue looks at two large hospital projects that have the biggest general contractors in the game entering joint contract agreements, years before they’re expected to break ground (page 34). We also discuss the seven degrees of separation hospitals can achieve through telemedicine advances, bringing together services across state and continental borders (page 38).

This will bring you to the Valley Partnership supplement, where we discuss the effect of higher education facilities on commercial development and the relationship between large, ground-up projects and hip adaptive reuses popping up around the Valley (page 46). You can also read about new CEO and President Cheryl Lombard’s vision for Valley Partnership and why the board calls her the changing face of development (page 42).

While you transition into the end of the fiscal year with a new governor and new opportunities in tow, I hope you find time to stop and enjoy the present. The future sure is bright, and I’m not just talking about that formidable summer sun.

‘Til July,

Amanda Ventura Editor, AZRE amanda.ventura@azbigmedia.com 2 | May-June 2015

President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Editor: Amanda Ventura Staff writer: Meryl Fishler Interns: Laura Burnett | Kaci Demarest | Maria Lopez Katie Malles | Jade Yeban AZRE | Arizona Commercial Real Estate Director of sales: Jeff Craig ART Art director: Mike Mertes Graphic designer: Shavon Thompson Intern: Laura Burnett DIGITAL MEDIA Director of digital sales: Mark Blum Web developer: Eric Shepperd Digital coordinators: Ashley Incardone | Robin Sendele MARKETING/EVENTS Marketing & events coordinator: Melanie Ploussard Marketing coordinator: Lorin Parkhurst Intern: Lea Martin OFFICE Special projects manager: Sara Fregapane Executive assistant: Mayra Rivera Database solutions manager: Cindy Johnson Az BUSINESS MAGAZINE Senior account manager: David Harken Account managers: Megan Gould | Shannon Spigelman AZ BUSINESS LEADERS Director of sales: Mark Blum RANKING ARIZONA Director of sales: Sheri King EXPERIENCE ARIZONA | Play Ball Director of sales: Ryan Moore AZ BIG MEDIA HOME SHOWS SCOTTSDALE HOME & TRAVEL SHOW Exhibit directors: Kerri Blumsack | Tina Robinson AZRE: Arizona Commercial Real Estate is published bi-monthly by AZ BIG Media, 3101 N. Central Ave., Suite 1070, Phoenix, Arizona 85012, (602) 277-6045. The publisher accepts no responsibility for unsolicited manuscripts, photographs or artwork. Submissions will not be returned unless accompanied by a SASE. Single copy price $3.95. Bulk rates available. ©2015 by AZ BIG Media. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from AZ BIG Media.

engineering Arizona’s next economy The Fulton Schools of Engineering at Arizona State University are designing the future of Arizona now, with: • Nearly 17,000 students, one of the five largest engineering schools in the country • More than 300 faculty members dedicated to teaching and discovery

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CONTENTS

FEATURES 2 Editor’s Letter 6 AZRE Source 12 New to Market

14 Big Deals 18 After Hours

20 Legislative Update

41

24 AAEDs EDDE Awards

26 USGBC

28 Financing Real Estate 32 CCIM

34 Healthcare

6

12

20

34

41 Valley Partnership

On the Cover: Banner-University Medical Center Tucson, Courtesy of Shepley Bulfinch

GO TO store.azBIGmedia.com to purchase subscriptions, digital issues and plaques

4 | May-June 2015

30 YEARS OF EXCELLENCE

3101 N. Central Avenue Suite 1070 Phoenix, Arizona 85012 (602) 277-6045 azBIGmedia.com

AZRE SOURCE

The good neighbor

By Katie Malles

PHOTOS BY JASON ROEHNER

R

edesigning an old building is hard enough, but what if that building is next to one of the oldest gentlemen’s clubs in Phoenix?

That is the predicament design partners Bill Tonnesen and Gabriel Saia encountered in December when they bought a property on 12th Street and Highland Avenue near Hi Liter Phoenix Gentleman’s Club. Instead of turning their backs on their neighbor, the partners decided to incorporate the strip club in the concept for a two-story office and restaurant hub. One way was naming the renovated building The Strip, complete with a giant white sculpture of a voluptuous woman on display.

Built around 1958 by architect Bennie Gonzales, The Strip is located in uptown Phoenix. Drawing attention from people on the street won’t be a problem, but as one might imagine, it’s not easy to attract potential tenants when your neighbor is a gentlemen’s club. And for Tonnesen, it’s especially hard to draw attention from prospective restaurants.

“It’s a delicate situation, because I have already had people say that they don’t think certain kinds of restaurants are going to want to relocate here because of the club,”

6 | May-June 2015

Tonnesen says. “The name is more of a help than a hindrance. I think it’s going to help bring my project to the public’s attention so they’re going to go with it.”

Tonnesen also hopes to showcase art on the first floor, and for art gallery owner and Phoenix-based journalist Robrt Pela, it might just be the perfect fit.

“What Tonnesen is doing that’s exclusive and different is he’s merging public art with commercial real estate,” says Pela. “Tonnesen’s work is singular and strong. What you get with Tonnesen’s projects, both commercial and residential, is a quirkiness that sets them apart. That’s rare — in fact, it’s

completely unheard of — in Phoenix.”

In Phoenix, there are a lot of the typical white-walled corporate buildings, but that isn’t what prospective tenant Moaz Khan, of design firm MoD a+p, is looking for.

“What Bill is creating at The Strip, in our view, is the complete opposite (of corporate) and that is the reason why we love it,” says Khan. “As a design firm focused on renovation of mid-century buildings and urban infill projects, The Strip encompasses our design philosophy and beliefs.”

Tonnesen hopes to see the renovations finished in July.

AZRE SOURCE

PROJECT

NEWS UP AND UP

Sundt Construction has been selected as the construction manager at risk for Tucson Airport’s terminal upgrade beginning in late 2015. The construction budget is between $18M and $23M.

Chandler gets its wings

Chandler approved a 50-year ground lease with WingSpan Aviation Center at Chandler Municipal Airport. The first phase of the project includes an 80KSF hangar building that will be equipped with office spaces. Total build-out is expected to take five years for 250KSF of development.

Rule of Three

The modernization of Sky Harbor Terminal 3 began in March. By next summer, larger security checkpoints and airline ticket counter spaces will be complete.

Future phases include redesigned concourses and additional retail. There are three architects on the project: DWL, SmithGroupJJR and Corgan.

Full house

One of the largest speculative office projects in Phoenix has been more than 35 percent preleased. As Airport I-10’s 600KSF phase 1 nears completion, DLS Worldwide, DHL and Pilot Freight Services signed leases at the Wentworth Property Company and Clarion Partners project. JLL handled the leasing.

8 | May-June 2015

Phoenix Warehouse District becomes salvage yard

By Laura Burnett

T

he downtown Phoenix Warehouse District is no longer just for storage.

The area from Jefferson to Grant streets, between 7th Avenue and 7th Street, is growing in a direction away from its history as a warehouse district.

Case in point: The Ong Gyut Wholesale Warehouse. Built in 1926 as a grocery storage warehouse, it’s now the new Phoenix home of Las Vegas-based advertising and marketing firm R&R Partners. The company moved into the building in November 2014, after renovating the historic building with the help of CCBG Architects.

Matt Silverman, vice president and managing director of R&R, saw the potential in the building years ago and held onto the building, waiting for the

right time to renovate and move in.

A half-underground basement worked for cargo loading from rail cars but made for a challenge when deciding how to accommodate the space for the company.

To make the lower level habitable for the creative team, a hole was cut in the second floor – now a stairwell – allowing light from the building’s six original skylights to flow downstairs.

R&R wanted a creative and flexible space to encourage engagement. Lounges, several small meeting rooms and a break room with a Ping-Pong table and PuttPutt golf set this company’s space apart.

In designing the building, CCBG Associate Martin Ball wanted to make sure homage was paid to the building’s history.

The ground-concrete floors keep the

PROJECT

NEWS Work it out

Plexus Worldwide — a health supplement seller — broke ground on its 70KSF national headquarters at Pima Center on March 30. This will bring the company’s total square-footage in the area to 100KSF. In the last four years, Plexus has grown from a company with an annual income of $1M to $300M.

Big stretch

The CanaMex Interstate 11 freeway study corridor has been extended from Wickenburg to Nogales.

This extension on I-11 brings the potential trade route between Canada and Mexico one step closer to reality.

PHOTOS BY MIKE MERTES, AZ BIG MEDIA

building’s industrial feel, as a reminder of the its original use.

Even the freight elevator shaft was saved, now a nook in the hallway.

The original owner’s son, Henry Ong Jr., was involved with the renovation, and, at 92 years old, rediscovered family history in the building his father built.

With limited space available, satisfying modern parking standards for offices becomes difficult. Retrofitting an old building isn’t easy or cheap, experts point out, and many smaller companies won’t have the resources to accomplish it.

Though only a few blocks from downtown, many people aren’t familiar with the area and just need to be introduced to it, says Brian Cassidy, president of CCBG Architects. Cassidy also serves as president of the Warehouse

Lap of luxury

District Council.

“We’re actively recruiting people to come down here and discover it,” Cassidy says.

“Almost every day, I meet somebody new and I walk them through the warehouse district or drive them around and look at a building or two.”

With buildings for sale and the potential of a growing district, the adaptive reuse of these old buildings may just be starting for those with a vision.

“We wanted to help shape it. We don’t want it to be an accident,” Silverman says of R&R’s part in the district’s revamp.

The P.B. Bell Companies has begun construction on Velaire at Aspera, an apartment community within the 75-acre Aspera mixed-use development in Glendale. Velaire at Aspera, expected to open in 2017, will offer 286 luxury apartment homes in a resort-like setting, with amenities that include an electric-car charging station and agility dog park. MT Builders, Inc. will serve as the general contractor on the project. Todd & Associates, Inc. is the architect.

Order Up

Site work has begun on a 17-acre parcel of land at the NWC of Houghton and Old Vail roads in southeastern Tucson. The area, dubbed Las Plazas at Old Vail, is slated to become a new retail and restaurant hub. CBRE’s Nancy McClure and Michael Laatsch have the marketing assignment.

9

AZRE SOURCE

PLANNING & ZONING

UPDATE State of Arizona

The Arizona Legislature is considering a measure to keep certain affordable housing rules from coming to Arizona via a statewide prohibition. Senate Bill 1072, a so-called “inclusionary zoning” ordinance being used in some other states, would ban cities from requiring developers to provide a certain percentage of new or refurbished units for low-income or moderateincome housing. However, some existing affordable housing ordinances allow developers and/or builders to pay fees to cities rather than meeting low-income housing quotas. The Arizona Multi-housing Association, among others, backs the ban, saying it not only discourages infill or rehabilitation projects but would technically impose price controls on a percentage of new housing. They also argue that Phoenix doesn’t have an affordable housing issue compared to other cities in the states that currently use these ordinances.

City of Scottsdale

The Scottsdale City Council voted to temporarily modify residential and commercial building permit fees within the Scottsdale McDowell Corridor.

The fee schedule is proposed as a two-year program designed to spark reinvestment to economic activity. Fee modifications will automatically be applied to residential and commercial owners within corridor limits, without any paperwork required on the part of residents, the staff report states. Proposed modifications to residential building permit fees would not affect cost per square foot but would eliminate base fees, certificates of occupancy, GIS fees and cost for lowest floor certificate reviews. This would allow a homeowner to save 45 percent of building permit costs on a 1,000-square-foot addition. Similar changes to commercial building permit fees, as well as a reduction in 10 | May-June 2015

application costs, will save business owners approximately 44 percent on a 1,000-square-foot addition.

South Mountain Freeway

Transportation funding has received final approval from the Federal Highway Administration, paving the way for the Arizona Department of Transportation (ADOT) to move forward with the Valley’s Loop 202 South Mountain Freeway, proposed by regional planners since the ‘80s. ADOT is also breaking new ground by moving it forward under a public-private partnership agreement to more closely involve the private sector, helping to save money and speed construction. The Record of Decision, signed March 5 by the Federal Highway Administration, grants the final approval necessary for ADOT to begin the process of acquiring right-of-way, complete the design and begin construction of the 22-milelong freeway to serve Metro Phoenix.

Acquisition of right-of-way is expected to begin immediately. The proposed freeway has been a critical part of the Maricopa Association of Governments’ Regional Freeway Program since it was first included in funding through Proposition 300, approved by Maricopa County voters in 1985. The freeway was also part of the Regional Transportation Plan funding passed

by Maricopa County voters in 2004 through Proposition 400. The South Mountain Freeway is the last piece to complete the Loop 202 and Loop 101 freeway system. This corridor link of the freeway is proposed as running east and west along Pecos Road and then north and south between 55th and 63rd avenues, connecting with Interstate 10 on each end. The freeway will be constructed with four lanes in each direction — three general-use lanes and one HOV lane — and modern features that have made Arizona freeways stand apart from other states for a generation, including rubberized asphalt and aesthetics designed in partnership with the community. The $1.9B project is expected to take about four years to construct.

Compiled by George Cannataro and Curt Johnson, Coe & Van Loo Consultants, cvlci.com

Brokers for Kids

Once a year, residential agents and commercial brokers put their brains, brawn and money where their mouths are.

It’s the ultimate showdown of fundraising, yard game skills and company pride. It’s the 17th annual Brokers for Kids charity tournament, and it always gets competitive.

This year’s event took place on April 24 at Scottsdale

Stadium to benefit Boys Hope Girls Hope. Last year, 38 companies raised $365,000. Over the last 16 years, the annual event has raised more than $3M and served more than 100 charities. — Amanda Ventura Read more about the event at azbigmedia.com/azre

PHOTO BY COURTNEY PEDROZA

New to Market

Public Arizona Fallen Firefighters & Emergency Paramedics Memorial DEVELOPER: State of Arizona General Contractor: McCarthy Building Companies

Architect: SmithGroupJJR Engineers: CVL and PK Associates Sculptors: Rusty Bowers; Paul Olesniewicz

Location: Wesley Bolin Memorial Plaza VALUE: $1.25M in donations Start/Completion: March to October 2015 Subcontractors: American Fence, Gothic Landscaping, W.R. Grace, Brundage Bone, Sun Valley, Schuff Steel, Wilson Electric 12 | May-June 2015

Office Northern Trust @ Airport I-10

Retail The Colony

DEVELOPER: Wentworth Property

DEVELOPER: Western Vertical Holdings,

Company

LLC

General Contractor: Wespac Construction Architect: DAVIS (core, shell); SmithGroupJJR (interior) Location: NWC SR 101 and Elliot Road, Tempe Size: 150KSF Brokerage Firm: JLL VALUE: $38M Start/Completion: January to 4Q 2015 Subcontractors: Schuff Steel, KT Fab, Ryan Mechanical, J.D. Sun, DP Electric

General Contractor: LGE Design Build Architect: Michael Rumpeltin Location: 7th Street and San Juan Avenue,

Phoenix SIZE: 22,500 SF

Brokerage Firm: Phoenix Commercial

Advisors VALUE: $7M

Start/Completion: February to

November 2015

Breaking Ground: (Top to bottom, left to right): Tom Jones Ford Dealership, Northern Trust at Airport I-10, The Grand at Papago Park Center, The Colony, Main Event at Park 10 and Arizona Fallen Firefighters & Emergency Paramedics Memorial.

Retail Tom Jones Ford Dealership

Mixed Use Main Event @ Park 10

Developer and General Contractor:

DEVELOPER: Parkland Development, LLC General Contractor: ARMays Architect: Butler Design Group, Inc. (Park

Sun State Builders Architect: Winton Architects Location: 24600 W. Yuma Rd., Buckeye SIZE: 31KSF VALUE: $6.225M Start/Completion: March to May 2015

10); Hodges & Associates (Main Event)

Location: NEC of I-10 and 107th Avenue, Avondale SIZE: 43 acres

Brokerage Firm: DTZ VALUE: $11.5M Start/Completion: Main Event is

scheduled to open in late 2015 Subcontractors: Hunter Engineering, Laskin & Associates, Inc., Landscape Architects

Mixed Use The Grand at Papago Park Center, Phase I DEVELOPER: Lincoln Property Company General Contractor: JE Dunn Architect: HKS Architects; Kendle Design Collaborative

Location: Loop 202, between Priest Road and Center Parkway SIZE: 1.8MSF Brokerage Firm: CBRE VALUE: WND Start/Completion: WND

13

There’s no such thing as a “small” deal in this industry, coming out of a recession. However, it’s the big deals, and the brokers who make them, that make the market an interesting one to watch.

In every issue, AZRE publishes the top five notable sales and leases that have occurred one month out from publication based on research compiled by DTZ and Colliers International with CoStar.

Top 5 Notable Leases and Sales (Feb. 1, 2015, to March 31, 2015) Source: DTZ Research Department, Colliers International and CoStar

Industrial/Sales

Office/Sales

1. 2650 E. Queen Creek Rd., Chandler 316,034 SF; $50.179M Buyer: Rood Investments Seller: SunCap Property Group Listing BrokerAGE: Stan Johnson Company

1. University of Phoenix HQ, Phoenix 599,664 SF; $183M Buyer: Epic, LLC Seller: American Realty Capital Properties, Inc. Listing BrokerS: Barry Gabel and Chris Marchildon, CBRE

2. 1415-1509 W. Third St., Tempe 82,257 SF; $10,899,284 Buyer: Senior Housing Properties Trust Seller: Select Income REIT

2. Camelback Esplanade III, Phoenix 218,226 SF; $74.3M Buyer: Crow Holdings Capital Partners, LLC Seller: AEW Capital Management Listing BrokerAGE: CBRE

3. 651 N. 101st Ave., Avondale 73,050 SF; $10.2M Buyer: Cummins Rocky Mountain, LLC Seller: Granco Enterprises 4. Kovach Headquarters, Chandler 62,533 SF; $8.08M Buyer: STORE Capital Seller: Kovach, Inc. Listing BrokerAGE: Core Properties, LLC 5. Washington Business Park, Phoenix 110,622 SF; $8,962,189 Buyer: Covington Asset Management Seller: City of Phoenix Listing BrokerAGE: CBRE

BIG DEALS is sponsored by

14 | May-June 2015

Waypoint

3. Promenade Corporate Center, Scottsdale 256,175 SF; $65M Buyer: Lincoln Property Company Seller: Excel Trust, Inc. Listing BrokerAGE: DTZ

Barry Gabel

Chris Marchildon

4. Lincoln Towne Center, Scottsdale 226,112 SF; $58.5M Buyer: Transwestern Seller: Equus Capital Partners, Ltd. Listing BrokerAGE: Cushman & Wakefield, Inc. 5. Camelback Square, Scottsdale 174,917 SF; $42.35M Buyer: Velocis Partners Seller: Lincoln Property Company Listing BrokerAGE: CBRE

Firm: Lincoln Property Company and Harvard Investments Build: Waypoint – A two-building, 258,000 sq. ft. Class A Office Campus in Mesa, AZ Loan: Construction Loan financed by Alliance Bank of Arizona

LAND/Sales

MULTI-FAMILY/Sales

RETAIL/SALES

1. Adero Canyon, Fountain Hills 75 acres; $15.86M Buyer: Toll Brothers Seller: MCO Properties, Inc. Listing Brokers: Greg Vogel, Ben Jenkins, Bret Rinhart, Ryan Semro and Ben Heglie, Land Advisors Organization

1. Trillium Deer Valley, Phoenix 646,830 SF; 634 units; $91.2M Buyer: Starlight Investments Ltd. Seller: Trillium Residential Listing BrokerS: Sean Cunningham, Tyler Anderson, Asher Gunter and Matt Pesch, CBRE

1. 4821 N. Scottsdale Rd., Scottsdale 22,500 SF; $15M Buyer: Levine Investments, LP Seller: Simms Development Co. Listing BrokerS: Jim Fijan and Will Mast, CBRE

2. Lincoln Drive and 56th Street, Paradise Valley 43.76 acres; $10.5M Buyer: Woodbine Development Corporation Seller: Crown Realty & Development, Inc. 3. Bellero, Queen Creek 130 acres; $8,413,170 Buyer: Elliott Homes, Inc. Seller: Axys Group Listing Brokerage: Nathan & Associates 4. Turquesa Equestrian Estates, Scottsdale 40 acres; $8.4M Buyer: Toll Brothers Seller: Cattleman’s Mortgage & Investment Corporation 5. Tempe Marketplace Trl., Tempe 8.17 acres; $6M Buyer: KEIM, Inc. Seller: J&V Farms, LLC

Greg Vogel

Ben Jenkins

Bret Rinhart

Ryan Semro

Ben Heglie

2. Ascent at Papago Park, Phoenix 308,938 SF; 270 units; $36.22M Buyer: MC Properties Group Seller: Trillium Residential Listing Brokerage: CBRE 3. The Springs at Gilbert Meadows, Gilbert 322,519 SF; 459 units; $36M Buyer: Resources Real Estate Opportunity REIT, Inc. Seller: Bank of American Corporation Listing Brokerage: Berkadia 4. Midtown on Main, Mesa 391,178 SF; 472 units; $34.95M Buyer: Domain Communities Seller: Residential Equity Partners Listing Brokerage: Colliers International

Sean Cunningham

Jim Fijan

2. 1521 E. Camelback Rd., Phoenix 20,255 SF; $13,197,607 Buyer: Berkshire Hathaway Automotive Seller: Van Tuyl Automotive Group Tyler Anderson

Asher Gunter

Will Mast

3. 9925 E. Baseline Rd., Mesa 80,247 SF; $11.75M Buyer: Kennon Stuart Shea Legacy Trust Seller: TME Augusta Ranch, LLC Listing Brokerage: Sun Commercial Real Estate 4. 4216-4242 W. Bethany Home Rd., Phoenix 95,057 SF; $9.9M Buyer: Oakmead Village LLC Seller: Michael A. Pollack Real Estate Investments Listing Brokerage: Phoenix Commercial Advisors

Matt Pesch

5. The Boulevard, Phoenix 282,712 SF; 294 units; $33.5M Buyer: P.B. Bell & Associates, Inc. Seller: Slavin Residential Listing Brokerage: CBRE

5. Monterey Vista Village, Chandler 88,382 SF; $9.8M Buyer: CIRE Partners Seller: Exit Realty Exclusive Listing Brokerage: ORION Investment Real Estate

Where Experience Meets Opportunity

BIG DEALS is sponsored by

Vicki Williams

When Craig Krumwiede, President of Harvard Investments, and David Krumwiede, Executive Vice President of Lincoln Property Company, needed to secure financing for the construction of Waypoint, a Class A office Campus accommodating over 600 workers when completed, they called on a strategic partner who shares their passion for performance. They called on Alliance Bank and their Senior Vice President Vicki Williams, a 20 year real estate veteran.

15

Industrial/Leases

Office/Leases

Retail/Leases

Dave Carder

1. Airport I-10 Business Park, Phase 1, Bldg. B, Phoenix 78,843 SF Landlord: Wentworth Property Company, LLC Tenant: Discount Laptop Supply Landlord Brokers: Pat Harlan, Steve Sayre and Kyle Westfall, JLL TENANT Broker: Mike Gordon, Cresa 2. DCT One, Tolleson 67,380 SF Landlord: DCT Industrial Trust Tenant: Inventure Foods Landlord BrokerAGE: JLL TENANT BrokerAGE: CBRE 3. Kovach Headquarters 2, Chandler 62,533 SF Landlord: STORE Capital Tenant: Kovach, Inc. 4. Deer Valley Industrial Park, Phase I, Phoenix 41,540 SF Landlord: Meritex Phoenix, LLC Tenant: Trane U.S. Inc. Landlord BrokerAGE: DTZ

Pat Harlan

Steve Sayre

Kyle Westfall

Mike Gordon

5. Airport I-10 Business Park, Phase I, Bldg. E, Phoenix 40,529 SF Landlord: Wentworth Property Company, LLC Tenant: DHL Global Forwards Landlord BrokerAGE: JLL TENANT BrokerAGE: Cushman & Wakefield

BIG DEALS is sponsored by

16 | May-June 2015

1. Phoenix Corporate Tower, Phoenix 112,323 SF Landlord: Colony Capital, LLC Tenant: State of Arizona - DCS Landlord BrokeRS: Dave Carder and Luke Walker, CBRE Luke Walker TENANT Brokers: Pat Williams, Steve Corney, Vicki Robinson, Andrew Medley and Chris Corney, JLL 2. Liberty Center at Rio Salado, Bldg. 4, Tempe 96KSF Landlord: Liberty Property Trust Tenant: Drivetime Automotive Landlord BrokerAGE: CBRE TENANT BrokerAGE: Lee & Associates; CBRE 3. Papago Buttes Corporate Plaza, Phase I, Tempe 67,275 SF Landlord: Papago Buttes Corporate, LLC Tenant: The Endurance Intl. Group, LLC Landlord BrokerAGE: DTZ TENANT BrokerAGE: JLL 4. Corporate Center at Kierland, Scottsdale 46,634 SF Landlord: The Muller Company Tenant: American Express Global Business Travel Landlord BrokerAGE: CBRE TENANT BrokerAGE: CBRE 5. Collier Center I, Barron Collier, Phoenix 41,570 SF Landlord: General Electric Capital Corporation Tenant: Uber Technologies Landlord BrokerAGE: CBRE TENANT BrokerAGE: CBRE

Pat Williams

Steve Corney

Vicki Robinson

Andrew Medley

1. Fry’s Marketplace, Artesian, Gilbert 204KSF Landlord: City of Chandler Tenant: Fry’s Marketplace Landlord BrokerS: Matt Morrell and Chris Corso, De Rito Partners 2. Mountainside Fitness, Aspera at Joy, Glendale 40KSF Landlord: STORE Capital Tenant: Mountainside Fitness Landlord AND TENANT Brokerage: Phoenix Commercial Advisors

Matt Morrell

Chris Corso

3. Gilbert & Guadalupe, Horne Plaza, Gilbert 35,959 SF Landlord: Brixton Capital AC, LLC Tenant: Smart & Final Landlord Brokerage: Colony Capital Acquisitions, LLC TENANT Brokerage: De Rito Partners, Inc. 4. Rancho Encanto Plaza, Phoenix 28,985 SF Landlord: Weingarten Realty Investors Tenant: Smart & Final Landlord Brokerage: Weingarten Realty Investors TENANT Brokerage: De Rito Partners, Inc. 5. Pueblo Pointe Shopping Center, Bldg. C 28,289 SF Landlord: Paradise Valley Ace, LLC Tenant: Smart & Final Landlord Brokerage: Westwood Financial Corp.

TENANT Brokerage: De Rito Partners, Inc.

Chris Corney

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AFTER HOURS

TRUE GRIT

PHOTO BY LAURA BURNETT, AZ BIG MEDIA

SPOKES PERSON Business cyclist Ryan Weed takes alternative route to meetings

By Laura Burnett

W

hat started as a hobby for Coe and Van Loo Consultants President Ryan Weed has now become a way to connect with clients and co-workers. Weed has been with the design and engineering firm for 18 years, working his way up from drafter, an entry level position, to president and CEO, having been asked to step up in January of this year.

Part of a long-lasting relationship with APS, Weed has come to spend more than just business hours with some of its employees. Trying to connect with clients with potential mutual hobbies was a habit of Weed’s, and after finding out about the company’s cycling team, he joined.

The rides are often organized races for charity, with money raised by employees from companies with a matching program in place. While rides average between 40 and 50 miles round-trip, the group mixes up its routes to keep the scenery interesting, sometimes meeting with other cycling groups to turn the group ride into a larger event.

18 | May-June 2015

These bigger rides offer a chance for Weed and the other riders to catch up with cyclists they don’t see often.

“It’s good to have a client that respects your work, but it’s better to have a client that respects your work and you have some sort of personal connection with,” Weed says.

Having a personal relationship with clients is just as important as having strong relationships with colleagues, he says. Weed appreciates these relationships and CVL fosters them as part of its company culture. With project teams all over the building, employee engagement is important to the company, which encourages team bonding, as well as working across teams.

That’s seen in the fact that CVL has both planning and landscape architecture departments within the firm. Allowing engineers to work with the more creative people at the firm allows everyone to learn to see and understand things from another perspective.

“It helps our clients to have one firm they can go to for essentially all of their project needs, which was originally the concept. It’s an old adage now: a onestop shop for clients,” he said.

Having a multi-faceted firm is just one way Weed ensures his company adds something extra to the work it provides. Weed prefers cycling but realizes everyone has different hobbies.

“They’ll go golfing or they’ll go to lunch or they’ll keep up with their clients in different ways that help strengthen their personal relationships,” Weed says.

C

PHOTO COURTESY OF KATIE JOHNSON

ole Johnson is the president of Paul Johnson Drywall, Inc. (PJD), the largest specialty contractor in Arizona with offices in Phoenix, Prescott, Tucson and soon Las Vegas.

PJD has experienced considerable growth under the management of Johnson, but once a month, Johnson likes to engage in some family ATV racing with his wife, Katie, and their four kids in the dunes of Yuma, Glamis or the Cinders of Flagstaff.

“It’s a great release from the workday race to refocus on ATV racing,” he says.

What did you think you’d be when you grew up?

Originally, a professional boxer. As I matured, I considered being a hostage negotiator. During college, I wanted to work on Wall Street. I still reflect on what I want to be when I grow up.

When did you become interested in your hobby of ATV riding?

Growing up, our family focused on family time. We incorporated ATV rides frequently as an integral part of our family recreational activity. I loved it, and when I began my own family, we all did the same thing. It’s been a hobby for most of my life.

Your wife, Katie, and your kids are also avid ATV racers. Did you introduce your family to this sport and how often/where do you like to do your racing?

Yes, we try to ride together often. Some of our favorite areas are the dunes in Yuma and the Cinders in Flagstaff. — JADE YEBAN Read more of the interview online at azbigmedia.com/azre.

Making a Difference in Arizona’s Economy for 40 years and beyond.

visit our site @ www.aaed.com

19

Legislative Update

Arizona & Congress:

New Opportunities, Same Fights

V

alley Partnership has a long history of advocating for selffunding of the Arizona State Land Department. We applaud Gov. Doug Ducey’s leadership as part of the state budget to place on the 2016 ballot a measure to amend the Arizona Constitution to allow for Arizona State Land Department (ASLD) self-funding.

If passed by the voters in 2016, it

Quick hits from AIA

S

en. Andy Biggs, Rep. David Gowan and Gov. Doug Ducey brokered a $9.1B budget and passed it in the early morning hours of March 7. This budget is seen as a historically lean budget by Arizona standards as the state needed to close an approximate $1.5B shortfall combined for the current fiscal year and next.

Highlights include a $99M cut to universities. The state’s two largest counties community college districts lost all state support. K-12 education got an additional $74M to compensate for inflation funding that the legislature cut during the recession, and there is no clear resolution to the unsettled inflation funding lawsuit (Prop 301).

Districts also received some latitude on the governor’s desire to direct 5 percent of non-classroom spending

20 | May-June 2015

would allow the ASLD to use up to 10 percent of the money from land sales to fund the department beginning in fiscal year 2017. However, in late March, the Arizona Center for Law in the Public Interest filed a lawsuit to block the measure because it violates the New Mexico-Arizona Enabling Act. Arizona lawmakers have attempted land department self-funding in the

away from administration and into the classrooms. The AIA is intrigued by the governor’s new charter school loan program (about $24M) that we believe is intended to help finance charter school construction. Details are lacking by press time.

The AIA was a strong advocate pushing for HB2337 for Historic Preservation Tax Credits. Ultimately, it died in subcommittee. We’re hoping to be more proactive on this issue and work over the course of the off-season to meet and develop a better stakeholder group for this.

The AIA thanks Reps. Karen Fann and Lisa Otondo for championing this legislation this year. The AIA intends to actively support this legislation in future sessions.

Arizona lacks some of the development tools other states have when it comes to historic preservation. This bill would have created up to $30M per year of tax credits for commercial historic properties. This legislation was

past, with a similar measure in 2009.

Unfortunately, the Arizona Supreme Court struck it down after a suit by the Arizona Center for Law in the Public Interest successfully sued on the grounds that it violated the state constitution.

Perhaps the greatest challenge to generating revenue from trust lands has been funding the agency from state tax dollars. In most states, trust land agencies are funded from the trust proceeds they generate and not with tax dollars. In Arizona, as state coffers have contracted, funding to the land department has also contracted, resulting in reduced staff and loss of the institutional memory needed to develop large projects for the greatest return to schools. With under-funding also comes decreased ability to generate revenue.

Finally, Valley Partnership participated in the Congressional Western Caucus Foundation Policy Briefing and Roundtable this month and spoke to the challenges of sweeping new rules proposed by the EPA on Waters of the US and its potential negative impact to our economy.

Valley Partnership remains committed to its mission of responsible development with advocacy at the federal, state and Cheryl L. Lombard local levels President & CEO of government.

Valley Partnership

perfectly tailored for Arizona as it incorporated an ROI component that, from the state’s perspective, would be required in every tax credit application. We have worked with out-of-state developers that struggle to make historically significant projects work in Arizona because we lack some of the tools other states promote. HB2337 would make Arizona competitive with 35 other states that have similar programs for historic John Glenn properties. We are very keen Associate, American on preserving Arizona’s rich Institute of Architects in Arizona and and diverse history government affairs whenever possible. committee co-chair

Arizona’s legislative whirlwind

A

SHAMING BUILDING OWNERS

is not productive

I

n January, the city of Phoenix considered a draft ordinance that mandates owners of buildings more than 50KSF had to report their energy usage on a government website or face a Class 1 misdemeanor and minimum $500 fine for every day or instance there is a violation.

According to the city, the ordinance would affect 1,398 buildings, including 35 hospitals, 69 hotels, 147 retail facilities and 142 schools.

This type of ordinance is similar to energy reporting in Austin, Boston, Chicago, Washington D.C., New York City, Philadelphia, San Francisco and Seattle enacted in the last few years.

These types of costly energy reporting ordinances are hard to comply with as they force property owners to collect information for dozens of tenants who view this type of information as private or proprietary.

The use of this type of information

is also dubious as it can be used by interest groups to shame certain building owners, leading to a movement to mandate expensive retro-fit improvements for facilities that can hold up the sale of buildings. This is where California is headed with legislation like AB 758, and these proposals have Tim Lawless a chilling effect President on economic NAIOP Arizona development.

We do not have a problem with a voluntary energy reporting system and some of our members who specialize in LEED would welcome that. In short, the market should dictate energy efficiency and the market is already going in that direction as younger professionals prefer these working environments.

t the Arizona Legislature, it’s been a year of new beginnings. New statewide elected officials, a remarkably high number of new legislators, and a new chance to build political alliances after the high-profile fights on topics such as Medicare expansion and budgeting decisions that had divided Gov. Jan Brewer and legislative leaders in recent years. Policy makers quickly learned that new opportunities do not mean the end to old problems. State leaders faced a state budget deficit estimated to be as high as $1.5B. A unified effort between Gov. Doug Ducey and legislative leaders in the House and Senate created a plan designed to address the deficit, and a budget was enacted well ahead of normal legislative schedules. The approved budget cuts state spending by 2.4%, from $9.3 billion to $9.1 billion, to solve the estimated budget deficit for next year, and relies on fund sweeps, spending cuts and $102 million from the state’s “rainy day fund” to balance the shortfall for the current fiscal year that ends June 30. It was criticized by entities that believe funding cuts will negatively impact Beth Lewallen local taxpayers, students President and low-income families, Italicized Consulting but was praised by business organizations that believe the continued income tax reductions (implemented after being previously approved by the legislature) will lead to job growth and enhanced state revenues.

Apart from the state budget, the fast-paced legislative session brought a whirlwind of policy discussions on key topics, including tax policy and reform of state regulations. County assessors opened a discussion on how to make the state’s property tax system more easily understood, and property management advocates enabled a conversation on the state’s role in local decisions with big impacts, like energy benchmarking. Throughout the session, BOMA/Greater Phoenix built stronger relationships with key leaders. We hosted a highly successful Day at the Capitol on Feb. 19, and benefited from enhanced participation of subject-matter experts in our Advocacy Committee. The early close to the 2015 legislative session provides an opportunity to continue our efforts to serve as a resource to legislators who seek to understand how they can improve the climate for commercial property management in Arizona, and we look forward to the challenge.

21

Legislative Update CONTRACTORS ACHIEVE CLARITY

T INFRASTRUCTURE NEEDS TO GET MOVING

A

rizona is at a crossroads of reshaping its economy and ensuring a resilient backbone of cutting edge infrastructure. It is clear that the enhancement and growth of the Arizona economy is going to be an enormous challenge and an incredible opportunity for the state. The creation of an environment that attracts and maintains new and existing businesses, industries, skilled workers and residents is the focus of many organizations and legislative leaders at all levels of Arizona government. The consideration of fiscal and taxation policies, education, quality of life and the regulatory environment are important factors that must be balanced. However, 21st century infrastructure that is reliable and accessible, and the means to finance its development, are critical for Arizona communities to grow sustainably and to be globally competitive.

The importance of infrastructure in Arizona is often overlooked because we have already delivered an exceptional transportation system in the Phoenix Metro region.

Jill Kusy Hegardt Maintaining Vice president of entitlements and expanding DMB Associates; Vice-chair, this system is ULI Arizona Community Initiatives Committee increasingly

22 | May-June 2015

challenging as demand for growth increases and infrastructure needs to grow, but revenues and funding for these efforts shrink and disappear.

There is substantial need for regional and local infrastructure improvements statewide, including for roads, buses, rail, sidewalks, bike lanes, parks, water, power, digital and fiber, but new tools and approaches to pay for these projects are sorely lacking.

The Urban Land Institute (ULI) Arizona District Council, through its Community Initiatives Committee, has been studying this issue and is initiating an effort to convene dialog on how local infrastructure investment is a vital ingredient to the creation of a successful community. The goal is to foster the exchange of ideas, information, and experience among industry leaders about which proven financing tools are best suited to be fully utilized in Arizona and communities to rebuild and support local economic development. The committee will engage with key stakeholders and topic experts to help educate and inform members of ULI and the community at-large which innovative infrastructure finance solutions will move our economy forward.

Arizona’s citizens and businesses require 21st century infrastructure and delivering this will require cutting edge approaches to infrastructure finance.

he Arizona Legislature passed a state budget for 2015-16 in early March. This is one of the earliest dates for that milestone and an indication of the close working relationship of legislative leaders and Gov. Doug Ducey. With the budget passed, leadership turned its attention to key bills remaining in the process.

The budget did not contain two items that were on the wish list for K-12 schools and universities. K-12 schools did not receive any funding for the School Facilities Board.

That program had been funded in the $400M-plus range for some years but was completely eliminated in 2010.

The universities had hoped for a package of funding for developing $1B worth of new research facilities over the next 10 years.

A broad coalition of construction groups, led by the Arizona Builders’ Alliance, worked to pass major changes to Arizona Transaction Privilege Tax. The effort has resulted in cleared definitions of “maintenance, repair, replacement and alteration” Mark Minter work. The new definitions Executive director Arizona Builders’ Alliance create a clearer distinction between work still classified as prime contracting and projects subject to taxing material at the point-of-sale. All of the parties involved in this effort agree that the ultimate goal for Arizona is to move all work to point-of-sale in a few years. A bill that appears to be heading for passage will change the bonding requirements for some projects done under a job order contracting method. If passed, JOC projects done for Maricopa and Pima counties will no longer be required to have performance bond if the job order is under $500,000. The option to require the performance bond is at the counties’ discretion. Payment bonds are still required under law.

One other amendment to the procurement law appears to be headed for the governor’s desk. SB 1090 would prohibit public agencies from requiring “neutrality agreements” in a public contract. A neutrality agreement prevents a contractor from resisting union organizing attempts. The bill would also prohibit public agencies from requiring contractors to have government approved apprenticeship programs as a condition to bid work.

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Camille Patterson, CCIM Capital Real Estate Arizona cpatterson@capitalreaz.com

David Miller, CCIM Chicago Title Insurance millerds@ctt.com

David Schmid, CCIM Berkshire Hathaway Homes Services AZ Properties david@wesellphoenix.com

Dennis Hoth, CCIM Orion Investments Real Estate dennis.hoth@orionprop.com

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Jenette Bennett, CCIM Voit Real Estate Services jbenett@voitco.com

Jim Kasten, CCIM Kasten Long Commercial Group jim@KLCommGroup.com

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Lisa Richardson, CCIM SJ Fowler Commercial Real Estate lrichardson@ccim.net

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Credibility, Commitment, Integrity Learn more online http://chapters.ccim.com/centralarizona

Arizona Association For Economic Development

WinnerS’ Circle:

2015 AAED EDDE Awards

By AMANDA VENTURA

T

he Arizona Association for Economic Development has been a community of practitioners who have worked through four decades to improve business attraction throughout the state. Every year, AAED awards Economic Development Distinguished

by Excellence (EDDE) awards to those who keep the nonprofit organization at the top of its game and those who best uphold the three pillars of AAED membership. This year’s winners were recognized at AAED’s Spring Conference in Prescott on May 7.

William Lampkin Award: Robert Riley, Kingman Industrial Park

Robert Riley was a member of AAED before it was AAED. As one of the founding members of the Arizona Associate of Industrial Development (AAID), he may be one of the few economic developers in the state who have actually worked and known the namesake of the award.

Riley moved to Arizona from Chicago to become Kingman’s first in-house city planner. A few years later, he became the first airport manager for Mohave County Airport Authority, where he is credited for the Kingman Airport and Industrial Park development. Since then, he has worked for Prescott, Chandler, Glendale and Bullhead City. In 2002, decades after becoming an Arizonan, Riley has returned to Kingman Industrial Park. There, Riley’s work has contributed to an economic impact of 1,889 jobs, $75,481,000 in wages and output of $221,498,000. With more than 30 years of AAED membership, he has held many roles within the organization’s leadership.

24 | May-June 2015

“Bob’s name isn’t on any of the projects he has worked on, but his fingerprints are all over the state,” says Bennett Bratley, director for Mohave County EDD. “The creation of jobs and tax base diversification is his legacy in the state.”

Colleagues statewide endorsed Riley’s receipt of the award — some simply call him Obi Wan, others a mentor who can always be counted on for advice.

“He has always been and continues to be the ultimate economic development professional,” says Pinal County Economic Development Director Tim Kanavel.

Large Organization of the Year: City of Scottsdale Economic Development Dept.

Everyone loves a Cinderella story.

“After a long absence, the Scottsdale Economic Development Department has become engaged as a leader in regional activities and initiatives, such as the advancement of the Cure Corridor and has dramatically increased its services and programs offered to existing firms, visiting more than 150 Scottsdale companies since July 2013,” says Scottsdale Mayor Jim Lane.

Yes, Scottsdale Economic Development Director Danielle Casey was the 2014 AAED president.

However, all five economic development practitioners on this year’s winning large organization of the year are active AAED members.

They sit on the board, committees and developed a CEcD preparation guide and classes to help aspiring economic developers study for their careerdefining exam. The department’s members also represent AAED on a national scale through its partnerships

with the Council of Development Finance Agencies, which is comprised of 300 public, private and nonprofit development entities. Scottsdale’s team helped bring the annual CDFA conference to Arizona.

The department was directly involved in securing Scottsdale locations of Weebly, Zenefits and Orion Health in the last year.

Small Organization of the Year: Economic Collaborative of Northern Arizona (ECoNA)

When more than 370 Flagstaff residents were laid off by Walgreen’s, the Coconino County Career Center formed by ECoNA mobilized a Rapid Response Team to assist. When talent is hired by incubator Northern Arizona Center for Entrepreneurship and Technology, ECoNA helps trailing spouses and partners also find work in the region. ECoNA is a regional economic development organization supported by 16 public, private and nonprofit agencies in Northern Arizona. It has attracted more than 700 jobs to Northern Arizona and $30 million in economic impact in 2014. To put this in perspective, 300 jobs in Flagstaff is equivalent to about 8,905 jobs in the Phoenix Metro. “The revolutionary approach of ECoNA and its leadership team cuts through barriers and turf that can slow down or stop a fast track response to business attraction, retention or expansion,” says M. Carol Curtis, director of Coconino Career Center.

Read about every company and individual who won a 2015 EDDE Award at azbigmedia.com/azre.

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U.S. Green Building Council

AArizonaSustainable State becomes top state for green building

By MERYL FISHLER

A

rizona real estate is LEED-ing the way, breaking into the Top 10 in the nation for the most projects per capita certified LEED for its green building initiative.

LEED, Leadership in Energy and Environmental Design, is a green building certification program where projects satisfy prerequisites and earn points to achieve different levels of certification. The U.S. Green Building Council (USGBC), created to promote sustainability in the construction industry, established LEED to exhibit projects notable for high environmental and health achievements.

Fifteen new LEED certifications, combining for a total of 2,810,153 square feet of space, have been LEED certified in Arizona since the beginning of 2015, says Aline Peterson, a spokeswoman for USGBC. The Arizona chapter of USGBC opened in 2002 and its founder Charlie Popeck, currently president of Green Ideas Sustainability Consultants, says “it has been refreshing to see more people are getting into (green building).”

Public developers have been among the leaders pioneering LEED building.

“Believe it or not, they are spending our tax dollars wisely,” Popeck says.

Some higher education establishments, municipalities and the federal government have established minimum LEED certification requirements.

Public developers have a greater awareness about the importance of life cycle costs, says Bryan Dunn, market sector executive at Kitchell.

The evaluation of a 30-year life cycle of a building shows 2 percent of the overall cost is attributed to construction, 6 percent for operations and maintenance and the remaining 92 percent is attributed to personnel cost, Dunn says. Many experts agree LEED buildings increase workplace productivity and engagement and, according to Dunn, “municipalities understand the importance of this and

26 | May-June 2015

are willing to make the investments in their human capital.”

Some private developers are skeptical of green building because they do not feel they have the luxury or incentive to build green. However, a variety of tax benefits and incentives are available for green buildings, according to the USGBC. Examples of these incentives include tax credits, grants, expedited building permits and reductions or waivers in fees.

LEED-certified buildings use 25 percent less energy and have a 19 percent reduction in aggregate operational costs compared to noncertified buildings, per the USGBC. “The struggle with LEED is it takes a lot of moving parts coming together to make a LEED project work,” says Thomas Cochran, the regional manager at Energy Inspectors Inc. It forces people to get together earlier in the design phase and may be a shift in process from developers.

The “sexy thing” right now is energy efficiency, Popeck says, and green building will pay off in the long run.

Education and the expulsion of the “myth” that LEED building is expensive will increase private sector activity, says Dale Benz, director of facilities consulting at FM solutions.

LEED for the private sector “boils down to the bottom line,” Benz says. With a good practical design and operation, you can get a silver certification with minimal or no additional cost, experts say.

“Most developers tell me they don’t want to pay the money for a plaque,” Dunn says. Their mindset can change if a market demands green building and developers can generate higher rents, maintain higher occupancy and lower operational cost, he says.

“There are a lot of stakeholders concerned about sustainability throughout Arizona,” says Lisa Estrada, board member for the Arizona chapter of the USGBC. “To get more on board, we just need to promote it and education people about its value.”

The continuation of the verification of the value of LEED building will cause the demand for LEED buildings to increase over time, according to experts. If a dollar amount can be attached to energy savers and sustainability, stakeholders will be able to see the value, Cochran says.

Getting more appraisers certified to validate energy and solar features on projects will help, Cochran says. “The key is to get all the players the industry to identify the value,” he says.

HOW TO SAVE GREEN ON BUILDING GREEN Experts say the key to saving money when building green is remembering LEED programs are project specific and what works for one project may not benefit another. Here are some tips to save green while building green.

• Start and the process early. You can keep costs lower if you know what you want. This will prevent you from having to design the building more than once. Look at what you are planning and see how that fits into the overall LEED requirements; employing energy efficiency may not be too far off the map.

• Putting in time pays off. The more engaged the end users are at the beginning of a project, the greater

the return is over time. The architect and contractor need to have a full grasp on who will occupy the building, how it will operate and future employees’ behavior.

• Do not just purchase points. Always choose impactful elements that give opportunity for payoff, rather than including something just to fill a requirement.

Find solutions that most benefit your project.

• Be realistic about your staff. You can take green building a step too far and actually waste more energy if the staff maintaining the building lacks qualifications. The complexity of the building needs to match staff skill.

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Kathie Gittins, AHC, CSI, CDT Mobile: 602-402-2766 Email: kgittins@assaabloydss.com Copyright © 2015 ASSA ABLOY Inc. All rights reserved.

ASSA ABLOY is also a proud member of the USGBC and is a 2013 recipient of the USGBC LEED Silver Certification.

U.S. Green Building Council logo is a trademark owned by the U.S. Green Building Council and is used with permission.

27

FINANCE

The Great Exchange How section 1031 deferrals balance local market

W

By AMANDA VENTURA

ith the talk of tax reform that would repeal or limit 1031 Exchanges, the global effect of changing like-kind deals is in the spotlight.

Section 1031 Exchanges, or like-kind exchanges, are used in commercial real estate to allow investors to reinvest their profits into a new property through an exchange of a similarly valued property and defer the taxes from the sale.

The proposed limitation in President Barack Obama’s 2016 budget would cap a deferral of capital gain at $1M. “Historically, Section 1031 deferral has been justified on the basis that valuing exchanged property is difficult,” according to the U.S. Treasury Department’s general explanations of the administration’s 2016 budget. “However, for the exchange of one property for another of equal value to occur, taxpayers must be able to value the properties.

In addition, many, if not most, exchanges affected by this proposal are facilitated by qualified intermediaries who help satisfy the exchange requirement by selling the exchanged property and acquiring the replacement property. These complex three-party exchanges were not contemplated when the provision was enacted. They highlight the fact that valuation of exchanged property is not the hurdle it was when the provision was originally enacted. Further, the ability to exchange unimproved real estate for improved real estate encourages ‘permanent deferral’ by allowing

“

taxpayers to continue the cycle of tax deferred exchanges.”

“Every commercial property potentially could be a 1031 Exchange,” says Dave Tornell, vice president for Investment Property Exchange Services, Inc. (IPX 1031) in Arizona and New Mexico.

Colliers International Senior Vice President Rob Martensen closed three 1031 Exchanges last December, only one of which he believes would have been able to happen without the option of an exchange.

Tornell and Phoenix Commercial Advisors Senior Managing Director Chad Tiedeman project that about 40 percent of transaction volume is influenced by 1031 Exchanges. At PCA alone, the team’s three investment brokers sold 23 retail investment properties totaling more than $100M. Fifteen of those sales, a majority, had buyers who used 1031 Exchanges. Martensen and Tiedeman note that a significant percentage of buyers are Californians looking for lower cap rates.

A repeal of the tax section would raise tax burdens on those involved in transactions, which can lead to longer holding periods, reliance on debt financing and less productive deployment of capital in the economy, according to an Ernst & Young study released in March and commissioned by the Section 1031 Like-Kind Exchange Coalition.

“It’s important in general. It gives people more reason to trade a property,” says Martensen. “I don’t need to do the research to know that if 1031 were not allowed anymore, it

...one-third of jobs in Arizona are tied to real estate in some capacity.

28 | May-June 2015

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GEnERal COnTRaCTOR Corp.

Tutor Perini Building aRChiTECT ; Lead: SmithGroupJJR Interior: Gensler; Westin’s in-house design team

Years with company: 26 Years in re: 30 responsibilities: The sale and leasing of industrial/back-office buildings and land. partnership with Andy In Strong, we represent Markham and Will corporate, institutional entrepreneurial real estate users and owners. and toughest challenge: Professionally, a tough challenge and opportunity is continuing to stay motivated to “grind” every the industry, I’ve learned day. After 30 years in “grind” when business it’s easy to stay in the is great. The ability focus to stay motivated and during the tougher is a test. times

SizE 250KSF STaRT DaTE September 2010 COmPlETiOn DaTE March 2011 SUBCONTR ACTORS

Downtown Westin Phoenix

hotel involves high rise into a luxury downtown it also has its to start absorbing vacant some constraints, but built as owner National original tower was What was originally office space, property perks. Because the in downtown LLC took action office space, premium office space Real Estate Advisors, intended for premium to a contemporary Westin Hotels a floor-to-ceiling Phoenix is now home and collaborated with every room includes project Westin Phoenix guest rooms hotel. The 242-room & Resorts. The redevelopment to the window. What’s more, revisions in the middle of spacious than Downtown resides entailed major design are considerably more are as constructing along with the In fact, corner rooms a 26-story high rise tower’s interior as well Ran Copper low-rise that average. larger than average hotel offices of Freeport-McMo new adjoining two-story outdoor percent a 50 natural an & Gold, an international includes a valet entrance, accommodations. facilities. resources company. courtyard and back-of-house in an “University Constructing the hotel ChallEnGES: and seven months was One of the many existing high rise in UniqUE FEaTURES: by the design Mechanical, the mechanical of the a savvy business had one not only gutsy but design challenges solved plumping contractor, identity says Mike waiting for the separate a than tasks,” create to Rather move. team was most challenging it from for Tutor and for businesses economy to recover for the hotel and distinguish Nunn, project executive To achieve this, “Because the Freeport-McMoRan. Perini Building Corp.

City as the with designed SmithGroupJJR worked structure was originally potable water an under-utilized of Phoenix to share office space, a parallel as the hotel’s waste and vent city bus bay to serve system and a parallel to different and installed valet entrance. In addition system were designed and Freeportrequirements. To entrances, Westin to meet the hotel’s lobbies three 750-gallon McMoRan have separate visiting provide hot water, installed on the Guests and elevator banks. hot water boilers were never need to either establishment roof by helicopter.” an existing office Adapting interface.

Caffall Tile Co. Cannon & Wendt Electric E & K of Phoenix PK Associates, L.L.C. University Mechanical ValleyCrest Vickers-Hari Contracting, Inc.Walters & Wolf Western Millwork, Inc.

al

20

To KNow 2015

PeoPle AND PRoJeCTS

75

To KNow 2015

Executive managing

Gpe commercial adVisors

shari a. tucker-Gas

Partner

director

cassidY turleY

2375 E. Camelback Rd., #300 Phoenix, 85016 602.224.4471 cassidyturley.com/arizona

2777 E. Camelback Rd., #230 Phoenix, 85016 480.994.8155 gpe1.com Years with company: 6 Years in re: 25 responsibilities: Healthcare real estate and tenant representation leasing, landlord and sales toughest challenge: Getting deals done It took patience, good during the recession. communication and win-win situation creativity to create during a sales advice: Passion! those stressful times.

If you are passionate and convey it with confidence, enthusiasm about something people will share your and knowledge, excitement and want cre bucket list: To to work with you. inspire other women estate and be a mentor in commercial real to them because they talent to be incredibly have successful in this business. so much

ser

sperrY Van ness,

llc 3200 E. Camelback Rd., #280 Phoenix, 85018 480.425.5500 svnpartners.com Years with company: 13 Years in re: 15 responsibilities: Sale of multi-tenant retail investment buildings.

mindY korth

Executive vice president

colliers internation

2390 E. Camelback Rd., #100 Phoenix, 85016 602.222.5005 colliers.com

Years with company: 1 Years in re: 30 responsibilities: Investment property sales brokerage of office, industrial and retail buildings as well as commercial land; representing sellers and toughest challenge: buyers.

Finding the site for a hot weather testing facility that met stringent criteria. It had to be remote enough for security, while close enough to the workforce. We poured over topography maps in five states, visited sites in three states and then went through an arduous process to secure the selected location.

This rewarding accomplishment was achieved by persistence and hard work.

PeoPle AND PRoJeCTS

eric Wichterman

Executive vice president

PROJECT Westin Phoenix Downtown 333 N. Central Ave. Phoenix, Arizona, 85004

Years with company: 19 Years in re: 19 responsibilities: Sale investment properties of office in Metro Phoenix

professional accomplishmen t: My reward comes from participating with a client full cycle of an investment.in the The cycle starts with selling a great property, but them it doesn’t end there. I work alongside my clients to select the best to operate, lease, financeteams and manage a property.

I strategize with them on every lease deal and important decision that impacts the investment. This means we celebrate the successes tackling the roadblocks and together. sales advice: Like most performances in sports, great and other arenas, controlbusiness is the key to success.

professional accomplishmen t: I took a position assistant in the beginning phases of my real estate as an to get my foot in the career just door and within three leasing agent. Within months became a my first year, I was promoted to director of sales. cre bucket list: Watching Peoria Town Center thriving center. I’ve become a sold it in escrow again with it three times over the years. I have a user that I believe new synergy to the will bring about a area. see the transformation. I’d like to drive by it in 10 years and

GreG VoGel

Founder, CEO

land adVisors

orGanization

4900 N. Scottsdale Rd. #3000 Scottsdale, 85251 480.483.8100 landadvisors.com

Years with company: responsibilities: 25 Years in re: 25 Overall direction and vision of the firm; toughest challenge: designated broker.

From just stopped. We overcame 1988 to 1991 and 2008 to 2010, the land business it by hard work service clients well while others quit. Being and creativity to find niches and little rewards, it paid a contrarian in effort off and offering sales advice: Taking when the market began its recovery. expertise to a level complicated business that cannot be compared. with fractured information Land is a importantly, articulate few can assimilate the nuances and best strategies to achieve and, more a client’s goals.

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For more information: 602.277.6045 or visit azBIGmedia.com 29

Sperry Van Ness Advisors goal is to be your eyes, ears a all of your CRE assets in Arizona. Our Advisors provide sa rate servies, consultat ion, accelerating marketing and au agement company, we have the knowledg e, experience your acquisition due diligence, financing , insurance, majo projects, property tax appeals and preparatio n for a sale – of your real estate investment.

We apply local knowledg e to national represent ation. W Canada or elsewher e, knowing there is someone local that whatever issues arise at your property will afford you the your business, family and other interests.

would have a major impact on the economy.”

The largest 1031 Exchange last year occurred in New York City, when the Waldorf Astoria Hotel went for $1B. In Arizona, the largest exchange in 2014 was a $50M land deal.

Rob Martensen

Chad Tiedeman

Money Talk AZRE: We’re a few months into 2015, how are pre-2015 predictions measuring up?

James DuMars: The prediction for completion is certainly coming to fruition. Lenders are very aggressive in terms of pricing and terms in order to win and place funds in good quality investments. CMBS shops are all working for very thin margins. The agencies (Freddie Mac & Fannie Mae) are also getting more aggressive. We’ve seen things like easing on prepayment penalties, more interest only and relaxing of debt yields. We are also processing our first CMBS 2.0 loan with no warm body on the guarantee and no reserves.

Where is the capital coming from for 30 | May-June 2015

Dave Tornell

“As for 1031 Exchanges in Arizona, we are close to 2004 levels,” says Tornell. “The market has recovered significantly from the bottom, which was 2009. During 2009, 2010 and most of 2011, 1031 transactions were almost nonexistent. Then, as the markets started to recover and every year since, we have seen an increase in 1031 activity.

One of the larger qualified intermediaries had a 32 percent increase in transactions from 2013 to 2014 and the first quarter of 2015 is up over last year.”

Furthermore, Tiedeman, who does not support the proposed changes, adds that one-third of jobs in Arizona are tied to real estate in some capacity.

“If the law did get repealed, it would be devastating,” he says.

new builds? Are multifamily projects still leading the pack in types of projects getting funding most easily?

What’s the most interesting thing happening in commercial RE financing?

Multifamily is still leading the pack.

However, the banks are very active and they have branched out more aggressively into the other main property types as well.

Most interesting is that the big doom and gloom wave of maturities that was going to hit in 2015-2016 that dominated so many conferences over the past few years has yet to materialize. We service $26B in loans and we’ve not seen any shake up. We have lending sources for the majority of our maturities. Candidly, we just as soon avoid interesting or any volatility.

We like it boring. Stabile rates and stable terms typically lead to a productive year for our business.

How about loans for buying existing properties? Where is that money coming from?

In order to match cap rates to (assumable, nonrecourse) long term cost of debt, most borrowers are either locking with an agency loan, life company loan or CMBS loan.

Considering cap rates (when applied to a specific property’s income stream) are perpetual and interest rates are fixed for a finite period, there is risk built-in when buyers chase cap rates too low and at the same time fail to fix their interest rate for the long haul.

—James DuMars, managing director, NorthMarq Capital James DuMars

MAY-J UN

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Two b y Two Health care affect project s st partn rategic ership s

COMING NEXT ISSUE Featured topics include:

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Certified Commercial Investment Member

NO GUTS, NO GLORY

Walgreen’s ground lease. The leases were sold in less than 100 days — and the new buyer sold the properties two years later.

To buy or not to buy

By AMANDA VENTURA

N

ot all commercial deals were created equal. It’s when things get a little messy, complex or a buyer is considering a potentially risky investment that having a Certified Commercial Investment Manager on his or her side can lead to the most informed decisions possible. This was especially true during the Great Recession. Below are vignettes of interesting, risky and downright bizarre deals local CCIMs have encountered.

The fine print

CCIM: Alan Davidson, ORION Commercial In 2009, an investment group* bought a package of properties.

One property in particular, a singlestory, single-tenant property, though gave them a bit more than they bargained for. When the investment company foreclosed on the property, they found three tenants in the building, a personal boat parked on the premises, flammable materials in what Davidson called a “non-permitted hut” outside the building, a second-floor mezzanine and electrical rewiring that was not completed to code. Furthermore, the previous tenant did not have permits for multiple tenants. The City of Gilbert, which happened to be operating across the street during all this, Davidson says, “red-tagged” the businesses and effectively asked them 32 | May-June 2015

to move out. Davidson’s role was to strike an agreement with the city to let the tenants stay in operation until they could find a new space to lease.

He managed to do this, and to sell the building “as is” to one of the remaining tenants who wanted to consolidate his cabinetry businesses around the Valley. *Davidson has left his clients and certain specifics vague in the interest of fiduciary duty. He is unable to divulge details without written release, which he did not seek for this feature.

The corner of happy and healthy

CCIM: Alan Davidson, ORION Commercial Universities receive planned gifts from alumni, especially those who have a particularly strong bond to their alma mater. One generous alum of a California university that will remain unnamed* who had no heirs named his alma mater the beneficiary of two Walgreen’s stores’ land leases in Phoenix. The university contacted a California-based bank for which Davidson was tasked to sell the properties as quickly as possible — in 2009. The university didn’t want to take the title for the land and the Walgreen’s leases were nearly up and losing value. Additionally, one of the leases had a defeasance clause, meaning the loan couldn’t be paid off unless the income to the lender was replaced with equivalent earnings. Davidson deferred to a North Carolina company that had an expert in defeasance clauses and found investments to acquire in

CCIM: Scott Fey, Omni-American LLC Horne Plaza, a 15KSF retail center in Gilbert was available for sale in 2012. The economy was still very soft and retail in Phoenix had not improved.

Furthermore the center’s largest tenant, Gilbert Center for Family Medicine, was preparing to move. The largest challenge was to replace the 6KSF medical tenant. The second largest challenge was beyond the control of the buyer. Part of the center not for sale was a 60KSF former Albertsons grocery store. The store was abandoned and there was no indication it would be replaced anytime soon. The CCIM performed a value forecast for the buyer showing the center value based on a CAP rate five years in the future under a worst case, best case and most likely case scenario. The CCIM also studied the retail market in the immediate area and discovered that many of the large vacant “big box” store locations that had been empty in the area were selling at a rapid pace. The buyer considered all of the research and made the decision to purchase what on the surface appeared to be a rather drastic situation. The CCIM helped the buyer negotiate a favorable termination with the medical center that had decided to leave its lease early. The broker on the building was instrumental in completing a lease with a new medical office tenant.

An investment group from Las Vegas purchased the old Albertsons location and leased the space to a new grocery chain. The owner successfully released a smaller tenant that was not paying rent on time and expanded the new medical tenant into its space. Cash flow of the property not only stabilized but grew with company guaranteed leases.

The value of the building has improved exponentially with the buyer taking a risk but a calculated risk based on the CCIM research.

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HEALTHCARE

BUDDY SYSTEM Two big healthcare projects in Arizona bring contractors together

By Amanda Ventura

I

f you want to build it, they will come.

Healthcare contractors have been champing at the bit for the last year in anticipation of two major hospital projects in Arizona. In November 2014, Prop 480 passed, which would enable a replacement of the largest clinical teaching hospital in Maricopa County, Maricopa Integrated Health Systems (MIHS), and to develop additional facilities on the campus.

In January, Banner Health finalized its acquisition of the University of Arizona Health Network, which includes the medical school and its facilities. The terms of the affiliation included an agreement to invest $500M over five years into the community.

So far, the plans include a new patient tower at the existing campus and a new hospital on the north campus.

“We started with what was the former owner’s priorities and tore into those assumptions and concluded that instead of upgrades on the campus, it was going to require a replacement of the patient care tower,” says Kathy Bollinger, executive vice president of academic delivery for Banner Health.

The current University of Arizona Medical Campus’ operating rooms are the same size as those built 40 years ago — 350 SF. Now, operating rooms are twice the size, Bollinger explains. Building a new facility will cost more, though considerably less than completely retrofitting the entire campus, she adds. Patients of the existing facility need somewhere to go.

That’s where the new comes in.

“From a timing standpoint, things must move out before we begin the hospital project,” Bollinger adds. The RFP for general contractors on the new hospital facility, Banner-University Medical Center Tucson, were issued in late March with a selection expected to be made May 1.

“I’ll be thrilled if we get a shovel in the ground this year,” says Bollinger, adding that it’s more likely to happen in

34 | May-June 2015

BANNER­­-UNIVERSITY MEDICAL CENTER TUCSON, COURTESY SHEPLEY BULFINCH

early 2016.

However, for the last year, general contractors have had their eyes on Tucson and preparing strategic partnerships (some are admittedly going solo) in anticipation of the RFP and work.

“A key criteria for the selection will include the ability to include Tucsonbased sub-contractors in the project,” says Kip Edwards, vice president of development and construction for Banner Health.

Banner Health solicits from a pre-approved general contractor list, meaning it works with firms it’s familiar with. Edwards had only heard of one joint venture prior to releasing the RFP. “There are not generals large enough in the Tucson market to do a hospital project of this magnitude,” he says.

“One of our big focuses will be their inclusion of Tucson-based subs. They’ll have to demonstrate their knowledge of the Tucson market.”

This is why DPR Construction tapped Tucson-based Sundt Construction for a joint venture on the project. In addition to a history of joint ventures on educational life science facilities

between the two companies, DPR aligned itself with the company for the local know-how.

“I think Banner will get a lot of pressure from the local Tucson marketplace to use as many Tucsonians as possible,” says Hamilton Espinosa, national healthcare leader for DPR Construction. “I think the Tucson community is very proud.”

Ryan Abbott, science and technology group leader for Sundt Construction, observes that using local subcontractors does bring more pride into a project.

“We find that we get a lot more pride in craftsmanship if (subcontractors) drive by that project and can tell family they did that,” he says. “A project built by a community that will benefit from the project, there’s a natural alignment of behavior there…Our industry is really complex and aggregates thousands of supply chains. The simpler you can make those by being locally sourced, the better you are at providing a predictable outcome.”

Sundt Construction is also a prolific joint venturer.

“Most of the time we form a joint venture, it’s not because of the scale of

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Kathy Bollinger

Kip Edwards

the project,” says Abbott, adding that there can never be too many different experts at work.

It’s about knowing the owner, adds McCarthy Building Companies’ Executive Vice President Justin Kelton.

“McCarthy has a bonding capacity so that we don’t really need a partner (on the MIHS project), but we listen to our owners,” he says. “Either one of us could do the job alone or on our own,” he adds of joint venture partner DPR Construction for the MIHS project. “On Maricopa, you make some assumptions that in public work we can bring a lot to the table as a team. I think they would be more comfortable (with a team).”

Though an RFP for the MIHS project may be a year or more away, one general contractor suggests, these partnerships all started being discussed more than a year ago. Kitchell’s Russ Korcuska said talks of joint ventures for the Maricopa 36 | May-June 2015

Hamilton Espinosa

Justin Kelton

project started about two years ago and more formally a year ago. Currently, it has a loose joint venture with Hunt Construction but nothing finalized by press time.

“These investments are understood to be tremendous opportunities for our community,” says MIHS CEO Steve Purves of the enthusiasm. “In addition to the construction jobs that will be created by the capital projects, the economic impact of what MIHS does – advanced patient care, medical education and clinical training – is quite economically significant to Maricopa County and the State of Arizona.”

As for insight into when general contractors can expect an RFP, Purves isn’t particularly specific.

“Since the election last November, the district board has been meeting regularly to discuss how best to approach the work ahead, ever mindful of its

Ryan Abbott

Steve Purves

stewardship role regarding this voterapproved bonding capacity,” he says. “The board is looking at best practices and studying integrated project management approaches to prepare for managing the numerous projects and commercial partners in a highly organized and collaborative environment.”

Prop 480 describes three types of projects: outpatient, behavioral and acute care facilities.

“The projects within these three buckets will compromise a substantial portfolio of projects,” Purves says. “It can be a bit daunting to think about them all.”

In the meantime, the district board will work on a timeline “for the proper staging of a project portfolio of this magnitude,” Purves says. He suggested those who are interested in the contract procurement process register at the district’s website to join an email list.

37

HEALTHCARE

TELE’ LIKE IT IS

EICU NURSE AT BANNER DESERT IN MESA. PROVIDED IMAGE.

Technology carries real estate changes in healthcare

By Amanda Ventura

A

patient sits in the ICU at Banner Health’s Fairbanks Memorial Hospital in Alaska.

It’s late, many of the staff have gone home. He watches the glowing blinks of the machines monitoring his vital signs lighting the room in little blue and green bursts. Suddenly, a nurse is beckoned to his bedside by an abnormal fluctuation in his stats.

The patient’s physician is notified and, if off-duty, with the press of a button, a critical care specialist or nurse sitting in what’s affectionately called “the bunker,” staffed 24/7 by highly specialized physicians known as intensivists at Banner Desert in Mesa, can appear on a two-way video 38 | May-June 2015

communications system to assist.

This is the future of medicine.

Though Banner Health has been working on its eICUs in the seven states where its located since 2006, telemedicine is continuing to affect change throughout real estate.

BEHIND THE SCREEN A COMPACCS study found that patients who would need critical care require, on average, 45 minutes of an intensivist’s time per day, according to “The Critical Care Workforce.” After crunching the numbers, the report claims ICU patients use 18 million ICU days every year. This is on the condition that only a third of ICU

patients are seen by an intensivist. To meet this demand, 3,100 intensivists would have been required to treat the patient demand in 2000. That’s more than 65 percent of those who were available in the U.S. There’s a shortage of these critical care specialists, even 15 years later.

This has a direct effect on care.

Mortality rate in ICUs is between 12 and 17 percent, according to U.S. Department of Health & Human Services’ “The Critical Care Workforce: A Study of the Supply and Demand for Critical Care Physicians.”

“If demand grows only as a result of the growth and aging of the population, demand for intensivists

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HEALTHCARE “REAL ESTATE IS A REALLY EXPENSIVE PART OF HEALTHCARE DELIVERY, IT CHANGES HOW REAL ESTATE IS DELIVERED. IT MAY NOT CHANGE QUICKLY; PEOPLE STILL NEED TO BE TOUCHED AND SEEN, BUT IT WILL DEFINITELY EVOLVE AND CHANGE.” – Julie Johnson will increase from about 1,880 in 2000 to 2,600 in 2020 (an increase of about 38 percent),” according to “The Critical Care Workforce.”

“Every ICU could hire a specialist, but it would outstrip the supply in the entire country,” Bollinger says.

With the Affordable Care Act, hospitals are seeing inpatient days decrease. The reimbursement methodology has turned toward value and outcomes at affordable costs versus being reimbursed for doing more, says Kathy Bollinger, vice president of academic delivery at Banner Health.

“There is a change in incentives to provide the right care in the right setting at the right time,” Bollinger says.

Inpatients are spending fewer days in hospitals, and bed and room quantity focuses are now on quality rooms with the appropriate infrastructure.

When Banner Health renovates the patient tower at the existing University Medical Center in Tucson, it will only add 10 additional beds.

“The hospitals are not getting bigger, but they need to get smarter,” said Bollinger.

Banner Health has 500 of its senior patients participating in a pilot program. They are provided an iPad and home technology that facilitate e-visits from their physicians.

“Our early evidence on that project is we’re decreasing those patients’ trips to the emergency department,” Bollinger says.

THE BRAINS Bollinger says hospitals need to get smarter, and DPR’s national healthcare leader Hamilton Espinosa agrees.

“Their payer mix is getting thrown off skew by the amount of Baby 4 0 | May-June 2015

Boomers and reimbursement rates offered by Obamacare,” he says. “The need to be smarter…part of that is leaner, smarter operation.”

The amount of technology used by a hospital requires a larger amount of data that must be managed. This requires updates. Hospitals have also been upgrading their presentation.

“Banner is (Arizona’s) largest hospital system, so they have been moving the fastest and doing the largest amount of work in terms of positioning themselves to streamline and provide healthcare in more efficient manner,” says GPE Commercial Advisors Executive Vice President Julie Johnson. She is referring to the number of satellite Banner clinics that have popped up in the East Valley. There is a grab for market share, she says.

“Dignity has been looking at several different clinics,” she says. “I don’t think they have been implementing them as quickly as Banner.”

These large hospital care providers can afford to expand. However, clinics that have been traditionally geared toward lower income patients are now in a market where these patients have Obamacare and the power of choice.

Johnson says Adelante and Mountain Park facilities have expanded their programs to compete. Most recently, Adelante Healthcare in Peoria moved into a retail center and put a huge emphasis on outfitting the space with attractive interiors.

“Real estate is a really expensive part of healthcare delivery,” Kathy Bollinger

says Johnson. “(Telemedicine) changes how real estate is delivered. It may not change quickly. People still need to be touched and seen, but it will definitely evolve and change.”

In addition to the adoption of telemedicine, the healthcare industry is seeing aesthetic changes.

There is a greater emphasis on patient care and reducing the amount of time a patient stays at the hospital as well as return trips.

“I think the hospital campus is always going to be a hub of activity, but there is more and more being done at these outpatient clinics,” says Johnson. “Heart surgeries will soon be done in outpatient settings. There is less of a need for hospital beds and more of a need for ambulatory settings.

It’s cheaper to provide (care) in those settings. The synergies of proximity around hospital campuses will always be there. Even though the trend is for clinics to be off-campus in the hub and spoke method from 12 years ago, there will always be a synergy.”

For example, HonorHealth, formerly John C. Lincoln, built Sonoran Health and Emergecy Center that is an emergency department with an attached clinic. In the event of needing a hospital, patients are transferred to Deer Valley.

“The actual patient is going to have a lot more choice in today’s market,” Johnson says. “There is going to be more hospitality element in providing healthcare. People want to choose it because of health care but also because it has a nice hospitality setting. As more people are having the ability to control their healthcare, if their first $5K is out of pocket and they have a choice of where to get an MRI or where to have my baby, they’re going to go where they’re most comfortable.”

Hamilton Espinosa

Julie Johnson

2015

30 YEARS OF EXCELLENCE

Valley of the Sun's Premier Advocacy Group for Responsible Development

VALLEY PARTNERSHIP

Q&A The changing face of development

42 | May-June 2015

By Amanda Ventura

I

f Valley Partnership is the voice of responsible development in the Valley, new CEO and President Cheryl Lombard is expected to be the deep breath behind it.

In mid-March, she transitioned from being director of government relations at The Nature Conservancy in Arizona to the leader of Valley Partnership.

“We were looking for a transformative leader that could really build on the organization’s more than 25-year history,” says Chairman of the Board Scott Nelson of Macerich. “Someone who was well connected and respected in the community, especially in the role of advocacy, which is one of our organizational pillars. We truly believe there is an opportunity to take Valley Partnership to the next level as a voice in the community and a value-add proposition to our partner companies. We are extremely

confident that Cheryl can deliver on those promises.”

Lombard has led companies and clients through challenging entitlement cases and large master-planned community developments in California.

“Her understanding of the government agency, municipal and community touch points and how they relate to the development process is paramount in the underlying goals of Valley Partnership,” says Nelson.

While at The Nature Conservancy in Arizona, Lombard helped develop, lead and execute the strategic initiatives for the organization.

“Her Nature Conservancy involvement with local, state and federal legislation and policy making will be a tremendous asset to Valley Partnership,” says Nelson. “Her role required her to bring different stakeholders and viewpoints together to work on and advance issues impacting the organization.”

Lombard holds a J.D. from Southwestern University School of Law, a Master’s in public administration from California State University and a Bachelor’s degree from American University.

What attracted you to working with Valley Partnership, given your previous role at The Nature Conservancy?

I gained years of experience in the development industry as a public affairs executive and attorney in California, helping acquire entitlements through some of the most challenging bodies. My 10 years with The Nature Conservancy made Valley Partnership the perfect fit to utilize my experience representing all sides in the development process.

What Valley Partnership Political Action Committee (VPAC) efforts we can expect with you as president and CEO? VPAC is a great tool that allows us to participate in the political process at a different level, while also furthering Valley Partnership’s reach. We anticipate enhancing VPAC for the 2016 elections to actively support state and local candidates and potentially ballot measures that share our principles and priorities.

What specific issues is Valley Partnership advocating in 2015?

The biggest is how we prepare for the future and our water so we continue to maintain economic vitality. Arizona has led the way in the West with its leadership in dealing with a continuing drought. We need to ensure funding is sufficient to our state agencies and water providers to ensure our water security.

Next are economic development and the tools we need for infrastructure, a well-funded Arizona State Land Department, and consistent policies on taxes and fees. As we prepare for the 2016 legislative session, we want to work closely with the chambers and other commercial real estate development organizations to assemble a unified agenda.

How does Valley Partnership partner with — and distinguish itself from — the other commercial real estate and development organizations in Arizona and the Valley?

Valley Partnership is an advocacy organization that is an umbrella group and honest broker for the development industry. We are the only group who can lobby at all levels of government and have members from the commercial, industrial and master planned real estate development industries. Other groups are slightly narrower in focus or membership. However, partnerships, collaboration and coordination with all of these groups is extremely important to all of our success.

What role do you see Arizona’s higher education institutions playing in the Valley’s development and growth? How do you think the recent budget cuts to education may affect such development?

PHOTO BY MIKE MERTES, AZ BIG MEDIA

The leadership and forethought of Arizona’s higher education institutions in the development of downtown Phoenix and Tempe have had a tremendous impact in kick-starting surrounding commercial development. It has made the universities a nationwide example of how public and private investment can be done. Recent budget cuts have made it even more important for our higher education institutions to focus on how to make the most of their assets and be true entrepreneurs.

43

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here are undeniable truths in commercial real estate. For instance — retail follows rooftops. However, when the right variables come together, the presence of retail can create a demand for mixed-use communities.

This is a phenomenon Michelle Schwartz, associate at RSP Architects, has observed in her firm’s recent work.

“Arizona has such a short history when compared with the rest of the United States and as such, we have developed around a more vehicular centralized society,” says Schwartz. “When we look at new communities — and the desire for connection in neighborhoods — creating mixed-use flexibility where residents can truly live-work-play is unique.”

RSP Architects has designed The Row in downtown Chandler, a 60KSF two-story mixed-use development in the city’s newly designated entertainment district. The 46 | May-June 2015

project’s anchor is Alamo Drafthouse Cinema, an Austin, Texas-based dine-in theater expected to bring 700 people to downtown Chandler four times a day.

“Today’s retail focuses on experience, which is exactly what The Row will bring,” Schwartz says, adding that many restaurateurs’ interest in the area has been piqued by the project.

Another rooftop project that has sought out a vibrant area in which to incubate is Portland on the Park, a 14-story luxury condo development by Habitat Metro and Sunbelt Holdings, designed by DAVIS Architecture. This project, jokes Habitat’s Timothy Sprague, has a three-acre front yard and 32-acre backyard, referring to the Japanese Friendship Garden and Margaret T. Hance Park adjacent to the site.

“The big different between suburban and urban environments is we’re able to do our own placemaking,” says Sunbelt Holdings President and CEO John Graham.

“It’s critical to be near meaningful open spaces and more interesting amenities.”

Sunbelt Holdings, largely known for its master planned

Concentrated Culture Symbiosis of ground-up developments and adaptive reuse

By Amanda Ventura

ABOVE: PORTLAND ON THE PARK. COURTESY OF DAVIS ARCHITECTS

communities throughout Arizona, is stepping off the golf courses and bringing its suburban sensibility to the urban environment of downtown Phoenix. The company’s 149unit Portland on the Park is also being constructed near the evolving Roosevelt Arts District. The cultural developments of the parks and Roosevelt Row were “absolutely critical” to the identity of Portland on the Park, Graham says.

He’s been following the development of the area for almost five years, since his eldest son moved into Portland Place. Through his son, Graham says, he watched and learned to understand the dynamics of the area, which has evolved over the course of the project with light rail and the growth of ASU’s downtown campus.

Graham says he’s seeing similar trends in Chandler, Phoenix and Gilbert and he has his eyes on Mesa.

“I think there’s a direct correlation between Marina Heights and Portland on the Park, Tempe Town Lake and Margaret T. Hance Park,” Graham says. The urban energy and urban vibes they share, he says, “is because of ASU students and the really fun, cool gathering places like The Yard.”

THE YARD IN TEMPE. COURTESY OF HAVAS PR 47

VALLEY PARTNERSHIP

THE ROW IN CHANDLER. COURTESY OF RSP ARCHITECTS

The Yard on 7th Street and Camelback Road was the shot in the dark heard around the Valley.

A former motorcycle garage was turned into a multitenant restaurant space that shares a patio and yard area. The Fox Restaurant Concepts design has since been emulated in what is Sam Fox’s largest project to date, The Yard at Farmers Arts District.

“When The Yard opened, it opened everyone’ eyes,” says Dave Sellers, president of LGE Design Build.

“The first Yard was very much an exploratory mission to see how successful it’d be,” says Brian Frakes, who worked on the first Yard with WDP Partners, and the second Yard with Common Bond.

“The Tempe one was different because it was west of the rail,” explains Frakes. “It was a dense, urban area. State Farm hasn’t even opened up yet, but there were a lot of good things coming. One-thousand multifamily units around us, and we noticed a strong southeast Valley group at The Yard on 7th.

We wanted to capture the southeast Valley (at the new Yard).”

There were a lot of State Farm and multifamily conversations in the planning stages of The Yard in Tempe, says Frakes.

“I think it’s the sum of all the parts that makes these places so dynamic and interesting. I think restaurant and retail is the big driver because employers are looking for that amenity base,” says Frakes.

Sellers announced plans for The Colony, a similar concept nearby the original Yard development. He is also working in downtown Gilbert’s Heritage District on The Marketplace, which houses a Fox concept restaurant, among others, and office space. Since Gilbert doesn’t have the same kind of old buildings as downtown Phoenix, LGE Design Build built Marketplace to look like something that had been there much longer than it had.

Brian Frakes 48 | May-June 2015

Dan Henderson

John Graham

“It is risky,” Sellers says. “It’s not your cookie cutter retailer.

It’s not a power center where you have a Walmart. It’s not that.

You’re developing what the clientele and customer kind of like, hoping the retailers believe in it.”

Retailers acclimate, he adds.

“What’s neat is we have projects that are larger retail, national users trying to fit into a space that isn’t a typical space,” he says.

To Graham’s point, Sellers says his company is looking to develop before big projects come through the pipeline.

Rivulon, for example, is a $750M mixed-use business park that broke ground in 2014 on Gilbert Road and the Loop 202 in Gilbert.

Gilbert’s Economic Development Director Dan Henderson sees a symbiotic relationship between developments such as Nationwide Realty Investors’ Rivulon project and the Heritage District.

“Candidly, you need both (types of development),” says Henderson. “You can’t have one without the other. These things work with each other and are in some ways the defining element of opposites attract. People will be attracted to both areas for different reasons.”

He refers to Heritage District as the “living room” of the community and Rivulon as the “family room” of Gilbert.

“What we’ve found in (Nationwide Realty Investors President) Brian Ellis and his team is a partner that is not looking at today, but at 20 years from now,” says Henderson.

“It’s a similar partnership in the Heritage District.”

“The $64,000 question is: Is it a blip or shallow market?”

Graham asks. “It’s not a blip. It’s a trend. The market is deeper than (people) think it is. A lot of people are thinking there’s a slowdown in master planned communities and that’s what’s driving apartment development, but it’s a modified business and trend that’s going to stay.”

Michelle Schwartz

Dave Sellers

VALLEY PARTNERSHIP

Anatomy of a Com JANUARY

“

FEBRUARY

REVIEW AND RENEW

CALL FOR NOMINATIONS

Committee celebrates successes, wins, challenges and budget review for former project budget from previous year. The board engages and elects liaisons for the year.

Grant application requests gets written, distributed and published.

SITE VISITS

THE CANDIDATES

Top-ranked grant requests get visited by the committee.

In 2015, the committee previewed four sites.

In 2015, Valley Partnership received 18 applications.

”

History: Since Valley Partnership was founded 27 years ago, it has given back to the Valley through an annual community project that transforms the location of a local nonprofit. The annual charitable event brings together the commercial real estate community, through year-round fundraising events as well as appeals for donations and volunteering on the actual event day. It’s a time when brokers build wooden swings, developers paint benches and subcontractors dedicate their services for free to make a nonprofit’s facilities worthy of its cause.

MARCH

APRIL

Together, We Build a

Stronger Valley

While more than 200 people show up for event day, a four-hour period when they can help “install” the project, there are months of work that go into the big reveal.

PLANNING BEGINS

MAY

JUNE

Planning, designing and fundraising for the project is a six-month process.

FUNDRAISING: Every year, Valley Partnership raises between $100,000 and $250,000 with in-kind and cash donations for the community project through a 50/50 raffle, call to arms to the board, Rock for a Cause charity concert and annual Wreath Raffle at the December FMB.

BOARD APPROVAL Committee leaders present recommendation to the board or directors and the board votes on the project recipient. The charity recipient is announced to the organization. For the last two years, this has been done as a surprise party during Friday Morning Breakfast (FMB) programming.

OCTOBER

SETTING THE SITE EVENT DAY More than 200 volunteers install the project. In the following days, contractors finish project and put last minute touches on it. Committee leaders meet with charity recipient to make sure they are happy with everything and finalize all details, and a post-event celebration/ribbon cutting occurs.

50 | May-June 2015

Pre-construction begins one month prior to Community Project volunteer day. Event T-shirts are designed and 200 volunteers are recruited.

NOVEMBER

EVERYTHING BEGINS AGAIN

DECEMBER

Information provided by Dena Jones, Fidelity National Title

munit y Project

Kingston White, then-3, joins his parents and the Caretaker Landscape team at the 2014 Community Project.

51

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P

hoenix may be built on a grid system, but it’s not too hyperbolic to say all roads (and, one day, light rail routes) lead to Arizona State University.

It’s the theory of diffusion of innovations, says Sundt Construction’s Business Development Manager Ryan Abbott. The theory, which has been around since Everett Rogers published a book about it in the ‘60s, suggests how cultures change and adapt to new ideas. What it takes for inertia to kick in on a cultural change is innovators (first 2.5 percent), early adopters (13.5 percent) and an early majority (34 percent). For an idea to carry, Abbott says, it has to reach a tipping point of 15 to 18 percent.

“That is exactly what the university and city did in downtown Phoenix,” says Abbott. “They started by innovating ways of being multiple places at the same time, using integrated technology, synergistic relationships, taking full advantage of mass transportation. Next, they brought in early adopters — Millennials who wanted to understand and report on society. Where better to be than fully immersed in it at ASU’s Walter Cronkite School of Journalism?”

Phoenix gets schooled Sundt Construction built the Walter Cronkite School of Journalism, a bright orange and maroon building that sits along Central Avenue and very much serves as the front door of the ASU downtown campus. It was completed even before the first 54 | May-June 2015

dorms, Taylor Place, were done. The university sits right along the Central and Van Buren light rail stop, which shuttles thousands of students a day to and from classes.

Years later, Sundt was asked to build the downtown’s campus’ Sun Devil Fitness building by the YMCA across the street.

“When we were selected to build ASU’s Sun Devil Fitness, (the university was) approaching the fulcrum that pulls the early majority with it,” says Abbott. “They had a reason for adaptive, creative people to be downtown; now, they were creating the places that keep them there.”

“Part of ASU’s mission is to deliver positive impact in the local community, where we are socially embedded,” university spokesman Mark Johnson says.

Universities serve as the catalyst for business attraction, with its well-educated labor force, as well as a hub for the Millennial generation that is changing the way society looks at work and life.

“At the nucleus of that new societal space is the university supplying its innovation, early adopters and early majority,” says Abbott. “The universities (in downtown Phoenix) are landlords to fantastic restaurants, creators of walkways that connect and amenities that inspire,” Abbott says. “And now that they’ve pulled in the early majority, the late majority and laggards are only to follow.”

Sunbelt Holdings (Portland on the Park) and P.B. Bell are two examples of the Valley’s largest commercial companies

Valley of the Scholars

By Amanda Ventura

Aerial of Grand Canyon University; PHOTO by Shavon Rose, AZ Big Media breaking ground on their first urban projects in Phoenix.

Both companies are known for their master-planned projects, though multifamily trends and the growth of Phoenix’s Millennial population, due to higher ed facility expansions, have caught their eye.

“The expansion of ASU and GCU moving into the downtown area did have an influence on our decision to proceed with developing an apartment community in downtown Phoenix,” says P.B. Bell President Chapin Bell, “We believe that there will be a need for additional housing for both the staff and students that choose to live near the downtown campuses. Also, we expect that the addition of these campuses will generate a new excitement and energy attracting new businesses and downtown dwellers outside of the student population as well.”

P.B. Bell was awarded the adaptive reuse project of the 100-year-old Barrister Place (colloquially referred to as the “Psycho” building, because it appeared in the 1960 film) for a multifamily development.

Downtown Phoenix has been working for more than a decade toward making plans for adaptive reuse and infill projects easier and incentivized.

Kimber Lanning, who founded Local First, was one of the first innovators of a “new societal space” in Phoenix. She actively worked to launch the pilot program nearly a decade ago to streamline the process for adaptive reuse projects in order to

retain young, vibrant minds.

“When I started Local First, it was on intuition,” she says.

“The kids coming to my store (record store, Stinkweeds) were leaving. I started to think about what do those cities have that connects them to those cities and not Phoenix. They were acting in a local manner. We were too spread out. I set out to create districts. We need to encourage small business development. The brightest people want to be where there are cool restaurants, for instance.”

P.B. Bell Companies has also broken ground this year on Velaire at Aspera, a community near Midwestern University’s campus in Glendale.

“The nearby university is expanding, which will create a need for new, quality housing,” Bell says.

Strength in numbers Universities aren’t just attracting new development. They’re actively participating.

“SkySong and the Chandler Innovation Center are strong examples of the kinds of projects that go beyond what you would expect a university to be doing, but provide linkage both to the university and to facilities attractive to new businesses,” says ASU’s Johnson. “We have regular conversations with municipalities around the Valley and around the state about projects that help build the larger infrastructure for economic development. We take those very seriously, but we don’t discuss 55

VALLEY PARTNERSHIP them until they reach a greater level of fruition.”

Grand Canyon University (GCU), a for-profit, private Christian university, has more than doubled its footprint in the last seven years and plans to move more than 2,000 employees into West Phoenix with an office complex that will break ground next year. The university has 3,500 employees, is expecting 25,000 on-campus students and have half a million annual visitors to its arena. The school also invested $10M into Maryvale Golf Course to bring additional economic activity to the west side of Phoenix and is renovating 700 homes in the neighboring community with Habitat for Humanity over the next few years.

“We’re in the midst of a $1M partnership with the Phoenix Police Department to increase the police presence and combat crime in the areas surrounding our campus, which has had a huge impact on the community,” says GCU President and CEO Brian Mueller.

On top of those and other investments, GCU’s economic impact is about $1B annually, according to Elliott D. Pollack & Co. “The biggest difference (between GCU and universities such as ASU) is that we are doing it as an enterprise, which means we are using investment dollars to build out a university that can make an impact in numerous ways in the community, all while also paying taxes back to the city, county, state and federal government,” Mueller says. “We’re having the same impact as other universities by producing more and more highquality graduates and raising the intellectual knowledge of the community, but we’re doing it as a tax-paying enterprise, which adds a second benefit to the area.”

The university also claims to have more than 2,000 students enrolled in the fall semester from California.

“Arizona used to lose thousands of college students, mostly to California, who were seeking a private Christian education,” Mueller says. “Now, those students are staying home. What’s more, the trend has completely reversed, as we’re attracting thousands of students from California and other states to our campus because of the low tuition costs and affordable room and board rates. Those tuition dollars are now coming into the

state and are being reinvested right here on our campus, which is a huge plus for Arizona. We hope that a percentage of those students will remain in Arizona after they graduate and build their careers here.”

Commencement Ryan Companies, which is working on the 2MSF State Farm build-to-suit at Marina Heights in Tempe and the ASU Research Park, specializes in office development. Nearly all of its office product is affected in some way by university expansions in Phoenix Metro, says Molly Ryan Carson, vice president of development for Ryan Companies.

“The search for educated employees is universal,” she says.

“Universities are certainly an important factor in many real estate decisions.”

Universities are surrounded by amenities, such as restaurants and recreational spaces, that appeal to prospective office tenants.

“Having a solid university like ASU in close proximity is viewed as a definite benefit by the tenants we are seeing in the market,” says Carson. “The opportunity to be near tens of thousands of potential employees is very appealing. Additionally, a university often is located in an area rich with amenities, again, a critical requirement for tenants.”

GCU has its eyes on the same type of growth.

“An estimated 1.2 million STEM jobs will be available in Arizona by 2018, yet our universities are producing just half the number of graduates needed to fill this demand,” says Mueller.

“We’ve launched programs in computer science, information technology and engineering to help close that gap and are working with industry leaders in Arizona to ensure that we’re producing graduates with the types of skills they are seeking.

When we grow out to 25,000 students in the next 4-5 years, it is our intention that 70 percent of those students will be studying in high-demand STEM areas that lead to good-paying jobs. That will have a major impact on the local economy and help attract businesses to Arizona that rely on having that workforce in place.”

ROOSEVELT POINT 56 | May-June 2015

Chapin Bell

Brian Mueller

Ryan Abbott

Molly Ryan Carson

Commercial Real Estate Advisors

NATIONAL REACH. LOCAL EXPERTISE.

THE SPERRY VAN NESS DIFFERENCE

57

VALLEY PARTNERSHIP

Conquering the Hill

V

alley Partnership defines itself as an advocacy organization with responsible development at its core. Behind the organization’s educational Friday Morning Breakfasts, networking mixers, fundraisers and annual community project, Valley Partnership has three committees that work year-round on the organization’s advocacy efforts on a federal, state and cities/county issues.

“Keeping with Valley Partnership’s focus on supporting water security for our economic vitality, economic development tools such as state land funding and consistent policies on taxes and fees, we had a successful year to build toward 2016 with the federal government, Arizona State Legislature and Valley cities,” says Cheryl Lombard, president and CEO of Valley Partnership.

Law of the Land

Arizona is the sixth-largest state, yet only 17 percent of its land is private. The role available land plays in economic activity is incomparable to East Coast states, says DMB Associates Executive Vice President Karrin Talyor.

States on the East Coast are nearly 98 percent private

Legislative Wins Federal: VP’s role: • Provided a forum for a continuing and constructive dialogue between federal congressional representatives and the development community with our monthly meetings.

• Provided formal comments on the EPA’s Waters of the U.S. Rule (“WOTUS”) and it potential damage to Arizona’s economic vitality.

• As a long time supporter of the Southeast Arizona Land Exchange and Conservation Act, also known as Resolution Copper, we were very happy to see it passed by Congress and signed by the President. The project will create 3,700 direct, high-wage jobs and a $61 billion fiscal impact to Arizona.

• Participated in the Spring Congressional Western Caucus Policy Roundtable on Land, Energy & Water. Spoke on impacts to Valley development by the EPA WOTUS and the proposed Desert Tortoise Endangered Species listing.

State: VP’s role: • Supported the extension of the Central Arizona Project (CAP) 4-cent ad-valorem tax from 2017 to 2045. This tax is levied by CAP in Maricopa, Pinal and Pima counties to pay for the canal infrastructure and to secure water operations for these counties. It is essential to ensure consistent water supplies for the Valley.

58 | May-June 2015

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61

VALLEY PARTNERSHIP land, meaning there is a higher percentage (or less land) that exists as productive tax-producing land. Such disparity can make it difficult to draft legislation that can fairly apply to all states, says Taylor.

“When you overlay the federal land, conservation land, clean water and critical habitats, there’s nothing left,” says Taylor. “You overlay all these regulations and you wonder, ‘How do you pay for economic activity?’”

Taylor says there is the possibility of more land that may be taken away from productive use in the name of conservation before the end of President Barack Obama’s second term. She notes that former President Bill Clinton created the Sonoran Desert Monument before the end of his term. It was a designation that she says removes land from being leased for grazing, mining or other economically vital purposes.

Valley Partnership’s Federal Affairs Committee, which Taylor helped form about three years ago, is a gathering place for representatives from different delegations to discuss these topics.

“Part of it is raising awareness,” says Taylor. “We routinely have four or five representatives from delegations every month to exchange information. I don’t know if some of these staffers get together in other situations.”

The Arizona State Land Department (ASLD) is one such group that attends committee meetings.

“Valley Partnership Committees (give) ASLD the opportunity to meet with local government representatives and discuss issues of mutual importance including land planning efforts that can enhance the value of ASLD land and increase economic opportunities,” says Bill Boyd, legislative policy administrator for ASLD. “Valley Partnership provides a forum helping ASLD to be active in the local business community by sharing information about land acquisition and development opportunities while contributing to an ongoing understanding of the condition of the local and regional economy.”

Cue the Water Works

In 2014, Intel Corporation, Sundt Construction, Carollo Engineers and the city of Chandler entered into a unique public-private partnership to tackle one of the biggest resource issues facing Arizona — water.

When Intel expanded its Ocotillo Campus in Chandler, its facility was going to create more waste streams that would add pressure to the city’s reverse osmosis facility (CHRO), which treats water for reclamation.

Salinity and total dissolved solids, referred to as TDS, are rising in reclaimed water throughout the Valley and most growing cities.

Reclaimed water is what’s used to irrigate public spaces in the city of Chandler. As reclaimed water quality drops, water shortages sit on the horizon. This is particularly an issue that arises when an industrial facility like one expanded by Intel increases its own need for water.

Therefore, Intel went to work on developing the Ocotillo Brine Reduction Facility, which would accommodate the increased waste streams and also contribute to upgrades at the CHRO facility. In the end, The OBRF project also eliminated discharges from the CHRO facility to the sewer – improving operations at the city’s water reclamation facility.

This project is an example of what Valley Partnership’s members are about. Sundt Construction, one of the oldest Arizona-based construction companies at 125 years old, is ahead of its time in bringing together the private and public sectors to build a project that’s responsible and sensitive to the future of Arizona.

62 | May-June 2015

• Supported various changes to Arizona income taxes to allow a taxpayer, beginning in tax year 2015, to take an expense deduction to the amount allowed under federal law if the maximum deduction allowed were $500,000 and the limitation were reduced by the amount of the property placed in service in the tax year exceeds $2 million. It also repeals obsolete sections of the tax code.

• As a long time supporter of self-funding of the Arizona State Land Department, we were happy to see as part of this year’s state budget, a measure placed on the 2016 ballot to allow up to 10 percent of the money from land sales to fund the department.

Valley cities and county: VP’s role: • Actively engaged in development impact fee update discussions in cities, including Phoenix, Peoria and Tempe with a particular focus on a new element included as a result of a statutory change — charging non-residential development for infrastructure related open space and parks.

Continued engagement with the Arizona Department of Transportation (ADOT) on the Access Management Guidelines to regulate spacing of ingress and egress along ADOTcontrolled roadways. The goal is to have guidelines that provide flexibility and context-sensitivity.

— Cheryl Lombard, CEO and president, Valley Partnership

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