AZRE magazine May/June 2016

MAY-JUNE 2016

Prescription for growth The trend toward one-stop healthcare impacts development

INSIDE:

HEALTHCARE p. 26 BUILDING TRENDS

REAL ESTATE p. 50 FINANCING

VALLEY PARTNERSHIP p. 65 ROUNDTABLE

July 21, 2016 ARIZONA’S AUTHORITATIVE MID-YEAR UPDATE & FORECAST AZRE magazine will host a panel of Arizona’s top commercial real estate experts, yielding in-depth discussions of economics, development and state of the industry. Highlights include market analysis, an all-star broker panel, networking and cocktail reception.

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L AS V EGAS

N OGALES

PHOENIX

R ENO

TUCSON

Valley Partnership’s impact is far-reaching

I

t’s hard to believe that summer is a heat wave away.

As Arizonans, we may not always welcome the transition from spring to summer, but in commercial real estate, mixing change and a little heat can be a good thing.

This issue contains plenty of evidence of the Valley’s ongoing transitions — from the latest in commercial real estate finance to the growing progress in healthcare and senior living.

Be sure to dive into the Valley Partnership supplement.

First hand, I have benefited as a member of this community-driven (and supported) organization.

Many of the sources I’ve cultivated and captured for our featured AZRE stories have been a direct result of networking at the Valley Partnership monthly breakfasts. Beyond networking, you’ll absorb how Valley Partnership’s outreach cultivates relationships with nonprofits, business and political leaders, and is ushering in an emerging group of new professionals to help our community continue to grow.

Until we meet again, happy reading and stay cool!

President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Associate editor: Erin Davis Contributing writers: Joyce Grossman | Tim Lawless John Prather | Deb Sydenham Interns: Kaia Evans | Samantha Pouls | Gianna Tracey AZRE | ARIZONA COMMERCIAL REAL ESTATE Director of sales: Jeff Craig ART Art director: Mike Mertes Graphic designer: Anita Richey Intern: Michael Bodnar DIGITAL MEDIA Digital editor: Jesse A. Millard MARKETING/EVENTS Marketing & event manager: Heidi Maxwell Marketing coordinator: Kristina Venegas OFFICE Special projects manager: Sara Fregapane Executive assistant: Mayra Rivera Database solutions manager: Cindy Johnson AZ BUSINESS MAGAZINE Senior account manager: David Harken

Erin Davis Associate editor, AZRE erin.davis@azbigmedia.com

Account managers: Ann McSherry | Bailey Young AZ BUSINESS LEADERS Director of sales: Sheri Brown RANKING ARIZONA Director of sales: Sheri King EXPERIENCE ARIZONA | PLAY BALL Director of sales: Joe Freedman

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. ©2016 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.

2 | May-June 2016

CONTENTS

FEATURES 2 Editor’s Letter 6 AZRE Source 10 Executive Profiles 12 After Hours 13 New to Market 14 Big Deals

18 Legislative Update

65

26 Healthcare Building Trends

38 Senior Assisted Care 42 U.S. Green Building Council

48 EDDE Awards

13

50 Real Estate Financing

58 CCIM

65 Valley Partnership

42

On the cover:

Banner-University Medical Center 4 | May-June 2016

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

26

UP FRONT PROJECT NEWS

ANTHEM MEDICAL OFFICES LGE Design Build has completed a 20,500-square-foot medical office building in Anthem for Wood Orthodontics and Sheppard Pediatric Dentistry. The new horseshoe-shaped building, at 41930 N. Venture Dr., includes a water feature in the courtyard. A bubble wall that blows real bubbles for patients separates the offices for Wood Orthodontics and Sheppard Pediatric Dentistry. The building has visible signage on Interstate 17.

GROUNDBREAKING on the ground floor

By ERIN DAVIS

MORE AND TOWN LAKE Colliers International in Greater Phoenix negotiated the $1.4 million purchase of 1.5 acres at 942 and 946 W. First St. in Tempe, near Arizona State University and Tempe Town Lake. The site, which consists of two parcels and a 10,200-squarefoot warehouse building, is planned for a mixed-use, live/work redevelopment.

POST-ACUTE DEVELOPMENT Construction on Phoenix’s latest post-acute development is underway. Mainstreet and Mainstreet Health, the operating company of Mainstreet, broke ground in mid-February. This will be the first project Mainstreet Health will operate for Mainstreet. The property, located at 3000 N. 91st Ave. in Phoenix, boasts 94 private beds, 67,697 square feet and will provide post-acute care and assisted living in a service-rich environment.

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I

f you believe the days of ground-floor glory and grandeur have gone asunder, think again. The lively lobbies and firstfloor streetscapes so admired in golden eras of old are making a comeback. Take a look at how two projects are meshing the best of ground-floor throwback with new-age amenities to create a hybrid of first-floor functionality and fun.

At its peak, the Luhrs building was a Depression-era, iconic, high-rise in Downtown Phoenix. Now, it’s one of the city’s most researched and historically significant structures. With Phoenix still in its historical infancy compared with other cities, buildings like the Luhrs are highly coveted in the commercial real estate market.

“There’s a limited supply of historical buildings,” explains David Krumwiede, executive vice president of Lincoln Property Company, “particularly in our area as a post-World War II city. Even Los Angeles in the latter part of the 20th century has significantly more in terms of historic buildings inventory.”

Despite the limited supply, there has been a high demand for office and retail entities who want to be housed in historic

structures, according to Krumwiede. But there’s more to the story.

Aside from its intrinsic historical appeal and prime location, Luhrs has much to offer, starting from the bottom up.

“The ground level boasts 12,000 square feet of retail availability,” Krumwiede says, “with open truss wood ceiling, concrete floors and exposed brick, all of which is adjacent to the light rail.”

Luhrs’ streetscape and perimeter (the whole block), will have trees and tree wells, high-finished sidewalks and plenty of landscaping, not to mention regional and local restaurants that will appeal to an indoor/outdoor setting — conducive to all seasons.

“Adding ground-floor retail won’t simply increase the amenity base for tenants,” Krumwiede says, “It’s an amenity offering for the entire urban downtown fabric.”

A short light rail ride from the Luhrs building to Tempe will bring you to another ground-floor groundbreaker.

Earlier in the year, Douglas Wilson Companies discussed plans for One | Hundred | Mill, in which a first-floor 10,000 square-foot layout resembles a

PROJECT NEWS

SKYSONG 4 ON TRACK

GRAND ENTRANCE: The Luhrs Building is an historic 10-story building in Downtown Phoenix.

Grand Central Station feel — a first floor packed with amenities for both travelers and residents.

“You can’t beat Grand Central, but for the size of Tempe, and the vast space surrounding it alongside the Tempe beach park, it’s going to be a great area for people to grab a coffee, get a haircut, or get their bike fixed,” explains Douglas Wilson Companies COO Nicholas Wilson.

Similar to Luhrs, One | Hundred | Mill has the historical appeal and design elements that tenants and patrons are looking for.

“There is a sort of craft culture,” Wilson says, “that seeks a vintage, yet accessible theme to be part of their community.

There’s a lot of pride to be part of that.”

Although One | Hundred | Mill is navigating through the planning stages, the intent to include first-floor amenities and retail is still at the forefront. Wilson is currently seeking a co-anchor for the lobby space, considering a concept similar to James Coffee Company in San Diego (which includes a barber shop, bicycle shop, eyeglass store and boutique marketplace).

“We are finalizing the financing of the project,” Wilson says. “That would have

David Krumwiede

The construction of SkySong 4 has gone extremely smoothly during the winter and spring months, and its topping out came after just 4 1/2 months of construction.

The building is scheduled to open in the summer or fall of 2016. The 150,000-square-foot square foot building will be located along SkySong Blvd. at the corner with Scottsdale Rd. Several new tenants are in negotiation, with significant new lease announcements pending.

SkySong 4 has approximately 50,000 square feet available and Lee and Associates, SkySong’s commercial real estate broker, is working with prospective companies and tenants.

Nicholas Wilson

TUCSON LAND DEAL us breaking ground this summer. We have a lot of things brewing, including an announcement pertaining to a local restaurant operator that we’re thrilled to work with.”

What can we learn from the framework of these mixed-use, ground-floor fixtures?

That office tenants, urbanites and consumers want and are ready for more.

“They want to be able to go downstairs and grab a coffee and different kinds of food, then later be able to get a glass of wine or beer,” Wilson says. “It’s not only what the city demographic seeks; it’s also what we’ll need to retain our top producers.”

The City of Tucson sold 173 acres of land in the Houghton Rd. Corridor to Mattamy Homes.

One of the city’s largest land offerings in recent memory, it is part of the greater 320-acre Civano land parcel which fronts the west side of South Houghton Rd., between East Irvington Rd. to the north and East Valencia Road to the South. The parcel commanded a sale price of $8.26 million. Mattamy’s plans for the 173-acre parcel are not yet final, but will involve a master planned residential community.

7

UP FRONT

Room to grow Arizona’s growth and lack of developable land present challenges and opportunities

By AZRE STAFF

A

rizona may be the sixth-largest state in terms of size, but it has few big landowners and will face development challenges in the future because just 17 percent of its land is private. Most of the rest of the land is owned or held by the federal government, American Indian reservations and state government.

But here’s the flip side: for potential land buyers and developers, the combination of rapid population growth (more Baby Boomers fleeing colder climates) and scarce available private land can mean a bigger price appreciation.

Income and job growth will follow the rise of the number of Arizona residents. According to George Hammond, economic and business research center director at the University of Arizona’s Eller College of Management, the latest 30-year outlook for Arizona, “suggests that the state will continue to outpace the nation in terms of job, population, and real income growth.”

Hammond wrote on the management school’s website that Arizona grew “much faster than the nation during the 30 years before the Great Recession. That means the state will have millions more jobs and residents in 2045 that it does today.”

Arizona’s growth presents opportunities for land buyers and developers, especially if they act sooner rather than later.

“I believe that as the population of Phoenix grows, it will be tough for developers to find suitable pieces of land to build on,” said Kuldip Verma, CEO and founder of Vermaland. “Since there is more private land available in the West, I predict the growth will move West.”

The Arizona State Land Department

8 | May-June 2016

controls the land sale process and sells a small amount, relatively speaking, of land each year.

The dilemma of future private land development typically flies under the radar despite the fact that Phoenix is expected, as Arizona Commercial Real Estate Magazine reported last August, to add one million people every ten years.

The growth means Phoenix will eventually become landlocked, forcing land development around governmentowned land parcels. For example, the Valley for the most part is up against land owned by the state, as AZRE reported, and the West Valley can accommodate growth because it's is not landlocked.

As a result of dominance in government-owned land parcels, finding available project space can be challenging for developers. Without an adequate supply of serviced and developable land, homeowners can’t build. A lack of new construction, in turn, can cause a price rise for homes and rents.

“When you drive around the Phoenix metro it looks as though there is still plenty of room for urban growth,” said Michael George Hammond

Orr, director of the Center for Real Estate Theory and Practice (and also known as the “Phoenix Real Estate Guru.”) “However, this is somewhat of an illusion because so much of the surrounding land is unavailable for development. Many built-up areas now reach federal or state land boundaries or reservations. The main opportunities for significant growth lie to the west where there is still private land available and far out to the southeast toward Tucson on land, which has been previously used for agriculture.

Orr added, “There are still pockets of infill land elsewhere, but the price of these parcels has reached levels that make it difficult for builders to make their target profits constructing traditional single-family homes. Instead, we are seeing an increase in proposals for high-density homes packing far more dwellings per acre.”

Michael Orr

Kuldip Verma

When DNA stands for

‘Dogs Not Allowed’

By JESSE A. MILLARD

W

alking out of your luxurious downtown apartment to a courtyard riddled with dog-laid landmines and the stink of — for lack of a better term — poop, isn’t exactly everyone’s favorite thing in the world.

To combat the rise of doggie droppings being left on the ground at apartment complexes, despite readily available clean-up bags and trash cans, property managers are starting to use a new high-tech trick: DNA testing.

The Residences at Fountainhead is one of the first properties in Arizona to utilize this trick by collecting a DNA sample of every pet resident. When the complex finds a pile of abandoned doggie droppings, they collect a sample and send it for testing.

If the DNA from the dropping matches up with a resident culprit, the

owner of the offending pet receives a $250 fine. The cost of the test is $75.

Bryan Fasulo, regional property manager for Pinnacle Property Management, the firm overseeing The Residences at Fountainhead, says, tenants loved the idea about testing Exhibit No. 1 to get to the bottom of who left behind No. 2.

With DNA testing, people cannot deny that their pet was the party pooper.

“We’re able to pretty much 100 percent go back, and say, ‘Hey, Joe, this was you,’ and give them a chance to correct the situation,” Fasulo explains.

“And if they continue to do it, then we fine them. Unfortunately, that’s the only way people learn.”

The property managers decided to utilize DNA testing at the Residences because it’s located within a corporate

park and is considered highdensity. There isn’t much room around the outside of the 322-unit complex and they don’t want the open space riddled with dog waste, Fasulo says.

Bryan Fasulo “Left-behind dog waste is actually one of the biggest problems we face on properties as a whole,” Fasulo says.

Folks are spending so much on downtown properties with nice amenities and a tight-knit community, he says, "they don’t want to have to dodge dog (droppings) as they walk out their front doors."

9

EXECUTIVE PROFILES

Evolving excellence Gould Evans Phoenix celebrates 20 years as a transformative architecture company

CELEBRATING 20 YEARS: Gould Evans

By SAMANTHA POULS

W

hile some people may view architecture as simply a design, Gould Evans Phoenix has proven throughout the past 20 years that it is dedicated to taking on projects that have community impact.

As Gould Evans approaches its 20th anniversary in Phoenix, Principal and Board Chair Trudi Hummel says, the company continues to evolve.

“In 1996, when Gould Evans Phoenix was established, Arizona was coming out of a slow economic period and there was optimism for our future,” Hummel said. “Through the next 20 years, we experienced economic ups and downs. We’ve achieved some fantastic and widely recognized successes, but we’ve also taken our hits. For Gould Evans, 20 years in Phoenix represents survival. It represents commitment.”

Since Hummel launched Gould Evans Phoenix with partner Jay Silverberg, commitment and creative energy are the terms on which Gould Evans thrives.

"We were consumed with getting the work and doing the work," Hummel said, "and we did that well, becoming one of the most award-winning firms

10 | May-June 2016

in Phoenix. Jay eventually moved on and now Krista Shepherd, a longstanding associate and contributor in the office, is my marvelous partner."

Hummel said Shepherd has been instrumental in continuing Gould Evans’ design leadership and becoming more involved in the community.

"As a firm, we have taken the pause that the recession afforded us to be more thoughtful and strategic about who we are and what we want to do," Hummel said. "We think we have found the right balance with the right mix of public and private clients, keeping in mind that it’s important to always be nimble and consider the potential of each project uniquely."

While Gould Evans has offices in San Francisco, New Orleans, Tampa, Kansas and Missouri, the Phoenix office is unique for its commitment to a multi-disciplinary atmosphere.

“We have offered an entrepreneurial perch to grow a studio within our studio,” Hummel said. She is talking about Canary, which focuses on branding, using design as a strategy to solve any business decision.

After 20 years in Phoenix, Gould

Principal and Board Chair Trudi Hummel and Principal Krista Shepherd in the company’s Warehouse District office.

PHOTO BY MIKE MERTES, AZ BIG MEDIA

Evans has moved to its new location in the the Warehouse District to further its impact on the community.

“We have become — and want to become even more — a part of the redeveloping urban fabric,” Hummel said. “We see endless possibilities to connect people with our context.

We embrace the complexities of our evolving city and our wheels are turning about what is the next appropriate iteration of our neighborhood.”

With a committed and diverse team, Gould Evans plans to evolve as the community evolves. Meaning and authenticity are important to the company and Gould Evans intends to prove that over the next 20 years.

“We have accomplished all of these things through the energy, creativity and determination of a very dedicated team whose synergy makes us all even better.

After 20 years, I know we are here for the long haul,” Hummel said.

11

AFTER HOURS

COLORFUL HOBBY:

Graycor Business Development Manager Jennifer Delaporte raised these orchids in a backyard greenhouse built by her father, brother and husband.

Strong roots Graycor business development manager’s greenhouse passion helps her career blossom

By ERIN DAVIS

G

raycor Business Development Manager Jennifer Delaporte says clients aren’t much different than orchids — and if anyone would know, she would. Delaporte’s love affair with orchids started almost 20 years ago in college, but her passion was fueled during her two-year stint in Hawaii, where she lived with her husband on an orchid farm on Kauai.

“I was hooked almost immediately,” Delaporte says. “Working with orchids can be very rewarding and I love that there’s an orchid variety for every climate on earth.”

When Delaporte returned to the mainland in 2013, she felt the loss of her orchids almost immediately.

“I was only back in Arizona for a few months when my amazing ohana (family) gave me an unbelievable gift,” Delaporte says, “My dad, brother and

12 | May-June 2016

husband built me my very first greenhouse — right in the backyard.”

Now, Delaporte’s happy place takes the form of a 100-squareJennifer Delaporte foot structure filled with hundreds of orchids. She grows more than five different varieties of orchids, specializing in scented-species varieties.

The greenhouse serves as a retreat for Delaporte, who spends the majority of her day working at Graycor Construction Company, where she is responsible for strategic planning, coaching and overall business development efforts for the company’s Phoenix-based Southwest Regional Headquarters.

“We have a 95-year-strong national presence and tremendous local talent,” Delaporte says. “I am so blessed to be part of this team and we’re dedicated to leveraging our services to their highest and best value for our clients.”

One of the best aspects of her job, Delaporte says, is being a member of

the Graycor leadership team.

“With some firms, business development and marketing are a sidecar to operations,” Delaporte says, “but here, we understand that they are an integral part of the whole client experience. It’s exciting to help set the vision for how we serve our clients.”

Delaporte likes that her role will continue to evolve as the company does, and she’s ready to grow her real estate roots along with her orchids.

“In my career, I’ve been part of the residential and commercial development industries, and I’ve loved them both. Knowing that our projects are creating jobs, tax revenue and diversified communities is a great way to make a living,” she says.

Back in her greenhouse, Delaporte sometimes finds life surreal.

“Sitting in the middle of a desert, in the middle of a city, in the middle of an orchid garden is pretty unique,” Delaporte says. “This hobby teaches me something new every day. For example, you have to be patient. There is no plant in the world that is always in bloom.

Orchids, like commercial real estate, operate in a cycle. And, like clients, every species of orchid thrives under a different set of conditions. It takes attention and commitment, but when you get these formulas right, really beautiful things happen.”

NEW TO MARKET NEW PROJECTS: (Clockwise from top left) The Grand at Papago Park Center, Wood Orthodontics and Sheppard Pediatric Dentistry, Proxy 333.

MULTIFAMILY PROXY 333 DEVELOPER: Tilton Development and Goodman Real Estate GENERAL CONTRACTOR: UEB Builders ARCHITECT: Studio Meng Strazzara LOCATION: 333 E. McKinley St., Phoenix SIZE: Lot size is 27,990 SF (.63 acres) total rentable square footage is 71,438 SF BROKERAGE FIRM: N/A VALUE: Multi-million dollar development START: February 2015 COMPLETION: June 2016

OFFICE THE GRAND AT PAPAGO PARK CENTER DEVELOPERS: Lincoln Property Company, Goldman Sachs GENERAL CONTRACTOR: JE Dunn Construction ARCHITECT: HKS Architects LOCATION: Loop 202 and Priest in Tempe SIZE: 3,187,000 SF mixed-use urban development BROKERAGE: Jerry Roberts, Corey Hawley and Patrick Boyle with CBRE VALUE: Multi-million dollar mixed-use urban development COMPLETION: January 2017

MEDICAL WOOD ORTHODONTICS AND SHEPPARD PEDIATRIC DENTISTRY DEVELOPERS: LGE Design Build GENERAL CONTRACTOR: LGE Design Build ARCHITECT: Cawley Architects LOCATION: 41930 N. Venture Dr., Anthem SIZE: 20,500 SF BROKERAGE: N/A VALUE: N/A COMPLETION: March 2016

13

LANDING A BIG FISH CBRE veteran helps bring Fortune 1000 company to Arizona

By MICHAEL GOSSIE

I

t’s not often that an Arizona broker can convince a North Carolina manufacturer to relocate its corporate headquarters to Phoenix.

But that’s exactly what happened when Tom Adelson, executive vice president at CBRE, represented Carlisle Companies, a Fortune 1000 business that makes products that range from commercial roofing to cookware to aerospace components and generates about $3.5 billion in annual revenues.

In February, Carlisle leased 46,503 square feet at Kierland One and is relocating its corporate headquarters from North Carolina to Arizona by year-end, with plans for more than 100 executive and management positions.

The company’s CEO, Chris Koch, said in a statement at the time of the lease that Carlisle made the move due to a shift in its core business.

“We have become more global as well, expanding operations around the world. Our footprint has changed, and as a result, we have made the decision to relocate our corporate headquarters to Phoenix,” he said. “We are excited to become part of a dynamic Phoenix business community. Phoenix will position us closer to many of our major customers, our employees on the West

14 | May-June 2016

Tom Adelson

Coast and in Mexico, and provide us better access to our Asia Pacific markets.”

AZRE talked with Adelson, who offers a little more insight as to how the deal was made.

AZRE: How did the Carlisle deal get started for you?

Tom Adelson: A friend of mine from the CBRE office in Charlotte, N.C., knows the corporate counsel for Carlisle and does work with them across the country and told me they were thinking about relocating to Arizona.

AZRE: What were the biggest challenges in the deal?

TA: Carlisle had to fit a lot of different parts because they own a lot of different companies. Most of the challenges were on Carlisle’s end, trying to figure out how much space they needed and how much growth they wanted to project ahead. The challenges were more on Carlisle’s end than mine. It was a pretty straightforward real estate deal for me.

AZRE: Does sealing a deal that has such a big economic impact on the region faze you?

CORPORATE OFFICES: Kierland One, the new home to Carlisle Companies, is a 175,441-squarefoot, Class A, four-story office building that has a contemporary dual-paned, reflective glass exterior complimented with sandstone accents. The building has panoramic views of the McDowell Mountains and the Kierland Golf Course.

TA: Maybe it did early in my career, but I’ve been doing this for 30-some years. It’s fun getting to know the leaders of a multinational company like Carlisle and selling them on all the great things Phoenix has to offer and taking them to events like the Phoenix Open. That’s super fun, but I don’t really think about the economic impact the deals will have once they’re made.

AZRE: What’s your outlook for the next few years?

TA: I’m very bullish on Phoenix in general. We have the infrastructure, the weather and all the pieces in place to be able to continue to grow. I think we will need to do some unique things to get corporate America to look more closely at us. It’s tough to compete with places like Dallas for major corporate headquarters, but there is a good amount of growth here, particularly with the tech sector.

It’s the big deals and the brokers who make them, that make the market an interesting one to watch. Here are the Top 5 notable sales from Feb. 1, 2016 to March 31, 2016. Source: Cushman & Wakefield research department, Colliers International and Costar.

INDUSTRIAL/SALES

OFFICE/SALES

BASELINE INTERSTATE 4707 E. Baseline Rd., Phoenix 128,305 SF; $14M BUYER: Industrial Property Trust SELLER: Dalfen America Corp.

LISTING BROKERAGE: CBRE

GAINEY CENTER II 8501 N. Scottsdale Rd., Scottsdale 146,770 SF; $35.25M BUYER: Lincoln Property Company SELLER: Invesco Advisors, Inc. LISTING BROKERAGE: Cushman & Wakefield

PROLOGIS SKY HARBOR DISTRIBUTION CENTER 1720 E. Grant St., Phoenix 176,640 SF; $6,753,445 BUYER: Prologis SELLER: Miller-Valentine Group LISTING BROKERAGE: Lee & Associates

PIMA NORTHGATE 14000 N. Pima Rd., Scottsdale 144,959 SF; $28.1M BUYER: Miller Global Properties, LLC SELLER: ASB Capital Management, LLC LISTING BROKERAGE: Cushman & Wakefield

PROLOGIS SKY HARBOR CENTER 1720 E. Grant St., Phoenix 122,828 SF; $6.5 million BUYER: Prologis SELLER: Miller-Valentine Group LISTING BROKERAGE: Lee & Associates

RIVERVIEW POINT BUILDING 6 PHASE 1 146 N. Alma School Rd., Mesa 83,264 SF; $17,195,681 BUYER: Harvard Investments Paul Hill SELLER: R&R Riverview LLC LISTING BROKERAGE: CBRE

PAPAGO INDUSTRIAL PARK 301 N. 45th Ave., Phoenix 76,950 SF; $5.7 million BUYER: Willi Itule Produce, Inc. SELLER: Overton Moore Properties LISTING BROKERAGE: Lee & Associates

501 GATEWAY 501 N. 44th St., Phoenix 102,251 SF; $17M BUYER: Irgens Partners SELLER: 501 N. 44th St. Trust LISTING BROKERAGE: Colliers

GRAND II 5655-5755 N. 51st Ave., Glendale 88,852 SF; $1.3 miliion BUYER: Francisco Gamez SELLER: Grand Avenue BP LLC LISTING BROKERAGE: Cushman & Wakefield

1515 W. 14TH ST., TEMPE 228,000 SF; $16.5M BUYER: Wentworth Property Company, LLC SELLER: BF Enterprises, Inc. LISTING BROKERAGE: JLL

15

LAND/SALES

MULTIFAMILY/SALES

RETAIL/SALES

S. RECKER AND E. WILLIAMS FIELD RD., GILBERT 92.70 acres: $20,667,865 BUYER: Fulton Homes Corp.

SELLER: JLC Family Investments LLC LISTING BROKERAGE: N/A

IMT DESERT RIDGE 17030 N. 49th St., Scottsdale 424,368 SF - 412 units: $68M BUYER: IMT Capital SELLER: Angelo, Gordon & Co. LISTING BROKERAGE: CBRE

PALM VALLEY PAVILIONS WEST 1380-1474 N. Litchfield Rd., Goodyear 150,111 SF; $39,048,210 BUYER: DDR Corp.

SELLER: Heitman LISTING BROKERAGE: Eastdil Secured LLC

INDIAN SCHOOL ROAD AND LOOP 303, GOODYEAR 78.30 acres: $12,864,139 BUYER: First Industrial Realty Trust, Inc. SELLER: Sunbelt Holdings LISTING BROKERAGE: CBRE

PAVILIONS AT ARROWHEAD 7400 W. Arrowhead Clubhouse, Glendale 413,481 SF - 248 units: $31.6M BUYER: Capital Real Estate LLC SELLER: Abacus Capital Group LLC LISTING BROKERAGE: Marcus & Millichap

PALM VALLEY PAVILIONS WEST 1400 N. Litchfield Rd., Goodyear 51,693 SF; $13,446,843 BUYER: DDR Corp.

SELLER: Heitman LISTING BROKERAGE: Eastdil Secured LLC

N. 95TH AVE. AND HAPPY VALLEY RD., PEORIA 91.66 acres: $11.5M BUYER: Pulte Home Corporation SELLER: TerraWest Communities LISTING BROKERAGE: N/A

THE FAIRWAYS APARTMENT HOMES 777 W. Chandler Blvd., Chandler 339,720 SF - 352 units: $47M BUYER: Virtu Investments SELLER: Fortress Investments Group LLC LISTING BROKERAGE: Colliers

6354 E. TEST DR., MESA 38,202 SF; $10 million BUYER: Seven Automotive LLC SELLER: Earnhardt Properties Limited Partnership LISTING BROKERAGE: N/A

NE CHANDLER BLVD. AND MCCLINTOCK BLVD., CHANDLER 10.79 acres: $11,280,000 BUYER: JPI/TDI SELLER: Lennar Multifamily LISTING BROKERAGE: N/A

SONOMA RIDGE 8201 W. Beardsley Rd., Peoria 311,556 SF - 240 units: $30.2M BUYER: Sunroad Enterprises LLC SELLER: Sentinel Real Estate Corporation LISTING BROKERAGE: N/A

METRO GATEWAY SHOPPING CENTER 3315-3443 W. Peoria Ave., Phoenix 64,793 SF; $9.1 million BUYER: TitanStar Properties Inc. SELLER: Floyd E. and Beverly A. Luman LISTING BROKERAGE: CBRE

SUMMIT AT PINNACLE PEAK PATIO 10424 E. JOMAX RD., SCOTTSDALE 9.19 acres: $10M BUYER: K. Hovnanian Great Western Homes SELLER: Michael A. Lieb Ltd. LISTING BROKERAGE: N/A

ASHTON POINTE 12175 W. McDowell Rd., Avondale 299,242 SF - 314 units: $42.5M BUYER: Parkmeed Properties SELLER: P.B. Bell Asset Management LISTING BROKERAGE: Marcus & Millichap

ADOBE VILLAGE 11475 E. Via Linda Rd., Scottsdale 58,836 SF; $9 million BUYER: Albertsons Companies SELLER: Spirit Realty Capital LISTING BROKERAGE: N/A

BIG DEALS: The 352-unit Fairways Apartment Homes in Chandler sold for $47 million. The buyer was Virtu Investments and the seller was Fortress Investments Group LLC. The listing brokerage was Colliers.

16 | May-June 2016

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LEGISLATIVE UPDATE

Reviewing Capital Availability and Arizona’s Housing in Recession Roles

S

ince the end of the Great Recession, the housing market in Phoenix has remained weak compared to other geographies. Despite a thriving multi-family market, permits are less than half of 2005 levels and prices remain below peak levels. What makes this particularly odd is that Phoenix has historically demonstrated strong recoveries following market corrections. In 1982, permits recovered 19,299 in one year and between 1991 and 1994, annual permits increased by 18,800 (Zonda). Phoenix is capable of eye-popping recoveries following dramatic down cycles, but this recovery is different. Over the last six years, annual permits have only recovered by 15,900, off of a base that was the lowest

18 | May-June 2016

Steven La Terra ULI

total in over 36 years!

Perhaps a more modest recovery is a good thing? There are many reasons to believe that the Phoenix housing market is now poised to embark on a sustainable recovery where permits

and pricing increase modestly for the foreseeable future. But of course, there is always a “but.”

Intrinsically, there are more tailwinds to our housing market than headwinds.

Perhaps the biggest headwind is capital availability. To put the impact of capital availability into context, think about how much you would pay for your home if you could not finance it.

So let’s agree that without capital to buy land, develop land, build homes and purchase homes, the market will remain constrained. Since Phoenix has been viewed as “risky” relative to other markets, we did not receive our fair share of residential development capital as the economy emerged from recession. This has kept the current supply of new housing at low levels and created questions about the future supply of housing in Phoenix.

Land acquisition and development capital is ultimately tied to Wall Street and Wall Street believes the US economy is headed for a recession within the next three years. There is some evidence to support this assumption. In the post WWII era, there have only been three time periods where economic expansion has lasted as long as our current expansion.

With this as a foundation for underwriting, it’s easy to see why Wall Street isn’t funding land development.

What this means is that the housing market in Phoenix will likely remain undersupplied as demand improves.

Optimists will say this could be the basis for a long-term housing recovery, despite a national recession. The housing market in Phoenix didn’t feel the recession of 2001 and they would argue that we won’t feel the next one either. Perhaps they are right, but without capital, it is difficult to predict a stable long-term recovery in Phoenix.

Steven La Terra is the chair of the Urban Land Institute Arizona District Council and Managing Director, Meyers Research, LLC, a Kennedy Wilson Company.

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19

LEGISLATIVE UPDATE

AAED Celebrates JTED Funding

AAED

is celebrating a big win for education with the Career and Technical Education (CTE) and Joint Technical Education Districts (JTED) made priority by our Governor and Legislature this month.

With over 90,000 students enrolled in these programs across Arizona, much was at stake. These programs help reduce the delta between theories and practice for students who need that relevance in order to take an interest in their future career choices.

Voters approved a .25 ADM (Average Daily Membership); a $1,147 addition per student enrolled in JTED courses.

These funds were allocated for modern equipment in biotechnology, engineering and automotive technologies and many other industry supported programs as well as teacher training and supporting curriculum.

These programs are pathways to high wage, high skill jobs for Arizona students. Approved cuts in the 2015/16

20 | May-June 2016

Julie Engel AAED

Budget would have removed the entire ADM for JTED students, starting in the 2016/17 fiscal year.

A proposed remedy for that was the creation of a competitive grant program that would have forced all schools to compete for money that was originally allocated to CTE and JTED programs. Newer JTED programs and smaller rural CTE and JTED programs would have struggled to compete with the schools that have more resources and capabilities, causing some of the

JTED programs to possibly cease in their entirety.

Recognizing this was placing students, teachers, JTED Districts and major employers at serious risk, the Legislature approved the restoration of $29 million in state funding for JTED/ CTE. Senate bill, SB1525 by Senator Don Shooter (R-Yuma), went back to the House where additional language was added saying that “restoring JTEDs was an important priority for the House� and added the names of the 56 Representatives who signed on to their version. This version received a vote of approval from the Senate and was promptly signed by Gov. Doug Ducey.

This is a very strong statement by our state leadership. We are very proud of their collaboration and focus toward achieving this important decision for JTED/CTE programs.

Julie Engel is the president of Arizona Association for Economic Development.

Who To Know...

P

21

LEGISLATIVE UPDATE

Passing Prop. 123 ensures long-term health of State Land Trust

A

s many in our state know, there has been a dark cloud hanging over Arizona’s budget when it comes to funding education.

Voting “yes” on Prop. 123 will settle a years-long lawsuit and put $3.5 billion into our K-12 public schools over the next 10 years without raising taxes. It’s time to stop paying lawyers and start paying teachers.

I’ve visited schools all across our state, and the message is clear. Our kids have needs today, and our educators need more resources to do their jobs.

Prop. 123 is a fiscally responsible, historic first step towards giving our students and teachers the resources they need. It puts money back in the classroom. And it doesn’t raise taxes. I know it sounds almost too good to be true: If this doesn’t raise taxes, how are we paying for it?

What many don’t know is that Arizona has a something called the State Land Trust – a fund with assets that have been set aside and invested for decades specifically to benefit education. This plan ensures we are managing the trust responsibly while putting the money

22 | May-June 2016

Doug Ducey Governor

to use for the purpose it was intended: funding our K-12 public schools.

So how does it work?

When Arizona became a state, the federal government granted our founders nearly 11 million acres of state land. Every time we sell a piece of that land, proceeds go into the Land Trust where the money is invested and earns interest. The trust has been growing rapidly in value – nearly doubling in the past five years. And now it is valued at more than $5 billion.

Currently, only 2.5 percent of the trust is distributed to schools every

year. We can do better. A “yes” vote on Prop. 123 will increase the distribution rate to 6.9 percent for the next 10 years.

That means we will be able to use more of this money for its intended purpose: funding our schools.

But this plan also takes into account the needs of future generations. An analysis done by the non-partisan Joint Legislative Budget Committee shows that even with the higher distributions if Prop 123 passes, there will be more than $6 billion in the Land Trust in a decade. That’s a billion dollars more in the trust after 10 years, even while we are increasing funding to education.

And let’s not forget: Arizona still has 9.2 million acres of land worth approximately $70 billion that are yet to be sold and fund the trust.

The bottom line is that passing Prop 123 ensures the long-term health of the trust, while injecting an infusion of resources into classrooms that have needs today.

Doug Ducey is the governor of Arizona. A different version of this column was first published by the Arizona Republic.

Projects To Know...

P T

LEGISLATIVE UPDATE

PHOTOGRAPH COURTESY OF AZDOT.GOV

Arizona’s Infrastructure: Past, Present and Future

I

nfrastructure makes our lives better and our economy more efficient.

Roads, highways, water pipes and much more make up the modern infrastructure we all use every day.

Arizona built today’s expansive infrastructure over many years, and our leaders are responsible for keeping it working with a growing population that uses more infrastructure. As we move forward, there is no one way to fund infrastructure needs because the challenge of funding is too big for any

24 | May-June 2016

Cheryl L. Lombard Valley Partnership

one method. Valley Partnership is happy to support and work with partners on steps we need to take to move forward with critical infrastructure and how we can pay for it.

As we are closing out the 52nd Legislature in Arizona, Valley Partnership is supporting a portion of the state cash balance to be directed to fund the Highway User Revenue Fund (HURF) as a one-time supplemental appropriation. Over the years, Highway User Revenue Fund (HURF) monies have been diverted to fund state programs other than the primary purpose of HURF – state and local streets and highways. Since 2001, almost two billion dollars have been diverted. Arizona must continue to seek a sustainable model to fund transportation improvements and maintenance well into the future and this is the first step toward this goal.

Valley Partnership is also working with Arizona Department of Transportation and Maricopa Association of Government to prioritize in the East Valley, the extension of State Road 24 to Ironwood Road in Pinal County. This would be a crucial link for economic growth and would help alleviate pass-through traffic from San Tan valley that otherwise would have gone through Queen Creek and Gilbert. For the Southwest Valley, we need to relieve traffic on the Interstate 10 by making the planning and funding of the new transportation corridor State Route 30.

Finally, since Congress has approved the extension of the official designation of Interstate 11 to run from the border with Mexico all the way to Nevada and beyond, we want to encourage parties to look for all means possible to speed up the planning and construction of needed highway. The most critical segment of Interstate 11 is between Wickenburg, south to Interstate 10, because this segment creates a commerce corridor for the north-south movement of freight that avoids metro Phoenix.

We hope you will join with us in supporting these goals for 2016 to continue the economic vitality of our Valley.

Cheryl Lombard is the president and CEO of Valley Partnership.

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P T K 25

HEALTHCARE TRENDS

26 | May-June 2016

A HEALTHY DOSE OF

GROWTH As the number of healthcare facilities and senior living complexes continues to grow and evolve, Arizona residents will soon reap the rewards of a new development trend: one-stop healthcare

By JESSE A. MILLARD

27

HEALTHCARE TRENDS

T

here’s nothing quite like onestop-shopping, where all of your errands can be finished in one trip.

West Valley residents will soon realize the pleasures of one-stophealthcare, a new development trend, with Dr. John Simon’s latest project: Westgate Healthcare Campus.

The first phase of the 250,000-square-foot, $30 million campus is expected to be finished at the end of the year, with the remainder of the project looking to come online within the next five years.

Once finished, the campus seeks to be a one-stop-shop for anyone’s healthcare needs, hoping to provide everything from lab work and routine check-ups, all the way to dental exams.

Simon also hopes to add research

Jason Anzalone 28 | May-June 2016

components to the campus.

“At the end of the day, it’s the place you can come, and if you have parents, children and yourself, you can all get seen and go about your day,” says Trisha Talbot, managing director for global healthcare services at Newmark Grubb Knight Frank, the marketers for the new development.

Kitchell broke ground for the Glendale project in early March for the first building – a 16,000-square-foot medical office building, which is almost completely leased out, Talbot says.

Healthcare campuses around the country have been creating these types of “medical homes” for a while now, explains Simon, who is also the founder of SimonMed Imaging.

“As a provider, we see patients

Brian Friedman

Sharon Harper

RISING IN THE WEST: Dr. John

Simon, the radiologist who founded SimonMed Imaging Inc., is developing the $30 million Westgate Healthcare Campus at the northwest corner of 99th and Glendale avenues. It will be the first comprehensive healthcare campus in Arizona.

having to go to multiple locations, where they are receiving disjointed care.” he says. “So from the provider perspective, it’s ideal if you have the whole community in one place.”

Arizona, and particularly the West Valley, don’t have integrated campuses that have been designed from scratch, Simon says.

John Simon

Trisha Talbot

HEALTHCARE TRENDS The Westgate Healthcare Campus will have five buildings in total, designed with a central hub and buildings surrounding the centerpiece, according to Simon.

The campus’ second building is a 13,000 square-foot structure slated for completion in 2017. It is being offered as a medical office building or buildto-suit.

There will also be two 90,000-square-foot medical office buildings, one of which is pre-leasing, followed by a 30,000-square-foot buildto-suit building, or medical office.

LOCATION, LOCATION, LOCATION Sixteen years ago, the Westgate area wasn’t much more than dirt fields and roads. But the area has exploded with growth since the construction of the Gila River Arena and eventually the University of Phoenix Stadium, along with the rest of what is now known as the Westgate Entertainment District.

Now, the area is turning into a healthcare hub. The Westgate Healthcare Campus is being built near the Loop 101 Freeway on 99th and

30 | May-June 2016

“There’s a lot of synergy” having a research institute so close to other hospitals, if you look at any major medical center in the U.S., there’s always clinical and research side by side.”

– Dr. John Simon

Glendale avenues, near the 24-bed St. Joseph’s Medical Center. The new healthcare campus hopes to leverage the existing healthcare infrastructure in the area by adding complementary healthcare services.

“We were very excited to find this parcel,” Simon explains. Its close proximity to the freeway will make it easy for nearly anyone in the Valley to reach, he says.

And the fact it’s so close to three different hospital systems – Dignity Health, Banner Health and the Abrazo Community Health Network – helps provide a solid healthcare infrastructure.

The Westgate area has grown into a centralized hub for healthcare and

Simon’s project is just one of many upcoming medical projects in the area, says Brian Friedman, director of economic development for the City of Glendale.

Healthcare has been one of the industries the City of Glendale has been focused on bringing in to boost the economy, Friedman says. The city, especially the Westgate region, has experienced an explosion of growth with projects such as Midwestern University’s Glendale Campus and a medical office tower Rendina Healthcare is developing for St. Joseph’s.

CHANGES IN TUSCON: Tucson Medical

Center and Banner-University Medical Center both plan to expand with construction of new facilities on opposite sides of town to provide medical services and offices for physicians. Banner-UMC, one of the nation’s top academic medical centers, will build a nine-story patient tower at its current location north of the University of Arizona’s campus.

Jokake

31

HEALTHCARE TRENDS

With so many healthcare facilities and options near Glendale’s portion of Loop 101, there are plans to brand the area as a healthcare hub, similar to the City of Scottsdale’s Cure Corridor.

Folks are already used to driving out to the Westgate area for their dining and entertainment needs, Talbot mentions.

Now, they can travel there for their healthcare needs as well, she adds.

The Westgate Healthcare Campus is hoping to fill the space with complimentary healthcare providers who will be drawn to the surrounding area.

For the 30,000 square-foot building on the Westgate Healthcare Campus, developers hope to fill the space with a skilled nursing facility, or rehabilitation clinic to complement St. Joseph’s right next door, as well as other hospitals along the Loop 101 freeway, Talbot says.

BRING IN THE RESEARCH Since the St. Joseph’s facility is an acute care facility, finding healthcare services for folks who may not be able to stay at the hospital longer, but want longer-term care, would be a great addition to the area, she explains.

Sometimes, building a healthcare 32 | May-June 2016

campus near a hospital can impose restrictions on who can lease out the available spaces, but that isn’t the case with this development.

There aren’t any ground-lease or hospital imposed restrictions on this project either, Talbot says. Hospitals can have a right of refusal to certain types of healthcare services if they ground-lease the land around the hospital to another developer.

If hospitals do impose restrictions on services they already offer, it’s so folks won’t go across the street for services the hospital already provides.

But there aren’t any restrictions on the Westgate Healthcare Campus, making it available for everyone.

Medical research facilities and clinics living side by side on the same campus is a common occurrence across the country.

Houston’s Texas Medical Center, one of the largest healthcare campuses in the world, has a mix of eight academic and research institutions and 21 hospitals among many other organizations on its campus.

Due to Arizona’s past rapid growth, many services — including research institutes — are scattered across the

MIXED-USE MEDICAL: Irgens Development Partners is developing a 60,000 square-foot build-to-suit medical facility for Cigna in Peoria, which will provide the staff with on-site amenities such as an on-site retail space.

Valley, Simon explains.

With the Westgate Healthcare Campus being so close to local hospitals, it only made sense to want to make the campus desirable for research institutes.

“There’s a lot of synergy” having a research institute so close to other hospitals, Simon says. “If you look at any major medical center in the U.S., there’s always clinical and research side by side.”

NEW CAMPUS, MODERN HEALTHCARE Over the last decade, a healthcare practice’s needs within a space have changed significantly. Electronic medical records have freed up a lot of space within medical offices as doctors no longer need to keep physical copies of their patients’ records.

33

HEALTHCARE TRENDS But retrofitting rooms that were once used as old storage rooms for hundreds of folders filled with medical information and turning them into exam rooms can be pricey. That’s why many practices have been moving into newly built spaces.

Doctors are starting to consolidate and are moving into new spaces because of electronic medical records.

And the days of a doctor having a large corner office are long gone too, as doctors spend more time interacting with patients.

Talbot says the Westgate Healthcare Campus meets all of those modern medical needs for practices that are looking to leave their old spaces. The buildings are designed by Butler Design Group and will fit modern tastes while still being practical, Talbot says.

This has been a trend for many new healthcare developments in the Valley.

Older medical offices that can’t meet these modern needs tend to struggle, says Jason Anzalone, vice president of development at Irgens Development Partners.

Obsolete facilities that don’t renovate have been seeing their FOLLOWING TRENDS: Plaza

Companies’ Estrella Medical Plaza II, which will break ground this fall near the growing Banner Estrella Campus, will serve the evolving needs of the healthcare industry.

34 | May-June 2016

“They’ve been needing larger spaces because of consolidations and as a result of healthcare providers acquiring practices,” Harper explains. “It’s a pretty significant trend over the last couple of years.” tenants move to newer or renovated facilities, Anzalone says. But places that do modernize with renovations see success, he adds.

A need for more access to patients, growing practices and new technologies have been driving medical groups to new spaces, Anzalone says.

Growing medical practices from consolidations means medical groups are less fragmented than they were in the past, Anzalone says. Since medical groups offer more comprehensive care than in the past, the groups need large spaces that offer plenty of services.

Anzalone’s latest project, a 60,000 square-foot build-to-suit medical facility for Cigna in Peoria, will provide the staff with on-site amenities such as an on-site retail space.

Plaza Companies’ Estrella Medical Plaza II, which will break ground this Fall near the growing Banner Estrella Campus, hopes to fulfill these changing tastes, too.

Sharon Harper, president and CEO at Plaza Companies, says the large

physician groups that operate in the Valley want larger floor plans for their new spaces.

They also want to make sure there are retail spaces along with other amentities for the tenants.

The floor plates at the upcoming four-story medical office will be 15,000 square feet, allowing larger users to operate on the same floor, she says.

“They’ve been needing larger spaces because of consolidations and as a result of healthcare providers acquiring practices,” Harper explains. “It’s a pretty significant trend over the last couple of years.”

But Metro Phoenix isn’t the only Arizona hot spot for healthcare. Barbi Reuter, chief operating officer for Cushman and Wakefield, PICOR, says the medical office market is one sector where Tucson is seeing the most growth and opportunity. Tucson Medical Center and Banner-University Medical Center both plan to expand with construction of new facilities on opposite sides of Tucson to provide medical services and offices for physicians.

TMC will construct a 40,000 square foot medical building at Houghton Road and Drexel Road to meet under served healthcare needs on the southeast side of town. Banner-UMC, one of the nation’s top academic medical centers, will build a ninestory patient tower at its current location north of the University of Arizona’s campus.

35

SENIOR LIVING SANTE WESTGATE: Santé of Westgate, coming in 2017, will have shortterm rehabilitation skilled nursing care, assisted living services and Alzheimer and dementia care services. It will also provide outpatient rehabilitation services, hospice and home health services to the surrounding communities.

Senior year Preventing displacement and offering healthcare options and amenities are key components in the facelift of construction for older folks

By ERIN DAVIS

T

he face of senior living and assisted care facilities is changing. From Continuing Care Retirement Communities (CCRCs) and stand-alone memory care and rehabilitation facilities, to entrance-fee models and rental options and hybrids of all of the above, continuum care is departing from a sullen and depressing nursing home stigma. There is no better place to witness the evolution of senior care, than in Arizona — where continuum care is a booming business.

“There’s always going to be a need for assisted living and assisted care,” explains Chris Harrison, Southwest office leader for The Weitz Company.

“But if you look at the heat map, most of the concentrated builds reside on the smile: California, Arizona, Texas, Southeast Florida and up the coast.”

Coinciding with the metamorphosis

38 | May-June 2016

of the type of care and housing being offered, is a comparably evolved demographic of seniors seeking more than simply warm weather and an attractive landing pad.

“The oncoming senior population is looking for more of an urban/mixeduse feel when seeking senior retirement and living options,” Harrison says.

“They like restaurants, retail, activities and continuing education, with access to nearby colleges and universities.”

According to Harrison and GPE Commercial Advisors Executive Vice President Julie Johnson, these factors will increase in importance in the next decade and beyond, as the Baby Boomers transition into senior living.

Although the Baby Boomers may be years from making the physical move into a Continuing Care Retirement Community (the typical age of entry is 82), they’re impacting senior housing now.

“They are the decision makers for their parents who are now in — or are going into — senior care,” says Johnson. “The qualities Baby Boomers are looking for in senior care for their parents are also what they ultimately want for themselves.”

Johnson goes on to explain that Baby boomers have high standards, the expectation for amenities and affordability.

So how do the expectations for more amenities and lower-living costs translate into an existing senior-care market?

“The rental model is definitely growing,” Johnson says, “rather than the entrance-fee CCRC.” According to Johnson, this is partly due to the Millennial mindset transcending into the senior-living population by passing along the desire for a lock and leave lifestyle. But there’s more to the story.

“The recession affected a lot of nest eggs,” Johnson says, “When it was over and people were finally able to sell their homes, that’s when they were finally able to enter memory- and-assistedliving care.”

Also trending: an increase of stand-alone memory care and rehabilitation facilities.

“With more awareness of Alzheimer’s and dementia, 30 percent of senior

Mark Hansen

Chris Harrison

Julie Johnson

Joe La Rue

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SENIOR LIVING SANTE TUSCON: The Santé of Tucson transitional rehabilitation center, which is expected to open this year, will include a short-term memory care (dementia) wing, which will be privately secured and include its own private dining and physical rehabilitation gym. The facility will be in close proximity to Tucson Medical Center, St. Joseph’s Hospital and surrounding medical districts.

SUNHEALTH COLONNADE: The

Colonnade retirement community offers 12 floor plans, state-of-theart fitness equipment, an indoor pool, art and entertainment venues, award-winning dining options and inviting common areas.

living facilities (whether stand alone or CCRC) offer memory care,” Johnson says. “Unfortunately, the statistics are growing exponentially.

“If you look at the Affordable Care Act and the improvement of long-term outcome,” says C. Mark Hansen, president and CEO of Santé, a healthcare real estate development company, “continuity of care will become more and more important.”

As a result of this, Hansen feels that continuum of care will keep moving toward an all-encompassing transitional-hybrid model of independent living that progresses to offering multiple levels of assisted care.

“We have high-acuity assisted living, custodial nursing and amenities,” Hansen says of in-progress Santé at Westgate. “Occupants will have their own apartment, but once they make the decision for assistance, they won’t have to move.”

Preventing displacement is a key component in the facelift of senior care.

“People moving into assisted living can be very traumatic and to have to do it more than once is even more difficult,” Hansen says.

Sun Health’s Executive Vice President Joe LaRue agrees.

“We offer an insurance model with continuum care included,” LaRue says, “so that no matter what happens health wise or financially, we’ll take care of you for life. We understand that to move someone is devastating — that’s something we can’t do.”

40 | May-June 2016

SunHealth has also created a product that allows seniors to stay in their home, extending a bundle of services much like what you’d receive in a CCRC, but with the added benefit of allowing an entrance fee in exchange for space on one of their campuses.

“People who really get the aging process are going to want to protect the downside risk,” LaRue says.

Senior care developers, operators and future tenants alike are also becoming more transparent in their expectation of needs — No. 1 being that they wouldn’t touch a nursing-home type of environment with a 10-foot cane.

“Nobody wants to move into Grandma’s nursing home,” LaRue say.

“Even the term ‘assisted living’ makes my skin crawl.”

This evolution in mindset will most likely spur the advent of more hybrid senior care developments, such as Sun Health’s Colonnade, recipient NAHB Silver Award for The Best of 55+ Housing.

“Colonnade consists of a 40-acre campus with casitas that resemble single-family homes,” LaRue explains.

“We also have a section that we refer to as villas that are independent living

units, as well as a new clubhouse with a pool, spa and yoga services and a meditation garden.”

“Incoming senior tenants tend to feel younger than their parents did at the same stage of life,” Johnson says. “They expect to live longer and will require more flexibility and choices — in amenities, floor plans and more.”

Freedom of choice and varied options is becoming increasingly more important.

“Many communities won’t let you make changes to the environment,” LaRue says. “We want to keep as much control and decision-making as possible with the individuals.”

As senior care continues to move forward, one thing is clear: there won’t be a shortage of options.

“The biggest trend I’m seeing is overbuilding,” Hansen says. “We track every new facility being built in Maricopa County. We’re in Gilbert and there are 20 senior living facilities alone. My prediction is that there will be an oversupply in the short term — the next three to four years. Once you get past that and Baby Boomers come online, that will solve that problem, but that’s still quite a few years away.”

41

U.S. GREEN BUILDING COUNCIL

Does alternative rock?

Solar isn’t the only other energy source that can cut costs and help the envirnonment

By JOHN PRATHER

W

ith more than 300 sunny days a year, Arizona seems like the ideal location for the future of solar energy in commercial building.

It’s also a big part of our past.

“Some of the earliest buildings in Arizona which took advantage of the sun were the cliff dwellings,” according to the Arizona Solar Center, an advocacy group. The low-angled winter sun would heat the south-facing buildings, while the cave sheltered the dwelling from the higher-angled summer sun.

Today, of course, the sun is not just used passively as the Natives did, but also to actively produce clean energy

42 | May-June 2016

through photovoltaic panels.

Although the collection of solar energy is good for the environment, that is not the main reason it has been embraced. Gonzo Gonzalez, senior project manager for Jokake Construction, said, “During the operation of finished buildings, energy usage is such a large percentage of operating costs that it just makes business sense to reduce energy costs.”

While solar energy is an obvious answer, it is not the only one. Others include: • Wind. Well-known to many Arizonans from the massive wind farm located along I-10 near Palm Springs, California. The website alternative-

energy-news.com reports that the iconic Eiffel Tower in Paris recently installed wind turbines, which are expected to generate enough electricity to power its first floor and last for 20 years.

• Hydroelectric. Produced by water flowing through turbines. Each year, millions of Arizonans pass over one of the world’s greatest hydroelectric projects: Hoover Dam, 30 miles outside Las Vegas.

• Geothermal. Heat from the earth. The Brock Environmental Center in Maryland utilizes geothermal to fulfill all its energy needs, and Ball State University in Muncie, Indiana has found significant

Gonzo Gonzalez energy savings from geothermal.

• Biomass. The combustion of carbon dioxide found in organic materials.

Wood and fossil fuel are two common examples of biomass, but agricultural crops or waste and municipal waste products are also utilized and more environmentally friendly.

Solar cells can be found on rooftops and in parking lots throughout Arizona, but these other alternative energy sources are mostly viable only when produced by commercial power plants.

One exception, though, is Lookout Mountain Elementary School in Phoenix, which was completely rebuilt two years ago by Adolfson & Peterson

Construction of Tempe and now utilizes a geothermal system. Jeff Keck, regional vice president of operations at Adolfson & Peterson, said, “The Washington School District has always been at the forefront of the movement to make sure their buildings are energy efficient and they are good stewards of the environment.”

Keck added that his company has also been working to develop biomass energy sources such as manure and algae.

President Michael Crow of Arizona State University made a commitment that the university will become completely solar-powered, and his efforts are obvious. “One of the largest

Jeff Keck

Mary Wolf-Francis

solar users that comes to mind is ASU,” Gonzalez said. “Their program is vast and widespread over dozens of spaces across campus.”

Still, some believe Arizona is not doing enough to capitalize on the variety of alternative energy opportunities.

“Unfortunately in Arizona, we have a very old-school network in construction,” said Mary Wolf-Francis of DIRTT Environmental Solutions, a Tempe-based manufacturer of prefab interiors. “Unless you’ve got a forwardthinking architect or design firm, it’s pretty hard to find projects that actually honor all these alternatives we have for energy.”

43

USGBC

Water, water everywhere, but not a drop to waste?

Roosevelt Lake

By ERIN DAVIS

A

lthough Arizona may not collectively be singing in the rain, some comfort can be had in knowing that water has been conserved with calculated intention. In fact, in Arizona State University’s 2011 “Watering the Sun Corridor” report, you’ll find a closing quote stating, “Water, among all things, has been what Arizona does really well.”

SUPPLY “We have been banking water underground for more than a decade,” says Grady Gammage, Jr., partner at Gammage & Burnham. “We’ve been doing it on our own account, but also for California and Nevada, with 10 years worth of water supply.”

Part of this highly variable water supply is due to Salt Water Project’s utilization of reservoirs, making the storage consistent from year to year, according to Christa McJunkin, SRP principal water analyst.

44 | May-June 2016

“SRP’s view of ground water,” McJunkin says, “is as something we only have to use.”

Although a substantial reserve of banked-ground water is a positive in terms of Arizona’s prowess in conservation, it isn’t a cure all. In terms of a drought, ground water must be drawn from multiple supply sources, whereas surface water is the main source readily available, as explained

by McJunkin.

“Infrastructure is the interconnections from city to city and allows water to be efficiently used, McJunkin says. “It’s important to realize drought does not mean there isn’t enough water to go around.”

Michael Pearce, founding member of what is now Maguire, Pearce & Storey, served as chief counsel for the Arizona Department of Water Resources from 1995 to 2002, and agrees that although Arizona has a diverse water portfolio and solid water supply, there may be

room for concern.

“The question is: how much road can we accommodate? In Arizona’s subdivided land and high population counties, you have to show a 100-year supply to get approved (for projects),” Pearce says. “This is one of the highest waiting periods in the country.”

DEMAND How will Arizona’s growing infrastructure — in addition to stringent supply regulations — affect water demand in the oncoming years?

Beyond these terms, McJunkin points to population. “If you think about what the Valley looked like 20 years ago,” she says, “many places on farms continued to use water, but at a lower rate and similarly, homes utilized less water per acre. We’re not increasing total water use, but replacing it with different types of usage.”

When examining water supply and demand, what do the experts say in

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45

USGBC regard to sources like Lake Havasu, Lake Meade and the Colorado River?

“Despite robust water supply,” says Director of Arizona Department of Water Resources Thomas Buschatzke, “we do have challenges, like making sure the Colorado River doesn’t fall below (necessary levels).”

According to ADWR, there is the possibility of a shortage declaration for the Colorado River projected for 2018, maybe even as early as 2017. This would mean an elimination of CAP water supplies to the Arizona Water Banking Authority with a portion of the CAP water supply being used for groundwater replenishment, ultimately effecting central Arizona agriculture users.

Still, despite the potential for adversity, and rising CAP rates, Arizona is prepared.

AGRICULTURE WOES “Challenges with the Colorado River are very real, but based on an agreement, the first entity to receive a smaller amount of water will be farmers,” explains McJunkin. “The amount of land and agriculture will fluctuate from time to time, but domestic water use will be considered a higher priority.”

While Arizona’s residents’ pools, landscapes and long showers don’t face imminent threat of water restriction, agricultural demographics may be

46 | May-June 2016

Thomas Buschatzke

Grady Gammage

less apt to rejoice with a conceivable reduction in water use.

“All agriculture is not created equally,” Buschatzke says. “Areas that are not regulated create hard choices and discussions. There is a range of risks and benefits.”

Pearce sheds light on these variables by adding, “We’re running about 85 percent efficiency and our farms are doing well,” he says, “and it’s important to realize that Arizona agriculture is 70 percent of our economy.”

MOVING FORWARD “Here is where we need to be careful going forward when discussing water conservation,” McJunkin says. “What is being done with saved or unused water? Is it allocated to new growth?

If so, the only success achieved is in hardening demand.”

Water will be conserved and

Christa McJunkin

Michael Pearce

stored, but there will always be more development and a new influx of population. Eventually, Arizona may be faced with the dilemma of water shortage for incoming populations — a situation faced by neighboring Las Vegas.

Ultimately, experts agree that Arizona needs to be more intentional in its approach to water conservation and resources.

“Conservation can’t be the only thing we hang our hat on,” says McJunkin.

“We’ve seen cloud seeding in Wyoming with some results, which could be interesting for us in terms of the Colorado River.”

Cloud seeding, a form of weather modification, is the attempt to change the amount or type of precipitation that falls from clouds, by dispersing substances into the air that serve as cloud condensation or ice nuclei, which alter the microphysical processes within the cloud. According to Buschatzke, although Arizona is helping to fund cloud seeding it’s not something to rely on.

“Unfortunately water management is a complex subject because everything is intertwined,” Pearce says. “It takes a lot of knowledge and experience. There is more room for leadership. Some of our political and business leaders really need to take time to understand these issues."

It will take cooperation of state and local governments, combined with political and public engagement to collaboratively come up with effective water-management solutions.

“We have become victims of our own success,” McJunkin says. “There is a lack of understanding and we need to get people to recognize discussions on our priorities concerning Arizona’s water issues and the hard decisions that need to be made.”

AAED

Winner’s circle: 2016 AAED EDDE Awards

By ERIN DAVIS

T

he Arizona Association of 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 its 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 — education, advocacy and collaboration. This year’s awardees were recognized at AAED’s Spring Conference in Tucson on May 5.

WILLIAM LAMPKIN AWARD:

David Bentler, manager of community and economic development, Arizona Public Services (APS) Bentler has been advancing economic development in Arizona for the past 25 years. Throughout his tenure at APS, Bentler has taken the lead in working with community partners to identify and locate companies including Aligned Data Centers (Phoenix), Rose Acre Farms (Parker), RIO Glass (Surprise), Walmart Distribution Center (Casa Grande), TGen (Downtown Phoenix) and USAA (North Phoenix).

LARGE ORGANIZATION OF THE YEAR:

City of Phoenix Community and Economic Development The AAED membership directory reveals 25 current employees of the City of Phoenix are members of AAED. Participation in AAED has contributed to building an organizationwide foundation for sound economic development principles. In 2015, projects that the the city assisted in

Heath Anderson 48 | May-June 2016

Steve Ayers

yielded more than 9,400 new jobs and nearly $1 billion in capital investment.

SMALL ORGANIZATION OF THE YEAR: Town of Sahuarita The Sahuarita East Conceptual Area Plan (SECAP) was a model of cooperation and development of policy between the town and the Arizona State Land Department for future annexation of approximately 30,000 acres of largely State Trust land.

SECAP is a vision of what the town seeks for its future and describes new ways for looking at future growth.

ECONOMIC DEVELOPER OF THE YEAR, LARGE COMMUNITY:

Christine Mackay, City of Phoenix The efforts of Mackay, community and economic development director for the City of Phoenix, resulted in 9,443 jobs created, 521 business outreach visits, 20,565 job seekers assisted and $1 billion in capital investment in 2015.

ECONOMIC DEVELOPER OF THE YEAR, SMALL COMMUNITY:

Steve Ayers, Town of Camp Verde Ayers recruited and saw the initiation of construction of the new $10 million Camp Verde Campus of the Verde Valley Medical Center. In addition to providing modern healthcare to families and business, the facility also brought the extension of sewer lines to 360 acres of mixed-use residential and commercial property.

Five-Year Strategic Planning Task Force.

As chair of the Government Affairs Committee, she has had a tremendous impact on the membership of AAED from growth, retention and community stature standpoints.

NEW MEMBER OF THE YEAR:

Heath Vescovi-Chiordi, Town of Marana As management assistant of economic development for the Town of Marana, Vescovi-Chiordi places a premium on education. He has worked with the University of Arizona to encourage and establish an economic development course within the curriculum for the Master’s of Public Administration degree.

WORKFORCE PRACTITIONER OF THE YEAR:

Heath Anderson, Maricopa County Anderson, who works in workforce and economic development employer services for Maricopa County, has played a big role in coordinating the 2016 AAED Workforce Symposium. He has recruited and organized a diverse group of practitioners in highly ambitious programs.

AAED BEST OF ARIZONA AWARD:

Rebecca Timmer, Dibble Engineering Timmer has been volunteering with AAED since 2006, was part of the first Governmental Affairs Lobbyist Selection Committee and served on the

2015 Arizona Super Bowl team (Super Bowl Host Committee; cities of Phoenix, Scottsdale, Glendale; Phoenix Convention Center, Downtown Phoenix Partnership, Arizona Office of Tourism; the convention and visitors bureaus of Phoenix, Scottsdale, Glendale and others) The 2015 Super Bowl and related activities were nothing short of an economic home run for Arizona. The total economic impact was $720 million and more than 1 million people visited Downtown Phoenix.

David Bentler

Rebecca Timmer

MEMBER OF THE YEAR:

Christine Mackay

Heath Vescovi-Chiordi

FINANCE

What should you be watching out for in the world of commercial real estate financing?

50 | May-June 2016

By MICHAEL GOSSIE

51

FINANCE

ooking at the commercial real estate financing industry is like looking at statistics: There can be several different interpretations.

If you look at the numbers from 2015, commercial and multifamily mortgage bankers closed $503.8 billion in loans, according to a report from the Mortgage Bankers Association (MBA).

Those numbers were 26 percent higher than 2014.

“Commercial real estate borrowing and lending in 2015 came within a whisker of the record level of 2007,” says Jamie Woodwell, vice president of commercial real estate research for MBA. “Despite some credit market disruptions to start off this year and regulatory hurdles still ahead, many of those positive factors (that helped increase numbers) remain in place.”

Sounds pretty good, right? Not so fast.

A three-year economic forecast from the Urban Land Institute (ULI) Center for Capital Markets and Real Estate says we can expect to see commercial property transaction volume decline over the next three years. ULI anticipates $475 billion in transaction volume by 2018.

One reason for the uncertainty is interest rates. The Federal Reserve made it clear in December that it sees growth as relatively stable and raised the rate a quarter point. While the Fed’s rate hike is small and the rate remains low, the hike is unlikely to have a massive effect on its own, but subsequent hikes are predicted for next year.

“In the short term, it does not appear that rates are going to be much of an issue,” says Stephen Loonam, executive 52 | May-June 2016

“Despite some credit market disruptions to start off this year and regulatory hurdles still ahead, many of those positive factors (that helped increase numbers) remain in place.”

– Jamie Woodwell, vice president of commercial real estate research for MBA

vice president of commercial real estate for UMB Bank-Arizona. “We sensitize the floating rates so that we understand how high rates can go before a property’s income stream is no longer able to adequately service the debt.”

Loonam says that because rates are depressed at the moment, it is driving values higher in all asset classes, not just real estate.

“I think the larger concern is what happens in the long run,” he says.

“Rising rates will eventually hold back values of assets, which could be a problem for assets with maturing loans. As rates rise in the long term, it may be difficult for borrowers with maturing loans to refinance.”

With rates at record lows for the past several years, lenders have been forced

to widen their spreads and to sensitize their underwriting to make sure the property can service debt at a higher interest rate, according to Don Garner, executive vice president of Alliance Bank of Arizona.

“If rates increase in a gradual, measured fashion, it should have a moderating impact on development and lending as high leveraged deals will be less feasible,” Garner says.

Beyond interest rates, what can the commercial real estate industry expect when it comes to financing projects?

AZRE talked with some of the most dynamic and active lenders in CRE to find out what they’re looking for, what projects they have financed and what to look for in the world of commercial real estate financing.

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FINANCE “Overbuilding in certain property types is a concern.

Developers and lenders often follow the herd instinct...."

– Don Garner, executive vice president, Alliance Bank of Arizona

DON GARNER

Executive vice president, Alliance Bank of Arizona FACTORS TO CONSIDER: “In addition to the real estate specific factors like location, feasibility, condition, etc., we focus on the sponsor. Does management have successful experience with this property type and with a project of this size and scope? Are they familiar with the geographic market the project is in? And what is their history in terms of handling their loans with other lenders?”

TREND TO WATCH: “Overbuilding in certain property types is a concern.

Developers and lenders often follow the herd instinct and financing becomes readily available at aggressive terms, which can lead to over-leverage and overbuilding. Apartment construction financing is a good example. Large banks were very aggressive two or three years ago, but now have pulled back significantly.”

PROJECTS ALLIANCE HAS FINANCED:

Don Garner 54 | May-June 2016

Town & Country shopping center redevelopment, Enclave at the Borgata condo project in Scottsdale, expansion of the Trilogy project at Vistancia, Parc Lucero light industrial project in Gilbert, SkySong 3 & 4 office buildings, new home subdivision at Mountain Shadows.

see net population and job growth as more and more people, including business owners, see Arizona and as an advantageous place to call home.

Phoenix has established a critical mass as a top metro area by population and continues to attract out-of-state and foreign real estate investors.”

BRANDON HARRINGTON

PROJECTS WALKER & DUNLAP HAS FINANCED: “We were recently reviewing an offering memorandum for an apartment community in Phoenix and every financed sale comparable noted Walker & Dunlop as the lender.”

Senior vice president, Capital Markets, Walker & Dunlop FACTORS TO CONSIDER: “Each project is unique and requires an independent financing strategy. We often start with the client and their business plan, exit strategy, and ownership structure to determine the appropriate financing term and structure. For example, we have seen a lot of product for sale, only a year or two into a 10-year fixed term with punitive prepayment penalties that could have been avoided with more creative structuring.”

TREND TO WATCH: “We are long term bullish on Phoenix and continue to

Brandon Harrington Stephen Loonam

Doug Reynolds

STEPHEN LOONAM

Executive vice president, Commercial Real Estate, UMB Bank- Arizona FACTORS TO CONSIDER: “We look at a number of variables including the requested leverage amount, supply and demand in the market for the particular product being offered, borrower experience, guarantor strength, and both national and local economies. As part of our standard

Joseph Stewart

Jamie Woodwell

FINANCE “Multifamily developers have enjoyed a number of years of rising rents and maybe the cheapest financing in history.

Rising rents have been a result of the housing collapse and borrowers inability to get financing for purchase."

– Stephen Loonam, Executive Vice President, Commercial Real Estate, UMB Bank- Arizona

TREND TO WATCH: “Interest rates impacting commercial real estate financing in Arizona is definitely the biggest issue to watch. Beyond rate hikes, I believe commercial real estate financing has a large runway given where we are in the current Arizona real estate cycle.”

PROJECTS BANKERS TRUST HAS FINANCED: “Multiple downtown Phoenix projects that were financed during the recession have helped contribute to the growth in downtown Phoenix.

DOUG REYNOLDS underwriting process, we will sensitize current conditions of any income producing property such as increased vacancy and interest rates (for loans with floating rates). In addition to all of the above but maybe even more important, I want to work with responsible borrowers. When there is a bump in the road, we need to have responsive borrowers that are willing to work through issues.”

TREND TO WATCH: “Multifamily developers have enjoyed a number of years of rising rents and maybe the cheapest financing in history. Rising rents have been a result of the housing collapse and borrowers inability to get financing for purchase. The Millennial generation that we read so much about is delaying major decisions like marriage and children, which ultimately impacts the housing market.

We believe that at some point that generation will want more living space as their families expand. Multifamily land prices and cap rates are being driven not only by a robust rental market but also by cheap financing.

Many of the multifamily deals we see today are back by institutional 56 | May-June 2016

capital partners driven by IRR. The IRR’s are enhanced by very aggressive bank construction financing and very aggressive permanent financing. This aggressive financing and development is concerning as you look back at the build-up to the housing crisis.

PROJECTS UMB HAS FINANCED: “All lending is about mitigating risk. A bank can have a string of successful, profitable years making good loans and getting repaid all principal and interest, but it only takes a couple of poorly structured loans or a few missteps to give all those gains back … Part of my job is recognizing the deals to avoid and being smart on the market to be able to avoid unfavorable deals – that can also be rewarding.”

JOSEPH STEWART

President, Arizona commercial banking, Bankers Trust FACTORS TO CONSIDER: “Sponsorship, sponsorship, sponsorship. The sponsorship, or people we are doing business with, is always the first and most important thing we consider when evaluating a project.”

Senior vice president of the Commercial Real Estate Division, Washington Federal Bank FACTORS TO CONSIDER: “We consider factors such as the location and condition of the property to make sure we are comfortable with the project itself and the surrounding area. This goes for both new and existing uses.

We’ll also look at the sponsors to ensure they have the capacity and experience to manage the project in question.”

TREND TO WATCH: “Employment and population growth, not necessarily in that order, will continue to be the driving force behind the commercial real estate market as they will impact supply and demand. Both have recently shown positive signs, and the expectation is that the positive trend will continue.”

PROJECTS WASHINGTON FEDERAL HAS FINANCED: “The bank continues to have success with financing many real estate projects, such as apartment complexes, single family home developments, manufactured home parks and RV resorts, ministorage facilities, and retail and industrial projects.”

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CERTIFIED COMMERCIAL INVESTMENT MEMBER

Class act Commercial real estate professionals that earn the Certified Commercial Investment Member (CCIM) Designation are recognized as CRE experts with proven expertise in financial, market, and investment analysis; in negotiation; and able to help their clients close more deals.

So what are you waiting for?

By ERIN DAVIS

58 | May-June 2016

59

CCIM

N

ick Miner, senior vice president of Orion Investment Real Estate is no stranger to Certified Commercial Investment Membership Institute (CCIM). Since acquiring his CCIM Designation in 2003, Miner has served as board member, member services chairman, presidential liaison, on the Strategic Planning Committee, Ward Center for Real Estate Studies subcommittee vice chair, Marketing Committee vice chair and has served on the Executive Committee.

It’s no wonder, then, that Miner is a strong proponent not simply of CCIM, but also for the designation process.

CCIM, for those unfamiliar, allows professionals across the commercial and investment real estate platform to stay current, educated and armed with the latest skills within their wheelhouse—and even beyond.

CCIM Designation is the process in which candidates receive an in-depth education constructed out of required courses, a comprehensive exam, annual dues and a portfolio of qualifying experience (with the exception of Fast Track Members).

IN A CLASS OF ITS OWN “Think of CCIM as the master’s program of commercial real estate,” explains Miner. “It gives professionals an opportunity to learn underwriting in commercial real estate transactions, from demographic, financial, market and investment analysis to negotiation skills.”

Designation participants learn these skills from practicing professionals within the business.

“Experts are always being selected from related commercial real estate fields to teach classes, keeping people up to date in the latest trends,” Miner says.

Past local Arizona CCIM President Julie Johnson, executive vice 60 | May-June 2016

“Think of CCIM as the master’s program of commercial real estate, It gives professionals an opportunity to learn underwriting in commercial real estate transactions, from demographic, financial, market and investment analysis to negotiation skills.”

– Nick Miner, senior vice president of Orion Investment Real Estate

president of Avison Young, is one such notable expert.

“I started by having to travel to every single class, so in an effort to stay closer to home, I started working with an institute to hold classes with our local CCIM chapter,” Johnson explains. “I ended up partnering with the Scottsdale Area Association of Realtors. We continued that partnership for about 10 years and grew the classes to where we had a core group of people.”

TAPPING INTO THE NETWORK “The networking component when you are young and working in the commercial real estate industry is important,” Miner says. “It can be hard to get people to trust you without having longevity of experience in the industry.”

Miner elaborates that the networking that comes from CCIM Designation offers added credibility and differentiation.

“We recommend people,” says Bonnie Halley, senior vice president and associate broker of Phoenix West Commercial, LLC. “When you have a client out of state, you can call someone who has been through the process — someone ethical and who has experience — a CCIM member.”

Johnson has several first-hand experiences in the benefits of national networking through CCIM. “I had a Chicago-based developer who purchased an asset out of Washington D.C. in senior housing,” Johnson says, “All I had to do was simply go on the CCIM site and locate someone and connect with them. It’s a great help.”

Because CCIM is a close-knit organization, there is the added benefit of a consistent language and fluidity in networking.

“Several clients found out I was CCIM and they were excited and confident in my ability to perform certain tasks,” Miner says.

CCIM CCIM Designation at a glance CI 101: Financial Analysis for Commercial Investment Real Estate This course is a prerequisite for CI 102-CI 104 and provides candidates a foundation of practical financial analysis skills needed to succeed in subsequent courses.

CI 102: Market Analysis for Commercial Investment Real Estate Here, participants analyze individual investment factors for four major property types: office, industrial, multifamily, and retail. In addition, eight hours of training on the CCIM Interest-Based Negotiations

SOMETHING FOR EVERYONE If you think CCIM Designation is strictly dedicated to individuals with previous experience in commercial real estate, think again.

“The Great advantage of CCIM,” Halley says, “is that it works for many related fields outside of commercial real estate — bankers, appraisers — a broader scope of people. I was in the banking industry for 24 years.”

“CCIM can benefit many areas of business,” Miner adds, “from asset managers, property managers and developers to GSA, allied professionals and more.”

Not only does CCIM Designation encompass a wide umbrella of professionals, it offers the determined individual a means of acquiring the knowledge needed to pursue and advance their career in an expedited manner.

“When I got into commercial real estate as my fourth career, I wanted to learn quickly,” Johnson says. “I was part of a smaller company during that time and since I couldn’t go to a larger company to learn the secrets of the trade, pursing my designation gave me 62 | May-June 2016

Model is required before going on to CI 103 and CI 104. This requirement can be completed through the online Preparing to Negotiate course, the one-day classroom course Commercial Real Estate Negotiations, or the two-day classroom Advanced Negotiation Workshop.

CI 103: User Decision Analysis for Commercial Investment Real Estate Candidates will utilize market and financial analysis skills for user space decisions, and apply cost-of-occupancy models for ownership and leasing.

CI 104: Investment Analysis for Commercial Investment Real Estate This course explores how to optimize investment returns and effectively forecast investment performance by quantifying real estate risk.

Online Ethics Course This free training covers the CCIM Code and Standards of Practice of the CCIM Institute. The electivecredit requirement can be fulfilled with courses offered by the Ward Center for Real Estate Studies.

the tools I needed.”

LONG-TERM SKILL SET The knowledge base and skill set obtained by a “pinned” CCIM Designation graduate can not Bonnie Halley only be acquired quickly, it can be enhanced and broadened.

“Site-selection courses are offered ‘post pin,’” Miner explains, “and continuing education classes are always being offered. The Ward Center is for designation continuing education classes, which are often less extensive and relevant to the latest trends.”

CCIM Designation from start to finish, in addition to postsupplemental education, offers participants the opportunity to learn real-time analytical processes and portfolio management, keeping them current on the latest applications.

“Ultimately, skills like deep-site and

Julie Johnson

Nick Miner

gap analyses give us the tools to help our clients make the best decisions,” Halley says, adding, “CCIM has a demographic database that rivals anyone: Site to do Business STDB.” CCIM takes care of its own, so once participants and members are pinned, they know that there is always someone there to assist them.

“Each chapter has a candidate guidance committee,” Halley says, “and we are accessible throughout.

Each chapter can help candidates be successful in our industry. We do a lot of one-on-one work.”

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VALLEY PARTNERSHIP

A VIEW FROM THE TOP Valley Partnership president and CEO talks planning, politics and superpowers

I

t’s been a little more than a year since Cheryl Lombard took over as Valley Partnership’s president and CEO. In her role, Lombard is responsible for leading and managing Valley Partnership, including developing and executing strategies, and managing the association’s resources, expertise and leadership initiatives.

AZRE sat down with Lombard to talk about her challenges and the impact she hopes Valley Partnership has on Arizona.

AZRE: What is the most challenging issue you face on a day-to-day basis in representing Valley Partnership to the community?

Cheryl Lombard: Valley Partnership has a very diverse group of partners that all support the real estate development industry. So focus, focus, focus is the challenge.

To accomplish this, the first thing Valley Partnership had to do was to frame how we are going to advocate for responsible development across the Valley. In late 2015, our strategic plan was approved; for the next 3 years we are going to create strategic alliances, partnerships and forums for education, discussion and cooperation within the industry; ensure the consistent administration of taxes, fees and regulations across jurisdictions; and ensure economic vitality tools such as secure water supplies, a well-educated workforce and funding for infrastructure, including transportation.

Then we had to develop a work plan for 2016 on how we are going to do these things. This year we are proud to support Proposition 123 in the May Special Election that will add $3.5 billion to Arizona schools in the next 10 years. This is key for our economic growth, including a well-educated workforce. We are also working to bring 68 | May-June 2016

By ERIN DAVIS

together diverse leaders to discuss what comes next for education. I have also been fortunate to be appointed

by Gov. Doug Ducey to the Arizona Water Augmentation Council. This group will determine how we plan our water future and why the real estate development industry is key in urban areas in terms of water reuse and recharge. Finally, working with key cities, Valley Partnership wants to use existing tools such as community facilities districts to help pay for needed infrastructure to grow our economy.

AZRE: At the state legislative level, what issues are most concerning at this time in regard to CRE? And how is VP monitoring those?

CL: One issue is the complexity of the Arizona Property Tax system.

Many experts have told me, and I now understand why, that Arizona has the most complicated property tax system in the United States. How can we be the most competitive state for economic development when only a few people completely understand this system? More importantly, one small change causes a shift in taxes to others, impacts our schools and our general fund. We must fix this so we can deal with how to pay for infrastructure for schools, roads, water and other necessary functions of government.

We monitor this through our collaboration with other industry groups such as Arizona Multihousing Association, NAIOP, Arizona Tax Research Association, Greater Phoenix Leadership and the Arizona Chamber.

AZRE: Is VP going to openly support political candidates? If so, who & why?

CL: Valley Partnership’s Political Action Committee – VPAC – was most recently active in the Tempe city elections. VPAC makes contributions to candidates that support responsible

development and as the election process moves forward in 2016 and 2017, we anticipate engaging with candidates that meet that mission. It should be a very busy next couple of years – these next election cycles for our Legislature and key cities determine our future economic decisions for the next decade.

AZRE: At the end of the day, what do you want the community to think about VP? What are your most proud moments in your position thus far?

CL: Valley Partnership is about responsible development and for almost 30 years we have been advocating for that. As our economy returns to our new normal cycle, Valley Partnership is the one-stop shop for elected and appointed officials to work together with the leaders in the Valley real estate development industry, as well as other interest groups to find solutions.

In my first year as President of Valley Partnership, we had the opportunity to successfully demonstrate this with development fees in Tempe and Avondale, and water policy in Chandler.

However, our biggest success this year in being the honest broker is our work with the U.S. Fish & Wildlife Service, Arizona Game & Fish, mining interests, homebuilders, Arizona State Land Department and others to develop a plan of action to prevent the listing of the Sonoran Desert Tortoise as an endangered species. This alone allowed responsible growth to occur across the Valley while ensuring the vitality of this beloved creature.

AZRE: If you only had one superpower and could use it to help VP, what would it be and how would you use it?

CL: That I can be in more than one place at a time. There is a lot going on in the Valley right now. I hate to miss any of it.

VALLEY PARTNERSHIP

Focus on the future Valley Partnership leaders see responsible development as the path to economic prosperity

V

alley Partnership’s mission is advocating responsible development. The advocacy group represents the commercial, industrial and masterplanned real estate development industry by presenting a balanced, pro-development perspective and the Valley’s best industry education and networking opportunities.

But what should be the 25- or 30-year vision for Valley Partnership? What role do Valley Partnership’s leaders think the real estate development industry

70 | May-June 2016

will play or should play in the longterm economic health of the Valley and state? AZRE talked with some of Valley Patnership’s most influential leaders to get their take on where commercial real estate development is, where it’s going and what needs to happen to enhance and grow the industry.

AZRE: What role will the real estate development industry play in the longterm economic health of the Valley and state?

By ERIN DAVIS

Molly Carson, vice president of development, SouthWest Region, Ryan Companies: It will continue to play a significant role. What those of us in the industry need to do is make sure it is a positive one. Smart development benefits the economic health of communities. Conversely, poorly planned development, or overdeveloping can be devastating to communities.

It is the responsibility of CRE to put the best interest (of the community) in the forefront when making these

decisions. We are fortunate to have Valley Partnership, an organization with the focus of responsible development, in our state. Their impact has been great through its 26 years of existence and I expect that to continue.

Heidi Kimball, senior vice president, Sunbelt Holdings: Thanks to the work of a lot of visionaries and leaders within our community, the Valley’s economy is becoming more diverse and less dependent upon growth. The development community contributes to that growing diversity by being responsive to the need for environments that attract these new high-tech industries, employers, and employees. The commercial development industry, in conjunction with municipalities and entrepreneurial institutions like ASU are creating truly transformative places to work, create and produce, and are even teaming together to provide infrastructure solutions. Home builders have responded ingeniously to changing demographics and demand for a variety of housing types, which also serves to make Phoenix a more interesting place to live and attracts a highly mobile educated workforce. This collaboration is what will fuel the economy for the Valley in the long term.

Jay Kramer, director, Fennemore Craig: Real estate development is one of the key economic drivers of our economy.

Real estate developers, their lenders and equity partners do not generally subscribe to the “build it and they will come” mentality. Real estate development is ultimately a result of job growth and in-migration. In order for the real estate development industry to flourish, our economy needs to continue to grow and diversify so that we can better withstand the vagaries of the real estate cycles.

Darin Mellott, director of research and analysis, Southwest Region, CBRE: Ultimately, real estate exists to serve a purpose in the economy. Although real estate itself can contribute to economic health, it should be more of a reflection than a driver. As such, it is the industry’s responsibility to respond to the needs of the community as a whole. This means real estate decisions need to take into account broader impacts and ensure that there is an appropriate supply of what the economy needs to continue growing and evolving. Furthermore,

because real estate assets are long lasting, the industry should always have an eye on both the short term and long term. Lastly, because the fate of property markets is so broadly and deeply connected to the economy, the real estate community needs to remain engaged on the local, state and federal levels to ensure that growth is both high quality and sustainable through good policy.

Mark Mitchell, mayor, City of Tempe: You cannot have a healthy local economy without a healthy real estate industry, in all economic sectors. But we also need to focus on diversifying our economy to ensure that the real estate market stays strong, regardless of construction industry ups and downs. An innovation economy will better weather any downturns. Tempe and the other cities in our region are building an innovative and diversified economy that should fuel real estate development as companies start, grow and thrive here in our communities.

Bryce Lloyd, president, Phoenix Metro, FirstBank: This is a primary objective of Valley Partnership: to ensure we have responsible development that supports a thriving economy. As our economy continues to expand and diversify, the real estate development industry will be there to support this with the necessary housing, office, industrial, medical and retail improvements. Responsible development will ensure we have the desirable and sustainable communities that we and future generations will demand.

Derek L. Sorenson, partner, Quarles & Brady LLP: The real estate development industry will continue to play a pivotal role in the economic health of the Valley and state. Aside from providing jobs and other economic opportunities across a wide array of industries and professions, real estate development touches nearly every element of our quality of life: where and how we live, where we work, where we shop, what we do for fun and what we offer to attract new businesses and new residents.

AZRE: Some experts are theorizing we’re headed for another recession — agree or disagree and why?

Carson: Some form of recession is inevitable, that is the cycle of business.

The level of recession is the million dollar

question. Since the growth over the past several years has been slower and steadier, and much more diverse (not relying solely on home building) (than previous recoveries), I believe the next recession will be a dip, rather than a steep drop.

Kramer: In the short term, I disagree.

We are likely to continue to see slower and more consistent, sustainable growth throughout Arizona. For the long-term health of our market, this is a better model than the hockey stick boom and bust that we previously experienced. When (and not if) the next recession occurs, hopefully, we will be better positioned to withstand the effects and rebound more quickly.

Mitchell: It has been said, “Economists have accurately predicted 11 of the past six recessions.” What I mean by this is, well, we don’t know — but we must be prepared. I am optimistic that our economy will stay strong, but it’s my job, and the job of all policy-makers to maintain and enact responsible policies at all levels that will build on the momentum we have now and weather the cyclical ups and downs of the economy.

Those responsible policies must be both short and long term in thinking.

For example we must support our local businesses, adequately fund education, and ensure cities have the ability to innovate and attract jobs.

Lloyd: I do not believe we are facing the prospect of a severe recession in the near term, at least not of the severity of the most recent one. Arizona, like all other states, is subject to national and global events, which are out of our control. Our recovery from 2008 has been bumpy, and certainly not as robust as other areas in the western U.S. As a result of this fairly sluggish recovery, I do not think we are facing a significant real estate decline in the near future. Due to the cyclical nature of any capitalist economy, we will see future recessions. I think the continued diversification of the local economy will assist in leveling out our peaks and valleys.

Mellott: CBRE’s expectation is that there will be moderate economic growth in 2016 (around 2 percent in the US), low inflation and low interest rates, but occasional bouts of pessimism. This outlook is underpinned by an improving and relatively good 71

VALLEY PARTNERSHIP

Molly Carson

Heidi Kimball

Jay Kramer

outlook for the consumer. The combination of low commodity prices, low interest rates, falling unemployment and rising home prices adds up to a reasonably good outlook for consumers.

A similar dynamic is in play in Europe as well, and China’s economy is stabilizing as it responds to policy adjustments. In short, CBRE’s expectation is that 2016 will be a good year — albeit not uniformly — across the U.S. and globe and in many respects, even better in Phoenix.

Sorenson: I disagree that another recession is around the corner. The real estate industry in the Valley is so diverse. Certain areas of the real estate economy (shopping centers, for example) have been slow to recover, but others have thrived and are continuing to thrive. Unless a recession hits the country as a whole, I believe the outlook is good for Valley real estate development.

AZRE: What do you feel should be the 25- to 30-year vision for Valley Partnership going forward?

Carson: Onward and upward. To attract, retain and grow as many successful corporate headquarters as we can. Doing this by continuing to spread the wonderful assets and attributes Arizona has to offer. In tandem with the goal/vision of becoming one of the Top 10 states in the country from a K-12 education standpoint.

Kramer: There will be so many changes throughout Arizona during the next 25 to 30 years, which makes it difficult almost impossible to have such a long-term vision. During the next five years, I want to see Valley Partnership continue to grow into the “go to” organization for responsible 72 | May-June 2016

Darin Mellott

Mark Mitchell

development that can coalesce the real estate and business community on the most pressing issues affecting Arizona, including water, transportation, infrastructure, high-paying job creation and education.

Mellott: Valley Partnership should be a vehicle to promote not just a healthy environment for real estate development, but should also look at the overall health of the Valley’s economy, because without one you can’t have the other. Issues in the community at large will affect the health of property markets. The global economy and landscape that the Phoenix metro is a part of will continue to evolve amid fierce competition. Success in communities is not an accident and a strong public-private partnership is almost always a defining feature of those successes. With this in mind, the real estate community should actively be involved in supporting and shaping an agenda that will allow the Phoenix economy to grow in a sustainable and balanced manner and create positive outcomes for all residents of the Valley.

Mitchell: Valley Partnership should remain true to its core mission: to advocate for responsible development.

An effective way to do that is for Valley Partnership to help businesses and government work together to achieve our common goals. A big part of that is honest communication. We need businesses and their organizations to feel comfortable sharing with our state and local governments how important things like a strong and well-funded K-12 and higher education system are to both the short and long term economic gain.

Lloyd: Valley Partnership will continue to advocate for a balanced,

Bryce Lloyd

Derek L. Sorenson

healthy, and sustainable development perspective. Arizona and the Phoenix area will continue to have growth due to its desirable lifestyle and business climate. Valley Partnership and its members will be an integral player in the next 25 to 30 years.

AZRE: How does the CRE industry establish a consistent administration of taxes, fees and regulations across all jurisdictions?

Carson: By working together. Smart, reasonable, collaborative minds can do great things when they focus on a universal goal. The Real Estate industry is in a good position to lead this effort.

Kimball: Valley Partnership can assist the development and real estate community to assure this consistency by serving as the convener for other industry groups, and wielding our collective influence across administrations. We can do this most effectively by being a partner in the jurisdictions we engage with, rather than an adversary. That has always been one of our greatest strengths, and the reason that public bodies seek our input and collaboration.

Kramer: Your question presupposes that consistent administration of taxes, fees and regulations across all jurisdictions is a worthy goal. I am not sure that I agree. There are areas of state-wide or regional importance where state law needs to supplant local control, such as water regulation, environmental protection and personal property rights.

There are enough differences from community to community and the wants and needs of different locales, that local decision-making and control are necessary in other areas, including zoning and land use and local taxes.

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VALLEY PARTNERSHIP Valley Partnership’s recent wins • Support the re-election of Mayor Mark Mitchell, Councilman Kolby Granville and Councilman Joel Navarro, and the election of Councilman Randy Keating in the Tempe City Council election • Successfully negotiate the Tempe development impact program that balances the needs of city • Support public/private partnership funding of the Tempe Street Car Project • Support flexibility options in the Phoenix Walkable Urban Code • Support the Avondale Economic Incentive Fund • Support Prop 123 to fund education without raising taxes • Represent the real estate development industry on Gov. Doug Ducey’s Water Augmentation Council to investigate long-term water augmentation strategies, additional water conservation opportunities and funding and infrastructure needs to help secure water supplies for Arizona’s future

What’s next for Valley Partnership?

• Protecting and enhancing the authority for and ensuring the use of existing economic development and infrastructure development tools such as Government Property Lease Excise Tax (GPLET) and Community Facilities Districts (CFD) and supporting the addition of other tools for use across the state • Supporting Arizona State Land Department to retain a portion of what it earns from transactions for administration • Ensuring Central Arizona Groundwater Replenishment District’s ability to meet current and future recharge obligations • Supporting Interstate-11, State Road 30, and State Road 24 as priorities for state and regional transportation and infrastructure funding

Lloyd: The CRE industry will help establish a consistent administration of taxes, fees and regulations across all jurisdictions by working with all government partners to ensure consistency in the imposition and use of development fees; engage in policies that impact the vitality of the development industry; support sensible standards and offer a wide-range of creative options to meet those standards. Valley Partnership is the one locally based real estate organization uniquely positioned to bring all the stakeholders together to ensure all of these things.

Mitchell: One thing to keep in mind is each jurisdiction in the Valley is different in their life cycle. Tempe is one, if not the only, built-out communities in the state and our challenges and opportunities are different than other communities that still have large amounts of developable land. Even considering redevelopment, Tempe’s redevelopment challenges are different than those of our neighbors given our geography. There does need to be a level of standardization across all jurisdictions, but there also needs to be flexibility so each community can address its unique needs.

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The road to

GROWTH Financing necessary infrastructure is the key to long-term economic development

By JESSE A. MILLARD

E

xisting transportation infrastructure can be a make it or break it point for any development project. If there aren’t any roads or other necessary infrastructure pieces in place, then a site isn’t very developable, says Brad Wright, of counsel at Squire Patton Boggs.

“I really see the connection between our ability to finance good public infrastructure and how it ties directly to our ability to grow the economy,” he says, “and be successful at economic development.

When Wright worked for SunCor Development Company, he saw how important infrastructure was to development projects.

Valley Partnership is part of business coalition that supports the restoration of Highway User Revenue Funds (HURF) this year at the State Legislature, in addition to a publicprivate partnership — referred to as a P3 — and other methods to pay for Interstate-11, State Route 30 and corridors that will have an economic impact and create public safety benefits.

Creating those projects could be

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tricky, though.

According to the State of Arizona Office of Auditor General, the Arizona Department of Transportation’s long-term plan for the state’s infrastructure requires $88.9 billion between 2010 and 2035, but is expected to only receive $26.2 billion during that time frame. That’s a $62.7 billion shortfall.

But hope isn’t lost. Arizona is making huge investments in its transportation infrastructure. The passing of Proposition 104, a transit sales tax increase from .4 percent to .7 percent over the next 35 years, will allow the City of Phoenix to expand the Metro Light Rail, busing system, street pavement and much more.

A common trend across the country — and in Arizona — has been the live, work, play model, and public transportation has attracted businesses and folks to city cores like downtown Phoenix, and other areas across the Valley.

While public transportation is covered in Phoenix, Mesa, Tempe and others in the West Valley have needs.

But what about the state’s highways?

ARIZONA’S FIRST COMPLETE NORTH-SOUTH CORRIDOR The majority of the nation’s Interstates were built in the 1950s and 1960s, connecting major cities across the country through a vast network of interstates, but Arizona never saw an interstate that went completely north and south, and Interstate-17 stops at Flagstaff.

“The reason there’s no north to south corridor in Arizona is because we have this ditch in the way, called the Grand Canyon,” says Scott Higginson in a jovial manner.

Higginson is the executive director of the Interstate 11 Coalition and is working to create the state’s first complete North-South Corridor.

Before the Mike O’Collaghan-Pat Tillman Memorial Bridge was finished in 2010, traffic was forced to use the top of the Hoover Dam to get between Phoenix and Las Vegas. The Hoover Dam was not an adequate crossing point because it was only two lanes, is a major tourist attraction and required a lot of curvy

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Scott Higginson

“The reason there’s no north to south corridor in Arizona is because we have this ditch in the way, called the Grand Canyon,” – Scott Higginson, executive director of the Interstate 11 Coalition

roads to get to, Higginson says.

The bridge will eventually be a part of upcoming Interstate 11.

Congress recently designated Interstate 11 to run from the ArizonaMexico border all the way up to Las Vegas, Higginson says. The interstate, once completed, will be the first NorthSouth Corridor in the state, opening up new opportunities for tourism, trade and retail in Arizona.

Mexico is Arizona’s No. 1 trade partner, accounting for 30 percent of the state’s exports to foreign markets, according to the Arizona Mexico Economic Indicators annual report.

Since the recession, Arizona has recovered the slowest out of the border states, according to the report. The state’s share of border-state GDP has declined from 7.9 percent in 2003 to 7.4 percent, the report found.

Higginson says Interstate 11 will serve as a significant commerce corridor, finally connecting Mexican markets with United States markets through Arizona, but the Interstate will take decades to fully complete.

78 | May-June 2016

Currently, the two best options to ship goods in and out of Mexico is either in Texas’ vast network, or through California’s Interstate 5, which is essentially a parking lot due to high traffic volume, Higginson mentions.

The interstate will be built in segments, Higginson says, and building the interstate in this manner will involve all levels of government and will break the interstate’s cost into bite-sized pieces.

Many of the environmental studies still need to be completed in Arizona for the interstate to become a reality, Higginson says.

“Interstate 11 will not be built without funding from a variety of sources at the local, state and federal levels,” he says. “And the potential for it to be a toll road, that is authorized under Arizona law, is of course one of the alternatives that will be examined.”

P3 AGREEMENTS One example of a P3 that would turn Interstate 11 into a reality is already being used to complete the 22-mile

Jay Kramer

Brad Wright

connection of the Loop 202 through the Southwest Valley.

ADOT recently signed a $1 billion P3 agreement with Connect 202 Partners to construct, maintain and design the rest of the freeway, says Jay Kramer, commercial transactions chairperson at Fennemore Craig.

Kramer says through this partnership, the freeway will be finished three years earlier and it will cost $100 million less.

“This P3 agreement will be a test case for ADOT and the private sector and, if successful, this template — or other innovative project delivery systems — may be used for design, construction, and maintenance of Loop 303, State Route 30, and Interstate 11,” he says.

A P3 agreement isn’t the only tool to complete these infrastructure projects.

Wright, the former SunCor attorney, says tools like Government Property Lease Excise Tax (GPLET), improvement districts, highway user revenue funds and community facilities districts are just some of the tools that can be used to build the necessary infrastructure to create a successful project.

“They all play a role on how we can finance (infrastructure),” Wright says.

Developers need to find the right tool for the project, but they are out there, he mentions.

Without things like GPLET, the midrise office buildings along Tempe Town Lake wouldn’t exist, he mentions.

“From a developer’s perspective, you look at the cost of public infrastructure required for these large-scale projects and it’s needed for the front end of the project, and a lot of the times the numbers just don’t work to move forward,” Wright says.

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80 | May-June 2016

Valley Partnership Advocates program helps young leaders cultivate commercial real estate knowledge

By ERIN DAVIS

W

hen the Forty-Niners sought to strike gold, they hit the mines and rivers — or the football field (depending on which analogy you prefer). When the best and brightest under the age of 35 want to strike gold in gleaning all there is to know in professional commercial development, they apply for the Valley Partnership Advocates program.

This year’s 2015/2016 Advocates’ class began in September 2015 and will conclude in May/June of this year. Candidates specifically selected for the Advocates Program — like this year’s 25 candidates — experience monthly events, networking opportunities and insight into local development projects — but that’s not all. This unique and specialized program serves as a platform for increased exposure to senior commercial executives in an intimate setting, with a chance to propel careers and cultivate knowledge within the community.

See how past and present graduates of the Valley Partnership Advocates Program are boosting their careers, creating lasting relationships with mentors and peers and contributing to the future of local commercial real estate.

INSIDER PERSPECTIVE This year’s advocates were granted the honor of an SRP helicopter ride, offering them a literal birds-eye view, alongside the inner workings of their home state’s land, utilities and development. From there, Advocates absorbed a similar introspection into the intricacies of community-leader occupations and projects.

Present Advocate, John Paul Mullhern, national investment sales specialist, Colliers International: “The dual take away is being able to meet people from all across the industry from city managers, architects and brokers, to cleaning companies—and then realizing that although you may not have immediate business opportunities—you’re learning how they operate and are cultivating future relationships. As a young person in the industry it’s nice to have an open door as a result of the relationships and mentorship that come from the Advocates Program.”

ACCESSIBILITY Each year Valley Partnership Advocates have the good fortune of shaking hands with some of the key players in local development and public policy affairs, some of whom have been from Vestar, Sunbelt Holdings, RYAN Companies, DMB, City of Phoenix, Macerich, State Legislative leadership and WDP Partners, in addition to past and present Valley Partnership board members and chairs.

VALLEY PARTNERSHIP Past Advocate, Chase Farnsworth, business development manager, Phoenix Operating Group: “From my first event through the last, I was amidst peers and industry leaders. I appreciated the time and accessibility of Valley Partnership board members, past chairs and many others. The true benefit of this accessibility is that it’s not just for the duration of the program. I have experienced and have benefited from that same accessibility even in the last few weeks now as alumnus of the program.”

current and potential growth via helicopter, joined Governor Ducey for a small intimate reception; hearing his plans for the future of our state, as well as having invaluable networking opportunities with industry and community leaders.”

"...As a young person in the industry it’s nice to have an open door as a result of the relationships and mentorship that come from the Advocates Program.”

CAREER ADVANCEMENT The interaction and exposure Advocates experience through community and business leaders, combined with monthly events, development facility tours and visits and ongoing support through the Valley Partnership network, sets local young professionals apart and offers them greater access to prestigious employment and career opportunities.

Present Advocate, Mackenzie Fitz-Gerald, economic development associate, APS: “This program has been an important tool in helping shape my career. As a recent hire at APS, it has been an exciting new challenge to learn the utility business while simultaneously figuring out the connection it has in commercial real estate. Not only has the program been a beneficial professional and personal development tool, it has helped me build an arsenal of great new colleagues and helped me to reconnect with old ones. As part of the program, I have been able to partake in many unique opportunities that typically would not have been afforded to me otherwise.

We had a chance to tour the Valley’s

Michelle Guina Alarid 82 | May-June 2016

LASTING TIES

– John Paul Mullhern, national investment sales specialist, Colliers International

COMMUNITY ENHANCEMENT Advocates are required to attend all Valley Partnership Monthly Friday Morning Breakfasts, and are instructed to engage in at least one committee, such as Valley Partnership’s Community Project. This routine and level of commitment prepares each candidate for further involvement within the community, by informing him/her on the most current local issues and needs.

Present Advocate, Brent Mallonnee, vice president, Cushman and Wakefield: “The programs I have been involved with, along with the countless interactions with business and community leaders, has provided me with an opportunity to better contribute to the evolution of Metro Phoenix and surrounding communities. The small group settings

Chase Farnsworth

Mackenzie Fitz-Gerald

and intimate exposure provides unparalleled opportunities to build relationships with a diverse group of high profile professionals and wellknown decision makers in the Valley.

Over the upcoming years, as an active member of Valley Partnership and the Advocates program, I hope to continue to build a network of cooperation that us mutually beneficial through the connections I’m cultivating within the organization.”

Past Advocates play an active roll in engagement with those presently enrolled in the program. The diversity of professional and to some degree personal goals, of both existing and alumni Advocates, doesn’t simply create a sense of fellowship, but rather solidifies a foundation—one that leaves a lasting impression, as well as continued connectivity.

Past Advocate, Michelle Guina Alarid, associate, Fennemore Craig: “As a real estate attorney, the interaction I had with executives from local and national developers gave me a greater understanding of my clients’ industry and how I can best represent them. The program also provided a powerful networking platform for young professionals from all areas of the development community—I learned a lot from interacting with members of the group who are financial professionals, planners, brokers, development associates, marketing professionals and engineers. They are friends and contacts who I will keep in touch with for years to come.

The Advocates program was an excellent foundation for my continued involvement in Valley Partnership.”

Brent Mallonnee

John Paul Mullhern

VALLEY PARTNERSHIP

Public works

Valley Partnership’s community projects reflect a sense of camaraderie and caring

By ERIN DAVIS

F

or more than 25 years, Valley Partnership has maintained a commitment to serve the greater Phoenix community by facilitating a yearly community project with the help of volunteers, corporate sponsors and community leaders. Past projects have included renovations to a diverse mix of nonprofit facilities, such as Southwest Autism Research and Resource Center, Foundation for Blind Children, Las Fuentes Health Clinic of Guadalupe and most recently, Florence Crittenton.

This philanthropic endeavor has not only collectively pumped more than $3.5 million back into the community, but has furthermore elevated a sense of unity and pride among Valley Partnership members, the local community and beyond.

FOCUS AND FOUNDATIONS

Each year, Valley Partnership sends out a grant application request.

All completed applications are subsequently evaluated by the Valley Partnership committee and then three to five site visits are scheduled.

“The committee meets to vote on a recommendation to provide to the board of directors,” says Valley Partnership Past Community Project Chair and current Board Liaison to the Community Project Dena Jones of Fidelity National Title Agency. “The chair(s) of the committee then present their recommendation to the board of directors and the board votes and approves the project selection.”

Jones, who chaired the community project for the past three years, has witnessed not only a rise in growth in the size of the Valley Partnership committee, but an increase in the sponsorships as well.

“Last year, we raised more than $400,000 to improve the site at 84 | May-June 2016

TEAM EFFORT: Almost 300 volunteers and a record 90 corporate sponsors contributed to Valley Partnership’s 2015 community project at the Florence Crittenton Girls Ranch in Scottsdale. More than $400,000 was raised to transform the sprawling grounds at the facility.

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VALLEY PARTNERSHIP Florence Crittenton, whose mission is to provide ‘safety, hope and opportunity’ for the girls they serve,” Jones says.

PARTNERSHIP AND PREP-WORK

“We couldn’t respond to the complexity of the needs of our girls without Valley Partnership,” explains Dr. Kellie Warren, CEO at Florence Crittenton. “We have to fundraise every year. As a nonprofit, the funding we receive never meets all our needs.”

Dedicated to continuum of care for girls ages 12 to 18, the Scottsdale Florence Crittenton location offers space for 15. Here, the girls (some of whom are pregnant or have children) receive a range of life skills and support.

“We help to break some of the cycles that they’ve been exposed to,” Warren says. “Fifteen residents under one roof is a lot to deal with, so we also encourage physical fitness and fresh air.”

As the oldest Florence Crittenton location in the Greater Phoenix area, with close to an acre of backyard space, room for outdoor activity is for the taking, but the landscape was in dire need of recuperation, according to Warren.

After what Warren and the Florence Crittenton development team knew would be a competitive application process, it took four months to complete the pre-planning for the project, including the prep-work of grating and irrigation.

“Local architects and various experts came together during the planning process,” Warren says, “The community worked tirelessly with experts and we got so many donations in terms of parts, labor and service.”

of stones reflecting positive sentiments which came to life with the help of engineer Kent Norcross with Dibble.

“I called it the ‘Smiling Heart of Opportunity,’” Jones says. “We created a guide to explain to the girls that the labyrinth is a place for de-stressing and meditation, where they can awaken their smile and engage their heart along the path.”

As a result of this particular completed community project, there is no shortage of smiles at the Florence Crittenton residence.

“The girls truly, truly love their new backyard,” Warren says. “I think those

involved with Valley Partnership have hearts of gold and I’m so glad they chose Crittenton and I know our girls do, too. They are friends for life.”

As for the future of Valley Partnership community projects?

Be sure to keep tabs on the next recipient by visiting the community project page on the Valley Partnership website.

WORKING TOGETHER: Ty Lusk and Terry Martin-Denning work on Valley Partnership’s 2015 community project at the Florence Crittenton Girls Ranch in Scottsdale.

FINISHING AND FLOURISHING

When Valley Partnership suited and showed up with a brigade of community volunteers, the magnitude of their dedication to providing a nurturing and beautiful environment was more than evident in the final product.

“The girls were involved (too); they painted stones with encouraging words and statements,” Warren says.

The original design by Kim Kleski from Olsson Associates included a labyrinth and Jones envisioned changing the shape to a heart composed 86 | May-June 2016

LEADING THE WAY: Dena Jones, center, of Fidelity National Title Agency, has chaired the community project for the past three years. She is Valley Partnership's past community project chair and current board liaison to the community project.