AZRE magazine September/October 2015

SEPTEMBER-OCTOBER 2015

TOP 10 OFFICES IN ARIZONA

Gensler was selected to reposition Alameda, a former 1980s industrial building soon to become a modern Millennial-friendly office space.

Inside:

LAW GUIDE p. 34 CRE Lobbyists

AMA p. 42 Living Large

NAIOP p. 49

30th Anniversary

Office politics

I

don’t know about you, but I spend more time in my office than at home during the week. While I like my office well enough, I have to say that looking at renderings like the one Gensler gave us to run on the cover of this issue makes me sometimes wish my office had a go-kart track or floor-to-ceiling windows and a food truck ring by the lobby. You can see my office wishlist on page 26.

Alternatively, offices are calling some unique obsolete and vacant buildings home. Read about Phoenix’s new wave of office product in our annual NAIOP section on page 49. Office is also paving the way for more retail development with the focus on work-live-play environments. Read about NAIOP’s plan to extend its previously industrial and office-focused organization’s resources to retail developers on page 70.

The shifts in commercial real estate extend to the legal community, as reported in AZRE’s annual Real Estate Law Guide (begins on page 34).

Regardless of where you read this issue — from the comfort of your house or work (your home-away-fromhome) — I hope you are able to appreciate the sense of community arising in the way all industries are approaching commercial real estate.

President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Editor: Amanda Ventura Staff writer: Meryl Fishler Interns: James Bunting | TreNesha Striggles AZRE | Arizona Commercial Real Estate Director of sales: Jeff Craig ART Art director: Mike Mertes Graphic designer: Ana Richey DIGITAL MEDIA Director of digital sales: Bailey Young, Kerri Blumsack Web developer: Eric Shepperd Digital coordinator: Robin Sendele MARKETING/EVENTS Marketing & events coordinator: Heidi Maxwell Marketing coordinator: Lorin Parkhurst OFFICE Special projects manager: Sara Fregapane Executive assistant: Mayra Rivera Database solutions manager: Cindy Johnson Az BUSINESS MAGAZINE Senior account manager: David Harken AZ BUSINESS LEADERS Director of sales: Sheri Brown RANKING ARIZONA Director of sales: Sheri King

Amanda Ventura Editor, AZRE amanda.ventura@azbigmedia.com

EXPERIENCE ARIZONA | Play Ball Director of sales: Ann McSherry CREATIVE DESIGNER Director of sales: David Silver

AZRE: Arizona Commercial Real Estate is published bi-monthly by AZ BIG Media, 3101 N. Central Ave., Suite 1070, Phoenix, Arizona 85012, (602) 277-6045. The publisher accepts no responsibility for unsolicited manuscripts, photographs or artwork. Submissions will not be returned unless accompanied by a SASE. Single copy price $3.95. Bulk rates available. ©2015 by AZ BIG Media. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from AZ BIG Media.

2 | September-October 2015

CONTENTS

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

14 Big Deals 20 After Hours

22 Legislative Update

26 Cover Story: Top 10 Offices

26

30 East Valley Update 34 Real Estate Law Guide

42 Arizona Multihousing Association 49 NAIOP Arizona

30

42

On the Cover: A rendering of Alameda, courtesy of Gensler

49

Corrections and clarifications:

In Leroy Breinholt’s profile for the July/August issue's “Big Deals” section, the story incorrectly stated that Breinholt owns a race car.

4 | September-October 2015

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

30 YEARS OF EXCELLENCE

AZRE SOURCE

By TreNesha Striggles

O

ne of the most talked about ballot initiatives this year has been the Arizona Marijuana Legislation Initiative. If it makes it onto the ballot and is approved by voters, the possession and consumption of marijuana would be legal for people 21 years old and older. A 15-percent tax would be levied on the sale of marijuana and revenue would go toward education and healthcare.

Passing of the initiative could impact school and marijuana enthusiasts, but there could also be an impact on Arizona’s real estate industry.

It’ll be a very specific type of property that can benefit from legalization of marijuana. Along with storefronts, cannabis start-ups could be looking for new spaces for their cultivation centers or greenhouses.

Finding the right property for such a purpose could prove to be difficult.

Derek Peterson left a job on Wall Street to enter the cannabis industry in 2010. When it comes to real estate, he says the first thing his company will look at it is the legislation concerning zoning regulations for storefronts and cultivation centers.

“You can only be so close to schools,” says Peterson, president and CEO of Terra Tech. “Those zoning perimeters

6 | September-October 2015

knock out a great deal of available real estate. You can only be so close to public parks. You can only be so close to residential areas.”

Under the proposed ballot measure, a new department, the Department of Marijuana Licenses and Control, would be charged with regulating the cultivation, manufacturing, testing, transportation and sale of marijuana.

However, local governments would retain the power to regulate and limit the marijuana businesses. This means that zoning requirements for businesses would continue to vary from city to city.

In most Arizona cities, a dispensary isn’t allowed to be at least 500 feet from a school, church or residential area. Cultivation centers are not allowed to be on the same property as the dispensary itself. The real estate options get even more limited when you take into account the maximum and minimum square footage needed for the business to operate.

According to Peterson, a proper greenhouse should take be no less than one acre in size and a warehouse facility could need anywhere from 10,000 to 30,000 square feet. Despite their restrictions, storefronts will also need to look at the same factors as any other business, such as foot traffic and the demographics of the residents.

The lack of available real estate could lead to bidding wars between entrepreneurs who want to break into the industry. This could mean good news for some of the more open-minded owners of the industrial real estate.

However, the impact will only be made if Arizona businesses and residents choose to be supportive of the incoming cannabis entrepreneurs. If a large group of nearby residents speak out against a prospective dispensary or cultivation center, there is a chance that it won’t be allowed to open. Ryan Hurly, a partner and chair of Rose Law Group’s Medical Marijuana practice group, has worked cases where there has major disapproval of medical marijuana based business opening close by.

“Any of these are public hearings in front of public officials so if lots of neighbors show up to complain it can cause a real problem,” says Hurley. “We work to assure those neighbors that this is a normal use, and it’s not going to be problematic for them and we’ll be good neighbors.”

Hurley has been practicing in the field of medical cannabis law for five years and his medical marijuana practice group has worked with medical dispensaries and cultivation businesses around the country. They help with more than just law and also give advice for site selection and land use concern.

Coming October 2015 Who will be Arizona’s most influential leaders in 2016?

Each year AzBusiness Leaders profiles more than 400 of the most dynamic, innovative and influential movers and shakers of Arizona’s economy. Find out how they overcame challenges in business, what accomplishments give them the most pride and even their childhood aspirations for what they wanted to be when they grew up.

They are our Voices of Leadership for 2016.

Learn from the best in:

• Law • Education • Government • Nonprofit • Healthcare • CEOs and CFOs • Manufacturing and Technology • Tourism/Entertainment/Sports • Banking/Accounting/Finance Management • Commercial and Residential Real Estate • Who’s who and more

Make sure your company is seen in AzBusiness Leaders all year long.

Call 602.277.6045 for advertising and sponsorship opportunities.

30 YEARS OF EXCELLENCE

AZRE SOURCE

PROJECT

NEWS Rowing Away

The Row, a retail and entertainment property destined to kickstart downtown Chandler’s culture hub, has been delayed.

As of press time, The Row’s expected 2015 groundbreaking is being delayed due to City of Chandler and developer agreements that need to be finalized. An issue, as reported by the Arizona Republic, includes potential need to add soil to the site for building support.

Move Over

Construction of a new transit center at Arrowhead Towne Center in north Glendale began in August. The facility, scheduled to open in November, will include new passenger amenities, including shaded bus shelters, free Wi-Fi, electrical outlets for phone chargers, bus pullouts and landscaping. The project is being funded by Macerich and City of Glendale.

SUNDT ENTERS A DIFFERENT DIMENSION

By Meryl Fishler

F TEN City

A July transaction assembled 215 acres at I-10 and 83rd Avenue in Phoenix to make way for a $300 million mixed-use business park called TEN. When complete, the project will become the largest freeway industrial employment site in Phoenix. Irwin Pasternack is the property owner, architect and developer. Within the next year, the project is expected to break ground.

8 | September-October 2015

or Sundt Construction’s 125th anniversary, the company developed a coffee table book that showcased 125 different clients and projects.

However, the contractor took it one step further by packaging the book in a 3D jacket that depicts a fictional “Sundt City,” that has real replicas of existing buildings around the Valley. To accomplish this, the company bought a 3D printer. However, the book jacket was just a gateway into additional applications of 3D printing in commercial real estate.

“We really wanted to learn the commercial aspects of 3D printing, and this struck us as a low cost, low risk way to play with a new technology,” said Jeff

Perelman, Sundt senior vice president and chief growth and strategy officer.

“In construction, you can’t afford to build one bad building, so you don’t want to try a technology until it works,” Perelman said. “This gave us a real chance to learn on a simple model.

Internally, just doing something as simple as a book cover let us master what you have to do for 3D design so it can be printed by the printer.”

Sundt learned a lot from its experience printing the jacket covers. When printing the bridge arches, the engineers assigned to master the printer learned that the arches couldn’t be printed the way they look. Rather, they had to be produced at

PROJECT

NEWS Sky High

Skanska started on phase one of the 8,675acre Skyline Regional Park in Buckeye. The $3.95 million project for the City of Buckeye includes roadway construction, park features including entry gate house, entry gate monument and gates, ramadas, restrooms and a pedestrian/equestrian bridge across the Skyline Wash. The park will also offer opportunities for hiking, mountain biking, horseback riding and other passive recreation activities such as wildlife viewing and camping.

PHOTO BY MIKE MERTES, AZ BIG MEDIA

an angle because the printer cannot drop material to print if there is no supporting body. Depending on the angle you set a structure, it might be physically impossible to print.

Later this year, Sundt plans to use the printer for prototypes of projects. The aim is to make visualizing the final product easier. The industry currently uses building information modeling (BIM), a process that generates digital representations of physical and functional characteristics of buildings, said Steven Ayer, a professor at Arizona State University’s Ira A. Fulton Schools of Engineering. Engineers can work in cyberspace and see how a complicated structure lays out, Perelman

said, but building owners often cannot and 3D printing holds value there.

Sundt’s interest in 3D printing is to find ways to print custom components, Perelman said. The construction industry is a unique manufacturer because everything is a one-off and no one wants the same building as what is next door.

This is where 3D printing has a lot of value, Perlman said.

Currently, modularization and prefabrication methods are used in the construction industry, but they involve repetition, Ayer said.

“3D printing offers an interesting ability to not have that consistency,” he says.

“The concept of having a manufacturing tool where you can build customized parts or components to fit a unique building has unlimited potential for our industry,” Perelman said.

Multifamily Makeover

Last summer, P.B. Bell purchased a seven-property portfolio that included about 2,800 units. Since taking ownership of the properties in Chandler, Mesa, Phoenix and Glendale, occupancy rates have increased by up to 8 percent and have reached an overall average of 97 percent leased. P.B. Bell has renovated about 300 apartment units and invested nearly $9 million into community improvement projects, such as new paint and landscaping, remodeled clubhouses and fitness centers and updated pool areas.

Deep End

A.R. Mays Construction completed EVO Swim School, a 6,030-square-foot, singlestory, wood frame building on 2.5 acres with site improvements that included the build-out of an indoor pool, viewing area, showers, locker rooms for men and women, and staff training rooms. The outdoor pool has sail canopies above it to help add shade and maintain cooler pool temperatures.

9

AZRE SOURCE The

By Amanda Ventura

Dave Miller

P

aul Weiser, shareholder and cochair of Buchalter Nemer, uses the term “blend and extend” to describe the attitude between landlords and tenants during the recession. This is the dark side of being a tenant-landlord lawyer, he says. This robbed many landlords of their ability to part with tenants who couldn’t afford to pay the full rent. Now, Weiser says, landlords are more comfortable taking their chances with kicking out bad tenants.

This is where his business picks up.

Landlords are engaging attorneys before locking out a tenant to review the lease and default letters to make sure all requirements for a lockout have been met.

“It’s sort of still more back to the pre-recession normal,” Weiser says.

“Tenants, at times, are a little more cautious about long-term leases because they don’t have that absolute faith in the continued growth of the economy. You might see more tenants taking less space initially…a right of first offer or refusal so they can grow into space but not obligated to take on more than they need up front.”

Weiser, who has represented landlords who have signed tech tenants, says modern landlords needs to embrace flexibility.

Another concern building owners should be looking at in the near future is the number of CMBS loans due for refinancing in 2017. Dave Miller,

10 | September-October 2015

CCIM, Chicago Title, and his team reported that of all loans totally more than one million dollars, 287 loans will reach maturity by the end of 2017.

Of the four major property types (retail, multifamily, industrial and office), office is the most likely to default, followed by multifamily, retail and industrial.

“We’ve always had a tendency to overbuild retail and office,” Miller says.

“It’s a function of over exuberance when the market is stabilized. It never got absorbed. Some have been traded twice already and still not leased up. The third owner has a chance of making money.”

Miller points out that Arizona is behind the curve in office and retail,

Paul Weiser

but ahead of the game on industrial and right on track with multifamily.

“Most properties are at values where they can be sold and new debt brought to the table,” Miller says. “This means there won’t necessarily be a foreclosure.”

The leading reasons behind commercial foreclosures, he says, is poor management or structural default. Owners with good, national sponsorships may also be saved from foreclosure or defaulting on a loan.

Despite all this, Miller says he’s more optimistic than most people.

“I’m convinced that next year, we’re gong to see the velocity increase to acquire properties,” Miller says. “Of velocity and volume of transactions … we may see a 25 percent increase.”

Property Type

Number of Loans Maturing

Likely to Default

Total Amount of Default

% of matured loans

Multifamily

79

7

$72M

8.86%

Retail

101

8

$110.4M

7.92%

Office

61

9

$145M

14.75%

Industrial

46

1

$19.8M

2.17%

Source: Chicago Title

Planning and Zoning City of Avondale The City of Avondale has created a $2 million fund to aid commercial and residential real estate developers offset the city’s own impact fees. The package produces a $2 million pool that developers can use to offset that cost for roads, parks, infrastructure and public safety needed for new projects.

City of Coolidge The Coolidge City Council approved an increase of the city’s property tax rate by 2 percent, which is the maximum allowed by the state. It is the first time in two years that the rate has been increased by its maximum amount.

TOWN OF LITCHFIELD The Town of Litchfield Park is planning something that may impact the fortunes of the West Valley. Last year, at the urging of the Wigwam's owners, Litchfield Park approved general plan amendments that are likely to alter the complexion of this regionally-significant community. The Wigwam's owners have created forward momentum that could lead to a main street-type development with regional impact. Recently, the city council

agreed to acquire nearly 20 acres in the center of the community that has long been targeted for development as a city center district. More recently, ground broke on a 28-acre residential development in the center of town.

These steps signal a transformation for Litchfield Park that is likely to play out over the next few years. The specifics of the transformation are scheduled to be debated by community representatives starting in the fall.

City of Maricopa The mayor and city council amended the city’s zoning map to include overlay districts coded Mixed Use – Heritage (MU-H) and Transportation Corridor (TC) to promote walkability and infill. The zoning overlays are intended to architecturally enhance the main thoroughfares of the city and broaden opportunities for reinvestment within the Heritage District Redevelopment Area.

City of Peoria The Peoria City Council approved a plan to build a water-transmission line linking the municipal system with the distribution system serving

Vistancia in the northwestern portion of Peoria. The change allows the city and its partners on the project to proceed with planning, design and construction of the Lone Mountain Water Line. The 36-inch pipeline will run from Loop 303 to Lake Pleasant Parkway along a route paralleling Lone Mountain Parkway. It will carry up to 22.8 million gallons of water daily, according to city Public Works-Utilities Director Bill Mattingly. The waterline will allow the city to convey potable water west of the Agua Fria River to properties within Peoria’s water service area. The project will enable the areas east and west of the Agua Fria to develop. The development partners will share the $10.6 million cost of the project. The city’s share will be $3.9 million of that cost. Construction is expected to run from January 2016 through September 2016.

The P&Z column is compiled by Dave Coble, Curt Johnson and George Cannataro with Coe & Van Loo Consultants, cvlci.com

11

New to Market

Hospitality The Algarve at Encanterra Country Club DEVELOPER: Shea Homes General Contractor: A.R. Mays Construction Architect: H & S International Location: 1035 E. Combs Rd., San Tan Valley Size: 60KSF VALUE: $3M Start/Completion: June/December 2015

12 | September-October 2015

Hospitality L’Auberge de Sedona

Multifamily Capital Place

DEVELOPER: L’ Auberge Newco, LLC, a Delaware Limited Liability Company General Contractor: A.R. Mays Construction Architect: PHX Architecture Location: 301 Little Lane, Sedona Size: 8KSF VALUE: $1.8M Start/Completion: June/ September 2015

DEVELOPER: Epoch Residential General Contractor: Hardison/ Downey Construction, Inc. Architect: Archicon Architecture & Interiors, L.C. Location: Downtown Phoenix Size: 292 units VALUE: $50M Start: January 2016

BREAKING GROUND: (Top to bottom, left to right): Capital Place, Porsche Chandler, The Algarve at Encanterra Country Club, Habitat-X and L'Auberge de Sedona

Multifamily Crossroads at San Tan Village Phase II DEVELOPER: LWI Properties and Cisterra Development General Contractor: The Renaissance Companies Architect: Architects Orange Location: 1725 S. Coronado Rd., Gilbert Size: 500KSF VALUE: $36M Start/Completion: November 2014/ July 2016

Retail Porsche Chandler

Office Habitat-X (Hab-X)

DEVELOPER: SubRally II, LLC General Contractor: Colton Constructors, Inc. Architect: Robert Brown Architects Location: 1010 S. Gilbert Rd., Chandler Size: 35KSF VALUE: $9.5M Start/Completion: August 2015/ April 2016 Subcontractors: Harmon Electric, Stoll Masonry, Alpine Mechanical, Ironco Steel, Sun Valley Concrete, Imperial West, Gen3

DEVELOPER: EDU3 Ventures General Contractor: Old World Architect: Ned Sawyer Location: 13430 N. Scottsdale Rd., Scottsdale Size: 42,000 SF Brokerage FIRM: Newmark Grubb Knight Frank VALUE: $7M Start/Completion: February/ December 2015

13

PHOTO BY ROBIN SENDELE, AZ BIG MEDIA

Star-crossed broker Julie Johnson, CCIM, executive vice president, GPE Commercial Advisors

By Meryl Fishler

J

ulie Johnson’s first job out of college was to conduct failure analysis for airplane turbine blades, and she couldn’t have been more bored.

She graduated from Arizona State University with a bachelor’s degree in metallurgical engineering with aspirations of conducting research for a space program. A career in healthcare real estate leasing, investment sales and site selection for medical office properties and senior living communities, didn’t even cross her mind as a career path.

Johnson launched her career

14 | September-October 2015

in commercial real estate in 1989 following a position in advertising sales with the Phoenix Business Journal.

During her years in advertising sales, Johnson began forging relationships with members of the hospital and healthcare community. She expanded her knowledge of the industry and strengthening her skills in sales, market analysis and transaction management.

Twenty-seven years in the industry and more than 100 sales transactions later, Johnson has never looked back.

“I love real estate because everyday is a new day; it is definitely not boring,” Johnson says.

When Johnson isn’t in the office or closing a $25 million deal, she can probably be found outdoors. She enjoys skiing, biking and is quite the adrenaline junkie. She used to race cars and has climbed Mount Kilimanjaro.

The most significant deal for Johnson involved working on the new build-to-suit for the VA Clinic in Gilbert. The deal involved working closely with McShane Construction Company as its representative for buying the land. It was almost two years before the deal came together.

“It was a long and very competitive process for both land sites and well as a lease package for this VA Clinic requirement,” she says.

What makes real estate such a good fit for someone whose dream job involved working out-of-this-world research?

“It merges doing all the numbers work with the marketing work; it is a great combination,” says Johnson, whose love for numbers brought her to study engineering.

However, the creative part of being a broker and trying to look at situations differently is something she says she enjoys while conducting research.

Johnson believes creativity is a vital aspect of being a broker and that her unique background in advertising has set her up for success in her field.

“Working through issues to try to get something done and being creative,” she says, are key traits of a successful broker. “If you cant do it one way, what are three other ways to do it and can you get one of those three ways to work?”

Currently, about one-fourth of Johnson’s business comes from the senior housing industry. As that part of the industry grows, Johnson has been meeting with people to position herself to grow with it. In the future, she anticipates more build-to-suits for healthcare clients and providers as well as more national clients as healthcare becomes more corporate rather than private practice.

It’s the big deals, and the brokers who make them, that make the market an interesting one to watch.

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

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

Industrial/Sales

Office/Sales

1. State Farm Insurance, Phoenix 250,043 SF; $38,084,200 Buyer: JDM Partners, LLC Seller: State Farm Mutual Automobile Insurance Company

1. One North Central, Phoenix 410,053 SF; $93.75M Buyer: Parallel Capital Partners Seller: One North Central, LLC Listing BrokerAGE: Eastdil Secured, LLC

2. 4550 W. Watkins St., Phoenix 313,600 SF; $20.32M Buyer: Cohen Asset Management, Inc. Seller: Kansas City Life Insurance Company 3. El Dorado Tech Center, Gilbert 182,363 SF; $18.6M Buyer: Everest Holdings, LLC Seller: JL Bates, LLC Listing BrokerAGE: DTZ

2. Three Gateway, Phoenix 221,885 SF; $38,383,408 Buyer: Lowe Enterprises Seller: Oaktree Capital Management LP Listing BrokerAGE: CBRE 3. One Compass Center, Phoenix 132,024 SF; $22,855,175 Buyer: The Blackstone Group LP Seller: General Electric Capital Corporation

4. FedEx Freight, Phoenix 34,650 SF; $17.162M Buyer: Swift Transportation Corporation Seller: Siegbert & Ruth Klebe 1991 Family Trust Listing BrokerS: Stan Johnson Company

4. 4129 E. Van Buren St., Bldg. 2 121,490 SF; $$22,133,048 Buyer: The Blackstone Group LP Seller: General Electric Capital Corporation

5. 221 E. Willis Rd., Blgs. A and B, Chandler 139,735 SF; $12,815,412 Buyer: Greenwood & McKenzie Real Estate Seller: Sun State Builders

5. Phoenix West Business Center I 125,172 SF; $19,652,004 Buyer: The Blackstone Group LP Seller: General Electric Capital Corporation

BIG DEALS is sponsored by

Waypoint

Firm: Lincoln Property Company and Harvard Investments Build: Waypoint – A two-building, 258,000 sq. ft. Class A Office Campus in Mesa, AZ Loan: Construction Loan financed by Alliance Bank of Arizona 15

MULTIFAMILY/Sales

RETAIL/SALES

1. SkySong Apartments, Scottsdale 210KSF; 325 units; $67.5M Buyer: Mid America Apartments LP Seller: USAA Real Estate Company Listing BrokerS: Tyler Anderson, Sean Cunningham, Asher Gunter and Matt Pesch, CBRE

1. Summit at Scottsdale, Scottsdale 190,408 SF; $54.1M Buyer: Weingarten Realty Investors Summit Seller: Donahue Schriber Realty Group Listing Brokers: Ryan Schubert, Michael Hackett and Dan Wald, DTZ

2. Broadstone Element, Phoenix 475,623 SF; 629 units; $66.3M Buyer: CBRE Global Investors Ltd. Seller: Stockbridge Capital Group, LLC Listing BrokerS: CBRE 3. Array South Mountain, Phoenix 742,178 SF; 600 units; $57.5M Buyer: Fairfield Residential Seller: Milestone Apartments REIT Listing BrokerS: CBRE

Tyler Anderson

Ryan Schubert

3. Arrowhead Plaza, Glendale 85,789 SF; $14M Buyer: Investment Concepts, Inc. Seller: Westwood Financial Corp.

Sean Cunningham

4. Gateway at Tempe, Tempe 289,704 SF; 288 units; $56.75M Buyer: Crow Holdings Seller: SCI Real Estate Investments Listing BrokerAGE: CBRE 5. Elevate at Ancala, Scottsdale 261,092 SF; 330 units; $41.65M Buyer: The Ergas Group Seller: Alliance Residential Company Listing BrokerS: CBRE

2. Lifetime Fitness, Goodyear 112,789 SF; $21.5M Buyer: Realty Income Corporation Seller: Lifetime Fitness

Asher Gunter

4. Haggens, Scottsdale 58,836 SF; $9,999,255 Buyer: Spirit Realty Capital Seller: Albertsons, Inc. 5. The Container Store, Glendale 23,329 SF; $8.6M Buyer: Consolidated Tomoka Land Co. Seller: Vintage Partners LLC

Michael Hackett

Dan Wald

Matt Pesch

Where Experience Meets Opportunity

BIG DEALS is sponsored by

Vicki Williams

16 | September-October 2015

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

Office/Leases

Retail/Leases

Jerry Roberts

1. Phoenix Plaza Tower I, Phoenix 140,048 SF Landlord: General Electric Capital Corporation Tenant: Banner Health Landlord BrokerS: Jerry Roberts, Corey Hawley, Pat Boyle, CBRE TENANT BrokerS: Pat Williams, Vicki Robinson, Steve Corney and Andrew Medley, JLL 2. Phoenix Plaza Tower II, Phoenix 121,219 SF Landlord: General Electric Capital Corporation Tenant: Banner Health Landlord BrokerAGE: CBRE TENANT BrokerAGE: JLL 3. Allred Park Place Central, Chandler 100,622 SF Landlord: Douglas Allred Company Tenant: Infusionsoft Landlord BrokerAGE: CBRE 4. Scottsdale Quarter, Phase III, Scottsdale 55,530 SF Landlord: O’Connor Capital Partners Tenant: JDA Software Landlord BrokerAGE: CBRE TENANT BrokerAGE: DTZ 5. Liberty Center at Rio Salado, Tempe 38,140 SF Landlord: Liberty Property Limited Partnership Tenant: Centene Management Company Landlord BrokerAGE: CBRE TENANT BrokerAGE: DTZ

BIG DEALS is sponsored by

18 | September-October 2015

Corey Hawley

Pat Boyle

1. Scottsdale Towne Square, Scottsdale 27,827 SF Landlord: Holualoa Companies Tenant: Natural Grocers Landlord BrokerS: Cliff Johnston and John Appelbe, DTZ TENANT BrokerAGE: GPS Retail Advisors

Cliff Johnston

2. Greenway Plaza, Phoenix 26,610 SF Landlord: Revesco Properties Tenant: Salvation Army Landlord BrokerAGE: Revesco Properties

Pat Williams

Vicki Robinson

3. Chandler Central Corridor, Chandler John Appelbee 25,000 SF Landlord: Michael A. Pollack Real Estate Investments Tenant: Jeg-Fit Alma School Landlord BrokerAGE: Michael A. Pollack Real Estate Invements TENANT BrokerAGE: NAI Horizon

Steve Corney

4. Town & Country Shopping Center, Phoenix 18,500 SF Landlord: Camelback RE Development, LLC Tenant: F21 Red Landlord BrokerAGE: Camelback RE Development, LLC TENANT BrokerAGE: Phoenix Commercial Advisors 5. Tempe Square Shopping Center, Tempe 15,083 SF Landlord: Watavision II, LLC Tenant: PetSmart Landlord BrokerAGE: DTZ

Andrew Medely

Arizona’s business bank of choice

Timing matters. No bank is better poised to act quickly and think strategically than the state’s largest locally-owned and headquartered bank.

Put us to the test. Call 602.386.5500 and experience the Alliance difference today. www.AllianceBankofArizona.com

Determination-HalfPg-Bjerk-111414_Layout 1 11/14/14 8:43 AM Page 1

The determination to be the best, to go the extra mile sets Bjerk Builders apart from other contractors.

Completing projects on time, within budget, and by continually exceeding expectations keeps Bjerk on top.

DETERMINATION.

License B1-088897

28

BUILDING SUCCESSFUL ARIZONA PROJECTS FOR 28 YEARS

480.497.2300 • fax: 480.497.9610 www.bjerkbuilders.com 19

AFTER HOURS

CLASSIC: Dan Mann with his restored 1969 Mercury Cougar Coupe.

PHOTO BY MIKE MERTES, AZ BIG MEDIA

Fresh coat

Engineer Dan Mann builds cars, business

By Meryl Fishler

W

anting a break from working for a big corporation, Dan Mann started 3 engineering last year. 3 engineering is a fullservice civil engineering, planning and surveying company. But, when Mann isn’t working on the next big real estate development, you can find him under the hood of a classic car. Mann strips beat-up classics down to their nuts and bolts and restores all their glory.

He began restoring cars in high school with his father and has been doing it on and off ever since. His first restoration was a 1969 Mercury Cougar Coupe with a 351W engine.

“It was my dad’s first car, and when

20 | September-October 2015

he got married to my mom, she made him get rid of it and all I heard about growing up was that car.” Mann still has the restored Cougar.

Another memorable restoration for Mann is a 1961 Ford Econoline Window Van, which he converted from a straight six with a manual transmission to a 289 V8 with an automatic transmission.

“It is something that is completely different from what I do from day to day, but it keeps your mind going,” Mann said. For Mann, restoring cars is all about the sense of accomplishment he gets from being putting a car back together and restoring it to working order. That sense of accomplishment doesn’t compare to that of starting a

successful business.

To get to this point, he received some good advice along the way. The best being, no matter what is going on, always be responsible and stay in touch with people, he said. Stay on top of things, he added. Additionally, Mann said it is important to be proactive, get to know clients and be willing to learn new things and do things that don’t really feel comfortable.

Launching a new business is a very time consuming task, but Mann still makes the time for his hobby.

Currently, he is working on an 1969 Mercury Cougar convertible with a 390 engine and his next project in the works is a 1969 Ford Ranchero GT with a 390 engine.

I AM A CCIM CCIMs are the commercial real estate deal makers and go-to experts in their local markets. CCIMs go through 160 hours of case driven study and demonstrate expertise to earn the designation.

CCIMs are the gateway to an international network of clients and professional contacts, conducting business in 1,000 markets in 30 countries. CCIMs build business relationships, promote their expertise, and close more transactions.

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

Grafton Milne, CCIM Menlo Group Commercial Real Estate grafton@menlocre.com

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

John Miller, CCIM Berkshire Hathaway Arizona Properties john@johnmillercommercial.com

Nick Miner, CCIM Orion Investments Real Estate nick@nickminer.com

Rich Andrus, CCIM Menlo Group Commercial Real Estate rich.andrus@menlocre.com

Stuart Milne, CCIM Menlo Group Commercial Real Estate stuart@menlocre.com

Tanner Milne, CCIM Menlo Group Commercial Real Estate tanner@menlocre.com

Jack Fowler, CCIM Fowler Commercial LLC jack@jfowler.com

Gordon Rasmussen, CCIM Martin Property Advisors, Inc. grasmussen13@cox.net

ACCELERATE YOUR CAREER CI 101 Financial Analysis for Commercial Investment Real Estate CI 101 serves as your introduction to the CCIM Cash Flow Model. Learn to apply the CCIM Cash Flow Model to make your investment decisions based on wise investment fundamentals. Some of the concepts you will explore include IRR, NPV, Cap Rate, Capital Accumulation, and the Annual Growth Rate of Capital. This class will also introduce you to two other important tools— the CCIM Strategic Analysis Model, the fundamentals behind the numbers, and the CCIM Decision-Making Model, a process for analyzing and making real estate decisions. After completing this course, you will be able to: • Make better investment decisions by using the CCIM Cash Flow Model as a framework for real estate analysis.

• Apply state-of-the-art real estate analysis tools to quantify investment return.

• Measure the impact of federal taxation and financial leverage on the cash flow from acquisition, ownership and disposition phases of real estate investment.

Format: Classroom Facility: Scottsdale Resort and Conference Center 7700 E. McCormick Prkway, Room Yuma, Scottsdale, AZ 85258

Register HERE - http://tinyurl.com/pdf7lpn

21

Legislative Update

Lake Mead

DIGGING DEEP FOR WATER A

balanced compromise has been found with Mayor Mark Mitchell and the Tempe City Council to remove street car from the city’s final development impact program. In the July/August Legislative Update, Valley Partnership mentioned our concern of street car being included in the final program. However, a big thank you to all who listened, learned and stepped up to help on this issue. Final passage of the program, without street car, by the Tempe City Council is anticipated at any time.

A new issue is on the horizon and one that is more complex than how to just pay for new infrastructure. It is how we deal with water supplies and water security in our cities and across the state.

The City of Phoenix took a first step last year with the creation of its Colorado River Water Resiliency Fund. It provides $5 million annually to fund projects focused on water supply resiliency, such as aquifer

22 | September-October 2015

Cheryl L. Lombard management, underground storage and water protection and restoration. The city created this fund by refinance of debt and without an increase of city water rates.

This summer, the City of Chandler passed an innovative policy about water to ensure the city grows and its water supply grows with it. What it will allow is high-volume water users that want to do business in the city will be required to purchase additional water on the open market to assure supply. In evaluating this, Chandler will take into account the benefit the business will

bring to the city in terms of numbers of jobs and what they pay in approving the business and its water needs. This is a shift from the previous policy, whereby local government assured a company it would have the city water they need in exchange for appropriate rates assessed on the business.

Valley Partnership promotes responsible development and appreciates the fact that Chandler, or any city, is proactively looking at this issue, but we want to ensure all future development will have access to critical infrastructure and resources. As this dialogue continues in these cities and expands to others, including as Buckeye and Peoria, as well as with Central Arizona Project and the State of Arizona, Valley Partnership will support efforts to lead the way to ensure water supplies are resilient, affordable and accessible.

Cheryl Lombard is the president and CEO of Valley Partnership.

Life and taxes N

AIOP Arizona will be soon celebrating its 30-year anniversary. Now is as good a time as any to communicate where our legislative advocacy started and where it is headed. About a dozen years ago, the board decided to concentrate on chipping away at the top perceived impediment to job creation in our state — high commercial property taxes, where businesses had among the top five burdens in the U.S. As a result, we made reduction of the commercial property tax assessment ratio a top priority. With the Arizona Chamber and the Arizona Tax Research Association, we were able to reduce the assessment ratio from 25 percent to 20 percent over a 10-year phase-in period during the 2005 state legislative session.

This was followed up by accelerating the assessment ratio decline over six years rather than 10 in 2007.

In 2011, we also played a key

Tim Lawless role with our same allies, plus the National Federation of Independent Businesses (NFIB), to pass an historic “Jobs Bill” (HB2001) that lowered the assessment ratio again from 20 percent to 18 percent. These assessment ratio declines have saved the entire business community billions of property tax dollars from what they would have been if the ratio had stayed at 25 percent or two-and-a-half times the rate homeowners pay.

During the election cycle of 2012, we were a key contributor to two successful statewide proposition tax efforts where we helped stop a permanent statewide sales tax increase (Prop 204) and were able to cap future property tax valuations to no more than 5 percent per year (Prop 117).

While we have helped Arizona move out of the top tier of highest commercial property tax burdens in the U.S., more remains to be done. Next session, we will work to help put on the ballot Gov. Doug Ducey’s plan to support K-12 education through State Trust Land transaction proceeds. We believe this support will stave off calls to raise taxes or enact a new statewide property tax that would potentially erode the steady progress we have made to be more competitive in attracting high-wage jobs to the state.

Tim Lawless is the president and CEO of NAIOP Arizona.

23

Legislative Update STRENGTH IN NUMBERS

T

he Arizona Builders Alliance’s statewide delegation attended the Associated Builders and Contractors 2015 Legislative Conference in June, where more than 400 ABC national members came to Capitol Hill to advocate for the commercial construction industry. Members

Study buddies I

t’s not an election year and the legislature is not in session, but legislators are staying close to the Capitol throughout the summer months. This year, the legislature authorized eight new study committees, essentially creating forums for ongoing discussion on issues that were too complicated or controversial to inspire immediate changes through the legislative process. These study committees cover a variety of topics, more than the normal number of study committees created in the legislative process. In addition, both House Speaker David Gowan and Senate President Andy Biggs have authorized the creation of ad hoc committees – entities that are less formal than the legislatively-approved study committees but that carry the same purpose of highlighting important policy discussions. Each of these committees will require attendance from several legislators, who will be responsible for carrying its findings into legislative debate in future sessions.

The 2015 legislative session was one of the shortest in recent history, so it is not surprising that complex topics will be addressed outside the abbreviated session timeline. The study committee process will also allow additional factors and information to be included in the discussions. For commercial

24 | September-October 2015

Tom Dunn

Beth Lewallen property interests, committees on community college and fire district property taxes will host informative discussions on the impacts of voterapproved property tax increases and adjustments. A study committee on the state’s carbon dioxide emissions will provide a forum for those in the energy industry to educate legislators and real estate experts on the potential costs associated with compliance with federal standards.

And, numerous committees will evaluate issues of importance to our education system. Arizona’s part-time legislature is never truly part-time; legislators connect with their constituents throughout the year. Study committees, however, create increased and more formal opportunities for industries and citizens to share opinions and concerns with their state leaders as important topics are highlighted and debated.

Beth is the president of Italicized Consulting and writing on behalf of BOMA of Greater Phoenix.

met with their representatives, and awards for the 113th Congress were also presented to representatives whose voting records support the construction industry. The ABA delegation met with Sen. Jeff Flake and Reps. Martha McSally and Matt Salmon. The advocacy efforts focused on issues such as the EPA overreach on “Waters of the United States - WOTUS” under the Clean Water Act. The EPA and the U.S. Army Corps of Engineers issued a final rule which aimed to clarify the WOTUS. The agencies’ stated purpose is to provide clarity and certainty regarding federal jurisdiction over water. However, the rule creates confusion and new regulatory liabilities while providing agencies with near unlimited authority to regulate at their discretion. The rule expands federal reach by declaring most water bodies jurisdictional which will likely increase compliance and transaction costs, decrease developable land and increase uncertainty among projects.

It’s vital that Congress sets parameters on the WOTUS rule to reflect Congressional intent. Transparency and oversight is needed to ensure that concerns are properly addressed in a rule where clarity is essential for an American economy to thrive. Efforts include supporting appropriations-based funding limitations on the WOTUS final rule; asking senators to co-sponsor the Federal Water Quality Protection Act (SB 1140); and thanking representatives for passage of Waters of the United States Regulatory Overreach Protection Act of 2015 (HR 594).

Tom Dunn is the director of southern Arizona for the Arizona Builders Alliance.

UNEARTHING EXCELLENCE SINCE 1965

SIMPLY THE BEST FOR YOUR NEXT DOWNTOWN OFFICE & GARAGE PROJECT

Through advancements in technology and solid people, Team Buesing is still going strong ямБve decades later.

Let us help you build a solid foundation.

INNOVATIVE AND EXPERIENCED AT HELPING CHANGE THE CITY SKYLINE

EXCAVATION | GRADING | SHORING | SHOTCRETE TRUCKING | RENEWABLE ENERGY INSTALLATIONS | CONCRETE AND ASPHALT RECYCLING

VISIT US TODAY AT BUESINGCORP.COM 602.233.3339

25

OFFICE 365: Live. Work. Play. Repeat.

10

Offices We Wish We Worked In

By Amanda Ventura

What’s your favorite part of work? If your answer is “leaving,” you probably aren’t an employee at one of these 10 Phoenix offices.

AZRE magazine asked readers to nominate their favorite office spaces around Arizona, based on amenities, rad decor and overall atmosphere.

We also looked for visionary employers who are early adopters of placemaking trends in the office sector. For instance, creating designs that

are intended to increase employee retention or create a sense of identity among an office park.

We also looked for some neat infill and adaptive reuse, because we can’t get enough of it. We don’t know if these companies are hiring, but we won’t judge you for spicing up your resume for the chance to work in one of these! Just don’t get an arm tattoo to fit in. Not all Millennials expect inked coworkers.



Amkor Technology Inc. Corporate Headquarters

Developer: Ryan Companies US, Inc. General Contractor: Ryan Companies US, Inc. Architect: PHArchitecture; Sherry Engle, s.e. design inc. (interior) Location: 2045 E. Innovation Circle, Tempe Size: 101,949 SF Brokerage Firm: CBRE; DTZ Value: $15.5 million Start: January 2014 Completion: January 2015 Why it’s awesome: Amkor Technology, one of the world’s largest providers of semiconductor assembly and test services, needed a new U.S. headquarters. It tapped Ryan Companies US, Inc. to make it happen at the ASU Research Park, where 26 | September-October 2015



Ryan has already completed about 50 percent of its existing facilities. The new headquarters features an open office concept for approximately 350 employees, complete with large training and conference areas. A lounge-y vibe is complimented with upholstered banquettes and seating in leather, sculpted wood walls, hip lighting and open ceilings. The art within the office showcases an eclectic variety and selection of commissioned artwork that share the Amkor story through various mediums.

Employee amenities include mother’s rooms, indoor and outdoor restaurant quality dining/ break areas, yoga classes, mini coffee spots and electric car charging stations.

Confidential Financial Client Office location: Phoenix

Architect: Gensler What makes it awesome: Other than being the office of a top-secret client that paid for colorful architecture, graphic wallcoverings, and flooring materials, this office is one that really buys into the latest office space research. Originating from a 1980s building purchase, this office space has seen very few improvements over the years. The creative solutions for Gensler’s confidential financial client merges global design standards into modified existing architecture, resulting in an activated office environment. An activated, collaborative office sounds fun, but this flexible space is also conducive to task-oriented workspaces.

Alternate types of spaces that teams can use for collaboration include informal living room settings, den and café environments.





Integrating a variety of casual seating options while incorporating AV and technology, all new space types will support enhanced productivity.

Crown Castle 

Developer: LGE Design Build General Contractor: LGE Design Build Architect: LGE Design Group Location: SEC of Germann Road and Stearman Drive, Chandler Size: 70,000 square feet Brokerage Firm: Colliers International Value: WND Start: November 2014 Completion: September 2015 Why it’s awesome: Crown Castle is the nation’s largest provider of wireless infrastructure, and its employees will certainly

feel connected to its new two-story office building. From an indoor gym and locker room to an outdoor jogging track around the nine-acre property, the office is equally focused on physical health and hard work.

Additional office perks include solar panelcovered parking, a fire pit, barbecue area and an indoor-outdoor design that brings together reclaimed wood and glass with skylights. The building is also within reach of 2 million square feet of retail and restaurants.

Gould Evans/Canary downtown studio 

Developer: Gould Evans / Canary General Contractor: Verge design: build Architect: Gould Evans / Canary Location: 521 S. 3rd St., Phoenix Size: 9,353 square feet

Brokerage Firm: DTZ Value: $567,000 Start: January 2015 Completion: April 2015 Why it’s awesome: The Gould Evans and Canary downtown studio sounds like an office environment out of a sitcom. “Open, connected, fun,” says Sara Wheatcroft, marketing manager for Gould Evans. “We ride our bikes to get coffee, head over to CityScape for lunch, and have a big open kitchen to hang out in and talk.” The office, which provides bikes for its employees, has a glass facade that opens to the street, giving passersby a glimpse into the studio. “The furniture, finishes and fixtures all allude to the space’s industrial feel, with cool gray offsetting a darker asphalt gray carpet marked with highlights of bright yellow alluding to the existing loading striping on the concrete,” says Wheatcroft. The meeting rooms are named after hip-hop artists and groups, such as Outkast, by the way. The wood is all original, but was extensively cleaned — silica bead blasted, actually — to reveal the original natural color. Many of the warehouse’s original features, like the loading dock, the concrete floor with its bright yellow paint lines and the brick walls have been left untouched, says Wheatcroft. “Even if we had a space like this in our old neighborhood, there is something exciting about being downtown, and we encourage more offices to make the move,” she adds.

The Lab — Upward Projects HQ

Developer: Mahoney Properties General Contractor: Construction Connection Designer: Upward Projects; Daniel Germani Designs Location: 5210 N. Central Ave., Ste. 101, Phoenix 27

OFFICE 365: Live. Work. Play. Repeat.

Size: 3,600 square feet value: WND Start: October 2013; expansion in spring 2014 why it’s awesome: employees of Upward Projects are literally working among the very restaurants their company developed. In creating its first official “headquarters,” restaurant development company Upward Projects moved into a mid-century modern Al Beadle bank building in the heart of the north central Phoenix neighborhood it revitalized. It’s the ultimate test and reward being within walking distance of Postino WineCafe, Windsor, Federal Pizza, Joyride Taco house and Churn, where employees get special privileges. (That’s right: This office comes with access to pizza, ice cream, wine and tacos.)

pathlight investors @ 3131 Camelback Owner: Lincoln Property Company general Contractor: N/A Architect: Krause Interiors location: 3131 e. Camelback rd., Phoenix Size: 4,067 square feet Brokerage Firm: CBre value: $205,000 Completion: April 2014 why it’s awesome: Pathlight Investors may not have a slide between floors or accent walls the color of Skittles, but the company did take a unique approach to its recent expansion and relocation within 3131 e. Camelback rd.

“They were a growing company, they were on top of each other,” says Brad Krause, of Krause Interiors. To make its new offices productive, the company interviewed its employees and asked what they wanted out of their workplace. The final product was a timeless, sophisticated look.

“It’s a new way of empowering employees,” Krause continues.

With neutral colors and textures that are accented with fun artwork, Krause left the space with room to grow with the company and its employees’ needs.

Scheduling institute Developer: Lge Design Build general Contractor: Lge Design Build Architect: PhArchitecture location: 245 e, Jackson St. Phoenix Size: 23,000 square feet 28 | September-October 2015





Brokerage Firm: Commercial Properties Value: WND Completed: April 2015 Why it’s awesome: The former Jackson’s on 3rd restaurant was transformed into a 23,000-square-foot West Coast training center for the Scheduling Institute, a medical and dental practice training company based in Georgia. The project added 8,000 square feet to the existing structure, which Dave Sellers, president of LGE Design Build, says was a fun challenge — making the old and new blend together. The training office, which will primarily host out-oftowners and capitalize on its proximity to the light rail and downtown sports district,

is meant to feel welcoming and urban. It features a 3,000-square-foot cafe that faces the street. And, the interior, plays up the old building’s beams, brick and concrete headers for a fun, non-dentist-office feel.

SheKnows Media Headquarters in Element at Kierland 

Developer: Montana Avenue Capital General Contractor: Layton Construction Architect: Corgan Location: 14614 N. Kierland Blvd., Scottsdale Size: ±22,093 square feet Brokerage Firm: Keyser/CBRE

 



amorphous forms harmonize with a balanced finish palette to create an energetic and collaborative work environment for the group’s 25 team members.

Valley of the Sun United Way

Value: $1.02 million Completion: Q4 2015 Why it’s awesome: This “creative” office environment was developed specifically for the needs of SheKnows Media. As the headquarters for SheKnows, it houses more than 100 employees and is also used to produce original content from two video sets. The build-out has an open café, stadium seating “scrum” or huddle area, collaboration rooms, double tap kegerator and an indoor/outdoor patio component. The space compliments the creatively re-imagined Element at Kierland office building on the Mesquite Course of the Kierland Westin.

Southland Industries 

Developer: N/A General Contractor: Graycor, Inc. Architect: SmithGroupJJR (interior) Location: 1500 N. Priest Dr., Tempe Size: 10,000 square feet Value: Client Confidential Start: November 2014 Completion: February 2015 Why it’s awesome: This Tempe office’s tenant improvement creates an engineering and pre-construction hub that supports local and national clientele for Southland Industries.

This contemporary and forward-thinking office template weaves a retro vibe with subtle, refined features. Open ceilings and

Developer: N/A General Contractor: Jokake Construstion Company Architect: SmithGroupJJR (interior) Location: 3200 E. Camelback Rd., Ste. 375, Phoenix Size: 30,600 square feet Brokerage Firm: CBRE (management) Value: WND Start: October 2012 Completion: November 2014 Why it’s awesome: Can you imagine going to work and not having your own desk? About 30 percent of Valley of the Sun United Way’s office is dedicated to unassigned workstations.

Instead, this space features collaboration spaces with different designations to indicate the type of interactions they support, such as “The Community Commons,” “The District,” “The Park,” “The Porch” and “The Market.”

“Since move-in, this space has increased productivity, created a more collaborative culture, and has become an extension to the community,” says Rachel Littell of SmithGroupJJR. The design direction for VSUW was centered on celebrating the impact of the organization on the community and supporting a mobile workforce, Littell says.

A “ribbon” wall that starts at the entry and meanders continuously throughout the space was designed as a billboard to tell the story of VSUW by honoring those whose lives have been touched by the organization.

29

EAST VALLEY UPDATE

Permit Power

By Amanda Ventura; PHOTOS BY MIKE MERTES, AZ BIG MEDIA

T

he East Valley is lit.

In October, Marina Heights will begin lighting up its floors on the State Farm campus in Tempe and earlier this month, Mesa began seeing more of the light rail.

The East Valley is comprised of submarkets on fire, thanks to the educated workforce coming out of higher education institutions. Tech and bioscience companies are increasingly attracted to these areas, which are seeing the lowest vacancies in the Valley and some of the biggest office and mixed use projects in the pipeline.

For the purpose of this article, the East Valley is defined as Mesa, Chandler, Gilbert and Tempe.

CHANDLER: Pipeline numbers (As of August 2015) Office - 700,000 square feet Industrial - 253,000 square feet Flex - 60,000 square feet Multifamily - 460+ units

Zoning updates: There are no updates from a building codes aspect. Chandler is working toward adopting the latest edition of the international construction codes (2015 editions) and plan to have them take effect January 2016.

— Source: Ronald Boose, City of Chandler Growth factor: Arizona Avenue, Chandler’s historic retail district, is expecting a light rail expansion. As part of that, the city is working on an adaptive reuse overlay program for the historic city core by lightening standards to ease the way for development to occur. This is expected to roll out in the fall.

Chandler will also see an expansion of Loop 202 East, which will allow it to compete for more projects. Product is catching up with the market, says the city’s economic development director. ­— Source: Micah Miranda, economic development director at City of Chandler

Downtown Gilbert Heritage District GILBERT: Permit numbers (As of July 2015) Industrial: 26 permits; 682,633 square feet Office: 7 permits; 164,701 square feet Retail: 18 permits; 255,843 square feet Zoning updates: At this time, there are no new codes nor ordinances to report. Last year, Gilbert created an Entertainment District in the Heritage District. While this does not change any existing zoning code regulations, it does provide a greater flexibility to the Council within the boundaries of the district.

Mesa Drive exit on Loop 202

30 | September-October 2015

Growth factor: What will the city look like after the build-out in 2030?

[Response is coming on Monday, August, 10] —Source: Amanda Elliot and Dan Henderson, Gilbert Economic Development Department

Sign up for the AZRE weekly newsletter delivered directly to your inbox.

For more information visit azBIGmedia.com

31

EAST VALLEY UPDATE MESA: Permit numbers (As of July 2015) New construction residential: 225 Commercial: 205 Zoning updates: We do not have any new codes; our zoning ordinance was updated in 2011. We have done a lot over the last few years to streamline our processes as much as possible. For good, high quality projects, we can move very fast to help get projects under construction as quickly as possible.

Market influence: The hot market has not affected how we operate other than being ready to step up and help getting development through the process as easily as possible.

Growth factor: A lot of exciting things are happening in Mesa with the completion of the next segment of light rail, the re-branding of the Fiesta District to a major office area and growth around Phoenix-Mesa Gateway Airport. We have a new general plan that is flexible and focused on creating neighborhoods and distinctive places.

— Source: John Wesley, director of city planning for Mesa

Marina Heights

TEMPE: By the numbers (under construction, entitled and under review for permits) (As of July 2015) Industrial: 30,766 square feet Office*: 1.9 million square feet Mixed Use (multifamily, office, industrial, retail): 7.7 million square feet Multifamily: 2,563 units Retail/Hospitality: 1.14 million square feet

Country Club light rail station

32 | September-October 2015

*Does not include Marina Heights, which is classified by Tempe as mixed use Zoning updates: The City of Tempe has adopted the 2012 international building codes, effective July 2015.

Growth factor: The City of Tempe is seeing a mixed use and multifamily boom. To accommodate its rapid growth, the city has created a Fast Track Tempe program that expedites small business or tenant improvement projects by allowing a third party to review for the permitting process. The city is also closing in on a five-year project to move all of its permitting documents to an electronic system.

“I think the need for speed is just a reality of this current and future markets,” says Dave Nakagawara, community development director for Tempe. “We’re still responsible and accountable to our citizens and other stakeholders to the city to adhere to our rules, but time is money. Any time you can shave off the process to not have to print out paper or transport things physically, it’s seen as an advantage.”

— Source: Dave Nakagawara, community development director for Tempe, and Gerald Koziol, plan check engineer for Tempe

The RED Awards, Real Estate and Development Awards, are Arizona’s most comprehensive annual real estate awards.

PROJECT CATEGORIES: • OFFICE • INDUSTRIAL • HEALTHCARE • MIXED-USE • MULTI-FAMILY • SAFETY AWARD • RETAIL • REDEVELOPMENT • PUBLIC • EDUCATION

Coming February 2016

Call for sponsorship information 602.277.6045 30 YEARS OF EXCELLENCE

haci_half.indd 1

8/28/14 4:12 PM

33

REAL ESTATE LAW GUIDE

Sticky Paper

What is the true role of a lobbyist?

By Amanda Ventura

K

nowledge is power. It’s also the currency used by lobbyist Ken Strobeck, executive director of the League of Arizona Cities and Towns.

“I think people have a very misunderstood view of what lobbying is,” says Strobeck. “You think of somebody who is sneaking around with money falling out of their pockets on edge of legality. ... We’re in the business of (information and education). We don’t lobby the state for earmarks or handouts or grants like a lot of Washington lobbying. We provide information and perspective.”

The League, founded in 1937, is funded by member dues paid by the group’s 91 municipal members.

According to the Center for Responsive Politics, which pulls information from the Senate Office of Public Records, more than $52M from 235 commercial real estate clients from 692 lobbyists were collected in 2014.

The highest percentage of lobbying money came from building materials and equipment, following by general contractors. Lobbying dollars peaked in 2009, when annual contributions reached more than $59M. For the last three years, lobbying funds in construction have increased by a few million a year.

“Lobbying in CRE is trickier than other industries; It’s a guarded industry,” says Russell Smoldon, CEO of B3 Strategies, who was a lobbyist for SRP for 26 years.

34 | September-October 2015

Lobbyist: Anyone who is trying to influence public policy.

— Tim Lawless, President, NAIOP Arizona

Smoldon, who is still “new” to the world of commercial real estate lobbying, says most of his work comes from companies that have already decided to move to Arizona before reading all the fine print. They use his services to get through tax issues, for example.

One of his challenges, Smoldon says, is the sheer amount of networking. You have to know the players, he says.

This is where trade organizations such as NAIOP come into play. The Arizona chapter of NAIOP, Commercial Real Estate Development Association, like other trade organizations, hires

contract lobbyists to support the interests of its membership.

Depending on how aggressive of an agenda a group has, contract lobbyists may charge between $35,000 and $70,000 per group. Lobbying is also a long game. NAIOP-AZ has been pursuing property tax issues since President Tim Lawless was hired a decade ago. Over the years, the group has been effective but is really only halfway to its goal of bringing the property tax for businesses from 25 percent to near 10 percent.

The power of the media is another lobbying tool of which trade organizations are making use. It’s about lobbying the hill as much as it is educating voters, he says.

“Lobbyists are also to reach the general populous,” says Lawless. “When you’re a legislator, you care about your overall constituency.”

Risk It and List It

For the first time in a while I am starting to see commercial office properties go on the market and sellers being willing to sell at prices that are being offered. We have quite a ways to go in that category and I think the buyers are early buyers. Some are taking a bit more of a risk than institutional investors… on the theory that vacant space is continuing to fill up over time. That’s where significant returns are made.

When people are willing to get their feet in the water.

— Don Miner, director for Fennemore Craig

Coming July 2016 ARIZONA’S 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.

Call to Sponsor

azBIGmedia.com I 602.277.6045

30 YEARS OF EXCELLENCE

35

REAL ESTATE LAW GUIDE

Abiding time Lawyers, contractors are seeing anticipation grow

By Amanda Ventura

W

hen things are good, what is there to fight about?

According to some legal construction experts, not much.

“Contractors are not willing to litigate any longer; They don’t want to pay attorneys to fight,” says Ed Rubacha, attorney at Jennings Haug & Cunningham.

When there were disputes between contractors, people relied on the option to sue people. Now, Rubacha says, companies have learned that doesn’t always yield a payout.

“From a construction perspective, we have seen a tremendous drop off in our business,” says Rubacha, who has been practicing law for 26 years.

There is some hope with increased construction coming through the pipeline. The more projects there are, the higher the chances are that lawyers will be needed, Rubacha says.

“I don’t get a call from a lot of my clients,” whom Rubacha says learned hard lessons and got smarter with the recession about how they do business.

36 | September-October 2015

“They either don’t have projects or the ones they’re on they have carefully worked them. Those relationships (between contractors) have led to a decrease in litigation.”

Rubacha says this emphasis on education over litigation has led to his involvement in more education work, such as holding seminars.

“I’ve seen more activity in the business side, including real estate and corporate, and a little less activity in litigation and cleanup work…when a project fails and something goes wrong,” says Don Miner, director at Fennemore Craig. “I’ve seen a little less work there and in the bankruptcy areas. Both of which point to good things down the road. In the law firms, we’re starting to see law firms wanting to be active in bringing on new people. What we’re still struggling with is whether those new people are laterals, or people who are moving from one firm to another versus people who are new and coming out of law school. The number of people being hired is still relatively low.”

Since Rubacha says construction lawyers are about two years behind real estate lawyers, he expects an uptick in the near future. Economic Modeling Specialists Intl., a CareerBuilder company, reported that for every law job opening there were two to four graduates. In Arizona, the numbers weren’t as stark, though the state did see a drop-off of 3 percent of available positions at the time of the 2013 study.

“One of the things the great recession taught us, including bankruptcy lawyers, is sometimes you need to be able to adjust to the marketplace,” Miner says. “Bankruptcy is now helping with turnaround management and equity financing development for troubled projects. A broader scope of services are being provided.”

Proof is in the Quitting Even though there isn’t a whole lot of work out there, Jennings Haug & Cunningham attorney Julianne Wheeler says an indicator of changing times start in HR.

FENNEMORECRAIG.COM

LAW THAT LEADS ®

COVERS MORE GROUND

FENNEMORE CRAIG REAL ESTATE ATTORNEYS One of the

largest Real Estate practice groups in the Mountain West, firm attorneys counsel real estate professionals from acquisition and finance, through development, leasing and sale. Our attorneys have significant experience in: • Commercial, Retail & Industrial Projects • Commercial Property Leasing • Health Care Real Estate • Production Home Building • Joint Ventures & Syndications • Golf Course Development • Convenience Store & Fuel Facilities

• Real Estate & Lease Litigation • Property Tax Controversies • Real Estate Finance • Workouts & Restructurings • Master-Planned Communities • Land Use Planning & Zoning • Real Estate Portfolio Management

For more information about Fennemore Craig, visit FennemoreCraig.com or contact Joe Chandler, Director, at 602.916.5403 or jchandler@fclaw.com.

REAL ESTATE LAW GUIDE Did you know?

Valley Metro, operator of the light rail, reported that ridership for the rail surpassed its 20-year goal within the first four years.

In the zone

Don Miner

Ed Rubacha

Julianne Wheeler

Paul Weiser

I’ve seen more activity in the business side, including real estate and corporate, and a little less activity in litigation and cleanup work…"

-Don Miner, director at Fennemore Craig

“We’re not seeing the typical legal issues,” she says. “Instead, we’re seeing anticipation.”

Part of this anticipation is the movement of high-level and project management employees seeking roles at different companies.

“Many (contractors) hadn’t positioned themselves to have much in terms of legal rights if a high level employee leaves and goes to a competitor,” Wheeler says. “The best advice for the contractors is to make sure there isn’t any one employee who has sole ownership of a relationship with a client.”

While there is no shortage of lawyers, there is a shortage of contractors.

“The entire industry is concerned of the shortage of available talent,” Wheeler says. “(Contractors) left us in droves…as we’re ramping back up, (companies are) scrambling.”

Organizations such as Arizona Builders Alliance and Arizona Subcontractors Association are among many that are seeking to foster and 38 | September-October 2015

encourage high schoolers to pursue careers in contracting.

Meanwhile, construction lawyers who aren’t advising on distressed projects or employee issues are going back to whatever they worked on before they specialized, Wheeler says.

“It’s the tail wagging the dog,” she says of her workload during the recession. “In the recession, you’re busier than ever because of disputes, now that the economy is rising you’re not nearly as busy.”

In 2014, Forbes reported more lawyers were moving their practice to a side-job while holding another profession full- or part-time.

“It’s so nice not to come into work everyday and feel depressed after speaking with your clients about their outlook for the future,” she says.

From this guarded excitement, Wheeler is seeing more joint ventures that keep companies from putting all their eggs in one basket as well as allowing companies to exercise their specialties.

Infill projects are the trend du jour in development. However, zoning laws are still catching up. “Infill is more challenging because most zoning ordinances were written at a time when a particular city was more focused on suburban development than infill development,” explains Ed Bull, shareholder at Burch & Cracchiolo. “Some rules are more suburban than infill in nature.”

He’s referring to the smaller size of infill properties as well as how to handle neighbors’ concerns.

Phoenix, Bull Edwin Bull says, is keeping pace. “Phoenix is working hard to find the appropriate balance in their zoning ordinances." The city has approved new zoning districts, such as the downtown zoning district. In July, City of Phoenix approved the WU Code, less known as the Walkable Urban Code. “The WU Code creates more predictable land use regulations and construction timelines on complex, challenging infill developments,” says a Burch & Cracchiolo brief. It’s one of many steps the city has made to encourage pedestrian-friendly and sustainable communities within Phoenix’s Transit Oriented Development — TOD — policies.

“It’s very new and intended to be very creative and is something that was just adopted so we haven’t seen it yet in the field,” says Ed Bull, shareholder at B&C.

AZ TOTEM ART

Custom Bird Feeders and Totems made from repurposed architectural materials

aztotemart.com

By Appointment Only • 602.677.5999

EDUCATION

Reign of the Sun Devil

By Meryl Fishler

A

rizona State University is looking to give its aging sports arenas a face lift, and the school is taking a unique approach to come up with the necessary funds for the expansion and renovations. The university plans to convert an area of its Tempe campus into a fee-generating commercial and residential development.

ASU and master developer Catellus Development Corporation have come up with a preliminary development plan for 330 acres, area bound by “A” Mountain, McClintock and University drives, and Tempe Town Lake.

The plan includes upgraded ASU athletic facilities and 150 net acres for new private development, which will be

40 | September-October 2015

a mix of commercial office space, retail stores, restaurants, hotels and urban housing. At full build-out the district’s new private development is projected to encompass more than seven million square feet.

“The overarching intent to create a revenue stream to fund the renovation of Sun Devil Stadium and in the future other athletic venues at ASU,” said Brian Kearny, senior development manager at Catellus.

Originating from legislation passed by the state legislature in 2010 to create special revenue districts on land owned by state-supported universities, the district will provide financial returns to the university. The 2010

legislation cleared the pathway for an athletic district impose an fee in lieu of property taxes, said John Creer assistant vice president for real estate development at ASU. This revenue stream will help fund the renovation of athletic facilities without the use of tax dollars. ASU is the first state university to act on this opportunity.

The athletic district will grow in several phases and phase one has already begun with renovations of Sun Devil Stadium. The upgrades of the other ASU athletic facilities will happen over time as funding from the district’s private development program and other sources permit.

ASU anticipates that private

Photo: Rendering: Sun Devil Athletic Department

development in the district will break ground by late 2016.

The existing athletic facilities will be relocated and renovated as the market dictates how to develop the land underneath them, Creer said, the goal of the district is to improve and expand ASU’s athletic facilities.

The Northwest corner of Rural Road and University Drive is expected to be one of the first areas for the to break ground, involving a mid- to high-rise office tower, because there are no existing venues and a high market demand at this location, Kearney said.

A major location of this development plan is the intersection of Rio Salado Parkway and Rural Road, where ASU

controls three of the four corners, and Sunbelt Holdings— a Marina Heights development partner — holds the remaining northwest corner.

The district will offer a unique combination of area amenities for its future tenants. The location is adjacent to downtown Tempe, an urban lake, a large public research institution and some of the Valley’s top destinations such as the Mill Avenue District and Tempe Marketplace. Additionally, the development offers accessible transportation with great proximity to freeways and the light rail. The district will add to vitality and economic engine that already exists in the area from these amenities.

John Creer

Brian Kearny

41

Arizona Multihousing Association

THE RENTAL RENEWAL Q&A with Tom Simplot

By Amanda Ventura

T

om Simplot, president and CEO of the Arizona Multihousing Association, has watched the hottest commercial sector light the way for new developments during the darkened years of recovery. Even though there are thousands of new units in the pipeline, Simplot weighs in on the cooler markets, the Class-A flood and important legislative wins.

With the increased interest in mixed use developments, which usually include apartments, are developers hoping to piggyback on multifamily’s success to jump-start the rest of the sectors?

If the old saying that “first comes rooftops” has any bearing, then, yes, after the construction of several thousand new multifamily units throughout the metro area, it will cause at least some level of new construction activity in office and retail. We have probably seen the end of “silo development,” where commercial, apartment or home builders work in a vacuum. There is now incredible motivation to create partnerships to build mixed-use projects and add value to the development. People want to live, work and play in the same vicinity.

Everyone wins.

How will rising rental rates affect dense urban areas such as Phoenix?

The new units being built throughout Phoenix are almost all Class-A properties, with incredible amenities 42 | September-October 2015

and design elements. These new properties are also pushing rents to all-time highs. The question is probably more about the depth of this market and how many units can sustain the new, higher rents. So far, the leaseups of these new communities have been fairly rapid and successful. By adding to the overall stock of housing, we add new options for families and maintain affordability. Our housing is still relatively inexpensive compared to other major cities, so instead of building a lot of new affordable housing stock in this cycle, our aging stock becomes the next affordable housing option. It may not be ideal, but in the current market, it is our reality. During the Great Recession, most of the new multifamily communities in Arizona were built with tax credits and government assistance.

Until the legislature is able to restore funding to the State Housing Trust Fund, affordable housing development is a tough business.

How are northern and southern Arizona markets?

Flagstaff is a hot market. Go anywhere in Flagstaff and the neighborhood chatter turns to how many student apartments are being built. The need for student housing has been the driver, but thanks to shifting consumer trends, we are starting to see market rate housing under construction as well. Tucson is coming back, but, historically, the Tucson market never reaches the highs (or the lows), of Phoenix. Vacancy rates are a little higher in Tucson, and that probably won’t change much given the new

communities (and competition) that are coming on the market.

Is there a buzzing around the multifamily sector that you think will get louder over the next 12 months?

What we see under construction in Scottsdale, Tempe, Chandler, Gilbert and parts of Phoenix has been on the planning books for several years now.

We continue to play catch-up after the dark years of the Great Recession, and since the Phoenix area has not yet reached post-recession growth like other Western cities, we are nowhere near the end of this building cycle. The biggest challenge is probably finding affordable land to assemble for new projects in the future.

Have there been any major legislative wins backed by AMA for the multiFAMILY sector in the last year?

The past few years have been fairly good for the apartment industry when it comes to government oversight: Local red-tape was preempted with regard to energy benchmarking; there is now a choice when it comes to selecting a solid waste hauler and how and when to recycle within an apartment community; and an apartment owner/manager seat has been added to the Real Estate Advisory Board. We work very closely with all Arizona cities and towns as they review new building codes and are vigilant to ensure that safe, affordable and welldesigned apartment housing remains the norm.

HEAD OF THE HOUSEHOLDS: Tom Simplot, president and CEO of the Arizona Multihousing Association, visits CityScape Residences.

PHOTO BY ROBIN SENDELE, AZ BIG MEDIA

43

AMA

Cigarettes butt out of multifamily

By James Bunting

F

or years it’s been known that smoking is bad for your health, and it has been subsequently banned inside of restaurants, offices and outside building entrances. With a the help of a grant from Maricopa County, the Arizona Multihousing Association wants to foster smoke-free programs at apartments as well.

“The purpose of the grant is to educate apartment owners, developers and operators about the advantages of registering their properties as smoke free properties,” said Tom Simplot, president and CEO of the AMA. “Those advantages are fiscal. It costs a lot less money to turn an apartment when there has been a non-smoker there.”

When a non-smoker moves out of a unit, he explained, there is not much to do before turning it over. An property owner may need to clean and replace carpet or repaint the walls. When turning over an apartment that had been smoked in, expensive chemicals and professional services are involved.

Sometimes, Simplot added, appliances have to be replaced.

“The smoke penetrates into the walls, into the filters, it permeates a home and there is a several thousand dollar cost to eradicate that,” Simplot said.

“You have a smoker in one unit, and non-smokers in the surrounding units, and they are all impacted.”

Because it takes longer to clean a unit formerly rented by a smoker, it

44 | September-October 2015

remains vacant for longer and doesn’t generate revenue.

In addition, during renovations managed by Anna DiSabato, district supervisor for Dunlap and Magee Property Management, units that were smoke-free and in smoke-free buildings (117 in total) leased 15 percent quicker than their smoking counterparts.

“This whole first year is about educating, once they go smoke free, then we move on to enforcement,” said Sharon Hosfeld, smoke-free community coordinator at AMA. There is some concern among operators that by going smoke-free, they will inadvertently exclude part of the market.

“If you are the operator of a senior housing community, we know statistically that seniors smoke more, because their generation grew up smoking,” Simplot said. “They are probably not as able to give up smoking.

So, there is some resistance based on some of their residents’ concerns.”

Overall, less than 20 percent of adult Americans smoke, with more than 85 percent saying smoking was not allowed in their homes.

In a 2012, a Maricopa County survey suggested that 7 out of 10 respondents would choose to live in a smoke-free community.

Right now, the AMA’s first step is asking its members to survey their residents about living in

smoke-free communities.

“Once these surveys come back to the property manager, they are shocked to see that people usually don’t smoke and many would like their community to go smoke-free,” Hosfeld said.

Other forms of smoking can also be a concern for operators. Marijuana, although not found to be damaging to properties, can cause legal troubles for landlords if it is allowed. An owner who knowingly allows the possession or distribution of marijuana on his or her property could be classified as a conspirator and face up to 20 years in jail and up $500,000 in fines. The best course for landlords is to prohibit it in the lease, according to Donald Eby, an attorney and partner at Robinson & Henry.

The new wave of e-cigarettes also appear to be harmless to properties and neighboring tenants. The main component in the e-cigarette liquid is very similar to the substance in fog machines, and even at frequent use would not cause any lasting damage.

Unlike cigarettes, the main by-product is water. Long term research has not be conducted at this point.

“We are disseminating the data, the scientific data that is already out there, and basically translating that into a language that we share with our members,” said Simplot. “We reach out to our people and have a real conversation about things.”

We create places that matter to you.

So come in and make yourself at home.

DEVELOPMENT

RESIDENTIAL PROPERTY MANAGEMENT

ACQUISITION

Your local provider of award-winning multifamily services since 1976.

www.pbbell.com 8434 N. 90th Street, Suite 100 • Scottsdale, AZ 85258 phone: 480.951.2222 • email: dwillis@pbbell.com

AMA

HUD-sight is 20/20

By Amanda Ventura

T

here’s an opening for a high school biology teacher. Hundreds of applications come in for the job, equally split between male and female candidates. Then, the school decides to combine the teaching role with coaching the high school varsity football squad. Suddenly, there’s a huge shift in gender availability and interest in what was originally a teaching position. This is something

46 | September-October 2015

called disparate impact. It’s the direct or intentional act of discrimination.

Though it’s easier to assess in the employment example that attorney Judy Drickey-Prohow remembers taking to court in Tucson, disparate impact has been in the limelight for its role in the Fair Housing Act, also known as Title Seven of the Civil Rights Act signed into law in 1964.

Imagine if renting an apartment

or applying for a mortgage were like applying for a teaching position with fine print of having to also be a football coach. With a recent Supreme Court ruling in June, people or communities who can prove they are intentionally discriminated against have a stronger argument for civil rights to a home that is not discriminatory in nature.

The Supreme Court case challenged the Texas Department of Housing and Community Affairs for “reinforcing residential segregation by consistenyly approving affordable housing in African American neighborhoods.” The state agency was challenged by The Inclusive Communities Project, Inc. Litigating a claim of disparate effect

...75 percent of African American families reside in 16 percent of the Census tracts.

That makes this group of individuals among the highest residentially segregated. is complicated, says Judy DrickeyProhow of Scott M. Clark law offices, who handled two such cases while serving as senior litigation counsel in the attorney general’s office.

“People in our industry convinced themselves the court wasn’t going to extend it to housing,” she says. “I’ve sat in on a lot of meetings and everyone was positive that HUD was overreaching and that when the issue finally got to the supreme court, they were going to say, ‘HUD, you’re off your rocker.’”

When the Supreme Court didn’t say that, it changed the game for bankers, lenders and zoning attorneys who were planning on the 2013 rulings to be overturned.

“The whole disparate effect is intended to knock down barriers that allow people to get housing or employment,” DrickeyProhow reiterates.

Though the court’s decision took the commercial real estate industry by surprise, it didn’t veer far from public opinion. In a recent national survey conducted by The Opportunity Agenda, only 10 percent of Americans believe the Fair Housing Act laws are too strong. In fact, a majority think they’re “just right” or “too weak,” according to the survey.

Multifamily apartment applicants without full-time employment or those who plan on sharing a onebedroom may either not be accepted as tenants or charged more money for the same number of bedrooms as a single tenant, respectively.

“Disparate impact complaints are problematic for the industry in that they ignore discriminatory intent as part of their analysis,” says Michael J. Thorell, chairman of the Arizona Bankers Association. “Broad application

of liability under this theory has the potential to chill lending in entire markets like housing, which would seem contrary to the laudable public policy goal of making home ownership widely available irrespective of race, gender or economic status.”

The U.S. Department of Housing and Urban Development (HUD) estimates more than 3 million cases of housing discrimination are reported annually. According to information compiled by National Fair Housing organization, based on U.S. Census reports, 75 percent of African American families reside in 16 percent of the Census tracts. That makes this

More than 3 million cases of housing discrimination are reported annually group of individuals among the highest residentially segregated. According to the same report by NFH, segregation of Latinos and Asian Americans’ housing has remained consistent for the last three decades.

MEB Management Services, which oversees 20,000 units in four states, has worked with an attorney to screen its rental policies.

“With this new ruling, there is the possibility of policies incorporated by the majority of property management companies to be challenged,” says Senior Vice President Mark Schilling.

“An example of this would be a criminal background policy. We do a criminal background check on every

prospect 18 or over. If a person has a felony for a sex crime, our policy is that the person could not live at one of our communities. We have the responsibility of protecting our current residents the best we can. We cannot guarantee the residents​‘​safety, but we can take steps to limit potential criminal activity on our property.”

Schilling says that in the future, MEB may consult an attorney about changes in rental policies.

“For example, we may increase the income requirement for a property,” he says. “Before we make that change, we will need to ensure that we will not have a disparate impact on a protected class, even though we would never intentionally discriminate against a person or a group of people. ... The new ruling is very murky and as I said before we are still researching the impact of the ruling. We have read several articles and have gotten legal advice from our attorneys​,​and there is no clear answer on the ruling and the how, or if, it will change housing practices.”

ABA is also in a holding pattern.

“The banking industry in this state is committed to lending without racial discrimination in all economic sectors,” says Thorell. “It is our hope that the banking regulatory agencies will codify these limitations and defenses in their regulations so as to provide more certainty for lending institutions engaged in the housing market. Relegating the evolution of the legal landscape in this area of the law to the courts creates uncertainty in the lending community, and thus artificially limits the amount of capital available to qualified borrowers who would otherwise grow this vital sector of our economy.”

47

SEPTEMBER-OCTOBER 2015

TOP 10 OFFICES

IN ARIZONA

COMING NEXT ISSUE Featured topics include:

InsIde:

LAW GUIDE p. 34 CRE Lobbyists

• American Institute of Architects

AMA p. 42 Living Large

NAIOP p. 49 30th anniversary

AZRE_SO_2015_Cover Final.indd 1 8/24/15 1:31 PM

• Arizona Association for Economic Development • Building Owners and Managers Association • Urban Land Institute

For additional information, call 602.277.6045 or visit

azBIGmedia.com COMPLETE PARKING LOT M AINTENANCE & PAVING

Statewide Asphalt, LLC 480-659-1828 Statewide Asphalt brings a unique blend of large company expertise, with the flexibility of a smaller, customer focused company.

Cristi Power, Owner

statewideasphalt.com | 480-659-1828 | ROC#276436 48 | September-October 2015

2015

YEARS 30 YEARS OF EXCELLENCE

CPI's listings include over Âą20 million square feet for sale/lease, with more than 150 properties and associations under management, totaling over 5.7 million square feet.

Contact CPI to learn more about Brokerage Services at 480.966.2301 or visit www.cpiaz.com.

ALWAYS...

THINKING BIG Our Team thrives on the ideas and stories behind the structures we have built, which have been possible by some of the most renowned Owners, Architects, Engineers and Contractors in the industry. We take pride in partnering with the best teams to build what starts as a simple concept and becomes a reality. Contact Suntec Concrete to discuss your next dream project.

Experience concrete like never before.

602-997-0937

•

suntecconcrete.com

NAIOP

BLOOD, SWEAT AND YEARS Chairmen’s expressions molded what chapter is today

By Amanda Ventura

A

Tom Johnston

t the helm of NAIOP Arizona, directing it into its fourth decade, is Voit Managing Director Tom Johnston. He has worked in commercial real estate for 19 years and been a member of NAIOP for most of them, he says.

“When I first became a member, it was a rocking four years. Everything was grandiose,” he says. “Through the downturn, we struggled through the recession, we built up out reserves, our events weren’t as well attended. Now, it has come back to life.”

Johnston has been a member since 2008 and prior to that was the chair

for Best of NAIOP, during which he worked to expand the scope of the awards and recognitions.

NAIOP has spent the last 15 to 20 years becoming financially stable. Now that it is, how has that influenced the caliber of programs and member opportunities IT OFFERS? You can look to the growing developing leaders program, to which we contribute some of our resources.

You can look at bringing back the signature speakers series. And, Night at the Fights is approaching the levels

we saw in 2006 and 2007. (For Best of NAIOP, we received a) record number of nominations this year, and we may have broken an attendance record.

On the education front is where some of these resources are being used.

But, most importantly, we as an organization and as a board support public advocacy. So we can make sure bills are passed or not passed. We use our resources to ensure our members are protected.

What is the next step in chapter growth? What keeps you a member?

LEADING LEGACIES

Megan Creecy-Herman Term: 2014 Legacy: Created education committee; first female chairman of chapter 52 | September-October 2015

Keaton Merrell Term: 2013 Legacy: Formation of philanthropic Dream Teams

John DiVall Term: 2012 Legacy: Formalized MRED and mentorship programs

Mike Haenel Term: 2011 Legacy: Developing Leader Group recognized as best in nation

Joe Ihrke Term: 2009 Legacy: Improved Board governance policies and financial reporting

Retail plays right into what we do. It’s just natural that retail would be mutually beneficial. It’s a win-win to have them a part of our group or membership...

Retail is going to be a big part of it.

It’s something we’re going to push for.

We’d like to attract more law firms, more lending institutions. We’re largely owners, developers and brokers. We have some title companies and we have the banks, but (a goal is) to grow our existing base. With the market improving, it’s naturally going to grow if we put on the right events for the right people.

NAIOP recently announced an initiative to include the retail sector in more of its marketing. How appropriate is that crossover to the Phoenix chapter?

It’s not just into the retail sector (that NAIOP National is expanding).

We support developers, so it’s all commercial development (we’re trying to reach), which includes multifamily.

What my goal is, and I’ve talked to

Chris Toci Term: 2008 Legacy: Instituted NAIOP Central Arizona Shelter Services homeless barbecue

a few of the retail people in town, is to have a roundtable discussion of their involvement in NAIOP. I think it’s natural when you look at Keirland, Esplanade and CityScape, there’s office and multifamily. Retail plays right into what we do. It’s just natural that retail would be mutually beneficial. It’s a win-win to have them a part of our group or membership, part of our future. There’s a lot of retail professionals out there who are already members of NAIOP — RED Development, for example, who does office and retail. Certainly, they have ICSC. What we feel is that through our education, we’d have a lot to offer as well as, and more importantly, on the public policy side. On the striker bill (Senate Bill 1241), working with Tempe, where they were going to add impact fees for the trolley system, the retail developers and owners benefit from our public policy efforts. Until we

Fred Stiles Term: 2007 Legacy: All-time revenue high, help on property tax reform

Kurt Rosene Term: 2006 Legacy: Political awareness of NAIOP, building better community

get some feedback from them, I can’t say exactly how they will benefit, I can say on a whole, retail will.

What makes NAIOP different from other industry groups?

NAIOP stands out. First and foremost, in my opinion, we’re the best at networking. We do a pretty good job at education, but we need to do a better job. One thing we’re really good at is philanthropy. This year, we founded a philanthropic foundation.

It’s a vehicle by which we can give back to the community. It’s not using any of NAIOP members’ money. It’s a way for us to collaborate with those people who want to get involved, even nonmembers, who want to get involved in an event that caters to some type of charitable organization. We’d be able to give to a charity without it going through the NAIOP membership channels. It’s being created under

Steven Schwarz Term: 2005 Legacy: Won National Chapter of the Year award, hired Executive Director Tim Lawless

Craig Coppola Term: 2003 Legacy: Implemented professional management and lobbying 53

NAIOP Right now, we’re focusing as an executive committee on how we can make education more meaningful. There are a lot of organizations out there that do a great job with education, but we want to be a strong education organization as well. my leadership, but it was fostered by (past Chairman) Keaton Merrell.

Lastly, what I think we’re most noted for and what we’re best at is public policy. We’re the group that goes to the Legislature to fight on behalf of our members, which are primarily developers. Whether it’s real estate taxes or taxes on energy uses, we band together and we use our resources for the benefit of our members.

Every chairman has left a unique mark on the organization. Did you achieve your goal? what do you hope is your legacy?

As the chair, I’m somewhat involved in all the committees — public policy, education and have an active role in Night at the Fights. The Best of NAIOP has been my baby. The Signature

Pete Bolton Term: 2000 Legacy: Successful fight against Sierra Club development ring 54 | September-October 2015

Speaker Series is something we’ve fostered under my term. This year, we had Dan Patrick and close to doubled in attendees. The other thing I have been involved with is our education. That’s one of the three legs of the stool. We’ve tried to build that. We sent a survey out in April, we had a good response.

The majority of the people wanted to see us improve our education platform, which is something Bob Hubbard will be focused on. Right now, we’re focusing as an executive committee on how we can make education more meaningful. There are a lot of organizations out there that do a great job with education, but we want to be a strong education organization as well.

The organization is not broken. I had some phenomenal predecessors.

Following Megan Creecy-Herman, those were some pretty big shoes to

John Strittmatter Term: 1999 Legacy: Met board’s goal for strengthening financial stability

David Krumwiede Term: 1998 Legacy: Introduced Night at the Fights

fill. She won NAIOP Chairman of the year, nationally. I believe if it’s not broken, don’t fix it. If someone asks, “What did TJ do?” I’d say if we can get this foundation created, that’d be something I’d like to see under my leadership. Given my history as a manager, I’m most proud of working and training younger people and promoting their careers and their desires. I helped organize revamping the mentorship program with the developing leaders, more of an educational format, where they receive a certificate of completion at the end. That’s something that was a tremendous success. The mentors loved it. The mentees really liked it.

I’ve agreed to be a part of it, going forward to grow it and becomes more meaningful in years to come. That’s something of which I’m proud.

Bill Petsas Term: 1997 Legacy: Membership recruitment

Bob Mulhern Term: 1996 Legacy: Recruited strong leaders to organization

NAIOP

WILL TO WIN THE EVOLUTION OF NAIOP ARIZONA PHOTO ILLUSTRATION BY MIKE MERTES, AZ BIG MEDIA

N

AIOP Arizona’s events can draw a crowd. About 750 people attended the group’s signature Night at the Fights event in 2015.

However, commercial success was an effort of dozens of chairmen, formerly referred to as presidents. In fact, one former chairman joked that all you had to do was miss the wrong meeting to be “awarded” the role. Now, the list of chairmen, even from the early days, are accomplished and recognized industrywide for success.

“It’s the preeminent national real estate development organization and I believe then and now that I needed to be involved in the organization,” says John Strittmatter, chairman of Ryan Companies US, Inc., who

56 | September-October 2015

joined NAIOP-AZ in 1994, when Ryan Companies opened an office in Arizona. “I got more involved as this office became more active.”

John DiVall, senior vice president and city manager of Liberty Property Trust’s Arizona region, came from the Midwest to start business in a new region for the company.

“Nobody knew me or my company.

As much as I put into (NAIOP), it came nowhere near what I got out of it. I encourage people to get involved in our industry. As willing as you are to get involved, the more you get out of it. It helped me get integrated into the real estate community here.”

With a continuing goal of expanding membership, the chapter imported

events like Night at the Fights, borrowed from a successful Orange County chapter. The chapter was on a mission for a signature event that could raise resources for the group.

Now, it has multiple signature events.

“The goal wasn’t to make a lot of money, but to make a lot of friends,” Bob Mulhern says about the group’s first golf tournament, held at The Raven. “Over the next five years, we became the organization that offered bigger relationship-building events.”

David Krumwiede was talked into joining by his then-employer and former NAIOP President Tom Roberts in 1986.

When he eventually became president, akin to what’s now the role

NAIOP of chairman, Phoenix was coming out of the savings and loan crisis and considered an up-and-coming market.

It was time, Krumwiede says, for signature events. At the time, NAIOP had 40 members. Even Krumwiede’s secretary doubled as the organization’s admin during his presidency.

“We didn’t have a big budget, so we rolled the dice by throwing a big, signature event,” he recalls. That event was the first Night at the Fights.

The event was held at the Ritz and drew a crowd of 250 people. Many of which, Krumwiede says with some amusement, didn’t even know what to expect or had ever seen live boxing. At the 2015 Night at the Fights, the event capped out at 750 attendees.

“It was such a big event, if it didn’t go well, we weren’t going to be a chapter anymore,” Mulhern says.

“Some of us weren’t sure if it would be successful,” Strittmatter admits. “I was sort of on the fence about it and (Dave) Krumwiede always kids me on this ... If you look at who is in the organization and who is in the events, it’s people I deal with daily. It’s an opportunity for me to create and find resources for Ryan (Companies) to use.”

Events like Night at the Fights, that helped bring NAIOP-AZ into the black paved the way for a stronger legislative presence due to its ability to donate to The ring at the XIX Night of the Fights.

58 | September-October 2015

“I’ve been here a long time. The chapter has done a great job. From my perspective, I know the chapter back in the early ‘90s was struggling and there was competition and soul searching in what direction the chapter wanted to take. By the mid to late ‘90s, the chapter had grown exponentially and positioned itself as the go-to group for legislative issues for CRE in Arizona.

We’ve been fortunate for some great leaders in those chapters. Those things don’t happen by accident.”

- NAIOP CEO Thomas Bisacquino

PACs and lobby at the Legislature.

The chapter has a legacy of bringing in more than just figurehead presidents, Mulhern says.

“It’s like any business. It’s being seen a lot of places, doing a lot of stuff, volunteering. You become friends with all these people,” says Bolton. “When you call, they know who you are. Is there one person, is there one event?

Nah.” Bolton also brought one more important thing to the table — a recommendation for Tim Lawless.

Lawless has been the CEO for nearly 10 years.

“They really go in there and pour a lot of time and energy into it,” Mulhern says. “It just amazes me how much each person adds.”

The networking events are a gateway to NAIOP-AZ’s role as an advocate for commercial development.

When Craig Coppola was chairman of NAIOP, Arizona’s commercial real estate taxes were among the top five most expensive in the nation.

“We were at a distinct competitive disadvantage competing for new company relocations,” Coppola says.

“Additionally, the entire commercial real estate industry was disjointed, with each segment looking out for its own specific interests. NAIOP was the group that could organize, coordinate, and advocate for commercial real estate. At the time, this was our sole focus because it had so much impact on the future.”

Bolton recalls, in 2000, “the biggest, largest, most dreadful attack on commercial real estate in Arizona” was initiated by the Sierra Club. The group was attempting to put a development restriction ring around every municipality that had 2,500 or more citizens, akin to Portland.

“That was a huge referendum that NAIOP, along with many others, were able to get the real information out to the market, to the citizens and they voted no,” Bolton says. “That was the legacy ... (Arizona was the) only state in the country trying this. We beat them so handily, they dropped it in other places.”

Bolton was also the member who brought Lawless to NAIOP, whose main focus has been property tax reform.

“Our voice has adopted a consistent, focused, and reasoned approach to help make Arizona competitive in taxation and meaningful job creation,” Coppola says. “We have had some major wins for our industry, but those wins have really helped Arizona’s economy grow markedly. Within the organization, the average member knows that our collective efforts matter and are encouraged to be thoughtful business citizens. I think this results in a more effective and productive trade organization.”

NAIOP Three Decades of Support

NAIOP Arizona 1986-2016 NAIOP Arizona is the

7

Annually, it holds more than

th

largest chapter in the U.S.

40

events, half of which are dedicated to its Developing Leaders Program

For the last consecutive decade, NAIOP-AZ has been recognized with 17 major awards: Most Outstanding Chapter Most Outstanding Chapter Chairman Most Outstanding Communication Tool Most Outstanding Corporate Sponsorship Program Best Membership Program Best Developing Leaders Program Most Outstanding Chapter Executive Most Outstanding Volunteer Greatest Net Membership Increase Best Periodic Publication Best Magazine Supplement Capital Dome Award for Public Affairs Most Outstanding Social Event (Comedy Night) Most Outstanding Government Affairs Program

60 | September-October 2015

Membership growth: 800 700 600 500 400 300 200 100 0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2013 2014 2015

In 2012, NAIOP-AZ was awarded for having the highest membership increase in the nation.

Major legislative wins:

2005 2006 2007 2011 2011 2012 NAIOP-AZ made it a top priority to lower property-tax assessment ratio from 25 percent to 20 percent over 10 years.

State equalization property tax rate is abolished over three years.

Accelerated property tax assessment ratio decline over six years, rather than 10 years.

Jobs Bill (HB2001) passes.

Contains top three legislative priorities, including further ratio decline from 20 percent to 18 percent; corporate income tax rate cut below 5 percent.

Municipal impact fee reform bill passes (SB1525).

This narrows definition of necessary public services.

The chapter was a key financial contributor to two statewide proposals on the ballot. Prop 117 was meant to cap property tax valuations to no more than 5 percent a year. Prop 204 opposed a statewide permanent sales tax increase.

61

NAIOP

NAIOP Arizona’s Annual Roundtable N AIOP, a Commercial Real Estate Development Association, announced its decision to add retail to its foundation of office and industrial sector resources. This, among other topics, made it onto the table at the 2015 roundtable discussion held by leading members of the Arizona chapter. NAIOP-AZ members gather every year around a table, not necessarily a round one, to discuss the national and local issues and trends entering the commercial market. Here are the leading trends, promising statistics and market updates they’re watching.

Moderator:

Tom Johnston Voit Real Estate Services

Participants:

Molly Carson Ryan Companies US, Inc. 62 | September-October 2015

Matt Mooney Parkway Properties Larry Pobuda The Opus Group David Scholl Vintage Partners

Christopher Toci Cushman & Wakefield James Wentworth Jr. Wentworth Properties

Tom Johnston (TJ): What is different in July 2015 in our local commercial real estate industry FROM a year ago?

David Scholl (DS): With each

passing year, I believe we are seeing a strengthening real estate market from the Great Recession. There seems to be more activity and less fear in the

market. We are still not to the point in the cycle where there is much demand for new commercial development, but “chatter” is more about the search for development deals rather than buying existing broken deals. As employment continues to strengthen and the single-family residential market gets on firmer footing, I believe we will begin to see more pressure for new commercial development.

Molly Carson (MC): We are seeing continued growth from new companies entering our market, as well as expansion of existing firms.

Companies continue to invest in their people, which manifests itself in the creation of a more optimal work space; with open areas for collaboration as well as closer proximity to amenities (food, shopping, transportation).

New construction and the reshaping of existing offices continue to benefit from this trend. The continuance of

this requires ongoing improvement of our education; our ability to produce talent is a key factor — we need to keep this a top focus.

TJ: How would you compare our Metro Phoenix commercial real estate market to other major markets throughout the nation and, specifically, the Western U.S.?

Larry Pobuda (LP): Without question, Phoenix has had a slower recovery, yet I don’t look at this as a bad thing, and actually think of this in very positive terms. We have come out of the economic downturn with a more diversified economy, driven by growth in technology, healthcare and financial services. This economic diversification provides relief from the construction/ housing roller coaster that has steep inclines and correspondingly steep declines that have taken our breath away in past cycles. In many ways, our recovery is similar to other markets; no longer can you look at aggregated market-wide statistics and draw meaningful conclusions. The Valley has “hot pockets” within various submarkets. It is difficult to paint with just one brush.

MC: Our market was badly hurt by the collapsing of the housing market.

Today, we’ve come back stronger than before, focusing on diversifying our economic drivers. This, coupled with our universities’ focus on educating the best and the brightest, is resulting in progress, slow and steady progress.

(We’re seeing) a much different pace than Arizona’s past recoveries.

Chris Toci (CT): There is no question that the Phoenix real estate market was hit the hardest among national real estate markets and particularly those in the West. As such, it has taken longer for it to recover than most other markets. The silver lining rests in the fact that our delayed recovery means that, as a market, we have several more years of solid recovery. To use a baseball analogy, we are in the much earlier innings of recovery (4th or 5th) than most other major markets that we consistently hear are in the seventh or eighth innings.

Moderator

Tom Johnston

Panelists

Molly Carson

Matt Mooney

Larry Pobuda

Panelists

David Scholl

Christopher Toci

Western markets like Seattle, Portland, San Francisco, Orange County, San Diego, Austin, Dallas and Denver are in the later innings. Though several of these markets may undoubtedly go into extra innings, Phoenix is attractive due to its bridled speculative construction deliveries, healthy job growth and strong housing affordability.

James Wentworth, Jr. (JW): When looking at the office

and industrial segments, the other major markets in the western U.S. are outperforming Phoenix and seem to have much more wind in their sails.

Tenants, developers and investors have been much more active in markets like Seattle, Denver, Dallas and California.

All of those markets would be considered “great,” while Phoenix could be considered “good.” Having said that, we are still on an upward trajectory and seeing many encouraging signs.

Our positive performance is happening without the “turbo booster” of the home building that we have seen in previous cycles. We may continue on this path if we don’t see substantial increases in the new home permits.

James Wentworth Jr.

TJ: Where does Arizona stand in its economic development plans? Are we headed in the right direction or leave anything for the asking? Is Gov. Doug Ducey on the right track? Is the furor over K-12 spending and high university tuition an issue? Have we done well to diversify our economy?

Matt Mooney (MM): Coming out of the Great Recession, Arizona has made tremendous strides in its economic development efforts.

There are a lot of positives that have manifested themselves in wins like State Farm, Silicon Valley Bank and Northern Trust expanding here.

Further, there has been a strong trend of California-based firms looking to take advantage of Phoenix’s business friendly environment and have expanded their footprint in the region.

For instance, Zenefits, a fast growing human resources software company, recently announced it was expanding its presence in Tempe by leasing 135,000 square feet of new office space 63

NAIOP at Parkway Properties’ Hayden Ferry III development that will accommodate upwards of an additional 1,000 jobs.

GPEC and most of the East Valley cities in the Phoenix Metro have been very aggressive and deserve a lot of credit. That said, nearly every other state is at the same time growing more competitive, so we have a lot of work to do, and K-12 is appropriately in the spotlight from Gov. Ducey.

TJ: What has been most surprising about Arizona’s commercial real estate recovery?

MM: The amount of time it

has taken to recover has been the most surprising. The hyper growth between 2005 and 2007 was so disproportionately fueled by access to debt, instead of fundamentals, that the scars from that cycle took a long time to heal and in some instances still haven’t healed. We built a lot of product that should never have been built, and it is born out in our stubborn overall office vacancy rate.

DS: We are six years into the current recovery and, other than multifamily, there has really been no pressure for sustained ground-up development. I think Arizona’s recovery has lagged behind the nation and we are seeing delayed demand for new buildings.

In the two previous real estate down cycles (’89-’90 and ’00-’01), I remember the Arizona market recovering at a quicker pace. The positive in this is that we may see the current recovery in rental rates last a little longer than usual.

JW: The subdued pace of the recovery is the most surprising.

Phoenix has normally been a growth leader coming out of previous downturns. That simply is not the case so far in this cycle and we may act more like Denver did in the last couple cycles. The positive side of this is that we will hopefully not see the wild swing between peak and bottom in this cycle. The other surprising part of the recovery is how it has differed from submarket to submarket and by building type. For example, heavily parked office buildings in the Southeast Valley have outperformed the multitenant buildings in our historically 64 | September-October 2015

POSITIVE CHARGE: “We have come out of the economic downturn with a more diversified economy, driven by growth in technology, healthcare and financial services.” — Larry Pobuda, OPUS Group strong submarkets of Camelback Corridor and North Scottsdale, both of which have vacancy rates hovering at around 20 percent.

CT: The most surprising element about Phoenix’s recovery from the Great Recession compared with other post-recession recoveries is its lack of a “snap back.” The hockey stick, or “J” curve, recovery of aggressive rent growth witnessed from 2002 through 2006 after the September 11-induced recession is sorely missing from this current recovery. The current recovery is more indicative of the 1992 to 1996 post-recession recovery in which zero speculative office construction occurred, 75,000 to 85,000 jobs per year were added, and in excess of 1 million square feet of net annual office absorption occurred. It was during this five-year period that rents grew most aggressively prior to the market’s sustained delivery of consecutive years of speculative office space. The moderation of the ‘92 to ‘96 recovery cycle was predicated on no speculative construction during the early years, which ultimately led to a more sustainable nine-year period of growth that prevailed between the trough of 1991 and the trough of 2001. Similarly, a more moderate current recovery which boasts growth of 52,000 to 55,000 jobs per year, muted speculative office construction deliveries, and net office absorption averaging in excess

of 1.5 million to 2 million square feet per year all point to another sustained period of growth that may rival the recovery cycle from 1992 to 2000.

TJ: What is the current state of our Metro Phoenix office market and what needs to happen to push the office sector into continued recovery?

MM: The Metro Phoenix office

market is improving overall but remains very bifurcated in the strength of the recovery. Well-located new product with good access to transportation and amenities in the Southeast Valley and Scottsdale is approaching historic rents in many places — and certainly at rents that justify new development. At the same time, there is a lot of product in Metro Phoenix that is functionally irrelevant, due to location, parking constraints or inefficient floor plates.

Some of this inventory still doesn’t make sense to lease at current rental rates and probably should be converted or demolished. The biggest catalyst to continued improvement is simply continued office-using employment growth in diverse industries. We are all invested in the job growth story.

LP: It’s been a moderate and generally steady recovery, not overexuberant in any way. There is greater segmentation within the office market

NAIOP

ALL IN: “Adaptive reuse is often not as cost effective as building new, but is a very important element for creating, strengthening and maintaining a city’s culture.” — Molly Carson, Ryan between older (last cycle) suburban office buildings that are parked four per 1,000 square feet with vanilla finishes and new Millennial-driven work spaces that are open, collaborative, more heavily parked, with walkable amenities nearby. The key driver is still job growth, yet we need to recognize that these new jobs are different from jobs in the past, and they are not necessarily going to locate where our current office stock is located.

Ultimately, we cannot “push” the office sector into recovery. We can, however, exercise better judgement and discipline as it recovers.

TJ: Why does the Tempe submarket appear to be so hot right now and what is the next hot sub-market? Is it central Phoenix? Is light rail a driver?

LP: It is hot and it is a confluence of great academics, great business and a unique and vibrant downtown. It’s also difficult to overlook the inherent location advantages that Tempe offers — highway accessibility, proximity to Sky Harbor and workforce availability.

The City of Tempe has also made smart investments in its future – Tempe Town Lake, light rail and now the proposed street car. This, combined with the leadership and vision of Michael Crow at ASU, and Tempe is on fire. Phoenix is already strong and

66 | September-October 2015

getting stronger. The next hot submarket will be everything within the Loops 101 and 202, focusing “in” rather than focusing “out.”

MM: Tempe is the most urban city in the Phoenix Metro, and the majority of tenants across the country today are focused on urban locations as a means to recruit and retain talent, particularly Millennial workers.

Tempe can boast border-to-border light rail, Mill Avenue amenities, Tempe Town Lake, Sky Harbor Airport proximity, freeway proximity and a connection to tens of thousands of ASU students. It is a compelling story.

Several other sub-markets are already hot, particularly Chandler and south Scottsdale. If Scottsdale were to ever embrace light rail to connect its downtown, it could be even more compelling.

TJ: There’s a lot of buzz around adaptive reuse and redevelopment of downtown spaces, particularly in Phoenix. What significance does this development have to the industry? What have been some of the most important projects?

MC: Adaptive reuse is often not as

cost effective as building new, but is a very important element for creating, strengthening and maintaining a

city’s culture. This is a recent (and often challenging) trend for Arizona, one I hope continues to gain more traction. The last two years we have seen a number of innovative adaptive reuse projects not only come to fruition but thrive. Restaurants such as Fox (Restaurant Concept)’s The Yard and (Jim) Riley’s The Vig revitalized not only the buildings in which they occupy, but the respective neighborhoods. They’ve created gathering areas where previously there was none, bringing life to these older buildings. The redevelopment of the Monroe and Barrister buildings no doubt will bring life to downtown Phoenix.

TJ: What is the current state of our Metro Phoenix industrial market?

JW: The Phoenix industrial market

is healthy. We have seen strong activity trickle from large users to the mid-sized users. Well-located and functional product is leasing, and we are seeing growth in the rental rates. Similar to the office market, certain sub-markets and building sizes are performing better than others.

Vacancy rates are just above 10 percent with new development happening in select sub-markets. This development is much more controlled than in previous cycles.

TIME MACHINE ENTERPRISING People

Ideas

The workplace. It’s where we spend a third of our lives or more.

So the commercial real estate solution our clients choose for their workers is critical to the performance of their business. Colliers International’s seasoned experts provide timely critical analysis and discerning industry-leading research that helps business make the right real estate calls. By serving both the needs of the here-and-now and the future, we help turn our clients’ “todays” into “happily-ever-afters.” colliers.com/greaterphoenix Phoenix +1 602 222 5000 Scottsdale +1 480 596 9000

NAIOP “core” investors. Late 2015/early 2016 may induce additional core investors to the Phoenix real estate market as they continue to chase yields and are forced out of gateway markets.

TJ: What are the challenges for retail and what will the next five years look like?

How does this inter-play with adaptive reuse and mixed use more generally?

DS: The retail sector is facing a

MARKET MINDED: “Office buildings in the best locations with the best barriers to entry continue to emerge as a preferred asset class.”

— Chris Toci, Cushman & Wakefield

TJ: Is the Phoenix market ripe now for spec building?

If so, where and what type of building type?

LP: We’re already seeing spec

development, and I think this will pick up steam. The key drivers will still be great, irreplaceable location, more infill than ever before and strategic investments that have their finger on the pulse of business demand. The danger with spec development is when it is driven by the supply. We too frequently act like lemmings in our industry.

TJ: There’s more capital coming into the market right now. Where is this best invested? How is financing trending? What do the large pension funds think about our market for investment properties?

CT: Office buildings in the best

locations with the best barriers to entry continue to emerge as a preferred asset class. Most institutional investors remain under-allocated to industrial product and have a voracious appetite for new, state-of-the-art, functional and institutional industrial assets.

Long-term credit tenant leases with a minimum of 12+ years of lease term and annual lease rate escalations remain in strong demand as portfolio

68 | September-October 2015

managers endeavor to mitigate risk.

High street retail located within the best mixed-use developments in gateway urban centers continue to draw true “core” investors along with grocery anchored shopping centers.

Functionally obsolete regional malls and strip retail centers will continue to flag. Though still sought after, luxury multi-family is feeling long in the tooth. Debt capital markets remain very active with bank and life company loans most heavily sought after. CMBS (commercial mortgagebacked security) loans allow for higher proceeds but are restrictive if resale is a consideration within two to three years. Institutional capital views Phoenix very favorably as it is perceived to be in the earlier innings of recovery (4th or 5th) compared with almost all other investment markets that are believed to be in the latent cyclical recovery stages (7th or 8th innings). Though there continues to be good depth of bidding, there remains an element of fickleness among investors. They have very keenly defined investment parameters and are not easily persuaded to adjust their yield requirements. Heretofore, “valueadd” investors have been most active.

However, we are beginning to see the return of the “core-plus” investor as well. Only the Super-A, or trophy, assets will garner the attention true

number of coinciding challenges in the current recovery. First, the long predicted Internet sales impact is in full force. Many commodity retailers are struggling to survive and almost all large format retailers are studying smaller store sizes.

Changing demographic preferences and improved fulfillment systems have truly boosted the acceptance of Internet retailing. Second, there is an old saying in retail development, “Retail follows rooftops.” Until the Arizona housing market fully recovers and new homes and neighborhoods are being developed, we will continue to see softness in retailer demand for new Arizona stores. Finally, pure demographic forces are currently working against retail development.

Gen X (people born between 1964 and 1982) is roughly half the size of the Baby Boomers and Gen Y (Millennials). Now approaching peak earning years, Gen X simply cannot keep pace with the level of consumption our economy has grown accustomed to over the last 30-plus years. Until Gen Y gets into its peak earning years (early 2020s), we may be faced with a “new normal” in our consumer-based economy. One bright spot for retail development has been the recent demand for retail components in mixed-use projects.

A combination of a hot multifamily development segment, along with new planning models have created high demand for specialty retail and restaurant destinations in many mixed use projects that are in the planning stages. Once the office segment moves into the development phase of the current cycle, we may see similar demand for retail additions in commercial mixed use projects.

NAIOP

RETAIL IT LIKE IT IS

NAIOP extends arm to retail sector

By Amanda Ventura

N

AIOP, a commerical real estate development group, has historically focused on industrial and office sectors. However, the national organization is extending its membership benefits to more obviously include retail developers and similar commercial professionals.

“The organization really started shifting gears more than 10 years ago,” says Thomas Bisacquino, CEO of NAIOP. “It was in 2005 that the association held a big series of mixed use summits.”

In 2009, NAIOP dropped the words behind its acronym, which stood for National Association of Industrial and Office Parks. Now the group simply goes by NAIOP, Commercial Real Estate Development Association.

“The reason we did that is because the association was more associated with the process of development and ownership than any one product type,” Bisacquino says. “Our roots are in office and industrial, but our members are doing so much more.”

According to NAIOP’s membership data, 67 percent of its members are involved in retail development.

Likewise, 66 percent of NAIOP members also report work in mixeduse development. It’s not necessarily the mixed-use component that’s

70 | September-October 2015

grabbing Bisacquino’s attention. It’s the way the product mix has changed over the years. When mixed use projects were planned in previous decades, they led with office. Now, he says, they’re leading with multifamily and retail, to be followed by office.

“The industry was naturally headed in the direction of mixed use,” says Bisacquino. “The lines are starting to

blur between traditional urban and suburban development. Society is pushing the envelope.”

When it comes to pushing NAIOP’s envelope, members of the organization can expect something different than what the International Council of Shopping Centers (ICSC) offers, Bisacquino says. ICSC is the largest commercial real estate group solely

“The line between retail and office is getting more and more blurred with the increased popularity of mixed-use, infill developments.”

-Ed Beeh, executive vice president of SRS Real Estate Partners

focused on the retail industry. “(Retail) has been something we’ve been doing for quite some time but has unfortunately been the bestkept secret in town,” Bisacquino says. “We recognize there’s clearly a misperception it isn’t the home for the retail business when it is.”

Ed Beeh, executive vice president of SRS Real Estate Partners, a retail consulting and brokerage firm, has been a member of International Council of Shopping Centers since 1989.

Beeh says his ICSC membership is sustained by networking and educational events as well as access to political action committees. Though he’s not a member of NAIOP, he has attended the group’s social events.

“The ‘I’ and the ‘O’ (used to) stand for

industrial and office, so the perception is that this organization is not focused on or beneficial to retail,” he says.

The changing market, though, he says, could make NAIOP more attractive to the retail sector.

“The line between retail and office is getting more and more blurred with the increased popularity of mixeduse, infill developments,” Beeh says.

“Additionally, retailers need distribution and warehousing facilities, so there is obviously a connection between the retail and industrial disciplines.”

Brokers, however, are probably going to stay more involved in ICSC for now.

“NAIOP is a fine organization, and if they are going to include retail and be more inclusive with that industry we would consider (joining),” says

Dave Cheatham, president of Velocity Retail and member of ICSC since 1984.

“However, if they are going to continue to focus on warehouses and high rises and those matters concerning the office and industrial industry, then we would most likely not see a benefit.”

With the growth of mixed use properties, office and residential developments are increasingly including ground floor retail amenities for the sake of residents and employment base. This is where the brokers may see value, Beeh says. “(Joining NAIOP) would help build better relationships between the retail and office/industrial sector players and cause more collaboration,” he says. :This evolution we are experiencing is fairly recent, and I don’t know that 71

One location. One opportunity.

One Scottsdale. ®

Located at the intersection of Loop 101 and Scottsdale Road, One Scottsdale is founded on a vision of progressive architecture, sophisticated business and an enviable lifestyle.

In partnership with Macerich, this rare opportunity features a mixed-use community, easy access to the Scottsdale Airpark, and immediate connections to Metro Phoenix.

For over 30 years DMB has built communities, offering opportunities for businesses of all sizes to develop quickly – moving them from land purchase/lease to opening in a matter of months.

Our flexible entitlements and speed to market set us apart.

See what great things we can do together.

Transition your business to One Scottsdale.

855-209-1561 | relocate@dmbinc.com

Henkel North American Headquarters

Jefferson at One Scottsdale (TDI Real Estate)

Class AA Office Coming 2016 (Ryan Companies)

Freeway visibility at Loop 101 and Scottsdale Rd

Entitled for 1,100 mixed-use residential units and 400 boutique hotel rooms

1.8M-sq.-ft. of retail, restaurant and Class AA office space available

onescottsdale.dmbinc.com © 2015 One Scottsdale Holdings LLC. Not an offer for sale or lease of real estate. The DMB name and logos are registered trademarks of DMB. All rights reserved.

NAIOP NAIOP members are involved in:

89 %

77 %

67 %

66 %

42 %

40 %

OFFICE

INDUSTRIAL

RETAIL

MIXED USE

NICHE

MULTIFAMILY

COURTESY OF NAIOP, “We are Commercial Real Estate”

retail building owners nor office/ industrial owners expanded outside their discipline very often, nor were any of them as interested in collaborating with the others on a platform such as NAIOP,” says Phil Breidenbach, executive vice president, Colliers International in Greater Phoenix, and 20-year NAIOP Arizona member. “That has obviously changed.”

Bisacquino adds that ICSC is transaction-oriented, whereas NAIOP is solely focused on development issues.

“For the first time, we’re seeing a more interesting nexus between industrial and retail,” he adds, in a nod to the transition Beeh mentioned.

“Many NAIOP members expanded

Ed Beeh 74 | September-October 2015

their portfolios as some of the lines blur between industrial and retail, thanks to e-commerce,” Breidenbach says.

Velocity Retail Senior Vice President Mike Fitz-Gerald, says he feels that retail and office will integrate further and there will be a need to have a more integrated organization that is equal parts retail, office and industrial. FitzGerald estimates it will be closer to five or 10 years before this happens.

“As our market changes and the retail market evolves into more integrated projects that this association will certainly need to incorporate retail on a higher level,” he says.

The Arizona chapter, according to 2015 Chairman Tom Johnston,

Thomas Bisacquino

Phil Breidenbach

managing director at Voit Real Estate Services, plans to host a roundtable discussion about retail’s involvement in NAIOP. “There’s a lot of retail professionals out there who are already members of NAIOP,” he says, adding that NAIOP’s recent advocacy benefitted retail development through fighting impact fees for the trolley system in Tempe.

“Until we get some feedback from them, I can’t say exactly how they will benefit.

I can say, on a whole, retail will.”

Johnston, a third-generation Arizonan, lives in downtown Phoenix, as does his daughter, and he says he constantly sees room for development in the urban core that will bring together the office, retail and multifamily sectors.

It’s not a hard sell.

“I think for the sophisticated owner, broker and developer, I think they see the benefit in joining and the collaborative effort with office and industrial developers,” Johnston says.

Breidenbach adds that NAIOP-AZ’s advocacy also benefits the retail sector.

“NAIOP also played a key leadership role in passing legislation signed by the governor that prevents cities from enacting ordinances that require property owners from tracking and publicly reporting their energy usage so owners can be shamed or face significant monetary penalties for reporting noncompliance,” he says. “This would have been especially onerous to shopping centers and larger retail boxes who often have to keep their air conditioners on for longer periods than say a comparablesized office building, given their working hours with customers.”

Dave Cheatham

Tom Johnston

The interchange of business right at your fingertips.

DownloaD The new PV|303 aPP ToDay! Day! Featuring: • • • • • •

Interactive Maps Building Information Foreign Trade Zone Information Project Downloads Site Video Live Aerial Feed and MORE!

NAIOP

Where obsolescence ends, new trend begins

By Amanda Ventura

A

flour mill, a bowling alley, a former shopping mall. All of these retail centers have one thing in common — they’re fated to become creative office space.

The life expectancy of older office buildings hangs in the balance along the streets of Midtown and other sub-markets in Arizona that saw extensive growth in the mid-80s. Now, developers and building owners are faced with finding innovative ways to either save or re-purpose these sites.

Will developers take the pre-1990s structures into the 21st century by raising the ceilings and perking up the interiors? Or will they be razed and given a new purpose?

Office vacancy rates are the highest of any other commercial sector at 20 percent in Tucson, according to CBRE’s second quarter office report, and just

over 20 percent in Phoenix. Despite the numbers, Class-A office is in high demand, as Cushman & Wakefield reported in its second quarter release.

Even with high vacancies, Class-A leasing is high and nearly 5 million square feet of new office is under construction in the Valley. New supply is expected to exceed historic average by 58 percent in 2015, DTZ reports.

“The current and future trend of office leasing will focus on amenityrich environments located in areas of strong labor pools,” reads Cushman & Wakefield’s report. The key to unlocking the death sentence on older, obsolete buildings is just that — amenities.

That brings the story back to the flour mill, bowling alley and shopping centers mentioned earlier. All of these spaces are near amenities. The Hayden

BEFORE AFTER

Nexus 76 | September-October 2015

Flour Mill is next to Tempe Beach Park and the Mill Avenue District, as well as Arizona State University.

The bowling alley. And the office space next to Fiesta Mall are literally walking distance from an amenityfilled shopping center.

“For reasons of timing and price, there’s a perception these will be cheaper than new builds,” says Lee & Associates Principal Andrew Cheney, who adds that even Fortune 500 companies are willing to look at adaptive reuse if it’s a time-sensitive enough situation.

“There are some companies that just have to have new space,” he says.

“Other companies that don’t. Other companies don’t want to wait for new build, so they are willing to look at existing product.”

According to DTZ, about 66 percent

NAIOP

BEFORE AFTER

Connexion of new construction is build-to-suit.

The existing space, though, Cheney says, isn’t necessarily Class-A. In fact, many of the adaptive reuse projects around the Valley are Class-B by typical standards.

“It’s tough to say they become Class-A,” Cheney says. SkySong was a complete scrap of its former, failed shopping mall and Circuit, a repurposing of a manufacturing center, is a single story. Even Discovery and Continuum, Cheney says, are Class-B with Class-A build-outs.

“For right now, the supply of good space will not meet up with the demand,” Cheney says. “At 20 percent (vacancy), that still hasn’t happened yet. There just won’t be enough nice space and right prices for new construction … the prices between re-purposed buildings and new construction aren’t as great as they once were. The gap isn’t as big at only $2 per square foot more.”

Big tenants such as InfusionSoft, General Motors, Amkor, GoDaddy, Shutterfly, Northern Trust, Isagenix and Crown Castle have entered the market as build-to-suits. However, these projects don’t fix vacancy rates, as DTZ Executive Managing Director Jeff Wentworth says.

“Office tenants are evolving and owners have to evolve as well,” Cheney says. “That’s why Discovery (Business 78 | September-October 2015

Campus) did so well. They redid that project and it happened before the tenants showed up.”

This is particularly important for Arizona tenants, Wentworth notes.

“The companies coming from out of state or northern California can envision this,” Wentworth says of repurposing obsolete buildings. “When you walk through the property with these tenants, they look at the space

and say you’re going to tear this down and leave the walls and fireplace. If you take the local tenants that are used to value office, they walk in and generally speaking don’t get it. It’s a safer bet to go to something newer like a suburban value office near good employment.”

When it comes to speculative projects, like Discovery Business Campus or Anchor Centre, it’s up to the owner to capture the image. KBS Real

What makes a building functionally obsolete? ● Built in the ‘80s or earlier The workforce was radically different in the 1980s, when most of Phoenix’s previous Class-A office space was constructed. ● Low parking ratios In the ‘80s, a parking ratio of four per 1,000 square feet was acceptable.

Now that employees are working in half of the square footage than they were allotted in the ‘80s, a more appropriate parking ratio is six per 1,000 square feet.

This sometimes can present a problem for older buildings that do not have that flexibility in available land. Some buildings, like Papago Tech Center, have

chosen to reduce an existing building size to make space for parking. ● Low ceilings Some developers have opted to literally “raise the roof” in obsolete office buildings to make suites more appealing to future tenants. ● Lacking amenities Access to amenities is a huge asset for an office building. The live-work-play dynamic may be an overused phrase, but the concept is still very relevant. Just don’t say it aloud too much, lest you see eye rolls.

NAIOP

BEFORE AFTER

San Tan Tech Center Estate, which purchased the Anchor Centre for $85 million in 2014, blew out the previous building suites to raise the ceilings, add more glass windows and walls as well as trendy designs and pops of color. The group also installed a shared meeting space complete with a kitchen, flexible conference room and billiards for tenants to use to unwind or host clients.

Adding to Arizona’s advantage, Phoenix’s Class-A properties tend to lease around $30 per square foot.

This is more than 50 percent off what northern California companies are looking at for speculative space in the Bay Area.

“It’s not that (adaptive reuse is) a trend, but it’s the start,” Wentworth says. “If you see success, you’ll see more people doing it.”

For the last five years, ViaWest 80 | September-October 2015

company has been purchasing assets that Founding Partner Steven Schwarz says weren’t performing at their highest level.

“It can be simply buying a property where the ownership doesn’t have capital to make it sing,” he says. “Or it can be identifying a market opportunity that other people don’t see.”

A recent project ViaWest has taken on is Nexus, previously owned by a semiconductor company, and built in the ‘80s. The company, NXP, stayed for three decades, but downsized, leasing half its building to Wells Fargo and later completely moved out because its equipment rendered obsolete by technological advancements.

“The cost of retrofitting the research and development space and clean rooms would be extraordinary,” Schwarz says, adding that they bought

it anyway (when the price was right).

“It was ignored in the marketplace for its lack of functionality but by working with ASU’s Research Park, we were able to enhance the asset.”

ViaWest demolished the interiors, built a snazzy lobby area, did some creative site work to boost the parking ratio and adding in glass to make for a classier, updated property. ViaWest currently has 2.5 million square feet under management.

“For a while, we were focused on things with financial issues or suffering from velocity in the market,” Schwarz says. ”Those opportunities are more gone than they’re here. The ones that really make sense now have that element of repositioning of taking something that is not working in its present state and figuring out how to modify it.”

81

NAIOP

DOUBLE VISION Protégés, mentors take developing leaders program to new level

By Amanda Ventura

L

ast year, NAIOP Arizona received national attention for its Developing Leaders program.

“It’s a great program, because you overcome the lack of common ground with more seasoned professionals,” says Robert Guerena, vice president of development at Seefried Properties and 2015 chair of the developing leaders program. “You don’t know the right questions to ask a 30- to 40-year veteran.”

The purpose of the mentorship program is to find a common ground for the two experience levels.

NAIOP Arizona’s young leaders program has about 230 members — 30 percent of its membership — who are under the age of 35 and active in the developing leaders program, which was launched in 2009 by former Chapter Chairman Megan Creecy-Herman. Over the years, the group has hosted events meant to bring together the young and experienced, including “Rookies and Rock Stars,” which allowed 50 under-35 members to invite someone with more than 10 years of experience to a black tie affair for free.

Now, the group is taking an even more selective step with its 10-month mentorship program. Every year, the developing leaders committee selects 12 applicants to take the role of protege with 12 mentors. Last year, the group tested a new program that pitted three teams of four against one another in

Jenna Borcherding John Divall 82 | September-October 2015

Robert Guerena

case studies of real, developable sites around Phoenix.

“The biggest challenge was creating a curriculum captivating of the proteges but also understanding they have fulltime jobs to commit to,” says Guerena.

John DiVall, a mentor whose team won last year’s competition, has worked closely with expanding the mentorship program and formalizing NAIOP’s Masters of Real Estate Development (MRED) program with ASU. “I wasn’t so much surprised as impressed with how sharp some of the young people are in our industry,” says DiVall, senior vice president and city manager for Liberty Property Trust’s Arizona region.

DiVall and three other mentors guided their four proteges through the process of developing a building from start to finish. He says they spent a good amount of time together and was blown away by how coachable all of the proteges were.

“I could see all of them working for me,” he says.

Jenna Borcherding, director of business development at Jokake, has been the chair of the mentorship program. She says seeing the first class

SHOW TIME: Top: Developing Leaders program participants strike a pose among fellow super humans. Above: A group of developing leaders present a site plan for the program’s final competition. graduate gave her energy to take the helm for the last four years.

“We had a protege from two years ago who (still) has a mentor two and a half years later,” Borcherding says. “They’re still meeting. (Proteges and mentors will) get their spouses together and build relationships.”

“We need to think about the future,” DiVall adds. “(We need to) think about

the kids with bright resumes who get their masters from ASU and we want them to stay. Reaching out to them to more formally meet people and intern for them is a great start to that. It’s the same thought with the mentorship program. They’re already here, but it increases the chance of them staying in Arizona. We’re still such a young market and state.”

83

GO BIG Make azBIGmedia.com your home page for news

I N COM M E RCIAL

R E A L E S TAT E

azBIGmedia.com

85

NAIOP

NAIOP members’ office and industrial projects Project profile criteria per NAIOP: · Property must be owned or have non-refundable earnest money in escrow by 8/1/15. · Property must have a color site plan and color rendering completed. · Property must have proper zoning in place. · Property must be bigger than 100,000 square feet

 Amkor Headquarters

Developer: Ryan Companies US, Inc. General Contractor: Ryan Companies US, Inc. Architect: PHArchitecture Location: 2045 E. Innovation Circle, Tempe Size: 101,949 square feet; 7.26 acres Brokerage: CBRE; DTZ Value: $15.5 million

Start: April 2014 Completion: January 2015 Subcontractors: Delta Diversified Electrical, Ace Asphalt, J D Sun, Ryan Mechanical, RCI Systems, Stone Cold, Phoenix Pipeline, Saguaro Steel, Scuderi Tile, Suntec Concrete, Sun Tech Glass and Aspen Construction

Ascend at Chandler Airport Center — Buildings A-D

Developer: Irgens General Contractor: Chasse Building Team Architect: Balmer Architecture Group Location: NWC of S. Cooper and S. Germann roads, Chandler Size: +400,000 square feet Brokerage: Cushman & Wakefield of Arizona Value: WND Start: Building C, July 2015 Completion: December 2015 86 | September-October 2015

Chandler Viridian

Developer: Hines General Contractor: TBD Architect: RSP Architects Location: W. Frye Road at S. Galleria Way, Chandler Size: ±240,000 square feet Brokerage: CBRE Value: $80 million Completion: Q1 2017 Subcontractors: TBD

The Circuit Tempe

Developers: EverWest Real Estate Partners: CarVal Investors General Contractor: RSG Builders Architect: Gensler Location: 615 S. River Dr., Tempe Size: 190,000 square feet Brokerage: Cushman & Wakefield of Arizona Value: $6.5 million (renovations) Start: November 2014 Completion: May 2015

Coldwater Depot Logistics Center – Phase 3

Developer: Trammell Crow Company, Clarion Partners General Contractor: The Renaissance Companies Architect: Butler Design Group Location: NEC 127th Avenue & Van Buren Street, Avondale Size: 187,000 square feet Brokerage: CBRE Value: $10.5 million Start: December 2014 Completion: June 2015 Subcontractors: Progressive Roofing, Sunnyside Masonry LLC, A.M.E Electrical Contracting, Gunsight Construction Companies, Hardrock Concrete Placement Co., Levake Construction, Inc. and Saguaro Steel, Inc. 87

NAIOP Corridors Industrial Park

Developer: Trammell Crow Company General Contractor: D.L. Withers Construction Architect: Butler Design Group Location: SEC 23rd Avenue and Alter Way, Phoenix Size: 221,000 square feet Brokerage: CBRE Value: $18.7 million Start: July 2015 Completion: January 2016 Subcontractors: Suntec, Gunsight, Western Underground, S&W Engineering, Panelized Structures, Mirror Works Glass, Specialty Roofing and ATS Electric

Estrella Medical Plaza 2

Developer: Plaza Companies General Contractor: Okland Construction Architect: Butler Design Group Location: SWC of W. Thomas Road and 93rd Avenue

The Grand at Papago Center

Developer: Lincoln Property Company General Contractor: JE Dunn Architect: HKS Architects; Kendle Design Collaborative Location: W. Washington St., Tempe Size: 450,000 square feet Brokerage: CBRE Value: $65 million Start: Q4 2016 Subcontractors: TBD 88 | September-October 2015

Size: 131,900 square feet Brokerage: Plaza Companies Value: $24 million Estimated start and completion dates: TBD Subcontractors: TBD

Commercial Real Estate Advisors

NATIONAL REACH. LOCAL EXPERTISE.

THE SPERRY VAN NESS DIFFERENCE

89

NAIOP Hayden Ferry Lakeside III

Developer: Ryan Companies US, Inc. General Contractor: Ryan Companies US, Inc. Architect: The Davis Experience Location: 40 E. Rio Salado Parkway, Tempe Size: 265,000 square feet Brokerage: CBRE Value: $42 million Start: May 2014 Completion: September 2015 Subcontractors: Able Steel, Aero Fire, Blount, Comfort Systems, EF Charles, JF Ellis, Kelley Bros, NKW, Performance Contracting Inc., Phoenix Pipelines, Stone Cold Masonry, Yesco, Kovach, Ceco Concrete, ISEC, Stockett Tile & Granite Company, Scuderi Tile, WJ Maloney, ThyssenKrupp Elevator, AAA Landscape, Roofing Southwest and Firestop Southwest

Mach One

Developer: Trammell Crow Company General Contractor: Willmeng Construction, Inc. Architect: Butler Design Group Location: 2222 and 2290 E. Yeager Dr., Chandler Size: 210,000 square feet Brokerage: CBRE

Nexus @ ASU Research Park

Developer: ViaWest Group General Contractor: RJM Construction Architect: PHArchitecture Location: 8375 S. River Parkway, Tempe Size: 120,000 square feet Brokerage: JLL Value: $4 million Start: November 2014 Completion: August 2015 Subcontractors: Various

90 | September-October 2015

Value: $40 million Start: February 2015 Completion: January 2016 Subcontractors: Suntec Concrete; Hawkeye Electric, Inc.; Pro Steel Erectors II, Inc.; Redpoint Contracting; Sutter Masonry, Inc.; and Artic Air Heating & Cooling, Inc.

91

NAIOP

ďƒŠ One | Hundred | Mill

Developers: Douglas Wilson Companies; Hensel Phelps Development LLC General Contractor: Hensel Phelps Architect: Shears Adkins; Rockmore Architect Location: 100 S. Mill Ave., Tempe

ďƒŠPark Ladera at Spectrum Ridge

Developer: Trammell Crow Company General Contractor: D.L. Withers Construction Architect: Butler Design Group Location: 750-850 E. Covey Lane, Phoenix Size: 220,000 square feet Brokerage: CBRE Value: $18.6 million 92 | September-October 2015

Size: 260,000 square feet Brokerage: Cushman & Wakefield of Arizona Value: $190 million Start: 4Q 2015 Completion: 2017

Start: December 2014 Completion: June 2015 Subcontractors: Suntec Concrete, RAPI, Panelized Structures, Specialty Roofing, Carlson Glass, Harmon Electric, Aero Automatic, Pete King Construction, Juarez Contracting, Milling Machinery, Stone Cold Masonry and Westar Environmental

Lawrence Pobuda

Development - Capital Markets - Finance Architecture - Engineering - Interior Design Project Management - Construction

602.648.5070 Š2015 The Opus Group | The Opus Group includes: Opus Development Company, L.L.C., Opus Design Build, L.L.C. and Opus AE Group, L.L.C.

larry.pobuda@opus-group.com

Your Vision, Delivered.

www.opus-group.com

93

NAIOP

Park Lucero — Phase 1

Developer: Trammell Crow Company General Contractor: D.L. Withers Construction Architect: Butler Design Group Location: 220-340 E. Germann Rd., Gilbert Size: 210,000 square feet Brokerage: JLL Value: $18.3 million

Start: August 2014 Completion: April 2015 Subcontractors: M&J Construction, Suntec Concrete, Western Underground, Structures Group, Specialty Roofing, Cutting Edge Fabricators, Harmon Electric, Stone Cold Masonry, Mirror Works, Pete King Construction, Aero Automatic, and Westar Environmental

Park Lucero — Phase 2

Developer: Trammell Crow Company General Contractor: TBD Architect: Butler Design Group Location: Gilbert Size (SF): 421,000 Brokerage Firm: JLL Value: $31 million Start: December 2015 Completion: July 2016 Subcontractors: TBD

San Tan Tech Center

Developer: ViaWest Group General Contractor: Sonoran Crest Architects: Ajanta (shell); McCarthy Nordberg (interior) Location: 145 S. 79th St., Chandler Size: 120,000 square feet Brokerage: DTZ Value: $650,000 Start: August 2014 Completion: March 2015 Subcontractors: Various

SkySong, The ASU Scottsdale Innovation Center — SkySong 4 Developer: Plaza Companies General Contractor: DPR Construction Architect: Butler Design Group Location: 1355 N. Scottsdale Rd., Scottsdale Size: 150,350 square feet Brokerage: Lee & Associates Value: $30 million Start: August 2015 Completion: July 2016 Subcontractors: TBD

94 | September-October 2015

Design/Build General Construction Construction Management

Serving Phoenix and the Southwest

www.mcshane-construction.com

95

SAVE THE DATE September 25-28, 2016 Scottsdale, Arizona

COMMERCIAL REAL ESTATE CONFERENCE naiop.org/crecon16

OUR BUSINESS IS GROWING YOURS .

Making long-term connections is the key to success in commercial real estate. NAIOP provides investors, developers and owners the opportunities, education and knowledge they need at every step of their careers.

So, whether you’re looking to meet potential business partners, nurture existing relationships or close a deal, NAIOP gets you to your goal.

NAIOP: THE FUTURE OF COMMERCIAL REAL ESTATE STARTS HERE. JOIN US.

FIND OUT WHAT YOU’VE BEEN MISSING AT

NAIOP.ORG/JOINTHEJOURNEY