Issue 1, 2021 by Commercial Executive Magazine

Mandala Masters the Market Rocco Mandala CBRE

Jerry Roberts and Pat Boyle Broker Team of the Month Q&A with Three Experts in CRE Law

C E M -A Z .C O M • I S S U E 1 , 2 0 2 1

ADVOCATE. ADVISER. ALLY. Being our clients’ best advocate, adviser, and ally owner and investor clients, and provide the best isn’t just how we do business – it’s who we are. options by tapping into our unmatched network of buyers, sellers and capital sources. With experienced experts in both debt and equity and investment sales, we’re a highly valued partner for Contact us to learn how we can provide certainty of clients in Phoenix and across the country. Together, execution and protection of your investments in any we focus upon ensuring exceptional service to both market conditions.

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IN THIS ISSUE

Cover Story Rocco Mandala talks humble beginnings and his unstoppable mortgage banking career

12 Healthcare Update Alexandra Loye and Philip Wurth discuss trends in healthcare and medical office

20 The Evolution of Prologis in the Valley Jeff Foster walks us through the company’s milestones in Phoenix

Prioritizing Mental Health John Graham gets candid about this important topic

6 Law Q&A CEM hears from three experts in commercial real estate law

18 Broker Team of the Month Jerry Roberts and Pat Boyle chat about the changing office sector

26 Brownfields Brad Johnston with SCS Engineers discusses investing in brownfields © MPmedia, LLC 2021

Letter From The Publisher

– Leo Tolstoy

e’ve all heard the phrase “Patience is a virtue.” While the origin of this colloquialism may date back to the third or fourth century, it hasn’t lost any meaning in our modern world. Our patience has been thoroughly tested for the past year, and it’s up to us to continue on, work hard and have faith that we are almost through these tough times. Our first cover story of the year features Rocco Mandala, a dear friend of mine and someone I’ve known since my early days in the industry. He offers insight into his impressive mortgage banking career and introduces us to his team. Read the cover story on page 6. After listening to input from our readers, I wanted to include a piece on mental health in this issue. John Graham and I have been discussing this very important subject for more than a year. Finally, it has come to fruition, and it’s one that is very close to my heart. Don’t miss John’s personal input on page 5. Other features include Jerry Roberts and Pat Boyle as Broker Team of the Month, the Evolution of Prologis in the Valley, a Q&A with three experts in commercial real estate law, along with many other exciting stories. Finally, while we wait for the vaccine to be administered, the market to recover and life to return to some sense of normalcy, we must be patient! In the meantime, you can find me practicing patience as I continue trying to master the everchallenging game of golf! Enjoy the issue,

Mandy Purcell

Founder & Publisher Commercial Executive Magazine

Team

Karen Gallagher

Celina Busse

karen@mpmediaaz.com

celina@mpmediaaz.com

Managing Director

Karen coordinates the many moving parts of Commercial Executive Magazine. Specializing in strategic planning, she ensures CEM’s readers and advertisers are happy. Contact Karen for information on advertising and general inquiries.

Editor-in-Chief

Celina keeps our readers up to date on the latest and greatest commercial real estate news in the Valley. She organizes and coordinates each editorial piece to perfection. Contact Celina for questions regarding editorial, copyright or purchasing commemorative plaques and PDFs.

We're getting a new look! Watch for our new innovative website coming in March 2021. FOUNDER & PUBLISHER Mandy Purcell, mandy@mpmediaaz.com MANAGING DIRECTOR Karen Gallagher, karen@mpmediaaz.com EDITOR-IN-CHIEF Celina Busse, celina@mpmediaaz.com SALES Karen Gallagher EDITORIAL Celina Busse, Tim Randall GRAPHIC DESIGN Lalo Reyes PHOTOGRAPHY Carl Schultz

All rights reserved. No part of this publication can be reprinted or reproduced without publisher’s permission. Opinions expressed are those of the authors or persons quoted and not necessarily those of CEM. 2920 East Camelback Road, #228 • Phoenix, AZ 85016 • 602-955-2899 • www.cem-az.com

Prioritizing Mental Health

ental health is no new topic for anyone. We have talked about it for years and tried to stop the stigma that surrounds all different types of mental illness. Unfortunately, anxiety, depression and suicide have been at epidemic levels for many years. And, COVID-19 has made these even worse due to social isolation, increased fear and job loss. Access to health care such as therapists and psychiatrists has also been a challenge for many during this time.

a problem, seek help, talk to professionals and get medicated. Many of my family members have also struggled with mental illness and are on medication for anxiety and depression. I have talked to many people in similar situations, and I unfortunately have lost friends to suicide. Mental illness is nothing to be ashamed of and seeking help is a sign of strength. It is no different than any physical malady that requires medical intervention. I always tell people to not be afraid to try therapy or see your primary care

“Mental illness is nothing to be ashamed of and seeking help is a sign of strength.ˮ In my early 30s, I began struggling with anxiety. I grew up in a family that viewed medication and professional help as a weakness, so I struggled in silence. In my early 40s, the anxiety worsened, and I struggled with depression. This manifested in physical symptoms such as chest pain, and I quite literally thought I was dying. I was eventually able to admit that I had

provider or a psychiatrist to explore the possibility of an antidepressant. Do what you can to be around positive and happy people. In this time of COVID-19, being around positive and happy people might be through digital platforms to keep you and others safe. Do not try to hide your weakness. Realize that you are not alone and that so many people

John Graham Chairman and CEO Sunbelt Holdings

want you to feel your best. Reach out to your friends and loved ones to ask how they are truly doing. Keep in touch with those you know might be struggling. Know that people care about you, people love you and there are always people to talk to. The National Suicide Prevention Hotline can be reached 24/7 at 1-800-273-8255.

Key Findings from Mental Health America (MHA) SUICIDAL IDEATION AMONG ADULTS IS INCREASING

EVEN BEFORE COVID-19,

19% 1.5M

of adults experienced a mental illness,

people over last year’s dataset.

.15% 24%

or 460,000 people from last year.

of adults with a mental illness report an unmet need for treatment. This number has not declined since 2011.

Mandala Masters the Market Rocco Mandala

Vice Chairman, Capital Markets, Debt & Structured Finance, CBRE

Starting Points

Mandala’s performance record at CBRE is simply stellar with over $10 billion in deals completed during his tenure. His success in managing originations has earned him over a dozen Top 10 Percent Producer, and 10 CBRE Colbert Coldwell Circle (Top 100 Producer in the Americas) accolades and a ranking in the Top 25 (1%) nationally for all disciplines including sales and debt. “Relationships are the key to success in the industry, and they take time to develop. My approach has always been to earn my way into a relationship,” he says. “I very much enjoy the mortgage banking process that affords the opportunity of developing close relationships with owners, lenders and equity providers as well as third-party professionals that support the underwriting.”

Background

n the U.S. in 2019, $2.3 trillion flowed through the capital markets to business entities in search of funding, according to the Securities Industry and Financial Markets Association (SIFMA). CBRE’s Capital Markets Division, “the #1 ranked brokerage firm globally,” according to the company’s website, participated in 6,535 transactions, across $98 billion in U.S sales volume and $50.1 billion in U.S. financing volume in 2019. A 25-year veteran of the firm, Rocco Mandala, vice chairman, Capital Markets, Debt & Structured Finance (DSF), has contributed immensely to the growth and success of DSF production nationally. “We hold a 16.9% share of U.S. capital market deal flow,” he says. “Our Phoenix team specialty is financing for all incomeproducing properties including multifamily, industrial, office, retail, etc. CBRE multifamily research indicates that Phoenix ranked sixth for 2020 investment with an impressive $6.4 billion in deals.”

While attending Arizona State University, Mandala scripted out a plan for his future. “As my family background was extremely modest with parents that did not go to high school, I wanted to be economically successful and able to financially take care of myself in the future,” he says. “With this desire in mind, I majored in finance. I also quickly realized that financial success was frequently achieved by those who invested in real estate, hence I wanted to combine those two focus areas.” After graduation, Mandala landed an early opportunity at Great Western Bank, where he learned the nuts and bolts of credit. Next up, a stint at H.S. Pickrell Company, and his foray into commercial real estate financing. “Pickrell served as a correspondent to many life-insurance companies and pension funds that made permanent loans on income-producing properties,” he says. “I soon got to study a variety of other sources of debt capital for CRE, and my mortgage banking career accelerated.” Subsequent to his time at Pickrell, Mandala assumed ever-increasing roles of responsibility at Boston Mortgage Company and Mellon Financial Services before landing at CBRE. “My focus has always, and continues to be, providing quality helpful work to a client. If we happen to win the assignment, it is considered icing on the cake,” he says. “Developing the skills to balance the needs of the parties involved, in order

to bring a deal together, is fun and rewarding. These relationships build over time and are extremely important for continued success.”

Multifamily

By now, it should come as no surprise that CBRE also leads its peers in multifamily. “The #1 ranked apartment brokerage firm globally and in the U.S. with U.S. sales and financing volume of $33.3 billion and $30.4 billion respectively,” according to the company’s website. “As in the industrial space, multifamily has performed extremely well given the abundance of equity and debt capital for these property types,” he says. “Lower capitalization rates on these property types should continue given strong demand and historically low interest rates and cost of capital.”

Phoenix Multifamily

The Valley’s multifamily environment remains one of the nation’s brightest stars with a surging population influx into the state, an affordability index outcompeting neighboring metros and dynamic economic growth. “Phoenix continues to benefit from population growth (1.83% average annual growth from 2018-2020), which is contributing to ongoing rent growth and value appreciation,” he says. “Quarter Four vacancy was less than 4%, as rent growth has averaged 5.3% annually over the last three years. Robust growth keeps demand high, as the Phoenix metro population rose to 4.6 million in 2020 and will remain one of the top U.S. growth markets.” From a peer metro perspective, Greater Phoenix is positioned perfectly to outperform in 2021. “The CBRE research team considers Phoenix the second-best market for investment in 2021, behind the Inland Empire (California), and ahead of Atlanta (3rd) and Indianapolis (4th),” he says. “Even as apartment rents continue to increase, as growth is expected to average more than 4.6% annually over the next three years, Phoenix remains an affordable place to live. Our average contract rent ranges between 19.8% to 23.8% of the area’s average household income, depending on the submarket, with an average of 20.3%.”

CBRE Team

Surrounded by a talented roster of CRE professionals (Anthony Valenzuela, Dominique Damerell, Joshua Manelis),

“Our team dynamic is outstanding. Each member of the team is important and contributes meaningfully to our success.ˮ —Rocco Mandala

Anthony Valenzuela, Dominique Damerell, Rocco Mandala, Joshua Manelis

Mandala believes 2021 will be another expansionary year for the brand. “Our team plan is to continue to grow with a focus on long-term success through originating debt and equity financing opportunities,” he says. Long-term success starts with a team that successfully collaborates. “Our team dynamic is outstanding. Each member of the team is important and contributes meaningfully to our success,” he says. “I am fortunate to have a team that works extremely well together.” The mission for Mandala is always the same: Take care of the client above all else. “I’d say a big part of his success is the work he puts in, but also that he’s fair,” says Damerell. “He goes about things the right way, which makes his clients trust him.”

Community

As with so many of the Valley’s elite CRE professionals, Mandala takes pride in giving back to the community and improving the lives of its residents. His work at New Pathways for Youth, a non-profit dedicated to mentoring and improving the lives of over 400 youth, demonstrates this commitment. “Rocco’s charity efforts really speak a lot to his character and world view,” says Manelis. “Working to make a difference is an important part of my life,” Mandala says.

COVID-19

Navigating the pandemic has brought its share of challenges and opportunities for Mandala and team. Workflows are different, technology is front and center, but the goal remains the same: client satisfaction. “COVID-19 has brought our team closer together,” says Valenzuela. “We are in constant communication, whether it be online or via Zoom and conference calls.” Mandala adds, “I believe that our COVID-19 experience may have opened up new ways to live and work that are positive in supporting continued success and growth while enhancing our lives.”

Future

With 2019 and 2020, the team’s best years on record, Mandala expects a similar trajectory for 2021. “My best prediction is that my team will continue to work hard and remain focused on increasing performance for clients, to provide the best financing available that meets their objectives.” © MPmedia, LLC 2021

“Relationships are the key to success in the industry, and they take time to develop. My approach has always been to earn my way into a relationship.ˮ —Rocco Mandala 9

REAL ESTATE INVESTMENT SALES • FINANCING • RESEARCH • ADVISORY SERVICES

THE BEST OF THE BEST CONGRATULATIONS TO OUR TOP ARIZONA INVESTMENT PROFESSIONALS OF 2020 Marcus & Millichap’s Best of the Best represents the highest level of investment professionals in the industry. To be in this elite group of professionals means that these individuals truly epitomize the firm’s 50-year commitment to unparalleled expertise gained though investment specialization, a culture of information-sharing and innovations in technology, research, and most importantly, client services. The success of our clients is celebrated by honoring our best of 2020.

MARK RUBLE

STEVE GEBING

CLIFF DAVID

PAUL BAY

PETER KATZ

Executive Managing Director

Vice President

Executive Managing Director

CHRIS LIND

JAMIE MEDRESS

HAMID PANAHI

RICH BUTLER

DARRELL MOFFITT

Senior Vice President

Executive Managing Director

First Vice President

Senior Vice President

TO ACCESS THE REAL ESTATE INVESTMENT MARKET, CONTACT THE MARKET LEADER. RYAN SARBINOFF Vice President/Regional Manager, Arizona 602.687.6700 Ryan.Sarbinoff@marcusmillichap.com

2398 EAST CAMELBACK ROAD, SUITE 300 • PHOENIX, AZ 85016 • MARCUSMILLICHAP.COM

ARIZONA DEBT & STRUCTURED FINANCE ROCCO MANDALA

2016 - 2020:

$3.82 Billion Total Volume

2020:

• $1.015 Billion total volume • 37 Deals • 11 Lenders - Agency, Debt Fund, Life Co., & Bank

CORTLAND BILTMORE

METRO 101

$64,350,000

$48,300,000

253 Units

259 Units

Built 2020 | Agency - Near Stabilized Execution

Built 2020 | Debt Fund - Bridge Tempe, AZ

Phoenix, AZ

ROCCO MANDALA Vice Chairman rocco.mandala@cbre.com +1 602 735 1775

www.cbre.us

THE ADDISON APARTMENTS

REGENTS AT SCOTTSDALE

$9,800,000

$36,500,000

68 Units

320 Units

Built 1969 | Agency - Conventional

Built 1997 | Life Company

Phoenix, AZ

Scottsdale, AZ

ANTHONY VALENZUELA Vice President anthony.valenzuela@cbre.com +1 602 735 5663

DOMINIQUE DAMERELL Vice President dominique.damerell@cbre.com +1 602 735 1792

JOSHUA MANELIS Sr. Production Analyst joshua.manelis@cbre.com +1 602 735 5356

CRE LAW Q&A

Nick Wood Partner, Snell & Wilmer

CEM: How did you get into law?

NW: I was born and raised in Milwaukee, Wisconsin. I attended University of Wisconsin, Milwaukee, for my undergraduate degree, Marquette University Law School for my Juris Doctor degree, then DePaul University Law School in Chicago for Taxation and Master of Laws. I moved to the Valley in 1985 because I could see this was a growing community, and I wanted to be part of that growth. I joined what was then Beus, Gilbert, Wake and Morrill and was there for eight years. While there, I worked with two very gifted zoning lawyers, Paul Gilbert and John Berry. In 1993, Snell & Wilmer made me an offer I couldn’t refuse, and I’ve been here ever since.

CEM: Why did you choose zoning as your specialty?

NW: My undergraduate degree was in chemistry. I was going to become a doctor. I’d been accepted to medical school and decided my senior year of college that I didn’t want to become a physician. Instead, I became a Realtor after graduation from 1973 to 1979. For the first year, I worked in residential real estate and then moved to commercial. My lawyer, Marty Greenberg, who was the preeminent real estate lawyer in Milwaukee, had been trying to convince me to go to law school for a number of years. I asked, “Why, Marty? Do you want me to learn how to kill my own deals?” He said, “No, you’d make an exceptional lawyer.” I am still trying to live up to his prediction.

CEM: What are the impacts of COVID-19 on your practice?

NW: There are a number of changes with the way COVID-19 has affected zoning. Zoning has always been a face-to-face practice, whether it’s meeting with city staff members, surrounding neighbors, planning commissioners, mayors and councilmembers. This process has now been transformed into a virtual world. Sadly, we have in a way lost the personal connection. Prior to the pandemic, we had systems in place that had efficiencies built into them. When you’re working in an office, you can walk down the hall and collaborate with someone instantly. When you’re working virtually, it just takes more time. Meetings and hearings that are virtual especially take more time. But through these challenging times, we have to adapt and keep going.

CEM: What skills are essential to your practice in CRE law? NW: Managing emotions. The first casualty of emotion is reason. Being a zoning attorney, you have to maintain a level of calm. In addition to managing emotions, another important skill is respect. Treating people with respect and dignity should be part of everyone’s approach. That means respecting them as people and their opinions, © MPmedia, LLC 2021

even if they are opposing your project or are emotionally distraught because of the fears they have over how they believe that a project is going to affect them. This is not just a guiding principal in my practice, but for my life as well. Too often, people get away from that, especially in this day and age.

CEM: Looking ahead to 2021, what are your predictions for commercial real estate in Arizona? NW: When I moved here in 1985, there were 1.7 million people in the entire Phoenix metropolitan area. Now, we’re in excess of 5 million. The city of Phoenix has 1.7 million people just in the city alone. Over the past couple of years, we’ve seen a tremendous in-migration of people from California, Oregon, Washington, Minnesota, Chicago and New York. There’s so much civil unrest, high taxes and challenges living in those areas that we’re seeing a tidal wave of people moving here. I talk on a regular

“I have never been busier in my career than I am now. It’s been very humbling and gratifying for me, and I think the best is still ahead of us.”

—Nick Wood

basis with both residential and commercial brokers, and the capital markets, just to get a sense from them of what they’re seeing and experiencing. They’re all saying the same thing: The metropolitan area of Phoenix is a safe harbor. We have great job growth and a diversified economy. With the influx of more people from all over the country, the demand for residential as well as job growth makes the present and the future very exciting. I have never been busier in my career than I am now. Even back in 2006, nothing compares with the volume of work that I’m seeing today. If you look at Downtown Phoenix, I’ve done 45 projects in the downtown area alone. It’s really been very humbling and gratifying for me, and there’s much more to come.

CRE LAW Q&A

Jim Director Fennemore Craig

Bond © MPmedia, LLC 2021

CEM: How did you get into law?

JB: I’m originally from a small town in Northern Michigan. I went to college to become a golf professional to teach the game and run a golf facility. During college, I took a course on business law and quickly realized that I wanted to pursue becoming an attorney. I went to law school in San Diego and moved to Arizona shortly after graduating. I have been at Fennemore my entire legal career and am now the chair of the Real Estate Practice Group.

CEM: Why did you choose real estate law as your specialty?

JB: I wanted to practice in an area that was a major part of the economy and that would help shape the direction of our state. Real estate checked both of those boxes. It’s an area where I can be involved with topics that are in our everyday headlines and where I can interact with some of the most successful and innovative people in the industry.

CEM: What are the impacts of COVID-19 on your practice?

CEM: How has technology made your practice more successful?

JB: Technology allows me to provide better service to my clients more quickly than ever before. In real estate, time kills deals. As a result, it is critical to provide my clients with the documents and advice they need quickly to keep real estate deals moving forward. Technology allows me to respond to my client no matter where I am and no matter the time of day.

CEM: What skills are essential to your practice in CRE law?

JB: Drive and work ethic are critical, especially considering

“Being a real estate attorney in Arizona is a dream come true. In one of the fastest-growing states, this is an area of the law that puts you out in front in helping to drive the direction and shape of Arizona.”

JB: As a transactional attorney, I’m very fortunate that my practice allows me to work from anywhere as long as I have a laptop and Wi-Fi. My practice was not interrupted nearly to the extent as others in the legal industry, particularly litigators who are required to go to court on a regular basis. As it relates to real estate, the pandemic certainly created a slowdown with deal flow in the early months as my clients worked to understand how the pandemic would affect their industries and specific businesses. However, as time has passed, my practice has actually become busier than ever as demand has spiked in certain sectors of the real estate market (e.g., industrial use and residential development).

CEM: Aside from the pandemic, what are the biggest challenges in real estate law and how do you overcome them?

JB: Technological advances in the legal industry are creating additional competition for our services. There is an abundance of information available online about preparing real estate contract documents and the local real estate market. In addition, virtual law firms more easily allow lawyers living in other states to work on real estate deals in Arizona. As a result, it is critical to offer my clients something that they cannot easily get with technology – creative problem solving that is project specific, detailed insight about the local real estate market that cannot be found online and access to the individuals who are the © MPmedia, LLC 2021

major players in our real estate market through personal connections.

—Jim Bond

how much demand there is to prepare documents and respond to clients as quickly as needed in the current real estate market. Having a love for doing real estate deals and meeting the industry leaders is also important, as these traits make the long hours worthwhile and help you to stand out from the competition.

CEM: Looking ahead to 2021, what are your predictions for commercial real estate in Arizona? JB: The year 2021 has started at a blistering pace. Demand for various sectors within Arizona real estate has continued to rise and shows no signs of slowing down for the time being. As a result, the number of transactions should continue to rise or at least remain steady, especially as the economy begins to improve. Unfortunately, there will also be an increase in loan defaults, foreclosures and evictions as lenders and landlords start to work through some of the problems that were created by the pandemic.

CRE LAW Q&A

Nicole Marucci Vice President & Underwriting Counsel Kensington Vanguard National Title

CEM: How did you get into law?

NM: I was born and raised here in Arizona and couldn’t be happier to be back. I attended the University of Arizona for my undergraduate studies in mathematics and chemistry then went on to law school at Michigan State University College of Law, where I graduated in 2013. Immediately out of law school, I was hired into the title business in the Washington, D.C., area. I have worked in title ever since then and absolutely love it. I worked in Virginia until I moved back to Arizona in 2019 and have continued to work in title here in the Phoenix Metro area. I am a licensed attorney in Arizona and Virginia and enjoy using that expertise to advise our clients on any issues that arise throughout their transactions.

CEM: What’s your expertise and how you assist CRE clients?

NM: My expertise is in the legal ramifications and risk assessment associated with title and escrow issues. As an attorney for a title company, I regularly advise our clients on the terms of the contract and options they have when they run into an issue. I also advise on the applicability and ability to resolve title issues that arise in our commitments for specific transactions.

NM: Some of the biggest challenges I have seen tend to center on complex title issues and disputes related to escrow. Some of the title issues I have seen most recently are about estate and trust cases, while most of the escrow issues are about disputes over earnest funds and the expiration of specific deadlines. The clarity of the contract is paramount in avoiding these issues. Making sure there is no contradictory information will help avoid these disputes further down the road.

“I love digging into the problems to find all the details and then working to create as many options as we can for the client. Then, I walk them through those options so they can make an informed decision on how to move forward.”

CEM: Why did you choose real estate law as your specialty?

NM: I had no idea attorneys were even involved in the title process until I interviewed for a non-attorney position at my first company. My former boss saw I was graduating law school and invited me to be a part of a training program they were starting to train newly licensed attorneys in the title business. That is where I started, and I immediately fell in love with real estate law and assisting our clients through the process of buying and selling real estate. I particularly like working through the problems and educating our clients through the transaction process.

CEM: What are the impacts of COVID-19 on your practice?

NM: COVID-19 has had an interesting impact on the real estate sector. While all of our work is still continuing, there has been a shift in areas that are getting the most attention. Office transactions have slowed while industrial and health care property transactions have significantly increased. Multifamily and land have stayed strong as well. We are also continuing to see residential and new construction homes fly off the market as a result of the incredibly low interest rates. © MPmedia, LLC 2021

CEM: Aside from the pandemic, what are the biggest challenges in real estate law and how do you overcome them?

– Nicole Marucci

CEM: What skills are essential to your practice in CRE law?

NM: The most essential skills to CRE law are problem-solving and communication-based skills. I love digging into the problems to find all the details and then working to create as many options as we can for the client. Then, I walk them through those options so they can make an informed decision on how to move forward.

CEM: Looking ahead to 2021, what are your predictions for commercial real estate in Arizona? NM: Looking at 2021, I think we are going to see a major increase in activity in commercial real estate. We have already seen many companies relocate their headquarters and business operations centers to various parts of the Valley, and I think we will continue to see that happen. I think that Arizona has positioned itself well to accept all of the incoming businesses and their employees and that we will continue to see expansion and growth throughout all parts of the Valley.

HEALTHCARE UPDATE

Alexandra Loye Philip Wurth

For healthcare commercial real estate experts Alexandra Loye, senior vice president, and Philip Wurth, executive vice president, there is always an urgency and immediacy to deliver actionable market intelligence and best-in-class, value-add services for their clients. “The Wurth-Loye Healthcare Real Estate Team at Colliers offers clients a holistic approach to healthcare asset management with offerings including acquisition, leasing services, tenant representation, disposition services and property management thorough Colliers Real Estate Management Services (REMS),” says Loye. STARTING POINTS

With a combined 28 years of CRE experience and over 1,400 transactions, these two Arizona State University graduates are among the most knowledgeable and distinguished healthcare experts in the region. “I began my career at Logan Commercial in 2003,” says Wurth. “At the time, medical office condos were really taking off, and I focused 100% on that product. Fast forward 18 years and I have been fortunate to represent all types of healthcare properties and practices.” For Loye, her

journey began as an intern at Cushman & Wakefield, while pursuing a Bachelor of Science in Business, Real Estate. “When the market crashed as I graduated in May 2008, I was devastated, but remained determined to follow my dreams of being a broker,” she says. After developmental roles at Grubb & Ellis and NAI Horizon, Loye landed a principal position at Avison Young. “I have been blessed to have good mentors along the way, including my long-term partner Julie Johnson (Avison Young and Colliers), and cannot

believe this is my 11th year in brokerage.”

HEALTHCARE

Demographic and financial trends indicate that demand for healthcare services will continue to accelerate over the coming years. “Healthcare is already 17.7% of our national GDP and will only grow as the silver tsunami of baby boomers continue to age,” Loye says. For the Grand Canyon market, these trends are amplified by a population surge into the state. “We are fortunate that we are experiencing huge inward

migration, with over 125,000 people of all ages moving to Arizona from July 2019 to July 2020, but particularly people over 65 who require 2.5 times the amount of healthcare.” This booming demand translates into a vibrant healthcare CRE sector for the Valley. “As the population in Arizona continues to increase significantly every year, healthcare providers must expand to service the growing market,” Wurth says. “There is a lack of high-quality functional medical space, and we are focused on site selection © MPmedia, LLC 2021

in order to build facilities that will meet this need. We currently have new developments underway in East Mesa, Goodyear, Buckeye, Surprise and Deer Valley, as well as construction completed on projects in 2020 in Avondale, Surprise and Gilbert.”

COVID-19

Prior to the pandemic, the American Medical Association estimated that 11% of patients used telehealth services in 2019. In 2020, that figure jumped to 46%. Additionally, telemedicine accounted for approx© MPmedia, LLC 2021

imately $3 billion in spend pre-COVID, but now could reach $250 billion annually. The shift in delivery from in-person to virtual also builds on a repositioning of care from inpatient to outpatient. “COVID-19 has caused healthcare systems and organizations to rapidly adopt digital healthcare solutions – remote consultations, remote monitoring and access to patient records,” he says. “More than ever, people prefer to receive their healthcare services outside of the hospital setting,” Loye says.

VALLEY MEDICAL

The region’s robust healthcare CRE environment fuels optimism for Loye and Wurth as 2021 unfolds. “I am very bullish on the market, with a declining vacancy factor here in the Phoenix MSA of 13.2% for the fourth quarter of 2020,” she says. “A great deal of the activity is coming from institutional groups with well-capitalized investors looking to take advantage of the stability and growth that healthcare offers,” he says. “These groups are coming from outside Arizona and pushing to grab market

share in the growing suburbs, as well as heavily populated infill locations.”

FUTURE

The healthcare landscape changed dramatically in 2020, and stakeholders across the value chain will continue to experience disruption. For Loye and Wurth, that means opportunity. “Overall, the outlook for future growth in healthcare CRE is positive,” he says. "We are very excited about this year and look forward to helping our clients achieve success,” she says.

BROKER TEAM OF THE MONTH Jerry Roberts and Pat Boyle While 25 years separate the beginning of their respective careers in commercial real estate, Jerry Roberts and Pat Boyle have formed an enduring partnership, which is a pillar of their success at Cushman & Wakefield. “I started in the business at CBRE in 1986, and Pat joined the company in 2011,” Roberts says. “I have six older brothers and am the proud father of three adult daughters. In the beginning, Pat was like the son I never had, but as he matured in the business and his hair got grayer, he became the younger brother I never had. We think alike and work very well together.” In 2013, they combined forces and are recognized as one of the premier office leasing teams in the Valley. “It was a tremendous opportunity to collaborate with Jerry, as it gave me a front row seat in working with one of the best leasing brokers in the market,” Boyle says. “I was truly fortunate to partner with someone who genuinely took the time to mentor me and teach me the leasing business.”

Location Courtesy of Andaz Scottsdale

STARTING POINTS

In 2017, Roberts, executive managing director, and Boyle, managing director, decided to pursue a new course. “Our team at CBRE consisted of 12 professionals. When we made the move, we opted to go leaner and operate as a fourperson unit,” Roberts says. “We ended up bringing Pat’s sister, Kaleigh (Boyle) Haenel, over with us from CBRE, and hired my daughter, Erin (Roberts) York, from property management at CBRE. The four-person dynamic could not be better. We are efficient and effective in producing superior results.”

OFFICE LEASING 2020

Without question, the office market has taken a hit during the pandemic, but for Roberts and Boyle, their leasing specialization helped them weather the storm. “Activity has absolutely been dampened in the office market. However, we do a good volume of transactions each year and leases expire every month, so we have focused, along with our clients, on tenant retention,” Roberts says. “Though deal volume was much lower in 2020 than in previous years, we did not see a huge dip in rental rates, which is encouraging,” Boyle says. “When the pandemic hit in March of 2020, leasing activity initially came to a screeching halt. As the year continued, we did see activity pick up, and we were fortunate to have transacted small- and mid-sized deals in the third and fourth quarters.”

OFFICE LEASING 2021

As the vaccine rollout accelerates, and more companies bring their workforces back into physical locations, the duo are confident of a more robust office leasing environment in 2021. “We have seen activity pick up since the start of the year. We are already seeing corporate users back in the market with larger requirements,” Boyle says. “In addition, we have seen preliminary interest from tenant rep brokers and users pick up in January, which we think will set us up for a very busy second half of 2021 and beyond.”

CLIENT MINDSET

COVID-19 has transformed how individuals work, how teams collaborate and what the thinking is regarding a five-day, in-the-office work culture. Business leaders are assessing the landscape and the economics of their

physical footprints. “I think landlords today are willing looking to lease space with a little more creativity and rent concessions but will maintain lease rates that ultimately create and maintain their building values,” Roberts says. “We know we will continue to see companies evolve the way they build out their office space, which will include more space per employee and a greater emphasis on health and wellness,” Boyle says.

CHANDLER VIRIDIAN

As 2020 closed, Roberts and Boyle successfully completed a lease transaction between Hines, the owner of The Offices at Chandler Viridian, and new tenant, Mobivity. The Class A, six-story structure boasts 250,000 square feet of space, and Hines tapped the Cushman & Wakefield pair to represent them on a unique project. “Hines, based on our recommendation, implemented a program of building spec suites, or © MPmedia, LLC 2021

finishes that tenants would expect in a project developed by Hines,” says Boyle. Mobivity entered into an agreement to occupy one of the units, measuring 8,900 square feet. “We have now leased two of the four units prior to completion of construction, and it has been a great success,” says Boyle. “Spec suites across the Valley have proven to be one of the success stories of attracting users to make a commitment and sign leases,” says Roberts.

COLLABORATION

Now in their eighth year working together, Roberts and Boyle continue to evolve in their approach to assisting clients and adding value. “I have been leasing office space for over 30 years and learn something new every day. Our plan is to provide ongoing, best in class service to our clients,” Roberts says. “As I am now coming up on 10 years in the industry, I provide a nice compliment to Jerry’s skillset, as I have worked to build relationships with the next generation of brokers and landlords in our market,” Boyle says.

CAREER

Erin (Roberts) York, Jerry Roberts, Pat Boyle, Kaleigh (Boyle) Haenel Location Courtesy of Andaz Scottsdale

Both Roberts and Boyle share a passion for the CRE business and are grateful to be involved in a profession with so much energy. “I truly think I am lucky to have found a career that I am excited about. I really do love what we do and am hopeful to continue working hard in this industry for many years to come,” says Boyle. “I just want to say I am thankful to be so blessed to have found a career that matches my personality and personal skillset so well,” Roberts says. “I cannot wait to get to work every morning and usually get in by 6:30 a.m. with a desire to tackle the day ahead.”

FUTURE pre-built spaces, ranging from 4,000 to 10,000 rentable square feet,” Roberts says. “As 2020 continued and deals were delayed, we were seeing more companies run out of time to wait for tenant improvements, which caused an increased demand for move-in-ready space,” Boyle says. “We are fortunate to work with Hines, who understood the significance of this, as well as our design and construction partners at the project.” Mobivity, a technology firm © MPmedia, LLC 2021

utilizing a data platform to deepen retailer and customer engagement, desired a high-end, fully furnished and turnkey space. “Mobivity did not want to deal with the issues that come up when building a new space, including timing of occupancy, concern of cost overruns on the build-out and the amount of time needed to design plans from scratch,” Roberts says. “We built out four spec suites, each featuring creative design and best-in-class

As the office leasing market heals in 2021, the successful partnership rolls ahead with optimism. “With the vaccine, most landlords are hopeful that the office market and tenant occupancy will bounce back in the near future,” Roberts says. “We will continue to work with existing and new clients to provide creative solutions to marketing and leasing office space. offerings that we can. With 2020 now behind us, we are all anticipating more success in the coming years.” Boyle says.

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We don’t just see another healthcare client. We see the value of partnership. At Colliers, we believe in partnering with our clients. Alexandra Loye and Philip Wurth provide the kind of partnership that produces innovative and comprehensive solutions for our healthcare clients throughout Arizona. Alexandra’s expertise in owner-user, investment sales and life sciences coupled with Philip’s 20 years of experience in both landlord and tenant representation for leasing and sales as well as site selection for new development provide a deep understanding of the healthcare space and the challenges being faced by both healthcare providers and the owners of healthcare real estate. it’s more than just helping clients find the right opportunity and execute on a strategy. They help them see what could be. Learn more by visiting colliers.com/WurthLoyeHealthcareRealEstateTeam

Thank you!

To all our clients, colleagues, and friends that have made 2020 a year for the record books!

Tony Marc Riley Lydon Hertzberg Gilbert John Lindsay Lydon

Davidson

jll.com

$1Bil

Transactional value

1,265

Acres

11MM SF

the

Starting Points

Evolution of Prologis in the Valley

“The detailed coordination of a complex operation involving many people, facilities, or supplies.” Logistics. A pioneer in the sphere of logistics real estate, corporate titan Prologis continues to transform the business-to-business, supply chain, distribution and fulfillment infrastructure across a global platform of nearly 1 billion square feet of industrial space in 19 countries. “In Quarter 3 and 4 of 2020, we experienced massive growth. As 2021 kicks off, the Prologis Phoenix portfolio stands at 11 million square feet,” says Jeff Foster, vice president-market officer. “We are excited to continue that growth by continuing to focus on customer-centricity and growing our footprint in strategic locations across the Phoenix metro.”

The Prologis Effect on global logistics markets cannot be overstated: $2.2 trillion in value cycling through their properties, representing 2.5% of global GDP. “We believe that 400 million square feet or more of total additional U.S. logistics real estate demand will be created in the next two to three years, as companies adjust to higher e-commerce volumes and higher inventory levels,” says Foster.

Background

The Prologis of 2021 can trace its roots back to the 1983 formation of AMB Property Corporation, the Security Capital Industrial Trust (SCI) in 1991 (the name changed to Prologis in 1998) and their eventual merger in 2011. “I joined Prologis in 2005 as a market representative, overseeing marketing and leasing of a 20-million-square-foot portfolio in L.A. and Orange County. In 2008, I was promoted to the position of market officer of Phoenix, tasked with growing a

2005

Jeff Foster joins Prologis as a market representative, overseeing the marketing and leasing of a 20 MSF portfolio in L.A. and Orange County.

2008

The Financial Crisis hits the Phoenix market. Foster is promoted to the position of market officer of Phoenix, tasked with growing a 3.5 MSF portfolio.

3.5-million-square-foot portfolio at a time when the 2008 Financial Crisis hit the Phoenix market hard.”

Jeff Foster, Vice President and Market Officer, Prologis. Location Courtesy of Andaz Scottsdale.

Phoenix

Transitioning to a new commercial real estate market is challenging enough, but throw on top the Great Recession, and Foster knew there was a tough climb ahead for his team. “The financial crisis hit the Phoenix market hard,” he says. “It was not until 2012 when Fritz Wyler, investment officer, and I moved from purely a management mindset of the Valley and Las Vegas metros to a growth posture.” In the eight-year subsequent stretch, the Prologis brand swelled by 7.5 million square feet with a flurry of acquisitions, build-to-suit and development opportunities. “The year 2020 was by far our biggest with nearly 5 million square feet of purchases through Industrial Property Trust and Liberty Property Trust,” he says. “As the region’s population

2011

AMB Property Corporation® and ProLogis close merger.

2018 2012

A thriving Prologis team in Phoenix drives continued growth as the market begins to recover from a global financial crisis. Investment Officer Fritz Wyler and Jeff Foster oversee Phoenix and Las Vegas markets between 2011 and 2017.

Prologis moves its office space to 2525 E Camelback Rd.

The new more modern office is equipped with golf simulator and lounge setting in the lobby where our employees, brokers, and customers enjoy socializing

continues to grow, we anticipate even greater demand for industrial real estate from a variety of industries.”

Jeff Foster, John Coughlin, Trina Thompson, Chris Repass and Megan Creecy-Herman on Impact Day 2019 participating in community service for Habitat for Humanity.

Pandemic

In the span of one year, COVID-19 disrupted and transformed the world economy in unprecedented ways. Communication technology and e-commerce solutions flourished, along with manufacturing, transportation and distribution. With an already-robust logistics ecosystem in place, Prologis went to work on developing strategic synergies and a seamless integration architecture in order to add more value for clients. “The pandemic put a spotlight on the need for resiliency in the supply chains and higher inventory levels,” he says. “As companies adjust to higher e-commerce volumes and higher inventory levels, Prologis has the unique opportunity to respond to our customers’ needs as they evolve in the wake of rapidly changing consumer behavior.” In addition to the adaptability of the Prologis logistics platform, services and capabilities, Foster and his

team worked tirelessly to ensure that their focus on long-term relationships with their clients remained priority one. “COVID-19 has made us more creative in our interactions. In the beginning, I did not know how we were going to keep the same momentum and communication with colleagues, customers, brokers and partners,” he says. “But it was surprising to see how

quickly Prologis adjusted as a company. We had already been integrating digital technologies prior the pandemic, which made it easier and quicker to move to digital collaboration and communication platforms.”

Logistic Real Estate The company’s fourth quarter earnings call highlighted financial and operational successes, which

positions it as the global leader in logistics real estate with a focus on high-barrier, high-growth markets. It has funds from Operations (FFO) increasing yearover-year, average occupancy 95.8% and a sterling balance sheet with a 20% debt-to-total market-capitalization ratio. The company’s 2021 projections are impressive, too: $1 billion in free cash flow, and FFO

2018 – Present

Significant activity by Prologis in Phoenix market:

Prologis I-17 Logistics Center 2

• Prologis completes an all-stock acquisition of DCT Industrial Trust. • Acquisition of 1.1 million SF Westside Business Park in Tolleson at the 86th Avenue and Buckeye Road. • Acquisition of a 150-acre parcel at intersection of Bullard and Yuma. • Development of 100% leased, 330K SF site at 61st Avenue and Van Buren. • Acquisition of a 50-acre parcel in the Central Airport submarket at 7th Street and the I-17 freeway. In mid-2019, the company completed 550K SF of development comprising of 4 buildings. © MPmedia, LLC 2021

Prologis I-17 Logistics Center 1

year-over-year expansion of 10%. These numbers convey a dynamic business flourishing in a booming CRE space. “Net absorption and utilization rates are gaining momentum, and demand is surging,” he says. “Rebounding activity and a falling supply pipeline could lead to a critical shortage of space in early 2021. Contraction in the development pipeline means that available options for customers looking to expand could narrow quickly, particularly in locations with high barriers to new supply.”

Team

With nearly 20 years in the business, Foster understands that the quality of a team’s members is vital to grow the business, capture market share and build and sustain long-term relationships with clients. “We recently hired two exceptional talents: our first ever leasing manager, Alicia Hardwick, and investment officer, Brian Dietz,” he says. “We have a great team here, and I am truly blessed to be surrounded by professionals at every level. Our new members have integrated into the culture and

business operations well, adding value by increasing our momentum in helping to solve customer challenges and identify new business growth opportunities.” With new additions also come departures, as is the case with Wyler who now serves as managing director, East region, capital deployment, Prologis. And Megan Creecy-Herman, an invaluable contributor to the Phoenix team, now serves as head of operations for Prologis in the West region. “Fritz and Megan catapulted our success in Phoenix, and

I look forward to continuing that growth,” Foster says.

Future

With industrial demand accelerating, Foster and team look to seize on opportunities in the coming year. “Our customers are demanding larger properties to accommodate the new demand. This is also creating a land supply shortage and we are looking for new investment acquisitions,” he says. “We also plan to put into production our existing land holdings to respond to the increased industrial appetite.”

2020

• Prologis completes an acquisition of the wholly owned real estate assets of Industrial Property Trust, adding roughly 900K SF to the Prologis Phoenix portfolio. • Prologis completes an all-stock acquisition of Liberty Property Trust, adding roughly 4 MSF to the Prologis Phoenix portfolio. © MPmedia, LLC 2021

2021

The Prologis Phoenix portfolio stands at 11 MSF (and growing).

• First ever Phoenix office Leasing Manager Alicia Hardwick is hired.

• Brian Dietz joins Prologis Phoenix as the new Investment Officer.

BROWNFIELDS CAN BE GREAT INVESTMENTS Brownfields are increasingly a hot topic for developers and investors, and they can be excellent opportunities. SCS Engineers, an environmental consulting firm with 40 years of experience in Arizona, offers a few tips when considering a brownfield site. One of SCS’ most visible brownfield projects is the Arizona Diamondbacks’ Chase Field in downtown Phoenix. The site was originally an industrial area that included warehouse, transportation and vehicle maintenance facilities. SCS investigated and cleaned up under a very compressed schedule, but everyone enjoyed opening day in 1998, right on schedule.

Can you put any use on brownfields? What about residential? It is possible to develop a brownfield for any kind of use, including residential. Arizona has numerous examples of developed brownfields including former landfills, railroad facilities, gas stations, crop-dusting strips, automobile test facilities and many more. The feasibility and cost will depend on the environmental issues specific to each site. Cleanup standards will be stricter for residential uses, and in some cases, it may not be cost-effective to achieve those standards. Each site needs to be evaluated to determine what uses are feasible. How do you evaluate a brownfield site? Brownfields are normally evaluated by

Brad Johnston is a vice president with SCS Engineers’ Tempe office.

your team who understands real estate transactions and financing, legal and regulatory aspects, and the local market.

first performing a Phase I Environmental Site Assessment (ESA), which is basically a study of existing site information. If potential issues (known as Recognized Environmental Conditions) are identified by the Phase I ESA, then a Phase II study is performed, including collection and analysis of samples to confirm the issue and to estimate the extent of contamination. The American Society for Testing and Materials (ASTM) has standard protocols for these studies. However, your environmental consultant should do more than just meet these technical standards. The result of the evaluation should give you an understanding of how this information will affect your project, both now and in the future. Your consultant should be an integral part of © MPmedia, LLC 2021

If there is contamination, what do I need to do? Your first concern is how much contamination is present and what it will cost to address it, as this will obviously affect your bottom line. It’s also important to know that contamination does not always have to be cleaned up. In some cases, it can remain on the site if the risk can be managed during construction and your planned end use. Are there funding sources to help pay for brownfield site investigation and remediation? The U.S. Environmental Protection Agency and Arizona Department of Environmental Quality have grant programs that can pay for assessment and cleanup of brownfields, but these programs are only available to governmental and non-profit organizations. However, a private entity may be able to team with these eligible parties. Some state or local agencies (such as the City of Phoenix) may also have brownfield revolving funds, which offer low-interest loans to private entities. In addition to “direct” funding sources, some local governments may offer assistance with issues such as planning and permitting for brownfield sites. Federal, state and local tax incentives may also be available.

I hear insurance can help pay for cleanups as well as help protect buyers. It can. This typically involves “insurance archaeology” to try to find old insurance policies that may have coverage for “pollution conditions.” There are a number of firms, including SCS, that do this type of work, sometimes on a contingency-fee basis. What are some examples of good risk management strategies for brownfields? The most important risk management strategy is to have a thorough understanding of the environmental issues on your site, and how those issues can affect your redevelopment plans. It is critical to have environmental and legal support that is experienced in strategies for identifying, anticipating and managing risks on brownfields. Are brownfield sites good investment opportunities? Brownfields can be excellent investment opportunities if you perform thorough due diligence and understand the risks of that particular site. They are often in desirable locations within emerging areas. They should be available at below market value and may have been on the market for a long time. In some cases, the property may look worse than it actually is, or previous cleanup estimates may have been overly conservative or even incorrect.

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Issue 1, 2021

Articles inside

BROKER TEAM OF THE MONTH

Mandala Masters the Market