Issue 1, 2017 by Commercial Executive Magazine

CEM-AZ.COM â&#x20AC;¢ I S S U E 1, 2017

Commercial Executive Magazine 2920 E. Camelback Rd. #228 Phoenix, AZ 85016 CHANGE SERVICE REQUESTED

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© 2017 CBRE, Inc. This information has been obtained from sources believed reliable. We have not verified it and make no guarantee, warranty or representation about it. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs.

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AN INSPIRED OASIS IN THE HEART OF NORTH SCOTTSDALE’S VIBRANT URBAN CORE.

AN ELEVATED APPROACH TO DESERT LIVING.

Amid the dynamic city energy of North Scottsdale, the lushly landscaped community grounds at Optima Kierland convey an atmosphere of peaceful serenity. Within this restful sanctuary, the extensive onsite amenities enhance and promote a healthy lifestyle and sense of personal well-being. Enjoy the Residents’ Club’s 16,000-square-foot sports and fitness center, relax in its saunas or steam rooms, or relish in the unsurpassed views of the Arizona landscape from the Sky Deck’s heated lap pool or spa. With exclusive, state-of-the-art amenities and modern living environments, these two new condominium tower and apartment residences offer a unique approach to luxury living in Arizona. Now Selling. Sales starting in the high $300,000s. Leasing opportunities available February 2017. Call 480 630 1200 for priority sales selection and 480 630 1400 for leasing opportunities.

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EXECUTIVE PUBLISHER Mandy Purcell mandy@mpmediaaz.com EDITOR-IN-CHIEF Sarah Stecko sarah@mpmediaaz.com GRAPHIC DESIGN Crown Press, Inc. art@crownpress.com EDITORIAL April Atwood Josh Gordon Tim Randall Wayne Schutsky PHOTOGRAPHY Tony Elliot Carl Schultz Matthew Strauss

© 2017 BY MP MEDIA, LLC 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

“The older I get, the less I listen to what people say and the more I look at what they do.” – Andrew Carnegie

2017

know this time of year usually marks the 10-Year Anniversary of Commercial Executive tends to cue all the “new year, new Magazine, and I cannot tell you how humbled and blessed opportunities” clichés, so we’re actually I feel to have had the immense amount of support I’ve received from going to do something a bit different – the the CRE industry of the Valley. With starting the company at what theme of this January issue is inspired by would become the Great Recession – not to mention, with a baby an “old versus new” feel. Banner Health’s new on each arm – I know its survival would not have otherwise expansion of its old Behavioral Health Hospital been possible. So, as a way to commemorate some of the in Scottsdale relates to this pattern for its desire features we’ve done, we’ve published a collage of many to renovate its already impressive investment in industry members’ quotes from of memorable and even healthcare CRE in our community. And while you can’t funny photoshoots. Reflecting on these memories really miss its new double X-shaped building, just minutes away, shows what a tight-knit industry we have! /// Following at the Loop 101 and Indian School Road, is the colossal tradition, this is also our Waste Management 70-acre Scottsdale AutoShow project that just completed its Phoenix Open Golf Tournament issue and we’re infrastructure this month, making it the first large-scale mastershowcasing this year’s chairman and all-around planned autoplex on tribal land in the nation! Another “first” for superstar, Andy Markham, for the cover story a seasoned professional is the formation of Kroot & Associates, because of his well-rounded success and who has also just moved into optimistic attitude. That perfect mix also a historic building as its new correlates to the Perfect Partnerships home. More of the theme is woven profile we’ve featured of partners of a throughout the issue as we cover two 50-year-old law firm who joined forces father/son profiles, industry legends because of a shared set of values provide today’s sector updates, and one that continues to stick today. /// company proves it’s staying current and So, thank you for 10 great years relevant with renovation trends. and looking forward to many more decades to come!

Sarah Stecko Mandy Purcell

Editor-in-Chief

Executive Publisher

STORY

Cover

“ I am cautiously optimistic. We have sold more tickets year-todate than last year. We continue to push the envelope & we hope to break all the records.”

MARKHAM Making

His

Mark

With the level of passion for sports that Andy Markham has, it is easy to see how he rose to become the Chairman of “The Greatest Show on Grass”:

STORY

Cover

fter serving as the Assistant Tournament Chairman in 2016, Markham is ready to make his mark on the 2017 edition. “I have patterned myself after the 81 people who had done the job before me and aim to continue improving year-over-year,” he says. /// Executive Managing Director at Cushman & Wakefield, Markham is part of a talented team that has consistently been named the No. 1 Industrial Advisory Group at the firm for the past 10 years. A four-time winner of the NAIOP Arizona ”Industrial Broker of the Year,” Markham has built an impressive resume of success in his 17-year run with his teammates: Will Strong and Mike and Phil Haenel. ///

“We really have the perfect squad,” he says.

Growing up in Phoenix, Markham entered the commercial real estate sphere after suffering a baseball injury, which put an end to a promising pitching career. He had played minor league baseball for five years for the Montreal Expos (now called the Washington Nationals) and the Baltimore Orioles. /// “I blew my elbow out for the second time in 1997 and the Orioles wanted me to go to Sarasota and have ‘ Tommy John’ surgery,” he says. “Based on the recovery time and my age (24), I decided to call it quits.” /// After graduating from the University of Arizona, Markham was hired to work on the retail side for Grubb & Ellis in 1998. “I can recall after having worked there for nine months I was working late on a Tuesday night, making brochure packages, and Mike Haenel walked in my office and asked if I liked retail. I honestly told him retail might be great for a lot of people, but it was not for me,” Markham says. /// From that point on Markham’s world changed, as Haenel mentioned he was looking for a new junior professional to join his industrial team. “Since our start, I have sit eight feet away from the guy (Mike) for 17 years,”he says. “He has been an awesome role model, I have been very fortunate to watch how he patterns his business and personal life.”

EVOLUTION From his first transaction leasing a 1,500-squarefoot retail site in Apache Trail to a nail salon owner, to his first big industrial win – Markham has come a long way in his CRE career. /// “On my first retail transaction, I think I spent more in gasoline driving back and forth than I made in commissions,” he says. “From there I really grew on the industrial side and remember I made a $25,000 commission on my first sale, American Tower in 2000.” /// Through the years, Markham has experienced the vicissitudes of the industry and has endured the recessions and booms.

“You never think the good times or bad times will end,” he says. “From 2003-2008 we had a great run, and in 2010 I was ready to pack-up and become a fly-fisherman guide in Montana,” he laughs. 5 © Copyright 2017 by MP Media, LLC

STORY

Cover

“Andy was touring yogurt shops & hair salons 18 years ago, & I told him he seemed more of an industrial guy versus a retail guy… We’ve been partners &

COMMUNITY

best friends ever since.”

As for Markham’s role as Chairman for the WM Open he jokes: “I think they ran out of people to ask.” /// Since 1937, the Thunderbirds have worked to host the Phoenix Open with extraordinary benefits to the community. Last year’ s tournament hit $9.06 million and the organization has raised over $111 million total since inception. /// “I love going to the tournament. I have so much admiration for the group and for how much they have raised for charity,” he says. “This is a great group and this is such an honor.” /// With 2016’ s phenomenal attendance of 618,365, Markham is excited about the prospects for 2017. “I am cautiously optimistic. We have sold more tickets year-to-date than last year,” he says. “We continue to push the envelope and, if the weather holds, we hope to break all the records.” /// Markham’ s role as he sees it is to build on the fine work of his predecessors to create a stronger tournament each successive year. “From the Bird’ s Nest to our hospitality platforms, you can’ t become stagnant -- you must accept and adopt change,” he says.

- Mike Haenel

Executive Managing Director at Cushman & Wakefield, Markham is part of a talented team that has consistently been named the No. 1

HAENEL | MARKHAM | STRONG

Industrial Advisory Group at the firm for the past 10 years.

PHOENIX INDUSTRIAL GROUP

TEAM STATS (2015-2016 YTD)

TRANSACTIONS COMPLETED

$189M

IN TRANSACTIONS

3.1M

SQUARE FEET

32 ACRES

About Cushman & Wakefield

Key Facts & Figures

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STORY

Cover

PERSONAL LIFE After his tenure as Chairman ends following the tournament, Markham looks forward to spending more time with his family. “This is the first year that I have not been able to coach all of my kid’s sports,” he says. “I love coaching.” /// Of course, Markham will find time for fly-fishing, one of his great passions, and golf. “I learned to fly-fish from my uncle in Colorado,” he says. “It’s one of the only things I like to do by myself, as most of my other hobbies are all social. I love the quietness and peacefulness of the mountains.” /// As for the industrial sector, Markham sees tremendous opportunities ahead. “Our team is in a good spot with the addition of Will Strong and Phil Haenel,” he says. “Phoenix is really set-up for a great run.” /// Markham is also honing his craft as a member of SIOR (Society of Industrial/Office Realtors). “I like what the organization stands for and how they do business.” /// As Chairman, Markham’ s efforts for this year’ s tournament, from an expanded Bay Club area, 10 new 16th hole skyboxes and eight Bird’ s Nest headliner acts, will be on display for patrons. /// Beyond the Open, Markham wants to be remembered as a good dad, good friend and a guy who cared about his community.

“In the end, life is short, surround yourself with people you enjoy and have as much fun as you can!

“We really have the perfect squad,” he says.

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Broker of the

MONTH

Presented by Willmeng Construction

“Bill is a terrific hotel broker. He is very dedicated to helping his clients achieve their goals, but at the same time he is honest & fair about what a client should expect in the marketplace. He doesn’t take ‘no’ for an answer & frames opportunities for buyers in a way that they understand the unique proposition. And as good as a broker that Bill is, he is even a better friend.” – M ichael A. D e N icola , PRINCIPAL, EM HOSPITALITY VENTURES LLC

rriving at Hospitality Real Estate Counselors (HREC) in 2009, Bill Murney has punctuated an already stellar resume of hotel brokerage deals over a 30-plus year career including the major sales in 2016 of the Firesky Resort in Scottsdale for KHP Capital Partners, the Beverly Heritage Hotel in Milpitas, Calif. for Fillmore Capital, and the Phoenix Airport Hilton for Waramaug Hospitality. /// In his impressive career, Murney has amassed over $2 billion in hotel

transactions – with over $200 million in hotel transactions in 2016 alone. /// “I am very fortunate,” the Senior Vice President says. /// Upon graduating from the University of Arizona with a Bachelor of Science and dual major in Marketing and Finance, Murney entered the business world working for the Burroughs Corporation, which ultimately became Unisys Corporation. After a brief stint at a major insurance firm, Murney discovered the world of commercial real estate and never looked back. /// “I was making good money in

the insurance business but did not like it,” he says. “It did not appeal to me as much as CRE did.” /// The foray into CRE began with CBRE as an office leasing broker and was due to a foretelling meeting with his accountant. “I met with [Beau Van Deren] and he made a comment that there were people who were making four to five times what I did by working in CRE, so I thought it was worth looking into,” Murney says.

TURNING POINT

The office sector was Murney’s starting point in the business, but not his ideal spot long-term. “I was not making any money and realized there were way too many brokers in front of me so I was never going to get a good shot at most deals,” he says. “But I worked on a couple of hotel land deals in 1988 and 1989, then a listing from the National Bank of Texas on the Hampton Inn at 53rd Ave and I-10 in 1989, and I was off and running.” /// One of his first big “breaks” was a sale of a Coachman’s Inn property in Tucson to Motel 6, which resulted in a lesson that stuck with him. “After that sale, I thought I had it all figured out, so I leased a 1990 Infiniti Q45 for $709.25 a month,” he says. “I did not do another deal for 18 months. I walked into the dealership after the two-year lease was up and said, ‘this is a great car. I hope I can afford one someday.’” /// It was at that point that Murney understood how tough and volatile the business could be. © Copyright 2017 by MP Media, LLC

Broker of the

MONTH

MAKING A NAME FOR HIMSELF Still at CBRE, Murney claimed his first real financial triumph in 1992 after closing an RTC note sale on the Mission Palm destination resort hotel in Tempe. /// “I made $67,000 and it was my first closed deal since the Motel 6 transaction,” he says. From there, Murney started to gain traction and become a recognized name in the hotel sphere. However, he recalls an amusing anecdote that occurred as he was just picking up steam. /// “I was playing golf at Phoenix Country Club with my banker and a new member of the club, and on the first hole I told a fellow member that I needed my banker to agree to an increase in my already tapped out line of credit. On the third hole, the banker told the member that he’s been told that Murney needed to make a payment or the bank was going to call the line in.” The new member wondered why he’d ever agreed to play in that group! /// It was in these sometimes humorous, sometimes tense moments that Murney found his competitive advantage.

Broker of the

MONTH DODGING A BULLET

“I HAVE WORKED WITH BILL FOR OVER 20 YEARS. HE KNOWS THE ARIZONA & SURROUNDING MOUNTAIN REGION HOTEL MARKETS BETTER THAN ANYONE IN THE INDUSTRY. ALSO, ON THE GOLF COURSE HE IS WITHOUT EQUAL & THE MOST FUN PERSON TO HANG WITH FOR 19 HOLES!” – JOHN J. PAPPAS, Principal, SCS ADVISORS, Inc.

After another decade at CBRE, Murney called it a 20year career in 2004 and headed to Molinaro Koger where he served five years as Managing Director. “I went to Molinaro because hospitality was all they did there,” he says. “We made some good money there, but in the end I found out the company was all about Rob Koger.” /// Murney left in 2009 to join HREC but tells a compelling story of a situation later that validated his move. On a fateful day in June 2011, Koger was sued by Host Hotels & Resorts. The Wall Street Journal reported: “Host sued the firm and its president, Robert Koger, alleging that Koger brokered the sale of three Host hotels in 2009 and 2010 to straw buyers created by Molinaro Koger without Host’s knowledge. Koger then immediately flipped the properties to legitimate buyers at higher prices, keeping the profit and the commission for himself.” /// Murney adds that the announcement of the suit came right before one of the nation’s three largest hotel conferences, this particular one in New York. “It was all anyone was talking about, and I was very happy that I had made the decision to leave two years earlier,” he says. /// In August of 2014, Koger was sentenced to 11 years in prison for financial fraud resulting in $55 million in losses.

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Beginning his eighth year at HREC, Murney appreciates the organization’s structure and stresses its importance in conducting transactions. “I work with institutional clients, so I need to have a national platform,” he says. “HREC’s platform fits.” /// As one of the few hotel brokers in Greater Phoenix, Murney has built his own special niche. “The key is you always need to add value and bring something to the table,” he says. “You get all the information you can from every source you can, catalogue it, retain it and provide it to your client.” /// And while the operational situation at HREC facilitates deal flow for Murney, throughout his career, the emphasis and the lever of success has always been about one thing. /// “I’ll outwork anybody – I’m Irish, it’s all I’ve got,” he quips. “During the first two years at CBRE, I turned the lights on and off every day. In this business, there is no other way than to grind it out and work hard.” /// Guess that saying, “Always be the first one in the office and last one out” is more than just a cliché!

“GOLF IS THE CLOSEST GAME TO THE GAME WE CALL LIFE. YOU GET BAD BREAKS FROM GOOD SHOTS; YOU GET GOOD BREAKS FROM BAD SHOTS— BUT YOU HAVE TO PLAY THE BALL WHERE IT LIES.” – BOBBY JONES

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PARTNERSHIP

Perfect

Mike TIFFANY & Mark BOSCO

PARTNERSHIP

Perfect

With over 40 practice areas, the firm’s total of 60+ lawyers have amassed one of the most impressive client rosters in the Southwest. And with soon leasing another floor in the Esplanade, it continues to grow even more. “Based upon interest we have received from outside attorneys wanting to join our firm to be part of our economic structure, our firm could easily grow to 70-75 lawyers within the next 12 months after our new space becomes available,” Tiffany says.

A D I F F E R E N T M O DE L Long before the 1996 merger that created the firm, Tiffany had his own established and successful practice, as did Bosco and his father, Michael Bosco Jr. “I was looking for an alternative to the traditional law firm economic structure,” Bosco says. “And I found that Mike had that at his firm.” /// “I had developed the financial model in 1967 and it has been in place at our practice since then, with minor modifications suggested by Mark at the time of the merger,” echoes Tiffany. /// The proprietary formula differs from the standard operating procedure at most law firms because it does not involve a compensation committee, and instead of tracking seniority or other metrics, the Tiffany & Bosco model simply focuses on the mathematics. In fact the firm does not have such a committee, because the system does not require one. It follows an alternate economic model where profits are measured in each department. “We run our firm like a business,” Tiffany says. Bosco concurs: “Our accounting system mirrors Corporate America. We look at every department based on profitability.” In fact, even during the downturns, Tiffany & Bosco did not lay off any employees and actually grew during what was a down market for most law firms.

THE PART NE R S H I P From the beginning, Bosco and his father along with Tiffany had a shared understanding of the type of organization that they wanted to build. “When Mike and I met and we agreed to merge our respective firms to form Tiffany & Bosco, P.A., we believed our concept would work well because we shared the same vision of what we wanted to accomplish,” Bosco says. /// Over the years, Tiffany cannot recount one argument with Bosco. “We have always gotten along very well. Mark has © Copyright 2017 by MP Media, LLC

been a great partner for me,” he says. /// Praise flows back to Tiffany from Bosco, as well as to his father. “My dad is a great partner, mentor in the law and a wonderful man,” he says. “And Mike has also afforded me another type of legal mentorship that has been very helpful.”

T REN DS TO DAY Both men see the legal environment as changing rapidly due to technology and the need to protect against communication disruption. “Communication is accelerating and we are more connected than ever,” Bosco says. “We are using technology to be more efficient.” /// Another big change, according to Tiffany, is the client’s position. “They are smarter and more sophisticated,” he says. “They are more knowledgeable and expect more than ever before.” /// “We also have made a significant commitment to serve and take care of the community in which we live,” Bosco says.

LO O KI N G FO RWA RD Besides their unique compensation model, the firm from inception has focused on controlling costs as a competitive advantage to their peers. “A comparable size firm might have overhead of $100,000-$200, 000 per attorney,” Tiffany says. “We have worked to keep overhead steady at $50,000 per attorney for 20 years, while still providing a state of the art operating platform, benefits and insurance coverages.” /// That frugality has allowed the firm to expand consistently and never reduce staff levels. “We always grow based on client demand. At times, available space has also dictated our growth,” Bosco says. /// For attorneys both seasoned and new to the profession, the potential is tremendous at Tiffany & Bosco. “We are very transparent,” Bosco says. “A young attorney’s chance for ultimate success is very high, if they are willing to make the proper commitment because you’re given a roadmap for success from day one. There is no guess work.” /// For partners Tiffany and Bosco, the firm’s positive trajectory is built on a phenomenal partnership with core principles that drive superior results. /// “We do what is best for our clients and understand that there is no substitute for hard work,” Tiffany says. 15

Father / Son

PROFILE

“It has been incredible to watch my Dad in action in the community over the years. I am truly blessed to have such a selfless Dad who cares so much for his family & community, & the examples of this are plentiful. I strive to have a similar impact on my family, work & community.” – Rusty

Rusty & Mike at 2016 PVCC Directors’ Cup 16

espite working in separate industries, the father/son duo of Michael and Rusty Kennedy have left an indelible mark on the business landscape of Arizona – Michael through his law firm, Gallagher & Kennedy, and Rusty through his position as a top producing industrial broker and market leader at CBRE. /// Although Rusty chose a different route from his father, he still carries with him the values of strong work ethic and dedication to family and community that his father instilled in him growing up. /// Just about anyone plugged into business, philanthropy or sports in Arizona has heard the name Mike Kennedy. As a founding partner of Gallagher & Kennedy and leading sports law and general civil litigation attorney, Mike has represented a range of high-profile clients, including the Arizona Diamondbacks, Arizona Cardinals and FreeportMcMoRan. He has served the legal community as President of the County Bar, President of the Arizona Defense Counsel, State Bar Board Governor, and was inducted into the inaugural class of the County Bar Hall of Fame. /// Sports fans will remember that Mike was the Arizona Host Committee Chairman for the NFL’s Super Bowl XLII and also made the bid presentation to the NFL owners for the award of Super Bowl XLIX. He was also previously the Chairman of the WM Open. © Copyright 2017 by MP Media, LLC

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Despite that busy work schedule, he always made an effort to achieve a home/work balance. That effort included nurturing all three of his children’s (Jennifer, Rusty and Kevin) passion for sports by coaching, traveling to tournaments and games, while never missing a meeting. /// Mike’s dedication paid off with all three children and, in Rusty’s case, he attended The University of Texas at Austin on a golf scholarship which eventually led to him playing golf professionally. /// In addition to his work and home life, Mike is also extremely active philanthropically in the Valley, having given time to Rusty awarded with USA Gold Medal at The Thunderbirds, Greater Phoenix Leadership and several educational institutions, including 2000 World Championships in Japan Xavier and Brophy College Preparatory. He has also served as the President of the Arizona Diamondbacks Foundation since ifferent irections 1998, and for those same past 20 years has been Tournament Chairman of the While having a successful Valley lawyer as a father would naturally lead Thunderbird International Junior, which many young men to follow the same path, Rusty felt compelled to go in is consistently ranked as the most a different direction – first golf and then commercial real estate. /// The competitive junior golf tournament decision has paid off in spades as the CBRE First Vice President is currently in the world. /// The commitment a member of the Phoenix office’s market leading Industrial and Logistics to bettering the community is team. As part of the team, Rusty focuses on landlord and tenant representation something that the father passed throughout the Valley and has shown a knack for helping reduce operating costs onto his children. Middle-child by assembling an efficient real estate portfolio. /// Rusty’s journey to real estate did Rusty has followed in his not follow a straight path, though. In fact, it took a rather significant detour that footsteps in this aspect and many of his colleagues probably find enviable. Prior to joining CBRE, Rusty spent has served with The Junior two years pursuing his dream of becoming a professional golfer by competing on the Golf Association of Arizona, Gateway Pro Tour and the Canadian Golf Tour. /// Following his foray into professional AZ Disabled Sports, Wild sports, Kennedy jumped into CRE due to a wealth of contacts he had in the industry. Canyon Games, Young The business graduate was fortunate enough to earn a spot on the team of respected Life at Camelback industry veterans: Joe Porter, Pat Feeney and Dan Calihan when he joined CBRE in High School, and is 2007. With them as mentors, he gained invaluable hands-on experience and quickly a member of The proved his worth. /// The team’s list of high-profile clients is impressive and includes Camelback Society tenants such as Amerisource Bergen, Home Depot, Nestle Water, PepsiCo., Vitamin and GenNext. Shoppe, Inc., , and landlords like Clarion Partners, Cohen Asset Management, EJM

Work, Philanthropy & Family It looks like Rusty, despite passing up becoming a lawyer, did learn a thing or two from his father. He also learned another important skill: juggling. Somehow the father and son, manage to dramatically affect the Phoenix landscape through their separate business endeavors and philanthropic efforts while still finding time to take a breath, enjoy a round of golf, and spend time with family. 18

Kennedy Family at the 1994 Phoenix Open (Mike - Chairman)

Development, First Industrial, LBA Realty, Lincoln Property Company, Merit Partners, Trammell Crow Company USAA and Wentworth Property Company. /// Rusty has won a number of awards in his still-young career, including NAIOP Emerging Broker of the Year in 2013; NAIOP AZ Developing Leader of the Year in 2011 & 2012; NAIOP National Developing Leader of the Year in 2012 and NAIOP AZ Industrial Broker Team of the Year in 2010, 2011 & 2015. /// Rusty also currently serves on the Board of NAIOP AZ and several NAIOP AZ committees, including Corporate Sponsorships and is the Co-Chairman of the NAIOP Golf Tournament. /// Like his father, he still finds time to golf on occasion, though that free time is hard to come by between his commitments to work, the community and his own family – which includes having to chase around an 17-month-old daughter.

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Father / Son

PROFILE

of Cottonwood Properties

ottonwood Properties is a small business in name only.

While the Tucson-based developer may not have many employees, it has had a huge impact on the city it calls home and is largely responsible for the development of the central foothills of Tucson and nearby Marana, including the creation of a range of residential options, high-end resorts and premier golf clubs.

Carson Mehl, David Mehl, Jack Nicklaus & Wesley Mehl

Brothers George and David Mehl started the company back in 1976 after George convinced David to leave academia and join him in real estate development. Both brothers attended the University of Arizona and played tennis but after graduation, their paths had diverged. /// George went into real estate and had some success building homes and purchasing buildings around Tucson. Meanwhile, David attended graduate school and was on track to become a professor. That is, until he joined up with his brother.

TITLE

Article

Father / Son

PROFILE

It turned out to be a prudent decision.

/// These days David’s son Carson has joined his father and the two have worked to honor George’s legacy by building upon the work the brothers started. /// “It seemed that the work [my father] did was really creative and made a big impact on the community. He developed some really beautiful projects, so when I finished school, he and I talked about the possibility of me joining him in business,” Carson says. /// Carson always knew there was an opportunity to work with his father but took a few years to work elsewhere before jumping into the family business. After graduating from Pepperdine, he worked for five years with San Diego developer, Kevin Kiernan, who also had Tucson ties. Then, during the Recession, he elected to leave California and come to work alongside his father. /// Whether it is George and David or David and Carson, family is at the center of everything at Cottonwood Properties. In fact, the name of the company’s preeminent developments – Dove Mountain and La Paloma – have familial roots. George favored the name La Paloma, which means “dove” in Spanish, as an homage to his Christian faith and he and David also chose the name because their father’s name Jonah means dove in Hebrew. /// Carson’s actual first name is also Jonah, with Carson being his middle name. He has named his son Jonah as well.

Shining in Tucson Initially, Cottonwood Properties found success in the Tucson market mostly in the commercial and multifamily sectors. The company bought and remodeled commercial properties in Tucson and also built and invested in apartment buildings. /// The company’s first major project – and a sign of things to come – was the La Paloma resort community in the central foothills of Tucson in the early 1980s. The project included 800 acres of residential and commercial developments as well as the 500-room Westin La Paloma Resort and country club with 27 holes of golf designed by Jack Nicklaus.

Cottonwood Properties is now working on the Dove Mountain master-planned community, a 6,200acre project that has been in the works for decades. /// The brothers first purchased the Dove Mountain land in 1985 then sold the property a partner before purchasing it back in the mid-1990s. The company then had plans to build a Hyatt resort on the land. It got as far as drafting construction documents and talking with lenders, but then the tragedy of 9/11 hit and the project was put on hold. /// It was not until the mid-2000s that a new future for the spot emerged. Cottonwood Properties began looking into the possibility of developing a new golf club to entice Accenture Match Play and the PGA Tour to leave San Diego for Tucson. The idea struck a chord with Ritz Carlton and eventually resulted in the creation of The Ritz Carlton Dove Mountain, which Cottonwood developed and now owns in partnership with HSL Properties. /// Since then, Cottonwood Properties has also developed The Ritz-Carlton Residences, luxury homes adjacent to the resort. The luxury residential market is challenging in Tucson, but Cottonwood’s product speaks for itself. /// “The market is certainly challenging, but we’ve found that if you build something great, people will always want it,” Carson says. While Dove Mountain includes a range of residences from luxury homes to starters, Cottonwood Properties residential development wing has focused on developing luxury residential properties. In addition to the Ritz-Carlton Residences, other residential developments created by Cottonwood

in the Dove Mountain area include Tortolita Vistas and Canyon Pass. /// Canyon Pass features custom homes located on estate lots in the 2,000-acre private canyon within Dove Mountain. Cottonwood Properties recently completed and sold a 5,000-square-foot spec home in the development for $1.8 million. /// While the Dove Mountain master-planned community might seem like it would take up most of Cottonwood’s resources, the company has plenty of other projects in the works in the area as well, though it has no plans to develop any more golf courses in the area as Dove Mountain already features 81 holes. /// The company has developed a series of industrial and commercial holdings in the Dove Mountain area, including the Tangerine Commerce Park that is located on 100 acres on Tangerine Farms Road. The park has already locked down one major tenant Ventana Medical Systems. The company, which is owned by Roche, has a 60,000-SF building that will be used for light manufacturing and logistics. /// In the future, Cottonwood will look to further develop Tangerine Commerce Park and other land it owns in the area zoned for commercial and industrial uses. It also owns roughly 1,000 undeveloped acres in Dove Mountain that it plans to use for new residential offerings. /// “Tucson’s future is bright,” Carson says. “We have some great land holdings that we will continue to develop and, as always, we keep our eyes open for great new opportunities in our community.”

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Belinda Rosthenhausler

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Project

SPOTLIGHT

Banner Health is even more impressive for its investment in healthcare commercial real estate to facilitate better patient care in the community. /// For the past two years Banner has pursued over 320 active projects totaling almost $2 billion to improve the healthcare experience in the communities they serve across six states. /// “We are investing almost $1 billion dollars for new hospital facilities and clinics for our academic division,” says Kip Edwards, Vice President of Development and Construction for Banner Health. About $500 million of that will go to funding the Banner-University Medical Center Tucson, and $470 million has been allocated to the Banner-University Medical Center Phoenix, both in affiliation with the University of Arizona. /// “This really demonstrates Banner’s commitment to the Valley and the residents it serves,” Edwards says. “It is very consistent with our long-term view about healthcare and providing a full continuum of care.”

BRIAN BEUTIN, CEO Banner Behavioral Health

This forwardthinking strategic approach is centered on a belief that healthcare is moving away from a traditional feefor-service model and toward a value-based care methodology. /// “Healthcare is undergoing a major transformation from a ‘sick-care’ system to a healthcare system,” Edwards says. “Population health is the solution. We assume the responsibility for a patient’s health on a risk basis, and we are investing in those areas that support health and bring access to care closer to the patient.”

Project

SPOTLIGHT Each patient will have a private room with a window and top safety features.

The window “flaps” were not only designed for aesthetics but with patient privacy in mind.

Future Nurses Station

On the continuum of care, comprehensive wellness services across all demographics is a critical component. Emphasizing this pledge to provide diverse healthcare offerings, an extremely large investment is in the works at the Banner Behavioral Health Hospital located at 7575 E. Earll Dr. in Scottsdale. /// “We needed to expand to serve the community,” says Brian Beutin, CEO of Banner Behavioral Health. “We have been at 95 percent occupancy for the last several years.” /// The expansion to the existing campus will result in a double “X”-shaped

design where future patients will enjoy more recreational activities and socialize in the “core area” or even outdoors, while receiving the treatment they need and being ensured safety and privacy. When completed in summer, the facility will have all private rooms with en suites totaling 156 beds for the whole campus. /// “This investment in behavioral health is indicative and consistent with our vision for the future,” Edwards says. “Behavioral health is an underserved need in the community and it is the right thing to do.”

Project

SPOTLIGHT “This investment in behavioral health is indicative & consistent with our vision for the future. Behavioral health is an underserved need in the community.”

- KIP EDWARDS

/// Of course, the hospital’s main goal is to help patients get well and their main concern is patient safety. “The No. 1 priority here is keeping our patients safe,” Beutin says. “There are a lot of different design elements from fixtures and doors and other features that were all chosen intentionally with safety in mind.” /// Beutin notes that one of the challenges in constructing a behavioral facility is the capital spend. “Because of this strong need to ensure that patients cannot harm themselves, cost elements are far greater than a traditional hospital. /// In 2017, the expectation is for three of the eventual four units in the hospital to come on-line with the fourth unit set for 2018. “We will ultimately have about 120 new employees with 90 of them being hired in 2017,” Beutin says.

Future

Banner will continue to invest in new construction such as the Scottsdale behavioral health hospital, but also distribute dollars toward expanding and improving existing facilities as it has done infill and renovation at Banner Del E. Webb Medical Center in Sun City West/Surprise and Banner Thunderbird Medical Center in Glendale. /// Facilitating the ongoing expansion of their ecosystem depends on strict control of their capital and utilizing a variety of means to raise funds. “We work hard to maintain our margin, because that is a primary source for dollars,” Edwards says. “We also have philanthropy through the Banner Foundation, as well as tax-free bond financing mechanisms.” /// Banner’s immediate focus is on serving their existing markets rather than infiltrating new states. “When completed, Banner Behavioral Health Hospital in Scottsdale will be the nicest behavioral facility in the Valley – if not one of the best in the country,” Edwards says.

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IDEAS INTO ACTION

WATCH

Project-to-

Photo credit: Pinnacle Aerial Imaging

/// For more than 30 years, developer Mullin360 has earned its title of being a highly successful operator in the auto park and auto mall development business. Mullin360’s projects in Greater Phoenix are some of the finest including: Penske Scottsdale 101 Auto Collection, 303 AutoShow and Tempe AutoPlex. The company’s auto development research project footprint is equally impressive with its sites dotting the national landscape. /// Scottsdale AutoShow represents another impressive accomplishment on the firm’s enviable lineup, particularly because of its involvement with SRPMIC in Arizona. /// “The SRPMIC community could not have been better to work with,” Mullin says. “The planning process with the SRPMIC leadership was terrific and ran smoothly.” 30

with the most recent figures indicating total 2016 annual purchases of new vehicles in the U.S. reaching a record 17.54 million cars and trucks. With this strong industry backdrop, Jim Mullin, President of Mullin360, has already begun to turn heads with the Scottsdale AutoShow development, strategically located at the Loop 101 and Indian School Road in Scottsdale. With its 70 acres located within the Salt River Pima Maricopa Indian Community (SRPMIC), it has become the first large-scale master-planned autoplex placed on tribal lands throughout the entire nation. /// “The infrastructure is complete and the first six dealerships are going to open July 1,” Mullin says.

WATCH T he P lans Project-to-

The location of Scottsdale AutoShow sits amidst some of the finest properties in the Easy Valley including: the Talking Stick Resort, golf and entertainment complex, Casino Arizona and the spring training residences of the Arizona Diamondbacks and Colorado Rockies at the Salt River Fields at Talking Stick. /// “The corner of the 101 and Indian School Road represents one of the highest traffic areas in the state, so it wasn’t a difficult decision on our part,” Mullin says. /// There are 10 multi-sized parcels designed on 65 of the 70-acre site and the parcels are currently under construction. The dealership diagram shows that 18 acres of Parcel 1 will be home to Jeep, Ram, Dodge and Chrysler; Parcel 2 is leased to Volkswagen; Parcel 4 has Ford; and Parcel 5 will display Volvo. /// Chapman Automotive Group has confidentally invested $60 million in leasing throughout

this project. The Group is anchoring the largest section, Parcel 1, which is set to move its existing brands Jeep, Ram, Dodge and Chrysler, currently located at McDowell Road. Parcel 2, also leased by Chapman, will house the relocated McDowell Road Volkswagen franchise. Parcel 4, the second largest parcel, has been leased by a Ford dealership, and Parcel 5 houses a new Volvo vendor. The five remaining lots are available.

T he A rchitecture The project’s groundbreaking took place in December of 2015, and with the careful planning and executional expertise from Mullin360 and partner SRPMIC, it has been delivered right on schedule. /// “The freeway sign is up and running, the roadways, lighting and landscaping are completed, and a beta test has recently been done,” Mullin says. /// As if the project wasn’t unique enough already, it uses a Mullin360 leasing structure. “We pioneered ‘singlepay’ and have been using it for this project,” he says. /// The concept allows lessees the option to prepay their 65-year land lease in a one-time upfront payment. “It was part of the planning process that it would be critical to the project because then we were able to accelerate the interest of dealers who want to control their lease and not worry about escalations and adjustments over the long-term,” he says.

The infrastructure of the park also brings important differentiators for dealers and consumers that prove care was put into the details. “We have increased the rubber content of the roads to make them smoother,” Mullin says. “The roads also have undulation in strategic places where the roads are raised 34 inches to allow customers to see vehicles more clearly.” /// Dealerships also have the assist of reduced setbacks on the lots, again as a means to improve the buyer experience. “The setbacks [of the AutoShow] are 12 feet from the road, not the 20 or 40 feet that’s considered standard,” he says. /// The Scottsdale AutoShow is well on its way to become another prime development in what is already one of the premier commercial real estate locations in the Valley. /// “Being in the land development business for decades, I can honestly say I know this is one of the highest exposure sites and the [auto] dealers are excited to be here,” Mullin says. © Copyright 2017 by MP Media, LLC

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WATCH

Company-to-

ith having more than 25 years in the commercial real estate field, including the last seven at Velocity Retail Group, Andy Kroot, a natural entrepreneurat-heart, decided it was time to branch out on his own.

“I BELIEVE THE RETAIL INDUSTRY IS STILL

VIBRANT “My strategic plan is to continue what we’re doing on the brokerage side combined with development. I’d like to own properties as much as possible in conjunction with my brokerage – that’s my vision,” Kroot says, adding that he hopes to continue tenant representation while adding build-to-suit projects tailored to the client.

& IT WILL ALWAYS BE THAT WAY.” – Andy Kroot

WATCH

Company-to-

Kroot’s experience runs the gamut in the retail space, including having worked with Starbucks on the development side for nearly a decade, with the next location about to go under construction on the corner of Cave Creek and Bell roads in Phoenix. And he’s hoping the relationships he’s made within this market will welcome his new team just as rapidly. /// But Kroot and recent additions, Christina Biagioli and Lindsay Fox are facing a challenging retail market that needs to maintain relevance in the face of a rising e-commerce tide. /// “I believe the retail industry is still vibrant, and it will always be that way,” Kroot says. Due to e-commerce growing as it is, however, developers have to be creative with their retail space versus simply posting up another shopping center. ///

Creative retail means looking at the market with an open mind, and finding properties that can be repurposed or redeveloped. Biagioli reiterates that while the initial impact of e-commerce sent a shock through the industry, many consumers still want stores as

destinations. /// “It seems like now a lot of retail is destination retail. A lot of newer retail include boutiques and eating experiences because you can’t give people that same experience on their computers,” Biagioli says. /// Realizing that not everything can be accomplished online, Kroot & Associates will soon also be dabbling in its own retail venture with a hot yoga studio to be named “radi8” already in the works at the shopping center at 40th Street and Indian School Road, just down the street from their “vintage” office. With Biagioli as the yoga instructor, the 2,400-square-foot space will open its doors in March/April. /// The team is wasting no time in making their name known in the market, welcoming new openings for Bassett Home Furnishings in Kierland and Ahipoki Bowl, a hot new fast-casual restaurant that will be in located in

The Wedge development in Tempe. /// The Wedge is a solid example of the way creativity and design is driving the retail market, as Kroot describes the trend of how landlords and developers are spending more on inspired architecture in order to draw consumers to a space. /// As Kroot and his team establish themselves in a growing market, he’s taking the long view, envisioning a company that that will not only be successful, but possible become a legacy within his own family and the Arizona commercial market.

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CULTURE

Commitment and stability are the foundation of every dynamic success story. Colliers International in Greater Phoenix fosters a business culture that encourages work-life balance. This commitment translates into a comprehensive view of client needs that creates unparalleled performance. colliers.com/greaterphoenix Phoenix Scottsdale

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10-Year

ANNIVERSARY

YEARS of Commercial Executive Magazine! Some of the best memories from our photoshoots… “We have a very talented real estate community here in Phoenix. But when we did the West Side Story Photoshoot, I learned that the talent didn’t translate to dance moves.” – Gary Linhart, ViaWest

“My favorite shoot was at Scottsdale Hangar One with my very talented women colleagues. All was going well until Mandy told me I had to sit on the wing of Bennett’s plane in the freezing cold!” – Karrin Taylor, Arizona Strategies “The best cover goes to Women in Power & Mandy convincing the FBO Manager that Karrin should be placed on the wing. We all know there’s NO limits to Mandy’s direction even though he thought he would get fired & was worried about her zipper dress scratching the wing! Mandy also timed it that George Clooney just happened to be flying in.” – Christine Zeihen, Biltmore Realty Advisors “I will always remember the panic-inducing shopping foray in search of a red suit!” – Heidi Kimball, Sunbelt Holdings 38 © Copyright 2017 by MP Media, LLC

10-Year

ANNIVERSARY “Thanks for holding me captive as a back-up to a back-up model filler in your Ninja Photoshoot. I made sure your photographer captured the essence of my “Ninja” 6” warrior heels – a very popular look people may not be familiar with.” – Belinda Rosthenhausler, Clear Title

“Wearing a dress while lounging across the Arizona Biltmore lawn for the Women in Power Photoshoot (2014) and wondering to myself if this could get any more awkward. Mandy is very persuasive & uniquely talented in getting so many amazing professionals to show up & go with the flow.”

“I miss f***ing with Mike Curley & all the bull***t that came out of his mouth.” – Jim Harrison Jr., Harrison Properties

10-Year

ANNIVERSARY “It was only after Mandy asked me to participate in the Women in Power issue (2015) that she disclosed we would be wearing red evening gowns. Good to her word, however, she helped me select a dress (after rejecting my first 3 choices) & even told me what shoes & undergarments to wear & how to do my nails and makeup!” – Jody Pokorski, Snell & Wilmer “My favorite photoshoot was the Women in Power (2015) – red ball gown edition. Getting red-carpet ready at noon on a Tuesday was quite the excursion! Thanks to Mandy & Sarah for making the photoshoot experiences so memorable! *Disclaimer: except in 2012 when a room of 20+ ‘Past Covers’ held a pose for over 10 minutes as Mandy perfected every last elbow & tie. At least the photo was fabulous!” – Ann Atkinson, HTA “There were many hilarious moments along the way – the Big Chess Pieces Photoshoot at Biltmore we thought was crazy but turned out great, & the Women in Power Photoshoot with the tight red evening gowns, & the hike in the hot desert for the Mother/Son Photoshoot. We do all what you ask without question: Sign of a true leader!” – Cindy Cooke, Colliers

“I remember the brokerage managers being asked to look at the camera while scrimmaging each other in basketball which, because offense and defense generally face each other, is very impractical. That didn’t discourage Mandy for strongly encouraging us to figure out how to make it happen (which we did)!” – Bob Mulhern, Colliers

“The funniest thing was when Mandy told my 23-year-old son to ‘take off your shirt & join us.’ Even though he is an agent in the business, he thought it was hilarious & he turned out to be ‘center stage’ in the photo. Your ability to adapt & maneuver is amazing. Thanks for the years of memories & laughs I’ve shared with you.” – Leroy Breinholt, CPI

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10-Year

ANNIVERSARY “I remember the Black Tie Photoshoot for the retail edition where I didn’t have a clip-on [bow tie] & no one there knew how to tie it. Mandy said go with it undone.” – Mike Polachek, SRS

“My son, Ryan & I had a great time down at the ball park for the Families in Real Estate Photoshoot. Although Ryan’s a true Hall of Fame son, we both gazed out onto the beautifully manicured diamond & wished that we had been born with Cooperstown-like ability. Oh well, it was fun dreaming.” – Dennis Desmond, JLL “It speaks volumes about our feelings for this business that so many of us are introducing our children to CRE as a career as shown by the Family Photoshoot at the ballpark.” – James Wentworth Sr., Wentworth Properties

NATE NATHAN fter my 40 years of selling real estate, it is amazing to me that the last 10 years have, in general, been brutal to Arizona real estate. Congratulations to Mandy for creating an incredible publication that has served our real estate community well. And congratulations to anyone reading this article because I think the next several years are going to be incredible and off the charts for the real estate market in the state of Arizona.

Lot supply is becoming a major concern for the top 30 builders who capture approximately 90 percent of all the permits. As the lot supply dwindles, larger land deals are beginning to occur for the first time in years. The opening of the 303 and the completion of the lawsuit for the South Mountain Loop will allow the West Valley to continue its increasing capture of the permit activity.

The strength of our population and job growth continues to get stronger. We finally have a pro-growth, businessman governor who is proving to be a great leader for our state and our future growth. Our economy is beginning to become more diversified and the attempt to increase the number of higher paying jobs seems to be taking hold.

The apartment market is still experiencing low occupancy levels with thousands of units being built in a concentrated Scottsdale/Phoenix area. We are beginning to see the acquisition of apartment ground in the outlying areas to capture the demand for rental units in certain locations.

N A ’ S A R I Z O

C AT I O N P U B L I

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R E A L

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T R Y I N D U S

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The success that Casa Grande is finally having, with new employment opportunities, will see a reemergence of builders in that area to absorb the 3,500 finished lots that are currently sitting dormant. The resale market has a 2.5-3-month inventory supply which is not close to serving the demand that is building.

The State Land Department is feeling the pressure of growth encroaching their borders and will be a huge part of our real estate activity for years to come. Over the past two years, we have also seen a reemergence of master plan communities throughout the Valley. With the conservative underwriting that the major homebuilders are required to follow, low-risk lot deals along with guaranteed long-term inventory is becoming more and more important for these companies’ boards of directors.

To sum it up, 2017 and beyond are going to be phenomenal years for whatever part of the real estate market you are in. Combining all the facts above with our pro-growth environment, weather, diverse economy, new transportation corridors, the fact that we are a “right to work” state, our four professional athletic teams and a governor that is pro-business – we are all lucky to be living in this great state. /// Happy New Year to everybody from Nathan & Associates, Inc.!

.com

www.CEM-AZ

Nate Nathan featured in Commercial Executive Magazine in 2008 44

Yours Truly,

RENOVATIONS

Trends:

SURVIVAL

of the

FITTEST:

Competition Through Renovation

the close of 2016, the average office vacancy rate in Phoenix sat at just 17.5 percent. Over the past 12 months, we’ve welcomed almost 2.5 million square feet of new office construction and absorbed more than 3 million SF of existing space. This is, in part, thanks to the Valley gaining back all of the jobs lost during the Great Recession … and then some. /// “Unlike the reality we were facing just a few years ago, today’s Phoenix’s office market is one of optimism and growth,” says Lincoln Property Company Executive Vice President David Krumwiede. “Companies continue to expand and relocate here because they want efficient, high-quality space; office designs that foster collaboration; and amenities that help them attract and retain top talent, particularly in the Gen X and Millennial age groups.”

Enter the property renovation. In 2016, LPC kicked off almost $6 million in renovation activity across five of its prominent Phoenix office assets. Like its competition, LPC’s goal is to strategically infuse these already well-known and well-located buildings with modern amenities – making them strategically competitive to a new era of tenants. /// For the last many months, LPC has been actively putting this renovation strategy into action. Here’s a look at their latest activity.

Dave Krumwiede 3131 Patio

3131 & 3133 Camelback

3131 & 3133 Camelback offer a prized, heart-of-the Camelback Corridor Class A office location. As one of the newer assets in LPC’s renovation push, the buildings are home to LPC, JLL, Johnson Bank, MGA Consulting, Phoenix Commercial Advisors, HSAG and SRS Real Estate Partners. In addition to maintaining a full menu of building services and an on-site coffee bar, LPC has created a collaborative outdoor lounge

area (with Wednesday food trucks), new state-of-theart conference center in the 3131 building, and has upgraded lobbies in both buildings with contemporary new furnishings. /// “Tenants love this campus and its location, and we continue to earn their loyalty by keeping these buildings well-maintained and amenitized,” Krumwiede says.

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RENOVATIONS

Trends:

Gainey Center

Luhrs City Center

“Gainey Center was a great reminder that, as useful as renovations are for incorporating sleek, modern upgrades, they are equally important for bringing traditional-style executive offices up to modern times,” says Krumwiede. /// This was the case at Gainey Center, a richly appointed and sophisticated environment for tenants such as J.P. Morgan, Apriva and Pfizer who are serving the area’s high net-worth demographic. With this audience in mind, LPC and Goldman Sachs purchased Gainey Center in March 2016 and have recently completed an executive-style lobby renovation that blends first-class finishes with elements that brighten and modernize the space, such as new light fixtures, brushed stainless accents and floor-to-ceiling tenant entries.

Built between 1924 and 1929, Luhrs City Center is a National Historic Landmark. It encompasses approximately 160,000 SF of fully renovated office and retail space featuring red brick interiors and exposed beams. LPC is nearing completion now on an additional, multimillion-dollar renovation that further upgrades the project’s lobby, common areas, garage and streetscapes. /// “We’re bringing a piece of the past into the present – instilling new style while protecting a level of historic character and integrity that you simply can’t build into new construction,” says Krumwiede.

Promenade Corporate Center Promenade Interior

The 260,000-SF Promenade Corporate Center consists of two, four-story office buildings in the North Scottsdale/Kierland submarket – at the center of the Scottsdale Promenade mixed-use retail development. LPC and Goldman Sachs purchased the buildings approximately 18 months ago and quickly launched an improvement plan that includes lobby renovations, modernized landscaping, tenant gathering areas, and common corridor improvements. Since that time, LPC has signed nearly 42,000 SF of new leases and renewals, stabilizing the building with a strong tenant mix anchored by FITCH, Healthcare Trust of America and Buchalter Nemer. /// “Modern companies love North Scottsdale for its almost immediate freeway access and walkable mixed-use environments,” says Krumwiede. “Promenade Corporate Center provides all of these just outside of its lobby doors. The buildings were built more than a decade ago, but the location is timeless. As is the case with each of our renovations, our job was to modernize and present those strengths to the market.”

Biltmore Commerce Center

Located on the northeast corner of Camelback Road and 32nd Street, in the heart of the Camelback Corridor, Biltmore Commerce Center is best known for its copper metallic exterior and highly visible, street-facing water feature. The project totals three stories and 260,000 SF, with above- and below-ground parking, and an 11,000-SF, remodeled three-story atrium running through the interior first floor. Since purchasing the property with Oaktree Capital Management, LPC has continued to improve the building – the latest of these being a new outside gathering space. Their efforts have helped to maintain a 90-plus percent occupancy with an established group of tenants including United Way, Phoenix Children’s Hospital and Lee & Associates. /// “Biltmore Commerce Center set the bar for shared, collaborative spaces,” says Krumwiede. “It was built more than 30 years ago, but with renovations, the lobby alone offers modern seating areas, a café, docking stations and a major water feature that rival new product. It is welcoming and polished – a commanding asset with a location that can’t be beat.” © Copyright 2017 by MP Media, LLC

R E S P E C T T H E FA N S | R E S P E C T T H E P L AY E R S | R E S P E C T T H E G A M E

The Waste Management Phoenix Open is a golf tournament like no other. Huge crowds. Enthusiastic fans. Exciting golf. It’s truly The People’s Open.

#THEPEOPLESOPEN Please enjoy the tournament and have fun. Remember to be safe, act responsibly and behave with class. Let’s show the world that we have the greatest fans in golf.

J a n u a r y 3 0 – F e b r u a r y 5, 2 017 | T P C S c o t t s d a l e | W M P H O E N I XO P E N .C O M

Sector Update:

LAND Strong market fundamentals are creating a growth environment for real estate and homebuilding, but 2017 also holds daunting challenges. Success will depend on developing new strategies.

strong market brings big opportunities, interesting challenges “Phoenix is in a much different place than following the last boom,” said Greg Vogel, Founder and CEO of the Land Advisors Organization, which hosted the 7th Metro Phoenix Land and Housing Forecast on Dec. 7. More than 500 attended the successful event, which was first presented in 2010. The Phoenix economy is more diversified, jobs and population are growing, and billions have been invested in major public projects. But there are constraints, too. Access to financing is still tight, labor is in short supply and consumers have changed their ways and their taste.

The resale market in Phoenix has been outperforming homebuilding, but the dynamics appear to be shifting. /// Resale homes in Phoenix are “very affordable,” Vogel said, with the third quarter median price, at $235,000, coming in lower than the national. Appreciation for homeowners across the Valley is 7.5 percent, representing $20.5 billion in new wealth, he added. Many homeowners who were under water have surfaced, and those who were foreclosed are coming out of the penalty box. The supply of resale homes continues to be tight, however. “This should drive traffic to new homes,” Vogel said. 46 © Copyright 2017 by MP Media, LLC

Trust, Strength, Value and Results: WORDS THAT DEFINE HEIPLE TRAVERS REALTY.

DAVID C. HEIPLE

BRIAN A. BLACK

RENEE ERVANIAN

ADAM P. GEIS, CCIM

ERIC TOLLEFSON

MARK STEVENSON

President

Senior Vice President

LISA BLACK

Vice President

KELLI CLARK

Office Manager

The Tenant’s Advisor Since 1979 7400 E. McDonald Drive, Suite 121 • Scottsdale, Arizona 85250 • 602.943.0640 • www.heipletravers.com

Sector Update:

LAND

the return of building Climbing numbers of building permits signal that the oversupply created during the run-up — which peaked at 63,500 permits in 2005 — has been consumed. Vogel estimated that 2016 will finish with 18,200 permits: better, but “nowhere near normal.” Going forward there could be as many as 4-6,000 more issued than in 2016. /// Higher density single-family homes are a trend worth watching, Vogel said. “We’re seeing more of these because of the quality of the product, and the organization of the open space.” /// Infill development represents 10 percent of the market, but Vogel doesn’t expect it to grow. “The builders who have tried this have done well,” he said, “but it’s really hard to find opportunities for the ones that want to reload.”

big opportunities

The multifamily sector is poised to take off, with rents accelerating—especially in Class B- and C developments. Residents faced with those rising rents may consider buying. /// Demand for apartments is coming from people who lost their homes during the downturn as well as millennials and retirees, all looking for an urban lifestyle. With new construction clustered in the Valley core, opportunity for development on the fringes is strong. /// The rest of the commercial sector, except for retail, is thriving. The office sector includes Class C and obsolete space that could be replaced, and with the vacancy at 17.8 percent. Meantime, Class A office rents could climb to $36 to $40 per square foot. Hotel occupancy is also up. /// “We are now seeing the first two new resort projects in over 10 years,” Vogel said.

the best supply areas for these is in the 303 corridor and finished lots in Maricopa. /// Vogel estimated that 185,000 acres will be needed in the next 13-15 years for all development, an area equivalent to the East Valley.

headwinds Industry leaders are excited by the energy in the current market but are aware of the challenges. John Burns, CEO of John Burns Real Estate Consulting, reported 76 percent of builders surveyed say that labor is holding construction back. /// Mortgage rates and financing are also causing headaches. On Dec. 14, the Federal Reserve raised its benchmark interest rate to a range of 0.5 percent to 0.75 percent. Heuser warned that climbing rates could shock buyers, especially millennials. /// But panelist Michael Orr, author of The Cromford Report, said interest rates are not a deterrent, if applying for a loan was easier. Because the economy is expanding, a rise in interest rates may not be the set back some fear. But with equity investors leery of the industry, construction financing is tight.

looking ahead With finished lots being consumed by builders, increased permit activity and a solid foundation of Phoenix macroeconomics, builder inventory will grow tight. Land development, land sales and housing demand should be strong moving forward, positioning Phoenix to be of the country’s top housing markets in 2017.

the lay of the land 2005 logged $10 billion in land closings; in 2008, activity had withered to $400 million. Land sales came in at $1.9 billion over the past 12 months, and Vogel expects land sales of $2 to $3 billion dollars a year going forward. /// Builders have been scooping up any finished lots they can find after emptying the cupboard in the past 12 months. They are now turning to platted and engineered, and partially finished lots. Vogel said one of 48 © Copyright 2017 by MP Media, LLC

SINGLE, SUCCESSFUL AND SELECTIVE... SIMPLY TOO BUSY?

NEW YEAR NEW LOVE

Amber Kelleher-Andrews CEO

Awarded Top Global Matchmaker

Sector Update:

RETAIL

BY: Ed Beeh, Executive Vice President & Alan Houston, First Vice President, SRS

2017

marks a year of change. We have a new President with a real estate background, the first interest rate increase in over 10 years, and despite the relatively strong economy – older concepts such as Sears, Kmart and Macy’s are struggling and closing stores.

Alan Houston

Retail and the real estate that serves it continues its never-ending transition. To cope with the change brought about by technology and demographic shifts, many retailers are downsizing and repositioning their stores to become more efficient, while others are expanding their reach with co-branding and/or mergers.

The growth of online retailing continues, but

brick-and-mortar retailers continue to fight back with an online presence. Conversely, many online retailers are now moving into retail storefronts, including Amazon, Warby Parker, Lumen and Bonobos. Despite the growth of delivery services like GrubHub and Blue Apron, restaurants and grocery stores are the strongest drivers of new retail construction. Even as they incorporate new technology such as online ordering and delivery services, the majority of their sales continue to be dominated by physical interaction with customers.

Sector Update:

RETAIL

Due to the influx of millennials and the increasing influence of Generation Z (who are just starting to come into adulthood), restaurant growth is driven by concepts that are hip, quick, healthy, specialized and require minimal waiting, no tipping and maybe even have their own secret menus (Cotton Candy Frappuccino anyone?). Chipotle, Raising Cane’s, Chick-Fil-A, Starbucks, Café Rio and others are aggressively expanding across Arizona, often to the detriment of the traditional fast food powerhouses and casual dining chains. It’s a race to establish their brand as the dominant in their category. Like the past, the trendy categories continue to evolve from many independents to a few chains, as we saw with frozen yogurt shops, fast casual burgers, quick serve customized pizza, and one of the newest concepts: quick serve poke cuisine. /// These younger generations like to eat out a lot, but they are more frugal and don’t care to spend much on clothing and other items. This, along with the growth of online sales, home delivery, and virtual or cloud-based products, has made it challenging for property owners to backfill spaces in many Class B and C retail properties.

The bright spot today for new construction in Arizona is grocery store-anchored centers, which began in earnest in 2016. Fry’s started to roll out new stores for the first time in many years. Sprouts and newcomer, Natural Grocers, have also opened multiple new stores. Safeway recently announced several new stores and WinCo continues to pursue new sites selectively. The demand for shop space in grocery-anchored centers is more limited, so the new centers are generally smaller than in the past.

Beyond food service concepts, health and wellness concepts are one of the few segments taking up small shop space. Concepts like Orange Theory, Pure Barre, Red Mountain Weight Loss, Gentle Dental and Nextcare take spaces that historically went to retail stores. /// 2017 promises to be an interesting year at the very least, but we remain excited and optimistic for what this New Year brings.

10 YEAR ANNIVERSARY

C O N G R AT U L AT I O N S Commercial Executive Magazine and Mandy Purcell on 10 years of success and a tireless commitment to the Phoenix commercial real estate market.

9617 N. Metro Parkway W. Phoenix, AZ 85051

602-944-0970 | www.metrocentermall.com

Specialization â&#x20AC;˘ Expertise â&#x20AC;˘ Results

The Best of the Best Marcus & Millichap proudly honors its top commercial real estate investment professionals in the Phoenix office who provided superior service to clients by helping them meet their investment objectives. These market leaders set the standard for dedication, expertise and achievement. We look forward to being a part of your success in 2017.

Congratulations to our Top Investment Professionals of 2016

Peter Katz

Mark Ruble

Jamie Medress

Cliff David

Executive Managing Director Institutional Property Advisors Student Housing/Multifamily

Senior Managing Director Net-Leased

Senior Managing Director Institutional Property Advisors Multifamily

Steve Gebing

Sanford Burstyn

Michael Hubl

Hamid Panahi

Senior Managing Director Institutional Property Advisors Multifamily

Senior Vice President Retail

Senior Vice President Multifamily

First Vice President Multifamily

To access the investment market, please contact our new market leader.

Ryan Sarbinoff Regional Manager | (602) 687-6700 | ryan.sarbinoff@marcusmillichap.com

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