BUSINESS

Chandler strip mall king sells 5 shopping centers

BY KEN SAIN

Arizonan Staff Writer

Commercial real estate baron Michael Pollack is reaping the benefits of one of the best markets in 15 years.

His company, Michael A. Pollack Real Estate Investments, sold five of his Valley shopping centers for more than $32 million.

“It has been very good for us for the last three years,” said Pollack, who is one of the largest commercial real estate owners in Chandler. “Anyone who wants to sell right now, it’s a sellers market, just like it is for anyone looking to sell a home.”

Pollack sold retail centers in Mesa, Peoria, Phoenix and Tempe.

He said they worked hard to wrap up all five transactions before 2021 ended because he is uncertain what the federal government might do this year with the capital gains tax rate.

“Hopefully, the federal government doesn’t do something irrational,” he said.

Pollack said he’s been working for more than a decade to make sure his retail centers continue to thrive in a changing marketplace. He called them “Amazon-resistant,” saying they have focused on businesses that offer experiences or services.

“You can’t get a haircut at Amazon,” he said.

Pollack said they will look to buy more retail centers but, considering how hot the market is right now, they might wait.

“It’s a little too hot to be a buyer,” he said. “We would love to put capital out right now, but we’re also realists. It’s a

Michael Pollack, seen here in his recently renovated Pollack Tempe Cinemas, sold five of

his shopping centers last year. (David Minton/Staff Photographer) seePOLLACK page 34

Developer sues Chandler over garage rent default

BY KEN SAIN

Arizonan Staff Writer

In a dispute that could cost taxpayers millions of dollars, the City of Chandler is being sued for failing to pay its rent of the parking garage at the Overstreet development at Arizona Avenue and Chandler Boulevard. Developer DT Chandler’s lawyers filed the lawsuit in Maricopa County Superior Court in mid-October and City Council went into executive session on Monday to discuss how to deal with it.

At the heart of the dispute is DT Chandler’s claim that the city did not exercise its option to buy the parking garage correctly. It says that option is now gone, and the city must pay rent as part of their lease agreement.

The city wants to buy the garage for about $8.7 million. If the court sides with DT Chandler, then it would have to pay a little more than $65,000 a month The parking garage at the Overstreet development in downtown Chandler is the subject of a lawsuit filed against the city. (File photo)

in rent for the next 27 years – about $21.1 million over the life of the lease, DT Chandler claims. Under the terms of the lease, the city paid $26,250 a month for the first three years. The rent increases starting the fourth year.

According to the lawsuit, the city had to notify DT Chandler it planned to exercise its option to purchase the garage for $8,690,351 in writing at least 30 days before the third year ended. DT Chandler said it was not notified until it received a letter on Aug. 27. It claims the city did not state it was exercising the option and that the letter was not sent to the escrow holder. It also claims the city did not provide the required $150,000 deposit to the escrow holder.

And it claims that written notice of the city’s intent to exercise the option was due on or before Aug. 12, since the lease began on Sept. 11, 2018.

DT Chandler argues the city failed to give the required notice, or take the required steps toward actually purchasing the garage, and therefore must pay the higher rent for the rest of the lease agreement, which was for 30 years.

But the city not only has denied the

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very hot market, not just in sales but the leasing side is on fire like I haven’t seen since 2006.” He said 2006 was the peak before this current market. Pollack said he currently has occupancy rates in the high 90 to 100 percent. He’s even had some of his tenants ask about a wait list for any openings he has.

“I haven’t seen it this way in a long time,” he said.

Pollack said his strong numbers shows there is still space for retail centers despite the growth of online shopping. He said the biggest trouble facing retail today is not Amazon, it’s the inability to find workers.

He said he knows of businesses looking to expand, but they can’t because they can’t find the workers.

The retail centers he sold are Trailside Center and Lindsay Marketplace in Mesa; Tower Plaza in Phoenix; Olive Plaza in Peoria; and Apache Central Center in Tempe.

Pollack said his company follows the same model. They look for retail centers that have an issue, such as poor occupancy, tenant issues or just needs major remodeling. Those centers usually come with a discount. They then invest in the centers and fix whatever issues they have.

The Tempe property, Apache Central Center, was sold to the City of Tempe for $10.6 million.

He said the city plans to redevelop it into a mixed-use center that has retail on the ground level and housing for working class and low-income residents above.

Lindsay Marketplace went for the highest amount, $11.2 million. Pollack’s company had owned it since 1993.

He owned the other Mesa and Phoenix properties for nearly 30 years. His company bought the Peoria property in 2003.

“This business is ever evolving, ever changing” Pollack said. “Anyone who thinks it’s easy, that you can buy a center and lease it out to the local T-shirt shop, well, they won’t be in it for long. You have to a have a specialty, you have to do a niche.”

GARAGE ���� page 33

charges, but also has countersued the developer.

The city contends that the lease “ represents only a portion of the overall dealings between the parties” and that the lease “must be read in conjunction with” development and option agreements.

Besides, the city says, the document the plaintiff attached to the complaint “does not bear the stamp of a document recorded with the Maricopa County Recorder’s Office and which the City considers the official version of the document.”

The City also notes that the pandemic was a major event that automatically extended the deadline for any action on Chandler’s part.

It also says it offered the purchase agreement “in the form required by the documents which DTC refused to execute” and that DT Chandler’s allegations “misstate the nature of the documents and imposes and assumes obligations not set forth in the documents. The City denies failing to comply the terms of the documents.”

The City also disputes the calculations DT Chandler made in what it is owed, suggesting DT Chandler has over-simplified the whole matter.

“The City acknowledges the dispute over the Option is one issue before the Court," the responses states. "However, that issue will also require the Court to resolve whether a valid, enforceable agreement exists between the parties, and …whether Plaintiff is a proper party to any agreement, whether it breached any contract that exists and the damages incurred by the City as a result of that breach. The City denies this dispute is capable of simple resolution with only a determination of the ‘option’ issue.” Chandler also filed a counterclaim against DT Chandler, contending it had already agreed to extend the deadline for exercising its option to October 2022 and that it had agreed on a sale price of $8.8 million, with rent payments going toward that purchase.

It asks the court to rule that the city is the actual owner of the site or declare the lease escalation rate “unenforceable.”

The case has been assigned to Superior Court Commissioner Richard Albrecht.

Inflation requires better retirement planning

BY HAROLD WONG

Arizonan Guest Writer

Inflation is accelerating in America. Recent data shows that the producer price index (a wholesale prices measure) in November 2021 increased by 9.6% over the previous 12 months, the largest gain on record.

Case study: Joe and Susan Boomer are 60 and are not sure when they will retire. Many of their retired friends who are 1020 years older than them are now very frightened by the current high inflation. This is forcing Joe and Susan to rethink their retirement plans and investment strategies. Assume that inflation will average 6% over the next 10 years.

Facts: Joe and Susan, currently, have total wages of $150,000 and $10,000 of investment income. They pay a total of $11,475 of Social Security and Medicare payroll taxes and $22,000 total income taxes. They save $30,000 per year and invest it. They have saved $1 million of financial assets and have no debts at all. They hope to be able to spend $120,000 per year in retirement and expect to live until 92. They have no pensions and their combined Social Security if taken at age 62 would be $35,000 annually vs. $70,000 if taken at age 70.

According to moneychimp.com, the compound annual growth rate in the S&P 500 Index has been 4.57% in the 21-year period starting Jan. 1, 2000. When one adds dividends of 2.02% the gross is 6.59%. If one subtracts a future 6% inflation rate, the net return would be 0.59% before annual Wall Street fees.

Even if they invest only in super lowfee Vanguard index funds, their projected net return would be zero. Note that if you loan to Uncle Sam by buying a 30-year US Treasury Bond, the current interest yield is 1.91%. Using $35,000 from Social Security taken at age 62 (most take it at 62) plus an assumed average 3% cost-of-living increases for eight years, that equals $44,337 annual Social Security income at age 70. One would add their $1 million times 2% return = $20,000 annually. One would add their $30,000 of annual savings for 10 years = $300,000 more saved times 2% return, which gives them an extra $6,000 of income. Now total retirement income is $70,337, which is only 59% of their desired $120,000 retirement income. However, with 6% annual inflation for the next 10 years, they would need $214,902 annual income in 10 years to buy what $120,000 will buy today. Their $70,337 retirement income will be only 33% of what is needed and retirement looks grim. Inflation means they need three times their projected income to retire as planned!

Different plan: They take Social Security at age 70 and it’s $80,000 a year, counting cost-of-living increases. They deposit $700,000 in a private pension plan at age 60 and it generates $70,000 a year at age 70. They invest $70,000 annually in solar equipment that saves them $20,000 a year in taxes and has a 10% return. Using a financial calculator: PMT = $70,000; I = 10% return; N = 10 years; and FV (Future Value) = $1,227,181. At age 70, 7% ($1,227,181) = $85,903.

Now total retirement income is$235,903 and allows them to spend more than what they planned on, even with high inflation for the next 10 years. They will still have some extra financial assets left over for emergencies. Conclusion: Continued high inflation requires innovative retirement planning.

Live seminar: For a discussion on “Double Your Retirement Income and Slash Your Taxes! At 10 a.m. Jan. 29 at Hyatt Place, 3535 W. Chandler Blvd. Chandler, and a free lunch at 12:15 p.m. catered by La Madeleine French Café, RSVP or schedule a free consultation by contacting Dr. Harold Wong at 480-7060177 or harold_wong@hotmail.com. His website is drharoldwong.com.

Dr. Harold Wong earned his Ph.D. in economics at University of California/ Berkeley and has appeared on over 400 TV/radio programs.

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