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BUSINESS
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Schnepf Farms home developer has eye on the future
BY PAUL MARYNIAK GSN Executive Editor
Richard Felker keeps one eye on the ground and the other on the future.
If that seems like an exaggeration, consider his track record.
From managing and owning two family businesses in Milwaukee in the 1970s – one that sold furniture and the other that ran coin-operated washers and dryers – Felker started signing up university dormitories and apartment buildings for the latter.
“I would call on apartment developers to get them to sign a lease with me put my laundry equipment into their buildings,” he recalled. “And that led me to say to myself, ‘Well, why don’t I try and get involved in real estate? So I became an entrepreneur who said, ‘well, let’s build a couple of buildings and see how it goes.’”
How it went is this: Felker sits atop The Empire Group, a Scottsdale company that over 40 years has accumulated more than $1.5 billion in assets and built a legacy of commercial, single family and multifamily residential and industrial development.
Now, he is riding the wave of a multi-billion trend that experts say will radically change the single-family housing landscape forever.
Empire’s announcement in December that it will build 144 single-family rental homes on 14 acres of Schnepf Farms – the celebrated Queen Creek agrotainment venue best
Developer Richard Felker has a firm footing in a growing trend in new-home construction: building houses not to sell
them but to rent them. (Courtesy of Empire Group) known for its peach festivals and annual October Pumpkin and Chili Party – was just the latest in a series of build-to-rent communities Empire has on the drawing board, already is building or has finished. The company’s first was the Village at Harvard, a nearly fully occupied 184home community in Goodyear. Then there’s the 208-home Village at Olive Marketplace in Glendale that’s 65% leased and 50% occupied. A 194-home community is rising at Camelback Road and 107th Street, as is a 180-home development in Avondale along with the 272-home Village at Paseo de Le Luces in Tolleson. The Village at Schnepf Farms is the company’s seventh in the Valley and one of 21 projects in a market area stretching from Casa Grande to Prescott.
And it’s hardly the last as Felker eyes
see FELKER page 24
Gilbert cinema programmer aims for the unique
BY KEN SAIN
GSN Staff Writer
The owners of Majestic Neighborhood Cinema Grill are mapping a strategy aimed at meeting the challenges movie theaters face today.
In addition to the impact of the pandemic and government-ordered shutdowns during the last two years, movie theaters also have to worry about competition from streaming – especially as some studios are now releasing films for streaming at the same time they go up on the big screen.
Majestic Neighborhood Cinema Grill hired Andrea Canales to bring innovative programming to its venues in Chandler, Gilbert and Tempe.
“You have to stand out, you have to be unique,” Canales said. “We pride ourselves on offering a really fun, unique experience for people. We want to make great memories happen at our locations. We find that the easiest way to do that is to play up to nostalgia, things that people really enjoy doing.”
Canales, who assumed her new role earlier this month, has been doing programming for a number of independent movie houses in the state for years.
“We are very excited to welcome Andrea to our Majestic family,” said Craig Paschich, Majestic’s CEO. “She has deep ties to the Valley’s film community, ranging from her academic relationships to connections with everyday cinephiles, and she truly respects and can accommo-
not only further expansion of build-torent single-family homes in Arizona but in other states by the end of 2022.
That expansion is extending a footprint that Felker began making in the Phoenix region not long after he came to the Valley for a vacation in the 1970s.
By the 1980s, he had become “the land guy” to homebuilder Geoffrey Edmonds and Associates and together, “We built $700 million or $800 million worth of homes in Gainey Ranch and Scottsdale Ranch,” Felker said.
Over time, Empire has become just that – an empire of almost every conceivable kind of development you can imagine, even including self-storage facilities.
“I try to be on the cutting edge of something new,” he said, crediting the company’s growth as well to his two partners, Geoffrey Jacobs and Randy Grudzinski.
That cutting edge includes several high-rise apartment buildings that helped to reinvent downtown Phoenix in much the same way that Marquette University reinvented downtown Milwaukee more than two decades ago, Felker said.
“I had seen what Marquette University did to downtown Milwaukee over a 20-year period and it just blossomed because of the university,” said Felker, who added to that blossom a 27-story apartment building overlooking Lake Michigan.
“With ASU and the bio stuff downtown,” he said, “I just figured it was going to be the same kind of thing happening here. And so, we went ahead and we took a bunch of risks to do those couple of downtown projects.”
MAJESTIC from page 23
date the varied interests of our cinema guests.”
All three theaters feature food and drinks delivered to your seat from their grill and bar. The first major event she is planning for Majestic’s three theaters is a Valentine’s Day special with showings of “The Wedding Singer” and “Scott Pilgrim vs. the World.” She said the food will be tied to the movie to enhance the overall experience.
One option also will be a “Gal-entine’s Day” screening of “Magic Mike” for single women and their friends.
Canales said she still needs to get a handle on what type of programming will play well in Chandler and Gilbert.
She said they rely on the people who work at each location for some ideas, but also get a lot of ideas from patrons themselves through Majestic’s social media platforms.
“It’s really listening to people on what they want,” Canales said. “Watching trends and patterns, and being a really keen observer of society and culture.”
Since she’s only been on the job a few weeks, she said she doesn’t quite know what those audiences are looking for.
“In Chandler and Gilbert, we’re doing see FELKER page 26
Besides rental homes, Empire Group also has built hi-rise apartment buildings, including the 312-unit, 19-story Phoenix building called The Stewart, located on the former site of the Stewart Motor Company, which was built in the 1940’s as Phoenix’s original Studebaker
dealership. (Special to GSN)
– Andrea Canales
a little experimenting to find out what is going to be the next consistent series for these locations,” she said. “We know there are movie lovers out here, we just have to find out what they want to see.”
Majestic to a degree has the Tempe audience figured out. One popular program Majestic has at its Tempe venue is The lobby of Majestic’s Chandler venue creates a welcoming atmosphere for patrons. (David
Minton/Staff Photographer)
a themed scary movie night. On Feb. 2, they planned a night of original sequels for the date 2-2-22. So Majestic will show the second film in a series such as “Friday the 13th” or “Halloween.”
Canales said if Majestic continues to focus on giving people something unique, the owners won’t have to worry about competition.
“People aren’t always looking for convenience,” she said. “They want to make memories, they want to have great experiences. We firmly believe you’ll never be able to replace that.”
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He added that Jacobs “was really responsible for seeing the high-rise opportunity in downtown Phoenix.”
Felker stressed that kind of risktaking isn’t just a matter of having that rare vision that builders possess. And it explains why he’s jumped into the buildto-rent market with both feet.
“It does come kind of naturally and intuitively. But it’s all based on data that you gain with being around in this industry for a long time. In the downturn, we bought houses and rented them. In this market and in many other markets, we’re just trying to stay ahead and this asset class of these single-family buildto-rent homes just appeals to everyone.
“If you look at our rental base of people who move into this kind of product, they’re in their 20s, their 30s, their 40s, their 50s, their 60s, their 70s. Our first project had three or four 80-year-olds and two 90-year-old people. It appeals to everybody because there’s nobody living next to you, nobody living above you or below you. It’s your own space. And you have a little back yard.”
And it comes maintenance-free as the people who move into one of those build-to-rent homes simply call the on-site maintenance crew if there’s a problem – no different from calling the custodian in an apartment building.
Florida-based housing economist Brad Hunter said build-to-rent not only appeals to consumers who desire a “lock-and-leave” lifestyle in their home base but also to investors.
“Investors seeking yield are having difficulty finding enough built homes to buy,” Hunter says on his website. “So, they are shifting more attention to ‘ground-up’ development of brand-new rental homes.”
He told the Wall Street Journal last June that by the end of 2022, investors already will have ponied up $40 billion in that trend.
His analysis of eight markets across the country showed that the Phoenix area is possibly ground zero for that growth, with 3,920 build-to-rent houses completed in 2020 and another 4,259 coming on board last year. The next biggest isn’t that close: In Dallas/Fort Worth, Hunter reported, 2,580 rental homes were built in 2020 and 2,906 last year. In a five-year production forecast, Hunter predicts that even as the number of new BTR houses hits 180,000 units nationally by 2025, “overall demand for rental homes still exceeds production.”
Hunter believes that the number of build-to-rent houses will account for 12 percent of all new houses by 2024. Taylor Morrison, the nation’s fifthlargest homebuilder, says that percentage eventually could reach half of all new single-family homes. And the commercial real estate finance company Walker & Dunlop notes, “The rapidly growing BFR market will continue expanding as more residents prefer to rent single-family homes with yards and upscale amenities on a longterm basis.”
Empire approaches the construction of its build-for-rent communities with the same care and attention to detail and a traditional homebuilder would bring to the table. With the Queen Creek development, for example, owners Mark and Carrie Schnepf “kind of interviewed” Felker about his vision before signing a deal with Empire, recalling how they told him, “’We don’t want something that doesn’t look good’” because of their popular and widely-visited agrotainment attractions. “We actually did some charrettes and spent a lot of time with Mark and his wife on coming up with what the architecture looks like, what the fencing looks like around the outside, and what the landscaping looks like,” Felker recalled, “because they were very concerned about what was being built next to their family treasure.” Now, Felker said, “we’re going to be really proud of that one as it comes out of the ground and finishes.”
He said the community will “have a little bit of that farm feel to it.”
“It’s going to be a little different from the rest of ours,” Felker continued, “because that’s how the Schnepfs felt comfortable selling it to somebody who’s going to develop it.”
He anticipates it will take about eight months to lay the community’s infrastructure and that “I’m thinking we’re going to start leasing probably 18 to 20 months from now.”
Peering into the future with the same vision that has guided the growth of Empire for four decades, Felker said the only thing that could stop new build-torent housing in the immediate vicinity of Phoenix is a shortage of land.
“It’s a kind of a new asset class but it is so well accepted by every age demographic,” he said of build-to-rent. “It does require more land. So, the more urban the city becomes, the less you’re going to see this type of thing. But we are going to be in other markets as well.”
“Places like Casa Grande are going to be the recipient of a lot more rental construction,” he said. “Once you go into the San Tan Valley, we’ve got two or three developments that are going to be in those areas. So yes, it is expanding.”
And his biggest worry has nothing to do with the availability of water but that for the average household, “costs keep escalating.”
“In the Phoenix market, we’ve been really low for a long time in terms of the percentage of our income that people can spend on housing. It’s been 25%, 26%, 27%. In San Francisco and other California places, people are spending 43% or 45% of their income and we are gradually bumping up against that.”
He estimates that people in the Phoenix area are spending at least 31% or 32% of their annual income on housing and that with soaring appreciation in non-rental single-family homes and 15 percent annual increases in rent, places farther away from Phoenix will become far more favorable to homebuyers and renters.
As a result, what might be broadly considered the Phoenix metro area will be not much different from how people view Los Angeles.
And Empire gives every indication that it will continue to be a major player in that expanding megalopolis, especially with build-to-rent.
“I’ve been around, obviously, a long time and done a lot of different things,” Felker said. “But we’ve gone very deep in this space…It takes a lot for me to get excited, and I’m very excited about this space and what we’re doing in it.”
Empire Group’s The Village at Schnepf Farms will offer 144 rental homes on 14 acres of the iconic Queen Creek farm known for its agrotainment. (GSN file foto)
