AZRE Magazine May/June 2013

MAY - JUNE 2013

RISING TO THE TOP THE VALLEY'S DEVELOPMENT COMMUNITY LOOKING UP

INSIDE

Healthcare p. 14 USGBC Arizona p. 34 Valley Partnership p. 41

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Of brighter days, adaptive re-use, and mOney tO build

hen I took over as editor of AZRE magazine three years ago, the commercial real estate industry was in the throes of the recession.

There wasn’t much work out there … companies were cutting back on staff … some were even shuttering their doors. Of course, it made for compelling writing as those in the industry were really “thinking outside the box” just to survive.

With positive signs that the industry is making a comeback, it’s nice to be writing about new projects, companies hiring new employees and brokerage firms filling up vacant space.

I’m also excited about a relatively new wave that is hitting the Valley — adaptive re-use. In Central Phoenix alone, there are no fewer than three such projects: >> The Newton, at 3rd Ave. and Camelback: a revitalization of the old Beef Eaters Restaurant, opening this winter; >> Old School O7, at 7th St. and Osborn: a mixed-use renovation of the former Osborn School House, also opening this winter; >> The Yard, at 7th St. and Camelback: the Sam Fox/WDP Partners/RSP urban infill project.

You can read about these projects and others at azremagazine.com.

With a new surge in commercial real estate projects, it appears that financial institutions are opening their vaults to developers once again. That is one of the articles in this issue. Also seeing the ripple effect are the commercial title companies. That story is in this issue as well.

Also in this issue: AZRE’s annual supplement with Valley Partnership; and a visit with industry groups CCIM Central Arizona and USGBC Arizona.

Let the good times roll … and no, I’m not talking about my AZRE anniversary or my birthday in June.

Editor (602) 424-8844 peter.madrid@azbigmedia.com 2 | May-June 2013

President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Editor: Peter Madrid Interns: Emily Nicholson | Rochell VanDeurzen | Desiree Toli Huan Vo | Courtney Merz ART Art director: Mike Mertes Graphic designer: Lillian Reid Art intern: Alisha Hurst DIGITAL MEDIA Web developer: Eric Shepperd Web and graphic designer: Melissa Gerke MARKETING/EVENTS Manager: Whitney Fletcher Intern: Sabrina Spector AZRE | ARIZONA COMMERCIAL REAL ESTATE Director of sales: Steve Koslowski OFFICE Special projects manager: Sara Fregapane Executive assistant: Mayra Rivera Database solutions manager: Cindy Johnson AZ BUSINESS MAGAZINE Senior account manager: David Harken Account managers: Arthur Alcala Shannon Spigelman | Zoe Terrill AZ BUSINESS LEADERS Director of sales: Carol Shepard RANKING ARIZONA Director of sales: Sheri King SCOTTSDALE LIVING Account manager: Gail Rosier EXPERIENCE ARIZONA | PLAy BALL Director of sales and marketing: Scott Firle AZ BIG MEDIA EXPOS SCOTTSDALE SUPER EXPO/APRIL SCOTTSDALE SUPER EXPO/NOVEMBER Exhibit directors: Kerri Blumsack Tina Robinson | Marianne Avila

AZRE: Arizona Commercial Real Estate is published bi-monthly by AZ BIG Media, 3101 N. Central Ave., Suite 1070, Phoenix, Arizona 85012, (602) 277-6045. The publisher accepts no responsibility for unsolicited manuscripts, photographs or artwork. Submissions will not be returned unless accompanied by a SASE. Single copy price $3.95. Bulk rates available. ©2013 by AZ BIG Media. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from AZ BIG Media.

Special Thanks to the AZCREW2013

elite sponsors!

Your support is icing on the cake.

www.arizonacrew.org

CON T E N T S6 14 34 FEATURES

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New to Market Projects in the pipeline

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VALLEY PARTNERSHIP

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Healthcare Reform will create diverse, new delivery systems Finance Banks back in the business of lending for commercial projects

Executive Q&A Four faces of industry leadership

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USGBC Understanding the complexities of LEEDigation

After Hours Nate Nathan: Quite the ‘rock and roller’

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CCIM A designation of distinction for brokers

Project News A&P restoring historic building; JE Dunn completes solar station

On The Cover: RED Development brings the final phase of CityScape into focus with the construction on 224 residential apartments atop the Hotel Palomar. The Residences at CityScape mark completion of the $500M mixed-use destination after seven years of development.

COMING NEXT ISSUE

» » » »

Arizona Builders’ Alliance IIDA: Commercial interiors Industrial/office overview AzCREW

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Free AZRE app for android online with this QR code

42 48 62

VP developers taking new approaches to retail Chairman’s message: Karrin Taylor Community project: SARRC a success; Save the Family next up in 2013

3101 N. Central Avenue Suite 1070 Phoenix, Arizona 85012

(602) 277-6045 azBIGmedia.com

New to MarKet

eDUcatioN

HosPitalitY

1´ colleGe aVeNUe coMMoNs/sUN DeVil MarKetPlace Developer: ASU/Follett Higher Education Group (for Sun Devil Marketplace) General contractor: Okland Construction architect: Gensler | Architekton (College Ave. Commons); Gensler (Marketplace) location: College Ave. & 7th St., Tempe size: 137,000 SF (32,000 Marketplace)

3 ´ sewailo GolF coUrse Developer: NB3 Consulting/Landscapes Unlimited architect: Notah Begay III in conjunction with Ty Butler location: Casino Del Sol, 5655 W. Valencia Rd., Tucson size: 7,250 yards

The new $54.5M, 5-story building will serve as the new home for the Del E. Webb School of Construction, School of Sustainable Engineering and the Build Environment and University Tours. It will feature a 200-seat auditorium, classroom and office space and Sun Devil Marketplace. Estimated completion is 3Q 2014.

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With construction complete and tribe’s blessing, Sewailo is scheduled to open to the public in July. The 18-hole, par-72, desert oasis-style championship course was designed by PGA player Notah Begay III. The project includes a dual-ended driving range, multiple practice bunkers and a 2,000 SF teaching facility. Subcontractors include Pinnacle Design and Wood | Patel.

3 4 ´ ciBola Vista resort & sPa PHase iii Developer: Princeton Resort Group General contractor: Layton Construction architect: Lamb Architects location: 27501 N. Lake Pleasant Parkway, Peoria size: 92,500 SF This $16M resort will sit between Lake Pleasant and Phoenix,

2´ caMBriDGe PreParatorY acaDeMY Developer: Toltec Unified School District General contractor: Adolfson & Peterson Construction architect: Adolfson & Peterson Construction (turn-key design-build) location: NEC W. Alsforf Rd. and S. Sunland Gin Rd., Arizona City size: 95,000 SF The $14M Cambridge Preparatory Academy is a K-12 charter school that will accommodate more than 1,000 students on a 48-acre site. With an estimated completion date of August 2014, the project is being designed in-house and is expected to include multiple buildings housing classrooms, labs, multi-purpose space and a new gymnasium.

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and offer private courtyards, fountains, kivas, gardens and pools throughout. Phase III includes four, 4-story buildings connected by exterior walkways to an elevator tower topped with a gold dome. A new maintenance facility and restaurant will be built as well. Expected completion is 1Q 2014

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MiXeD-Use 5´ MaiN eVeNt eNtertaiNMeNt Developer: Main Event General contractor: A.R. Mays Construction architect: Hodges Architecture location: 8545 S. Emerald Dr., Tempe size: 56,600 SF

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This $8M entertainment center will include a ground up bowling center with restaurant/ bar, arcade, laser tag, meeting rooms, billiards and a party area. Subcontractors include Sun Valley Concrete, RML Electric and Dave’s Construction. Expected completion is 3Q 2014.

MUlti-FaMilY 6´ tHe coloNNaDe Villas Developer: Sun Health General contractor: The Weitz Company architect: Greey Pickett/ORB Architecture location: 19116 Colonnade Way, Surprise size: 96.132 SF

HealtHcare The $10M Phase I began 3Q 2012, and will include 96,132 SF. When complete, total additional development will be $65M and 350,000 SF. The campus will also include Sun Health’s new corporate headquarters. Subcontractors include Bold Framers; Hilty’s Electrical; JBS Plumbing; K.C. Air; S.P.G., Aero and Spray Foam Southwest.

Expected completion of Phase 1 is 3Q 2013.

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oFFice

7´ ZioN & ZioN HeaDQUarters Developer: Architekton General contractor: Richard Bistany architect: Architekton location: 464 S. Farmer Ave., Tempe size: Total new building size 14,241 SF Public relations firm Zion & Zion is getting a new $2.5M technologically advanced office at Farmer Studios II in Tempe.

Amenities will include open collaboration spaces, client hoteling stations, a state-of-the-art digital wall and a digital cafe/theater.

Subcontractors include Pioneer Masonry, Saguaro Steel, B&D Concrete, Arcadia Glass, Ducts, Inc., Canyon State Electrical and Santee Plumbing. Expected completion is 2Q 2013.

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8´ Northwest Medical center surgery expansion Developer: Northwest Medical Center General contractor: Layton Construction architect: Earl Swensson Associates location: 6200 N. La Cholla Blvd., Tucson size: 87,000 SF (61,000 SF new; 26,000 SF renovation) Northwest Medical Center is expanding its facility with a new, $46M surgical wing. This phased expansion not only adds additional surgery suites, but allows for growth. The expansion includes 16 new ORs, 2 neuro ORs, a cardiovascular OR and a hybrid OR. It will also include 24 new PACU bays. Subcontractors include Sun Mechanical, Enterprise Electric, Universal Wallboard and Tucson Commercial Carpet. Expected completion is 2Q 2014.

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iNDUstrial

9´ cYrUs oNe Data ceNter Developer: Capital Commercial Investments General contractor: JE Dunn Construction architect: Corgan Associates and PHArchitecture Broker: Jones Lang LaSalle location: Continuum, Price and Queen Creek roads, Chandler size: 200,239 SF Cyrus One’s $44.2M data center is the first company to locate in Continuum, a 152-acre science and technology business park in Chandler. The data center is expected to be the biggest of its kind in the U.S., with 110 MW of power delivered from an onsite SRP “Delta” substation. The ultimate build-out of the Phase 1 (of 7) will yield an 82,000 SF regional, Class A office building with 80,000 SF of raised access floor white space. Subcontractors include Banker Insulation, Bel-Aire Mechanical, Cookson Doors, DM Robinson, Kone, Phoenix Scaffolding, Ricor, Schuff Steel, Sun Valley Masonry and Urban Landscape Group.

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coNstrUctioN PlaNNiNG & ZoNiNG ´ city of ScottSDalE

As part of its city-wide outreach program, the City of Scottsdale has invited interested parties from the community to review and comment on the preparation of a Zoning Ordinance Text Amendment. The amendment primarily involves Article X, Landscape requirements that address the Downtown Plan but also includes modifications meant to create a more user-friendly and more contemporary Zoning Ordinance. Emphasis will be applied to ensuring such things as clarity, expectations, and administration. Information is available at scottsdaleaz.gov/ codes/zoning/update, or by contacting Dan Symer at (480) 3124218, or dsymer@scottsdaleaz.gov.

The City has also instituted a periodical for architects, engineers, and contractors as a way of keeping these professionals up to date on current building code and inspection information. The publication is appropriately called “Building Code and Inspection” and is generally meant to better inform the industry of any changes to the City’s codes or services. To subscribe go to eservices.scottsdaleaz.gov/listserve/.

´ toWn of florEncE

Earlier this year the Town of Florence voted to join its neighboring cities in the new Sun Corridor metropolitan planning organization (MPO). The MPO is being formed by the City of Casa Grande to serve in organizing transportation, air quality, and/or any other issues of mutual concern within the region. The MPO includes Casa Grande, Eloy, Coolidge, and Pinal County. At the time, Florence had specified that San Tan Valley, its closest neighbor, and Superstition Vistas planning area would be included in the MPO as well. Since then the Town has learned that San Tan Valley is already a part of the Maricopa Association of Governments (MAG) MPO. Based on that, Florence council members decided to change their initial decision and voted to join the MAG MPO. The council voted 6-0 to join with one council member absent.

´ toWn of QuEEn crEEk

The proposed development of Church Farms, a residential master-planned community that will eventually contain 20% of the Town’s population, has required the Town of Queen Creek to acquire a water provider for the project. As a result the Town is proposing to purchase and operate the H2O Inc. Water Utility and will hold a special election in May to ask voters to authorize the purchase. Once approved, the purchase would expand the Town’s current water utility capacity base beyond its Town borders. Th is would enable the Town to not only provide water to residents within Queen Creek who are currently getting water from the H2O Inc. utility, but would also enable the Town to provide water to the Church Farms development.

´ city of cooliDgE

Earlier this year the City of Coolidge, in a general plan kickoff event, presented an initial rough draft of the Coolidge 2025 General Plan for public viewing. The general plan land use text

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and map revealed a much simpler land use code that, in an effort to enhance the element of flexibility, has reduced the number of land use designations from 16 to just six that include agriculture, rural, neighborhood, downtown core, business/ commerce, and industrial. The process for development of the General Plan continues to move forward with monthly meetings to outline and discuss other elements of the plan such as open space planning and transportation. The next meeting, held in early April, is a presentation and discussion of the “Growth Areas” element of the plan. Questions and comments can be directed to Rick Miller, Director of Growth Management at rmiller@coolidgeaz.com or at (520) 723-6075.

´ city of avonDalE

The City of Avondale has created an interactive web based application that encourages the submission of ideas, provides an open forum for community discussion, and allows the City to highlight current issues or projects. Individuals wishing to utilize this site must create a user account at avondale.org through “My Dashboard.” The site, which has been named “A Voice,” offers citizens the opportunity to submit ideas and to provide opinions, comments, and/or support for community issues and planning. Participation is categorized by topic areas selected by city staff and include topics such as Amenities for Single Family Homes which seeks citizen input on a currently proposed update to the Planning Division’s Single Family Design Manual.

´ city of pHoEnix

Phoenix has recently initiated “Information by Mapped Address in Phoenix” or IMAP. IMAP is an interactive web mapping application that maps city resources, such as “find my council district,” “find a dog park” or “find all existing HOAs within a mile.” Th is is a single point of access to information that citizens, industry consultants, and developers most often contact the City for. To use IMAP go to phoenix.gov/imap/index.html.

´ toWn of BuckEyE

The Town of Buckeye has been preparing an amendment to the industrial development section of its Development Code.

The purpose of the amendment is to align the sections of the Code that affect industrial development with the Town’s economic development goals while preserving quality of life and protecting residential and other sensitive uses from any impacts of industrial use. Proposed amendments to permitted uses, bulk standards, and landscaping standards are intended to make the Code competitive with other communities in the Valley. The amendment was scheduled for planning commission recommendation in early April of this year. For additional information contact Development Services at buckeyeaz.gov.

The P&Z column is compiled by Dave Coble and George Cannataro with Coe & Van Loo Consltants, cvlc.com

Project News

Saddle Mountain Solar Electric Generating Station

´ JE Dunn, SunEDiSon complEtE $8.99m Solar ElEctric gEnErating Station JE Dunn Construction teamed with SunEdison to construct the $8.99M Saddle Mountain Solar Electric Generating Station in Tonopah. The project consisted of general earthwork and infrastructure work to convert the existing 160-acre farm field to a solar generation facility. The facility construction included driving more than 13,000 steel piles as the foundation support for the single-axis tracker system. This tracker system allows the nearly 60,000 photovoltaic modules mounted to it to track the sun from sunrise to sunset. SunEdison coordinated through agreements with the local electrical utility company to connect the facility to the electrical grid. At full capacity, the project supplies 15 MW(AC) to the electrical grid, enough power to supply the electrical needs of approximately 3,750 homes in the Southwest. Subcontractors included Auza Contracting, Bell Steel, Biddle & Brown Fence Company, Blount Contracting, Development Engineering, E Light Electric Services, Highway Technologies, IDG Innovative Development Group, On Site Surveyors, Recon, and Torrent Resources.

´ Dpr proJEctS incluDE Data cEntEr, maJor ExpanSion for BannEr HEaltH DPR Construction is on pace to complete two projects this summer, and is expected to complete major work at the Banner MD Anderson Cancer Center in Gilbert in 1Q 2014. DPR is removing and replacing a CR AH unit for APS. FM Solutions is the architect. Completion is expected in July for a build out of three data center suites at DLR Chandler J Suites. Digital Realty is the owner and DGA is the architect. A $62.6M, 110,904 SF expansion at BMDACC is underway. Banner Health is the developer and HKS and ccrd partners are the architects.

Subcontractors include Cannon & Wendt Electric, Comfort System USA Southwest, RCI Systems, Schuff Steel, M.G. McGrath and K.T. Fabrication.

´ aDolfSon & pEtErSon rEnovating HiStoric garfiElD BuilDing A completion date of 4Q 2013 is expected for the $9M Garfield Sacred Heart Housing renovation project in Phoenix which Adolfson & Peterson is building. The developer is DESCO and the architect is Biltform Architects for the 100,000 SF facility at 110 N 16th St. Garfield Sacred Heart Housing is a historic preservation project in the Garfield neighborhood. The existing Sacred Heart/Little Sisters of the Poor Home for the

Aged is a mid-century building constructed in 1960. It is large historic preservation/adaptive re-use project for a building that has been vacant for nearly 20 years. It will contain more than 100 units of affordable housing for veterans when completed.

´ lgE DESign BuilD, corE pickED for muSEum of tHE WESt LGE Design Build and CORE Construction were selected as general contractors for the 40,000 SF, $12M Scottsdale Museum of the West. Studio Ma is the architect. The project will be a state-of-the-art cultural center with a sculpture garden, theatre and other visitor amenities located in the Loloma Art District. LGE also completed construction on a 11,740 SF medical office for Sonoran Medical Centers in Phoenix. This design build primary healthcare facility features 19 exam rooms, a laser treatment room, eight nursing stations, back office support and a waiting area.

´ W.E. o’nEil BEginS Work on $4.5m gEriatric carE cEntEr in tucSon Construction began on the $4.5M geriatric and psychiatric care center that Tucson Medical Center and the Handmaker Foundation are teaming to build. General contractor is W.E. O’Neil Construction and the architect is Frank Mascia of Tucson’s CDG Architects. Construction is expected to take 12 to 18 months. The project will consist of two floors with 36 total beds. The first floor, with 20 beds, will be managed by Handmaker and will be a long-term care facility for patients with dementia and Alzheimer’s disease. The second floor, with 16 beds, will be licensed by TMC and will be available to geriatric patients and patients with psychiatric needs.

´ anotHEr 360,000 Sf to BE aDDED to macy’S gooDyEar cEntEr Macy’s is expanding its online order fulfillment center in Goodyear to accommodate sales growth. It is expected to invest more than $35M in capital in the project. The Goodyear facility, with 600,000 SF of space, was built by Macy’s, Inc. and opened in 2008. The expansion will add 360,000 SF. Construction is expected to begin this summer so the expanded facility, with a total of 960,000 SF, can be operational in spring 2014. The Goodyear fulfillment center currently employs more than 500 full-time-equivalent associates. With the expansion, it is expected to grow to more than 625 full-time equivalents.

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eXecUtiVe Q&a

BY PETER MADRID

Andrew Geier

M. Randall Levin

eXecUtiVe Vice PresiDeNt laYtoN coNstrUctioN co.

Years in commercial real estate: 12 Years at company: 9

ceo & MaNaGiNG MeMBer Mrl PartNers Years in commercial real estate: 32 Years at company: 3

Q: wHat was it aBoUt tHe iNDUstrY tHat attracteD YoU? a:Construction runs in the family. My dad owned a residential construction company and I learned the business hands-on, by pushing a broom. Eventually, in high school, I graduated to swinging a hammer. I guess it made quite an impression on me.

After college, I turned my attention to commercial construction.

Q: wHat was it aBoUt tHe iNDUstrY tHat attracteD YoU? A: As a commercial real estate developer and architect, the ability to create profitable, unique, and forward-thinking work environments which enhance a city’s urban fabric and daily work experiences are what attracted me to this industry. Having major roles in creating memorable properties are a bonus.

Q: How Has tHe iNDUstrY cHaNGeD siNce YoU starteD? a: Technology has transformed the way buildings are designed and built. The industry has moved from a paper-intensive, two-dimensional approach to using electronic and digital tools that help us fi nd answers and add value in three and four dimensions. Th is shift has greatly increased communication while reducing schedule durations and project costs.

Q: How Has tHe iNDUstrY cHaNGeD siNce YoU starteD? A: Technology has enabled us to increase our efficiencies and production. However, to complement these efficiencies and to ensure success, one must maintain and build new personal relationships each and every day outside of technology. I have learned to turn off the computer/smart phone and go shake a few new hands.

Q: wHat ProFessioNal acHieVeMeNt are YoU Most ProUD oF? a:My greatest achievement is when our teams are successful and our clients are happy. I know how much effort it takes from every team member to make a project successful; that’s why I count each one as my greatest professional achievement.

I’m fortunate to be surrounded by great people, producing countless achievements.

Q: wHat ProFessioNal acHieVeMeNt are YoU Most ProUD oF? A: Leading a quality team in a corporate environment to develop the award-winning and iconic Hayden Ferry Lakeside project at the Tempe Town Lake is a milestone in my career. The great recession has afforded me an entrepreneurial opportunity to put together a unique group of talented and contributing investors.

Jodi Malenfant

Bart Patterson

Q: wHat was it aBoUt tHe iNDUstrY tHat attracteD YoU? a: My father was in the steel business in Chicago, so I essentially grew up “in the industry.” I have had the honor and the privilege of working with him for more than two decades. He is the “godfather” of the steel industry. There is a very tangible result for the work that you perform. We can look at our projects that stand a testament to all of the hard work our team puts in.

Q: wHat was it aBoUt tHe iNDUstrY tHat attracteD YoU? a: I began my career in title and escrow due to my interest in real estate data and started a company in 2000 focused upon automating access to real estate information. When I sold that company to Data Trace, a subsidiary of First American, it left me with a great deal of knowledge about the title industry and without a job.

So, I decided to venture into the retail side of our industry with Clear Title Agency of Arizona.

PresiDeNt/owNer w&w strUctUral, iNc. Years in commercial real estate: 25 as a structural steel subcontractor Years at company: 25

Q: How Has tHe iNDUstrY cHaNGeD siNce YoU starteD? a: Construction in general has been hurt significantly by the economy. We have watched some really good contractors struggle and eventually close their doors. Our business is based on relationships and customer service. It is these relationships that are a true testimony to our survival during the economic downturn.

Q: wHat ProFessioNal acHieVeMeNt are YoU Most ProUD oF? a: My greatest achievement so far in my career is raising five children along with celebrating 25 years in the industry as a woman-owned business. It is possible to succeed in construction as a woman and as a mother. We should all leave our footprints to focus on a future that unlocks potential, shows the value of giving back to the community, and steer each other toward a path of success with respect and integrity.

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ceo clear title aGeNcY oF ariZoNa Years in commercial real estate: +15 Years at company: Founded Clear Title of Arizona in 2006

Q: How Has tHe iNDUstrY cHaNGeD siNce YoU starteD? a: Technology and business drivers have caused the biggest changes since I started. With the recession came REO and default service-related transactions that became our lifeline to recovery. And, the technology available today enables quick and broad access to data and services which create higher levels of productivity and quality.

Q: wHat ProFessioNal acHieVeMeNt are YoU Most ProUD oF? a: I continue to be inspired and greatly rewarded when I see the people I have the privilege to work with every day reach their potential. Leading a company is about the development of people and paving a path that allows them to do great things.

I couldn’t be more proud of what our team at Clear Title has accomplished.

aFter HoUrs

Knowing more about the people we work with is the fun side of the business. It helps start conversations and strengthens business relationships. To nominate a colleague, request an After Hours form from Peter Madrid, peter.madrid@azbigmedia.com.

PHOTOGRAPHY PROVIDED BY NATE NATHAN

Nate Nathan President, Nathan & Associates, Scottsdale With N&A for 33 years Born in Chicago Received a BA in History from Arizona State University Wife Tally; two children ages 16 and 20 responsibilities: Everything.

Favorites: Sports/teams: Arizona Cardinals, Chicago Bears Music: Jimmy Buffett, Jerry Jeff Walker, the Zac Brown Band Destinations: Favorite so far, Bora Bora Activities: Playing in my band, the Orange Blossom Ramblers. what did you think you’d be when you were growing up?: I had no idea. what accomplishment are you especially proud of?: My two boys. what would people be surprised to know about you?: My passion for cooking, music and friends. advice: Received: Never forget where you came from.

To Share: Everything you do is cumulative.

12 | May-June 2013

Visit AZREmagazine.com to see what Catherine does After Hours. Catherine Alcorn, president of CR Engineers in Fountain Hills, loves to listen to Johnny Cash, probably while she’s preparing a gourmet meal.

13

HealtHcare

BY PETER MADRID

A

NEW

Model of heAlthcAre the construction industry is bracing for the impact the Affordable care Act will have on delivery methods

W

ith much uncertainty over healthcare reform, it is hard to define what the final model will look like and how it will impact not only construction of new healthcare projects, but more importantly, renovation of existing facilities.

Already there are several initiatives that have been put in place that are driving the need to change what the healthcare delivery model has been up to this point, says Kristin Moore, director of healthcare for DIRRT Environmental solutions. “The main drive is to reduce healthcare costs while at the same time enhance the patient experience and improve patient outcomes and safety,� she says. "Healthcare facilities recognize that the patients have much different expectations, and that facilities have to compete for patients. Facilities are using several tools to support the changing face of healthcare including standardization of facilities and applying LEAN process to the design and evidence-based design."

14 | May-June 2013

In a report he presented at a recent National Healthcare Summit, Hamilton Espinosa, national healthcare leader for DPR Construction, says, "Healthcare is in the U.S. is undergoing the most extreme transformational paradigm shift in over a century."

CEO's, owners, developers, designers and consultants identified 10 trends. They included: 4 Hospitals will be smaller and more integrated at many levels; 4 Outpatient services will be the focal point for growth; 4 Speciality areas will focus on those area that are the most profitable; 4 Technology/data intensity will be crucial; 4 Renovation and adaptive re-sue will increase; 4 New delivery methodologies and best practices are being embraced.

What will be the trend in Arizona moving forward once healthcare reform goes into effect? “There will be little new hospital or bed construction in the

HealtHcare

Banner Health Center at Verrado Phoenix area beyond what is going on now,” says Craig Jensen, system director for New Site Development for Banner Health.

“The changes in healthcare are pushing services to the more accessible and cost-effective outpatient settings, reducing the demand for inpatient beds.

“Healthcare projects will be focused on outpatient facilities away from hospital campuses. There will be more, but smaller projects than MOB developers are accustomed to. Many will be smaller primary care facilities in outlying areas as Banner is currently building (Banner Health Centers). Larger multispecialty centers (100,000+ SF) located to serve a larger market area will either be newly built or put into re-purposed real estate that is properly located. Most will be single tenant buildings, many self-developed and owned by the healthcare provider.”

A focus on wellness And prevention With reform on the horizon, healthcare facilities will be designed more with wellness and preventative care in mind.

“This is the big trend for healthcare that has gained

momentum over the past several years,” Moore says. “A lot of healthcare systems are looking at how to get away from the reactive healthcare model that we find ourselves in today, to becoming a preventative healthcare model.

“There has been a big shift in how care is being delivered, and instead of having a large healthcare campus model where costs for that care is much higher, healthcare is getting closer to the community. There is a big shift from procedures that in the past would be treated as in-patient procedures to today being delivered as out-patient procedures.”

This translates to lower costs in delivering care as well as less facility restrictions. It also means that spaces that previously were commercial type environments, and being turned into medical surgery suites, MOB’s, and even stand-alone ED’s.

According to Jensen, the type of facilities that will need to be built: 4 Medical office buildings to provide uniform geographic coverage. As providers begin to sell network products — where they are at risk for the health and healthcare costs of the 15

HealtHcare

BY PETER MADRID

members — a need will exist to cover a market geography with a broader range of services. Banner’s fi rst health centers have been in the growth areas on the outskirts of Metro Phoenix and supply primary care services using employed physicians, diagnostics to support those services (X-Ray and lab) and have space for telemedicine consults with specialists and rotating specialists (e.g., a cardiologist every Tuesday from 8 a.m. to noon to see scheduled appointments). These markets are underserved currently, so Banner is meeting an important community need.

All are designed to grow as the community grows.

4 Larger health centers will be located centrally in larger populations where large entities such as Banner will offer multi-specialty services with full diagnostics and potentially pharmacy services to its patients. These offer a more one-stop shop, coordinated experience for patients. The larger buildings are also a more economical delivery site for these services (vs. smaller or individual physician offices widely scattered).

4 Facility designs are also changing to reflect a world where we are rewarded for health and wellness instead of treating sick people.

“The focus on wellness and preventative medicine is really part of a broader move towards fully integrated care, with everything from preventative care to ambulatory services provided through an integrated, accountable care organizations,” says Scott Peters, chairman, CEO and president of Healthcare Trust of America. “These organizations are 16 | May-June 2013

generally run through larger health systems or physician groups and come at the expense of individual physicians. From a real estate perspective, this means that we are working to provide our tenants with the larger blocks of contiguous space that these bigger groups require.

“We have also spent significant time and resources on building out our national asset management platform that enables us to manage our assets and control costs in a way that these larger tenants require,” Peters says.

Jensen adds that facility designs are also changing to reflect a world where providers are rewarded for health and wellness instead of treating sick people. Some impacts: 4 More space for wellness — non-clinical space for education, for case managers who are working directly with patients to keep them healthy; 4 Space for group visits for chronic illness (e.g., diabetes).

New models show group visits to be both effective for patient care and an efficient use of clinical provider resources.

4 Space for telemedicine – rooms equipped for remote consults with specialists so that we bring this care to the patient instead of the patient having to travel for routine specialty care.

4 Flexibility in designs so that interior configurations can be changed easily and quickly as care models evolve.

4 Waiting rooms could either shrink as more people schedule appointments and register online or become larger as

HTA’s Phoenix /Desert Ridge Medical Campus we have more insured people seeking care. We don’t yet have the information to see which scenario will become reality.

4 Designs must provide better operational efficiencies.

Designers need to understand our processes, technologies and objectives better than they have ever had to do.

flex And chAnge Flexibility and integrating technology into the physical design of healthcare projects will be vital, experts say. The care delivery models are still evolving and will change. “We will need to be able to make changes quickly,” Jensen notes.

One general contractor embracing flex design is McCarthy Building Companies. That delivery method is being executed at Banner Estrella, says Chris Jacobson, vice president of business development for McCarthy.

“We look at what is going to be most cost effective: concrete vs. steel frame,” Jacobson explains. “Saving money is a big deal, but you still have the needs of a healthcare delivery model now that in 10 years will be quite different. This investment today might represent a huge repurposing of space in the future.

What is an ICU floor now might need to expand into surgery space or space for less acute care down the road. What you need to have is a building that meets all the requirements of the future of healthcare.”

With so much uncertainty, healthcare facilities will look to create environments that will be able to respond to whatever

change is coming. They will be looking for environments that will support whatever technology changes are happening today, but more importantly in the future. Healthcare facilities are also seriously looking at the patient experience and are striving to create environments that are calming, design focused, healing environments that are a far cry from what has been done in past — the need to redefine the patient experience and substantially improve patient outcomes.

“It will definitely be a different kind of facility,” Jacobson says. “Healthcare will be adapting to smaller clinics with more open, multi-use space. Eventually these facilities will have the capability to flex in size according to population demands.

A hospital will have the ability to grow with the community rather than the other extreme — building big and waiting for the community to grow.”

leAsing And MoBs The passage of the Affordable Care Act will be a significant benefit to owners of MOBs such as HTA, according to Peters.

Most importantly, he adds, this reform is expected to add 30M to 40M additional insured individuals into the system.

These individuals will be seen in the lowest cost settings (which are MOBs) and will primarily be seen by the fast growing population of nurses, physician assistants, and skilled technicians who are becoming the first line of care.

The Affordable Care Act is also causing health systems to 17

HealtHcare spend more capital on core items that grow market share — physicians and technology, and less on non-core items like real estate.

“The movement of care from hospitals to an outpatient setting has been going on for some time and has definitely increased demand for MOB space over the last decade,” Peter says, “However, as an owner of MOBs in 27 different states, we have seen that there is a limit to this move towards retail settings in the suburbs. Most of the leading health systems and physician groups we work with still prefer to be located near health system campuses, where they can conveniently utilize the critical infrastructure, synergies, and critical mass a healthcare campus provides.”

The ramifications: 4 In light of consolidation, standard leases within medical office buildings will be larger (from 1,000-3,000 SF to 5,0008,000 SF for larger physician practices). We are seeing 15-year triple net leases and a lot of 7-year leases with TI that is higher and annual rent increases of 2-3%.

4 The real estate investment community, including the REITs, pension funds and private equity groups, will continue to hold medical real estate as a favored product class, along with multi-family and industrial.

4 Primary care physicians will increasingly be at a premium as tenants because they will act as gatekeepers in the postreform world.

4 The biggest user of healthcare are people with chronic conditions (about 145M people and projected to grow to 171M by 2030) so snow-bird states will show a lot of growth.

A new pArAdigM According to Donna Jarmusz, senior VP, Alter+Care, the Affordable Care Act will go down in the history books as comparable to the passage of Medicare in 1965. It has guaranteed that healthcare will remain one of the leading sectors of commercial real estate: the national vacancy rate for medical office buildings is 10.9%, much lower than the 12.5%

for the office sector as a whole. Approximately $5B worth of healthcare property traded in 2012, and that figure should rise by 10% in 2013.

“It is a restructuring of our system that will have longterm effect on healthcare providers and their balance sheets,” Jarmucz says. “One impact will be that scale will matter in the future. The new value-based purchasing and bundled payments that Medicare will make to providers will make it imperative for them to be part of more efficient, larger systems and groups. So smaller hospitals will merge or be acquired and small physician practices will join larger groups. So we are less likely to see new construction by small independent systems (say those with one or two hospitals or medical office buildings) and more growth by large providers, including academic systems.”

Jensen asserts that the real estate approach for ambulatory (outpatient) services will be similar to retailers for several reasons: 4 “The competition for outpatient services is much greater than it is for hospitals. People have many choices for outpatient services — look at your health plan and you will see a short list of hospitals and a very long list of outpatient providers, from primary care physicians to specialists to diagnostic services. We need to compete hard to have patients choose our outpatient services, much like retailers do.

4 “Our success in the future will be tied to how well (and cost effectively) we can manage people’s health. To do that, you need services and touch points that are accessible and convenient for patients. These make it easier for patients to maintain their health and treatment program and this increased compliance enables us to keep them healthy and out of expensive healthcare facilities (e.g., hospitals). Retail services use the same criteria in site selection — so we will be acting more like retailers in selecting the sites for our healthcare and wellness services. In fact, we use the same site selection software tools that many retailers use.

Banner Estrella during concrete construction phase 18 | May-June 2013

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PROUD OF OUR NATIONALLY OWNED MEDICAL OFFICE BUILDING PORTFOLIO 12.7 Million Square Feet Owned Nationwide

Healthcare Trust of America, Inc. | Corporate Office | NYSE:HTA 16435 North Scottsdale Road, Suite 320 | Scottsdale, AZ 85254 p: 480.998.3478 | f: 480.991.0755 | www.htareit.com A Leading Owner of Medical Office Buildings

HEALTHCARE TRUST OF AMERICA, INC. (NYSE: HTA) AS OF JUNE 6, 2012 Forest Park Medical Center - Tower Dallas, TX

GHS Patewood Memorial - Medical Office Building B Greenville, SC

Rush Oak Park Hospital - Medical Office Building

Banner Thunderbird Medical Center - Medical Plaza Glendale, AZ

Oak Park, IL

Healthcare Trust of America, Inc. (NYSE:HTA), a publicly traded real estate investment trust, is a fully-integrated, leading owner of medical office buildings. HTA listed its shares on the New York Stock Exchange on June 6, 2012. Since its formation in 2006, HTA has invested $2.5 billion in its portfolio comprised of 12.7 million square feet of geographically diverse properties in 27 states.

57% of HTA’s annualized rent base comes from “credit rated tenants” of which 40% are investment grade. HTA holds investment grade ratings from both Moody’s and Standard & Poors and ninety-six percent of HTA’s portfolio is strategically located on-campus or aligned with recognized healthcare systems.

March 2013

HealtHcare

BY PETER MADRID

MEDICAL MARVELS

NEW TECHNOLOGY IS THE GUIDING FORCE AS USERS & BUILDERS TAKE HEALTHCARE FACILITIES INTO THE FUTURE Healthcare. Technology. Construction.

With signs of an economic recovery in commercial real estate and healthcare reform on the horizon, construction is picking up for critical services as emergency rooms, imaging centers, and surgery rooms continue to need almost constant renovation and expansion.

While the recession put a halt to healthcare systems’ construction and expansion projects as capital budgets were slashed, there once again is a pent up demand for new, high-tech healthcare projects.

And according to the healthcare technology website aspenadvisors.net, specialty facilities such as cancer treatment centers and pediatric hospitals are also experiencing new building growth.

Modern Healthcare’s annual Construction & Design Survey indicates the healthcare construction industry continues to show signs of rebounding as a result of a resurgence in new projects, including work restarted post-recession.

The Central Arizona Society for Healthcare Engineering (CASHE) is an organization dedicated to advancing the development of effective healthcare facilities management in healthcare institutions.

Its members come from a wide range of disciplines including facilities maintenance and operations; plant engineering; clinical and biomedical engineering; technology management; planning, design and construction; safety; and security management.

proton beam concrete pour at Mayo clinic cancer center 24 | May-June 2013

They all have one common goal: to help healthcare facilities plan and deliver new construction or additions/renovations in the ever-advancing and ever-changing industry.

According to Chris Hilgemann, director of Facilities Project Development for Mayo Clinic and a CASHE member, most healthcare facilities — including medical office buildings and hospitals — take conservatively one year to develop the scope/business plan and gain approval and two to three years to design, construct, and bring into operation.

“With the ever-changing healthcare world in which technologies advance dramatically year to year, planning can be very difficult,” Hilgemann says. “During the early stages, it is important to look toward the latest medical and equipment technologies while planning the facility.

“You must keep an open mind that these will change, so, when developing my project cost estimates, I always include a reasonable contingency for each of design, construction, and equipment costs line items while avoiding escalating the project’s cost out of the range of approval.”

Hilgemann says this approach allows for some technology and/or scope changes while developing the design or constructing the facility. With limited capital available, he adds, it is difficult to ask for more space than needed, buts helpful.

Nick Dalba, who served as CASHE president in 2011, has been in facility management since 1977. He has held various design and construction positions at hospitals in California, a

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HealtHcare

cutting edge technology is evident at phoenix children’s hospital, which has the only pediatric cath lab in the southwest.

Pennsylvania and Arizona and retired as director of facilities at Banner Del Webb Medical Center in 2011.

During his time in the industry, he has witnessed the latest technological advancements — for both the user and the builder — and how they have brought added value to healthcare facilities.

“BIM (Building Information Modeling) is being used as a tool in the design and construction communities,” Dalba says. “The next evolution is taking this information and developing it so it can be used by the facilities staff to better manage daily operations and insure compliance with TJC and AHJ needs. Our CASHE members need to be an integral part of this development.”

As did healtcare facility members begin to overcome decreasing budgets both for capital and operating expenses,the purchase of new technology could help offset the loss of full-time employees, minimize unexpected failures and reduce operating expenses, especially utilities costs.

“One of my concerns is that even when new facilities are constructed or renovated, we are unable to provide the staff training necessary to effectively operate and maintain the new equipment and systems we are given,” Dalba says.

“Our CASHE programs are a great source of education for our members but there are staff at other levels in our organizations that are unable to participate in any

26 | May-June 2013

educational sessions due to time or money considerations.

“Our affi liate members need to continue to design, construct, service and equip our hospitals to assist facility members and their organizations meet the many changes facing our future healthcare delivery system.”

So what will healthcare facilites of the future look like as new technology finds its way to the ERs and the contruction office?

Hilgemann says healthcare facilities of the future will be vertical, multi-use buildings (I-Occupancy with a mix of B-Occupancy) designed for easy navigation and with clear way-finding.

“They will be very patient-friendly and inviting with much use of the arts and natural elements (courtyards, gardens, trails, etc.) to distract patients and their families from their current medical struggles,” he says.

“Buildings will need to be easily remodeled to accommodate the myriad of technological and medical changes. They will need to translate well to the use of eHealth and be just one tool to make patient care more adaptable to the home environment with eConsults. Patient exam rooms will need to have technologies installed to accommodate virtual examinations allowing the patient to remain at home or at a far distance from their caregiver.”

Arizona’s Premier Brokerage and Healthcare Real Estate Firm :: M egan Sherwood, CPM Executive Vice President Brokerage Services

: : P er ry gabuzzi Vice President Brokerage Services

:: P laza Companies announces the expansion

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of its powerhouse medical real estate team.

Adding to Plaza’s three decades as a leader in the medical office marketplace, the esteemed professionals you see here have recently joined the Brokerage Services Team. They join Plaza’s Margaret Lloyd, Melynn Wakeman, Howard Schwiebert and Daniel Schwiebert to further enhance Plaza’s services. Their extraordinary experience and depth of knowledge in the industry make Plaza Companies a true center of gravity in medical office real estate.

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FiNaNce

BY PETER MADRID

BANK STATEMENT As Metro Phoenix comes out of the recession, financial institutions are back in the business of lending

W

ith the general consensus that Phoenix is coming out of the recession faster than most big cities in the U.S., banks are starting to lend again on commercial real estate deals.

“We are seeing more banks back in the market lending, and underwriting is starting to get more aggressive,” says Pat Rourke, market president of the Phoenix office of Bankers Trust. “Many lenders remain cautious, but we are seeing activity from a larger number of banks.

“Multi-family and industrial properties remain strong because supply and demand are not in balance,” she says. “There is more demand than supply, and the result is a shortage of multi-family and industrial properties. Retail and office space were overbuilt and still need to catch up as they relate to supply and demand.”

As proof, Rourke says, Bankers Trust is currently analyzing a small spec project

28 | May-June 2013

with the right sponsorship in the right area with conservative leverage.

“We would not have even considered this during the past four years,” she explains. “The project is in the Deer Valley airport area.

Light industrial space in this area is in demand compared to the supply that is available. Th is is a result of the area’s great freeway access and airport location, as well as its central location in Phoenix.”

According to industry fi nance experts, Metro Phoenix is coming out of the recession based on several factors: Commercial and residential real estate values are increasing Rental rates are increasing and vacancy rates are decreasing for commercial projects — this in turn contributes to increased value Jobs are being created and added Residential real estate market data is all positive. This includes new home

• • • •

starts, listings, increases in median home price, and other factors.

“We have been able to fi nance deals in the past six to 12 months that weren’t fi nance able during 2010/11,” says Scott Holland, managing partner at Keystone Commercial Capital. “On these deals, the fi nancial metrics didn’t change; the lender’s perspective did.

“Ironically, when assets were trading at 9% caps, lenders were still so shell shocked from the market upheaval that they were unwilling to provide traditional

FiNaNce

leveraged financing (i.e. 70% LTV). Now that the market has firmed, these same assets are trading at 7% caps. Lenders are back in providing traditional financing.

This equates to a 25% increase in proceeds on same asset. However, the story on available financing should really be centered on current rates. We are routinely financing transactions on 5- to 10-year terms with rates from 3.25% to 3.75%, which is unbelievable to me based on my nearly quarter century in the business.”

Capital Markets Director Brandon

Harrington says his firm, Cohen Financial, has seen a big up tick in lending from all capital providers. Banks, he says, have been looking to lend more on a short term basis such as construction loans and floating rate loans. If a client needs more than a 5- to 7-year fixed rate with non recourse than life companies, the GSE’s and CMBS usually make a better fit, he adds.

“We recently financed a suburban office in Surprise at 75% leverage with a 10-year term, 30-year amortization on a non recourse basis,” Harrington

says. “The loan was non recourse and the borrower was a foreign national and this was their first purchase in Arizona. Office is one of the tougher products to finance, especially when the sub-market vacancy is 20% to 25% in some cases. We were able to convince the credit committee that this office was located at one of the best locations in Surprise which was why it was preforming better than the market which allowed them to underwrite a much lower vacancy.” a 29

FiNaNce Jim Belfiore, President of Jim Belfiore Real Estate Consulting, says lenders are much more bullish on the commercial front; more specifically, residential development/subdivision acquisition and financing has picked up dramatically over the past six months.

“Builders of all sizes and types, both newly-established and existing, are finding multiple options for debt,” he says. “Equity has been plentiful for a considerable time, but the debt is a welcome addition for the industry. Most of the debt available in the market has been by large regional institutions, although larger banks have weighed in. The most active subdivision lenders today include Meridian Bank, Alliance Bank of Arizona, M&T Bank, Wells Fargo, and First Scottsdale Bank.”

According to David DeVictor, Senior VP for Wells Fargo Commercial Real Estate, there appears to be a substantial increase in capital flows into the real estate sector over the past 6 to 12 months. Increases, he says, are coming from community banks to large national institutions as these firms are trying to grow their book of business as well as respond to improving real estate fundamentals.

“Regarding the lending environment, I believe that Wells Fargo is an active lender in the Phoenix market and around the country,” DeVictor says. “We have specialized lending platforms that cover all types of real estate customers including private

HOT PROPERTIES

developers, REITS, and the hospitality industry. Right now the ‘hot’ property types remain multi-family and industrial/ warehousing for construction.”

With most of the commercial real estate stress in the rearview mirror for banks, they are now becoming more active and looking for new transactions, says Ann McCartney, Senior VP/ Private Banking for Enterprise Trust & Bank.

“It appears to me that there is more capital available than good projects to finance,” she says. “Some lenders, especially life companies, can be sub-3% for 5-year term loans at 65% LTV. Several banks can also offer 5- to 10-year fixed rates. The resulting competition is forcing LTV ratios to increase and easing other underwriting criteria.

Life companies and CMBS lenders saw the most dramatic increase in 2012 with banks also increasing originations.

MetLife Insurance alone originated $9.6B in CRE loans last year, McCartney says. CMBS lenders are continuing to be active, with $20B closed in January and February and another $6B in March (compared with a total CMBS origination volume of $33B in 2011 and $48B in 2012). Banks are also more active, with higher targeted funding goals for 2013.

“Many banks are actively lending to strong sponsors and projects with good fundamentals,” says Jim Pierson, principal at Legacy Capital Advisors. “Life insurance companies and CMBS lenders and banks all have larger allocations for 2013. Fannie Mae and Freddie Mac are coming off record multi-family volume in 2012 and are anticipating somewhat lower production this year.”

Property types financial institutions are seeing as actively selling or being bought:

“Of the four traditional asset classes (office, industrial, retail and multi-family), it’s no secret that multi-family asset values have significantly rebounded during the past 24 months.”

— Scott Holland

30 | May-June 2013

“Multi-family still takes the prize for the most desired property type.

However, any property leased to a credit tenant is also highly desirable to finance.”

— Ann McCartney

“Multi-family, industrial, retail, hotel, MHC, self storage, office in that order.”

— Brandon Harrington

FiNaNce

BY PETER MADRID

RIDING THE WAVE With an improving economy and banks lending once again, commercial title companies are seeing an uptick in their business

I

n the world of banking and finance, the “trickle down effect” can either be positive, or negative.

As financial institutions are back in the business of lending for commercial real estate projects, it’s a positive thing, and commercial title companies are benefitting.

And although new construction activity still has a ways to go before the industry is “back to normal” and traditional portfolio lenders are still proceeding with caution, some title companies are seeing increased lending activity for strong borrowers with well-conceived projects in most all sectors, particularly multi-family and industrial.

“Two to three years ago, the majority of the title work that we performed was in the form of trustee sale guarantees that were used in connection with foreclosure proceedings,” says Brett Hopper, executive vice president at Thomas Title & Escrow. “Over the past year or so, much of the foreclosure work has dissipated as lenders have worked through most of their bad debt. We have been busy with lender REO sales over the past couple of years, but that work is also slowly being replaced with more normalized commercial resale activity.

32 | May-June 2013

West Sixth Apartments in Tempe “Although our business has continued to grow fairly dramatically over the past several years, our mix of title work has changed significantly,” Hopper says. “Today we are seeing an uptick in nearly every sector of the market and commercial resale activity is now the majority of our title and escrow work.

Investors have started to sell their previously acquired distressed assets, and the homebuilders have all become very active over the past nine months or so.

“The multi-family sector has been hot over the past couple of years; and more recently we’ve seen increased activity in the office, industrial, and even retail sectors. In addition to that, given the historically low interest rates, we have also seen an increased amount of refinance activity.”

According to Jim Clifford, president and COO at Clear Title of Arizona, end users and buyers have seen an increase of SBA and conventional fi nancing. In addition and maybe just as important, he says, there is “obvious excitement and enthusiasm on behalf of lenders. They are not just refi nancing old deals; they’re aggressively looking for new business and creating new loan programs.”

FiNaNce

Clifford says Clear Title has been busier and as has grown it Commercial Escrow Department with the addition of a senior escrow officer in November 2012.

“I hesitate to call anything ‘normal’ anymore, but it is nice to see that it is more common for an appraisal to come in at or above the contract price, and the lender underwriters seem to be in agreement with those appraisals,” Clifford says.

Most of the financing with institutional lenders has been single tenant deals, and/or owner/user deals, say Linda Bruce, assistant vice president, Commercial & Banking Business; and Patti Graham, VP/Branch Manager with Fidelity National Title. Institutional lender refinances are occurring, Graham adds, with a fairly high number of equity to loan amount.

“Our business has increased over the last year both locally and nationally with a healthy pipeline,” Bruce says, “Not where we want to be just yet, but certainly moving in the right direction.”

Adds Phyllis Dumond, vice president of commercial development, Stewart Title-Arizona: “We have seen a tremendous increase in the number of bank financed sale transactions rather than cash. However, refinance is still the leader. We are actively working with a number of lenders to reach the brokerage community with their ‘We’re ready to lend’ message.”

At Clear Title, Clifford says his firm had a transaction at the end of last year in which the buyer of a large downtown office building was actually able to secure a 90% loan from a bank.

“We haven’t seen that sort of thing is some time,” he says. “Of course there are always nitty gritty details to a good lending success story, like guarantors, intended use, tenants and cash flow. But I think the real success story is that banks are now listening to the story.

“It has been quite a while since the ‘story,’ or purpose of the loan, has added value to the approval of a loan. It’s nice to see less work-out deals and more growth deals.”

What is Clear Title seeing at closing in terms of type of financing?

“Being active in the commercial title industry gives us a fairly broad perspective,” Clifford says. “We see a good sample of what is going on in the market whether it is money, property type, or demographics of buyers and sellers. Cash is still very active, but all other aspects of lending are increasing, too. Private money, seller financing and especially SBA financing are becoming increasingly more popular. With all the development going on in Metro Phoenix, it is making it difficult not to get excited and we are seeing some nice movement.”

Hopper says Thomas Title & Escrow handled the escrow on the recent sale of an office building on the SWC of Camelback and 24th St. The building sold for $81M, one of Arizona’s largest office sales in 2012. Thomas Title also handled the escrow on several other large office sales in 2012, including:

Brett Hopper

¶ The sale of Promenade Corporate Center, home of Thomas Title’s corporate headquarters, 256,000 SF, North Scottsdale, $56M

¶ The sale of MAX at Kierland,

a 6-story office building, North Scottsdale, $79M

¶ The sale of Orbital Science’s office complex, Chandler, $19.5M

In addition to the office complex closings, Hopper says one of the more interesting transactions — and undoubtedly one of the most complicated deals done to date in Arizona history — involved the sale by ML Manager to Zaremba Group of the partially completed Centerpoint condominium towers in Tempe. That transaction, he says, presented many complicated title issues to work through, including nearly 80 existing mechanics’ liens, 10 seller entities, four parties in bankruptcy, and 122 title commitment requirements to satisfy. Closing that transaction required a lot of creative deal structuring and perseverance, which ultimately resulted in 65 documents being recorded at the closing “In many ways, the failed Centerpoint transaction was the icon of the collapsed Arizona real estate market,” Hopper says. “Everyone who flew into Sky Harbor crossed over these partially completed, boarded-up towers. All of the parties involved worked tirelessly for months to address these issues and ultimately close the transaction.”

The project was subsequently completed by Zaremba Group and is now called West Sixth.

“Seeing that high-visibility project come to fruition has sent a very positive message to the rest of the country that Phoenix is back,” Hopper says.

Phyllis Dumond

Linda Bruce

Jim Clifford 33

UsGBc ariZoNa

BY PETER MADRID

Understanding

LEEDigation The fast-growing trend of GREEN building spurs new issues for the commercial real estate industry

W

ithin the legal industry, according to Marc Erpenbeck of Snell & Wilmer, a claim related to litigation about the USGBC LEED system is often referred to as “LEEDigation.”

Despite the fact that green building has been a fastgrowing trend throughout the country and specifically in Arizona, he says, green building specific LEEDigation has lagged behind. "There are significant green building potential liabilities that I have no doubt will play out in arbitrations and the court system, yet there are simply few reported cases at this time.

“LEEDigation generally consists of five categories of potential claims: construction defects arising from new green building materials, certification issues, failure to meet specific requirements for green building mandates and incentives, misrepresentations of green building benefits, and regulatory/green building code issues,” says Erpenbeck, whose practice is concentrated in both transactional and

Audubon Center 34 | May-June 2013

litigation matters in the areas of environmental, construction and real estate law.

“In Arizona, the efforts are frequently focused on energy efficiency (particularly with respect to air handling systems during our extreme heat) and water management — after all, we do live in a desert,” he adds.

With new materials, for instance, green building is driving new technologies to the marketplace because of their “green” or sustainable benefits, including potential points that a project may receive under the LEED system. With the design, specification, and installation of new products comes risk that the products will not perform as designed or marketed or maybe they simply will not hold up over time, Erpenbeck says. There are many product failure related claims in construction litigation when new products come to market, such as EIFS (synthetic stucco), Chinese drywall or polybutylene piping. Many times, he adds, it takes a number of years before the defect becomes apparent.

“With new and untested products, there is always some risk,” Erpenbeck says. “Some problems are more apparent like a claim made related to One Rockefeller Park in New York where a $1.5M lawsuit was made by condominium owners because the building’s much-heralded ‘green’ heating system consistently fails to provide adequate heat, and that the actual performance is much different than was promised.

In addition, delays in obtaining these more unique and new materials is also more common and can significantly impact the construction schedule as some of the products are not available at your local building supply stores.”

Certification and failure to meet required certification is a relatively unique element of LEEDigation, and centers on the fact that a third party through USGBC Arizona to certify the points is required for LEED certification.

Sometimes buildings are “built to LEED standards,” and sometimes they are actually certified and certified to various levels, Erpenbeck says.

“We have experience on several LEED certified buildings in Arizona,” he explains.

“When certification is sought and or required (by contract, code or as part of fi nancing/incentive program) there is always risk that the third party will not

Marc Erpenbeck

Carla Consoli

transactions, Erpenbeck says Snell & Wilmer has done extensive work with many corporations in Arizona regarding the acquisition and construction of green spaces. The construction contracts include both typical and atypical modifications to address any specific risks with green building.

“We also have clients in Arizona that have modified their leases to make them more ‘green’ to conform to the company’s policies,” he says.

As with most things in life, proof is what counts the most. How well does “green building” work?

Does it work in our own backyard? And what does a green building look like and — marc erpenbeck “do” for us? snell & Wilmer The answers can be found at the Nina Mason Pulliam Rio Salado Audubon In addition, owners who are new Center at the edge of the Salt River to the process do not realize all of right in Downtown Phoenix, says the various rating systems that are Carla Consoli, Partner and Practice available for homes, commercial Group Leader for Lewis and interiors, core and shell, new Roca. The Center, LEED Platinum construction, schools, healthcare, retail, or existing building operation certified in June 2010, is home of the Arizona state office of the and maintenance.

National Audubon Society.

“USGBC Arizona is a great “As a lawyer — an Environmental source of education and has been and Natural Resources lawyer at responsive with respect to all of that — travelling from a downtown these issues,” Erpenbeck says.

Misrepresentation of green building high-rise office building, I look forward to meetings at the benefits, also known as “green Audubon Center,” Consoli says. “I washing,” is grounds for litigation. walk through the front door leaving Th is is typically referred to as the the hustle and bustle of urban life misleading of consumers regarding and entering a transformed former the environmental practices of a auto junkyard home to a pollinator company or the environmental garden, habitat for native birds benefits of a product or service. and other wildlife which is truly “The Federal Trade Commission transformative. has taken the issue seriously and “Set against the Downtown has issued stricter requirements on appliances and labeling and last year Phoenix skyline, it proves that natural and urban landscapes can coexist,” issued a Green Marketing Guide,” Consoli says. “Isn’t this truly the Erpenbeck says. mission of green building?”

With regard to contracts and agree with the project owners and participants.

“When the level of certification desired or required is not achieved, the damages could be significant such as lost incentives or tax benefits, failure to obtain green financing, lost tenants, etc. The same can be true of a delay in the certification or additional expenses that are required to revise the design to pick up more points in another area when not as many points as anticipated were actually received.”

“in arizona, the (leed) efforts are frequently focused on energy efficiency and water management — after all, we do live in a desert.”

UsGBc arizona initiatives: 

Each branch will adopt a selected school and work with them to achieve a higher level of sustainability to teach/ learn as they mature the program.



Start a multi-organizational intern program that will allow businesses to establish ongoing annual Internship programs with Arizona universities.



Develop a dashboard, almost complete, and have at least 6 cities and/or counties participate in this year with a focus on documenting where each currently is on sustainability issues and where they can focus ongoing annual improvement. We hope to make this a feature at our upcoming Heavy Medals Banquet. We will partner with ASU to help collect and evaluate data.



Acknowledge LEED Certifi ed Building Owners and their support teams for the time period of April 2012 to April 2013. We will show a short video on each winner so they can teach banquet participants their “Lessons Learned as well as their Best Practices.” ASU students will be assisting us in creating these videos.

We will also feature three future LEED Certifi ed Buildings so we can give a little bit of a taste to next year’s banquet.



Develop a multi-organizational approach to understanding what legislation is being developed that assists in the cause of sustainability.

Currently IFMA, BOMA and USGBC have mutually purchased software to assist them in achieving this goal.



Redo our website to make more presentable and more up to date.

 Develop a universal “Sustainability Map” that all organizations in Arizona can bless as an appropriate direction to take.



Hire an Executive Director.

— curtis slife,

usgBc Arizona president 35

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cciM

BY PETER MADRID

TITLE SAY S I T ALL

CCIM designation signifies a recognized expert in the commercial and investment real estate industry

W

hen it comes to professional designations in the commercial real estate industry, few can argue that one of the most prestigious is Certified Commercial Investment Member, or the more recognized acronym, CCIM. According to the organization’s website, “A CCIM is a recognized expert in the commercial and investment real estate industry. The CCIM lapel pin is earned after successfully completing a designation process that ensures CCIMs are proficient not only in theory, but also in practice. This elite corps of CCIMs includes brokers, leasing professionals, investment counselors, asset managers, appraisers, corporate real estate executives, property managers, developers, institutional investors, commercial lenders, attorneys, bankers, and other allied professionals.”

To earn the title, CCIMs must complete a designation curriculum that covers essential CCIM skill sets including 38 | May-June 2013

ethics, interest-based negotiation, financial analysis, market analysis, user decision analysis, and investment analysis for commercial investment real estate. CCIMs must complete a portfolio demonstrating the depth of their commercial real estate experience and must demonstrate their proficiency in the CCIM skill sets by successfully completing a comprehensive examination.

The CCIM designation is backed by an intense investmentfocused curriculum, says Marina Hammersmith, CCIM, with Ensemble Real Estate Solutions.

“The education I received from CCIM has given me a deeper understanding and perspective into the ‘whys’ behind investment decision making.

“Because of the CCIM education, I have a greater knowledge base that allows me the opportunity to provide a broader range of services to our clients. The more services we can offer with accuracy and expertise, the greater impact to the bottom line.”

What she enjoys most about CCIM Central Arizona, Hammersmith says, is “the camaraderie with like-minded real estate professionals. The local CCIMs are an amazing group of talented people.”

Carrick Sears, CCIM, with Sperry Van Ness, says having the designation impacts him in a positive way. He is the only CCIM in his office.

“If a new client of the firm is aware that we have a CCIM on our team, it makes our office come across as more professional and that client may insist on having me represent them or be a part of the transaction,” Sears says. “It makes me a very value-added component to our firm.

“I would expect to bring in more business into the firm because I have my CCIM through networking with other CCIM brokers as well as potential clients that are aware of the benefits,” Sears says. “Obtaining the CCIM designation helped me to step up my game in commercial real estate.

I was provided with tools to analyze not just one, but a portfolio of investments, allowing me to guide my clients on multiple facets to enable them to make educated decisions on acquisitions and dispositions.”

Andrew Cheney, CCIM, says the designation helps him nationally in building credibility within the 46-office Lee & Associates network, as well as with other national brokers with whom he works.

“It shows I’m serious about my career and my clients,” Cheney says. “The designation further solidifies that my firm is made up of talented professionals. The more complex and significant assignments I work helps raise both my and the firm’s profile.”

What does he enjoy most about CCIM Central Arizona?

“The different speakers that come to the monthly meetings,” he says. “Also, the education I’ve received on relevant economic and real estate matters is incredible.”

According to Barbara Lloyd, CCIM, of NAI Horizon, part of a leading investment sales team, the designation increases her team’s credibility within the firm and through NAI Horizon’s global network.

“Holding the CCIM designation sets the bar higher as it pertains to being able to provide increased skill sets and resources for our clients,” she says. “Not only do we, as CCIM designees, have access to a broad selection of investment

Marina Hammersmith

Jim Keeley

Tyler Wilson

tools, we also have access to the entire CCIM global network of professionals, allowing us to broadly expose our listings as well as draw from the knowledge of our peers.

“If a client is seeking someone holding the CCIM designation or a fellow broker is looking to refer business within the CCIM network, our office has CCIM designees in all property types.”

Jim Keeley, CCIM, founding partner of Colliers International’s Scottsdale office, adds that the CCIM designation indicates to both clients and brokerage professionals that he has the knowledge, experience and skills to be a valuable resource and help them make better business decisions.

“Industry leaders often prefer to work with CCIMs due to our in-depth knowledge, education and ethical business practices,” Keeley says. “The CCIM designation provides brokers with instant credibility.”

Adds Tyler Wilson, CCIM, with Cassidy Turley: “It has made me a more well-rounded broker. The designation has given me the chance on my team and within my firm to carve out a niche for myself as an analytical, data-minded broker who not only can tell the story, but can back it up with facts and numbers.”

Of his association with the Central Arizona chapter, Wilson says: “I enjoy the quality speakers that come to many of the events and give us their perspective.”

Andrew Cheney

Barbara Lloyd

Carrick Sears 39

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Looking Ahead To The Next 25 Years

2013

Special Section:

Retail On The Rise Chairman's Message Diversity of Dollars Partner Profiles Crucial Collaboration Community Project

p 42 p 48 p 50 p 54 p 58 p 62

PUBLISHED BY

Valley partnership

BY PETER MADRID

retail on the

REBOUND Valley Partnership developers taking new approaches to attracting shoppers, filling vacant space

I

t’s no secret that the future of retail will have a direct impact of future economic well being, both locally and nationally.

As the Internet changes the way Americans shop, so, too, are developers changing their strategy. With Valley Partnership the advocate for responsible development representing the commercial real estate industry, this is an issue some of its partners face.

“Brick and motor will never be replaced as a method for shoppers,” says Stan Sanchez, president of DeRito Partners.

“Some things can not be purchased on the Internet. What we are seeing is retailers making adjustments to their business models in order to keep profitability and have the market presence that they need. Internet sales have increased and will continue to do so. This will have an effect on the what type of retail fills shopping centers.”

Owners now must look at retail through a different window as the face of retail is changing and new types of retail tenants are being created. Shopping centers are being merchandised differently. And according to Sanchez, the future of the traditional shopping mall is bright.

“After all,” he says, “we are country of shopkeepers, and this has been the backbone of our economy for years. Adjustments 42 | May-June 2013

CityScape will need to be made to keep up with the ever changing world and the needs of tomorrow’s shoppers.”

The retail market in Metro Phoenix appears to be rebounding and showing very signs. Vacancy has dropped a full point and rents have stabilized.

Of course, the retail market is tied to the overall market, and in the broadest sense, as housing is improving, Metro Phoenix is seeing more new, quality jobs. As a result, the local economy is gaining some momentum.”

“This sense of upturn is prompting some new retail opportunities weighted toward targeted infill and repositioning of existing properties,” says Keith Earnest, Vice President of Development for RED Development. “ We also are noting some specific retail demand, though it is not a big upsurge.

For instance, right now we are bringing a new L.A. Fitness to RED’s Paseo Lindo property in Chandler and creating room for a Whole Foods at The Shops at Town and Country and a new major retailer at Aspen Place at the Sawmill in Flagstaff.”

Metro Phoenix is a great place for retail, Earnest says, and the in-person shopping experience is a central part of any retail brand.

More and more, retailers — and probably shoppers as well — look

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Valley partnership

The Pavillions at Talking Stick at in-store and on-line shopping as one increasingly integrated channel, with more synergies than ever before. Retail sales in this market generally have been increasing in recent months as the economy has been improving.

In reality, rents and vacancy rates have remained relatively fl at over the past three years in Metro Phoenix with the current market providing developers the opportunity to purchase infi ll locations at a reasonable price, says James R. Pederson, senior leasing agent for the Pederson Group. As a result of this trend, development opportunities in underserved markets will evolve, relying less on housing growth.

“Our company redeveloped many retail facilities during the economic downturn of the early 1990s,” Pederson says.

“Almost all of these redevelopment projects were of an infill nature, and continue to be successful and profitable today.”

The retail market in Metro Phoenix is seeing an increase of infill — or adaptive re-use, or re-purposing — projects.

As the lending market continues to be weak for new retail construction, retailers are looking for high-quality, existing space to expand. Prospective tenants are reducing the size of their footprint and paying more attention to highly-visible infill locations, while landlords are exploring effective strategies to replace “big box vacancies” with smaller tenants.

“In the restaurant sector, operators looking to expand are seeking second generation locations to save on start-up costs,” Pederson says. “Restaurant owners are willing to take gray-shell space, with an inducement of receiving tenant improvement allowances north of $60 per square foot. Grocery stores are not paying more than $8 per square foot for build-to-suit locations.”

Adds Earnest: “We see a great deal of potential in this market for repositioning retail assets so they are a better fit for their communities and for retailers. We’re doing just that with a couple of prime pieces of real estate — The Shops at Town &

Stan Sanchez 44 | May-June 2013

James Pederson

Keith Earnest

Country in Phoenix and Hilton Village in Scottsdale. But we also are involved in new construction, such as the addition of the Hotel Palomar to CityScape Phoenix last year and, now, we’re adding a residential element to this successful downtown Phoenix development.”

The current type of vacancies, along with sizing, have an impact on what type of users can fill the spaces, Sanchez says.

Landlords, therefore, have had to become very creative and think outside of the box in order to fill vacancies with tenants.

“With the current rental rates we do not expect to see new ground up development in the near future,” Sanchez says.

“Developers will need to get comfortable with rental rates prior to turning over any dirt. We are seeing users cherry-picking in-fill sites and building from the ground up to capture trade areas that fill voids.”

Because of the proliferation of Internet shopping, brick and mortar retailers have had to become more effective in creating a positive shopping experience by providing shoppers with better customer service, improved store layout, and bargain in-store offers. In order to be competitive in the marketplace, smaller retailers have designed and implemented new sales strategies to combat the big box competitors. Shoppers now can choose between bargain buying and a higher quality shopping experience.

“The Pederson Group has put a premium on attracting new tenants that fill a specific trade area’s shopping needs,” Pederson says. “New and innovative retail concepts provide shoppers with another reason to visit our centers.

The shopping experience is as important as the items the customers are buying.”

It is likely that there are going to be fewer regional and power centers built over the next 10 years due to their higher costs, higher CAMS and higher rent. Outlet malls and specially-oriented neighborhood centers are making a comeback because of their affordability to both developers and retailers.

“We think retail real estate is a thriving platform for retail when we can deliver beautiful properties with a great mix of amenities, an inviting merchandise mix, and — increasingly important — compelling dining opportunities,” Earnest says.

“It’s the social dimension of the shopping center — the place to grab dinner after work with your friends and see what’s new — that has become a strong part of how we like to spend our free time.”

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Valley partnership

BY PETER MADRID

KARRIN TAYLOR Chairman Q&A Karrin Taylor was invited to serve as an exofficio member of the Valley Partnership Board in 2008 to bring her expertise in land use and policy issues. She was subsequently elected to the Board in 2009, then served on the executive committee. She assumed the duty of Valley Partnership Chairman this past January. Taylor is Executive Vice President of DMB Associates, an Arizona-based real estate company. Over the past 6 years she has led the entitlements for the company’s signature communities including DC Ranch, Silverleaf, Verrado, Marley Park and their newest community at Eastmark. Her role has expanded to include the public affairs and economic development initiatives for the company.

Q: How important is it to be an advocate for the commercial real estate industry?

A: Valley Partnership’s voice in the real estate community

has never been more important. The economic downturn demonstrated how critical economic development and job growth is to the real estate industry. The extended reach of Valley Partnership into the local, state and federal levels of government has brought a new level of trust and partnership with our elected officials and regulators.

Q: What are Valley Partnership’s goals for 2013?

A: I’ve been working to make our committee structure even

stronger and more active. Working with their industry peers, each Valley Partnership committee has articulated goals and metrics to help us evaluate our success this year. In addition to our standing committees, I formed an ad hoc committee to develop a program to identify and develop the next generation of real estate leaders. Th is program will be rolled out in the third quarter of 2013. In addition, Valley Partnership continues to leverage our expertise with the expertise of other local and statewide advocacy groups like the Arizona Chamber of Commerce and GPEC so that we can continue to broaden our reach and amplify our voice for the industry.

Q: How will you, as new chairman, help the organization achieve them?

A: I’m proud of the work we have done to bring new focus to our

work in economic development and supporting the expansion, the attraction and relocation of businesses to Arizona, and to the Valley. Each new employer that comes here, our industry benefits

48 | May-June 2013

as a multiplier — construction of offices, homes, and more. We need to be an active partner in these efforts to make Arizona a more competitive business environment to fuel our industry.

Q: What are Valley Partnership’s biggest challenges in 2013?

A: One of the legacies for Valley Partnership must be the

development of young leaders in our industry. Th is takes time and focus at a time when we are all so busy, but this new generation will ensure the sustainability of our efforts. As industry leaders we have a responsibility to educate our partners about the critical need for engagement in public policy issues and to get younger members to understand these priorities.

Q: VP just celebrated its 25th anniversary.

How big a role in the development community do you see it playing in the next 5, 10 or even 25 years?

A: Valley Partnership’s impact continues to grow. This 25-year

milestone gave us the push to look ahead and be more aggressive about pursuing our goals at the state and federal levels to make Arizona the best place to live, work and grow a business. These next few years, as companies struggle to stay in California, Arizona has an opportunity to be the destination of choice for tourists and businesses where our responsible development has created an exciting place to live, visit and work.

Valley partnership

BY PETER MADRID

A DIVERSITY OF DOLLARS Whether it’s back-to-basics financing sources or owner equity, development community seeing a rise in commercial lending

I

n order for the development community to thrive, fi nancial institutions need to fund commercial real estate projects on a consistent basis, and with varying sources.

Valley Partnership partners who practice real estate law say they are seeing not only “back-to-basics” financing sources, but also owner equity and some foreign investment.

“We are really back to the basics on fi nancing sources now that there is more confidence and pricing stability in the commercial property sector,” says Carolyn Obelholtzer, a partner/attorney at Rose Law Group. “There has been an influx of private money that has been sitting on the sidelines, and you are seeing many out-ofstate and Canadian sources.”

50 | May-June 2013

Lesa Storey, shareholder at Greenberg Traurig, says the primary funding source that she is seeing right now is owner equity, often in the form of a joint venture between the end user and the owner/developer.

“End users are making significant long-term equity investments in projects at a level that didn’t exist in prior market cycles,” she says. “Th is speaks to two very positive signs: (1) large amounts of cash being held on the balance sheets of U.S. companies, and (2) confidence in the Arizona real estate market as a long-term investment prospect.”

When asked if she was seeing any type of creative fi nancing in the market, Storey no; although she added that long-standing fi nancing techniques are often being used in new ways or among

Valley partnership

different types of players that historically have not engaged in these transactions.

Is the private money that’s been sitting on the sidelines available now?

“Yes, absolutely,” Storey says. “It started breaking loose over the last year or so, and I think that trend will continue.” Storey, however, says she is seeing little to no foreign investment.

“Again, I think this speaks to the availability of cash in U.S. companies and, to a lesser extent, the relative degree of turmoil in foreign markets such as the European Union as compared to the U.S. She says she is also seeing partnerships involving a combination of both land and development money via private equity sources.

According to Don Miner, director, Fennemore Craig, commercial real estate development is relatively slow at the present time and tends to focus on markets where a proven need has been demonstrated, such as multi-family and specific area industrial projects.

He adds it is perceived that the market is gathering strength, is poised for slow but steady growth, and that timing is relatively good for investing to see appreciation over the next three to six years or so.

“Credit requirements are considerably more stringent today than in times past and greater equity contribution is often required,” Miner says.

As a result, project developers are seeking less traditional fi nancing sources such as private investment groups, real estate

investment funds, hedge funds and foreign investors who believe the commercial market is poised for growth.

Foreign investors, Miner adds, have included Canadians who see future value in investing in a neighboring country with a similar culture as opposed to competing investment opportunities much farther away.

“However, today’s investors can be more expensive to developers in that they are more keenly aware of risk and have a tendency to demand greater returns with a higher priority than returns being allocated to developers,” he says. “Contribution of land to the deal, in lieu of cash, has had less appeal than in past years because of lessons learned from the recent economic downturn in which land values plummeted to the point of no longer contributing value to the project.”

Carolyn Obelholtzer

Don Miner

Lesa Storey

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52 | May-June 2013

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Valley partnership: partners

BY DESIREE TOLI

Chris Burns

Duke Realty Team

Chris Burns has been in the realty business for 20 years.

For the past 9 years he has been a part of the Duke Realty Team. He graduated from the University of Louisville with a BS in Finance and went on to get his MBA with finance and real estate concentrations from the University of Cincinnati.

He has been active in the Valley commercial real estate industry for 9 years and joined Valley Partnership 2 years ago.

“There are many issues that affect the local real estate community,” Burns says. “Valley Partnership provides our partners with the platform to work together through a variety of educational, networking and philanthropic events to provide balanced solutions for all involved.”

Burns is chairman of the newly formed young leaders committee and is involved in the golf committee. For him, Valley Partnership lays the foundation for continuing growth.

“Valley Partnership plays a critical role in partnering the interest of the commercial real estate community with local municipalities in a collaborative effort to promote our region and advocate for responsible development and best practices for future growth,” he says.

54 | May-June 2013

Fred Bueler

Dani Huval

Chasse Building Team

Hubbard Engineering

Fred Bueler is part of a team.

For the past four years, he and members of the Chasse Building Team have made a collaborative effort to provide clients the best possible service and product.

Valley Partnership, he says, not only builds networking in the industry, but also leads everyone in the right direction.

As an avid golfer, Valley Partnership has even allowed Bueler to mix business and pleasure. For the past two years he has served as cochair for the golf committee, helping with sponsorships budgets providing the best golf experience for the participants.

Bueler says he believes that because it brings together a group of industry leaders from every sector of the real estate development community.

“Valley Partnership truly works in the best interest of our communities to provide developments that we will all be able to look back on and be proud of,” he says.

Being a partner is important to Bueler as the word "development" is key. He is responsible for real estate development consulting, commercial retail projects, tenant coordination, design Management, government and utility coordination,

For Dani Huval, it’s staying ahead of the latest trends and innovation that keeps her thriving in developing business relations and partnerships.

For 13 years, she has worked in the civil engineering and land development industry.

“My career began in business operations, training and recruiting 8 years ago. Then it took me into developing business partnerships and relations,” she says.

Huval has worked at Hubbard Engineering since 2009 and has been involved in Valley Partnership for the past 8 years.

“The organization provides me with the knowledge and information regarding real estate and development in an everchanging industry,” she says.

Valley Partnership has helped Huval stay ahead of the latest market trends, understand the best practices and meet industry professionals.

For the past 5 years, she has been committee chairman of the golf tournament, which is the organization’s biggest fundraising event each April.

For Huval, Valley Partnership is more than just an opportunity to build relations.

“Valley Partnership presents a balanced, pro-development perspective and is the advocate leader that drives responsible growth policies and development for Arizona,” she says.

Valley partnership: partners

BY DESIREE TOLI

Brett Hopper

Thomas Title & Escrow

Brett Hopper has seen the real estate industry from many sides.

After years as a client, he joined Thomas Title & Escrow as vice president in 2009. Prior to working for Thomas Title, he served as vice president of residential development and investment for Trammell Crow Company.

A Cum Laude graduate of Brigham Young University, Hopper established a distinguishing career as a real estate attorney with some of the largest fi rms in Arizona before serving as vice president at numerous real estate development companies.

“I was initially involved in Valley Partnership in the early 90s, but then renewed my involvement and activity with VP in 2009,” he says.

At the time, the industry was facing menacing economic conditions.

“I saw Valley Partnership as a vehicle to bring together the varied interests in the real estate community and to advance important real estate and development issues in a responsible and constructive manner.” He says.

Hopper serves as the board liaison for the membership committee, and is a member of numerous subcommittees.

“Valley Partnership is a forum where your voice is heard and your impact on the community is tangible and meaningful,” he says.

56 | May-June 2013

Terry Denning Martin NAI Horizon

When Terry Denning Martin relocated from western Montana with her family to the Phoenix area in 1985, she began working in the commercial real estate industry as an accountant for the development and investment company National Portfolio, Inc. Six years later the company would become the major stockholder in what is now known as NAI Horizon.

Denning Martin was appointed COO, then became a principal of the firm and assumed the role of designated broker.

“My role within the firm has been one of continuing evolution, allowing me personal and professional growth,” Denning Martin says.

As for her involvement with Valley Partnership, she has been an active member for 14 years.

“My membership in Valley Partnership has given me the opportunity to meet, work and share ideas with a very diverse group of individuals in both the public and private sectors,” she says. “Through my involvement I have developed strong relationships both personally and professionally.”

Denning Martin is passionate about charity and giving back to the community. She is actively involved in the community project committee and co-chaired the committee in 2011.

“Valley Partnership provides resources, education and advocacy for the real estate development industry, bridging the gap between public and private sectors on issues large and small that impact our businesses,” she says.

Bryce Lloyd FirstBank

Bryce Lloyd talks development figures. He has been involved in the lending side of development and with FirstBank for 23 years.

He graduated from Colorado College and received his MBA at the University of Colorado.

He has served as president of FirstBank for the past 6 years.

The commercial real estate industry has been a big part of his career, and for the past 5 years Valley Partnership has been an integral part as well.

“Valley Partnership is a prominent voice for responsible development in Arizona, and lending plays a big part in that,” Lloyd says. “It is a great networking organization full of wonderful people.”

For the past year, Lloyd has served on the Valley Partnership Board of Directors.

He previously served on the Flat Tire Tour committee and hopes to get involved in the federal affairs committee.

For Lloyd, Valley Partnership is voice of local influence.

“Valley Partnership has a tremendous amount of significance to development in Arizona,” he says. “It is wholly local in its membership and structure. Many of the influence makers in Arizona are involved in Valley Partnership.”

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Valley partnership

BY PETER MADRID

THE

PAYOFF

PITCH Collaborating on projects a tangible benefit for businesses large and small in Valley Partnership

A

mong the numerous benefits of being in Valley Partnership are building networks and collaboration.

When it comes to partners working together on projects, actions speak louder than words.

“The interaction of working with a company that is affiliated with Valley Partnership has proven to be excellent,” says Steve Hoover, division manager for SiteWorks.

“First and foremost you know that the organization is committed to excellence within the industry based on their involvement. You also have more avenues of communication with partner companies than if you were not involved with members from their company in a venue such as Valley Partnership.

“Being involved in and active with Valley Partnership

58 | May-June 2013

develops relationships at multiple levels within partner companies,” Hoover, says, “which is a tremendous asset when pursuing opportunities or working on projects together.”

For example, SiteWorks has worked with, and is currently working with Ryan Companies projects including the Brophy Sports Complex, W.L. Gore Phase 1 and currently in construction of Phase 2 and a Walgreen’s project.

“We also worked with Adolfson & Peterson recently on a Buckeye Union High School Project,” Hoover says. “We have worked with Kitchell for many years, including a project in Hokuli’a Hawaii. We currently work in a maintenance capacity on a number of Lincoln Property Companies commercial properties which can

be directly attributed to our relationships developed within Valley Partnership.

“We regularly work alongside a number of other subcontractors and sub-consultants within the group as well.”

Ben Shunk, senior project manager at Adolfson & Peterson, says there numerous partners that he has worked with over the years that he didn’t necessarily meet through Valley Partnership, but that he stays in contact with through Valley Partnership.

“Evergreen, we have worked on a Kim Scholten multi-family deal together,” Shunk says. “WDP, I built a mall for them in Casa Grande and I speak to Brian Frakes monthly at the board meetings. Macerich, they were a partner on the mall in Casa Grande and I have gotten to know Scott Nelson through the board and Friday morning breakfasts.

“Vestar, we have built several projects with them over the years and I really have gotten to know Rick Hearn through his involvement with Valley Partnership. Markham Contracting, they have been a subcontractor on several of our projects and I have gotten to know both Mike Markham Jr. and Andre Bluth from their office much better through the community project.”

Shunk adds he met Janelle Schick with Schick Design Group through Valley Partnership years ago.

“On my last senior housing project the owner asked if I had any interior designer recommendations for the project,” Shunk recalls. “I gave them Janelle’s information (the architect provided two others) and she ended up being awarded the project off her proposal. I felt the personal connection Janelle and I have made over the years through Valley Partnership let us hit the ground running.”

This collaboration can be even more important to the smaller companies in Valley Partnership.

“I have worked with Dan and Melinda Hinkson of Sigma Contracting on a budget for our new facility in Phoenix,” says Kim Scholten, Arizona division manager of Western Colloid. “I met Andre (Bluth of Markham Contracting) on the community Project last year.

Andre’s son, Shaun, is a roofing contractor. He has since completed a couple of Western Colloid Systems on commercial projects.”

Steve Hoover Says Jay Silverberg, design director at Gensler: “We work with many partners that are a part of Valley Partnership both on the client and consultant side. Valley Partnership gets credit for keeping us in front of partners who we have successfully collaborated with, as their events are always well attended by key decision makers in the industry.”

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Valley partnership

BY DESIREE TOLI

ALL FOR THE

FAMILY

Valley Partnership’s 2013 annual community project to benefit Mesa’s Save the Family Foundation

F

or 25 years, Valley Partnership has been committed to serving the community through an annual project. The event in 2012 delivered renovations to two sites of the Southwest Autism Research and Resource Center (SARRC). The 2013 Valley Partnership community project will serve families in Mesa.

“The Community Service Projects that Valley Partnership has contributed to over the past 25 years have made a huge impact in the Valley. Community service is one of the cornerstones of the partnership,” says Dena Jones, 2013 Valley Partnership Community Service Project Co-Chair and Director of Project Development for Caretaker Landscape.

The 2013 Community Service Project recipient is the Save the Family Foundation of Arizona.

“Save the Family helps build strong families. Valley Partnership helps build strong communities. Together, we can build a stronger Valley by giving children in homeless, low-income, and low-income foster families a safe place to build stronger bodies and minds,” says Jacki Taylor, CEO for Save the Family Foundation.

Save the Family is redeveloping the Historical Washington-Escobeda Neighborhood in Mesa. The redevelopment is called Escobeda at Verde Vista. The new development will revitalize the area, providing on-site residential services, including features for the disabled and new administrative and program facilities for Save the Family.

The mixed-use development provides affordable housing for low-income families, foster families and veteran families. The development also provides supportive services including case management, an after school youth program, and workforce development in an attempt to end the decades of decline in the Washington-Escobedo community, where median income averages $15,000 a year.

The date is Saturday, Nov. 2, and between 100 and 200 Valley Partnership volunteers will be installing landscaping, and also painting, at Escobeda at Verde Vista.

“One of the reasons that Save the Family was selected 62 | May-June 2013

Valley partnership

as this year’s project recipient was the alignment of their mission and Valley Partnership’s mission,” Jones says.

Another reason was, “The cost of homelessness affects us all — no matter where we live. And the saddest statistic of all, the number of homeless children that continues to grow,” says Delores Ferguson, Division President for CCMC.

SARRC

Dena Jones: 2013 project chairman

The Valley Partnership Community Service recipient for 2012 was SAARC. On Saturday Nov. 3, 2012, Valley Partnership volunteers spent the day renovating the garden and hydroponic greenhouse at the vocational and life skills academy. At the SARRC preschool, volunteers built a garden space and painted a mural.

Volunteers installed new work stations, a new irrigation system and added plants. The site was enhanced with a brick wall and sculptural pieces sprinkled throughout the garden.

Jeri Kendle, president of the SARRC leadership team, says the renovations have improved the programs for the more than 12,000 children, teens and adults they serve.

“The project has provided us with a platform to prepare our adults with gardening skills while offering herbs and veggies to local restaurants and farmer’s markets,” Kendle adds.

The garden program trains and hires adults with autism to make planters that sell in the community.

“The garden works program is a connector for young adults and adults, which promotes language, following directions, and socialization. It’s a motivating connector,” says Denise , SARRC co-founder.

Work began early in the morning last Nov. 3 as Valley Partnership volunteers renovated SARRC's facilities (facing page; above, top photo). Teamwork was the key.

“The new amenity is enthusiastically embraced by staff parents and the community.”

Adds longtime Valley Partnership community project volunteer Steve Hoover, Division Manager for SiteWorks: “It’s like putting the star on top of the tree; it’s an extreme makeover kind of feel.”

“The 2012 project is providing training, employment and most importantly a future for our young adults with autism,” Kendle says.

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