Issue 3, 2021 by Commercial Executive Magazine

Lasting Legacies The McWilliams

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IN THIS ISSUE

Broker Team of the Month The sky is the limit for Brad Goff, Brett Polachek and Chris Canter

14 Multifamily to Watch Five companies discuss one of the hottest sectors in the Valley

Banking Update Paul Engler with Alliance Bank of Arizona shares three trends

10 Lasting Legacies Our cover story features four families in commercial real estate

29 © MPmedia, LLC 2021

Letter From The Publisher

– Alex Haley

ne of my favorite features every year is CEM’s Families in Commercial Real Estate. The hardest part is choosing whom to feature—there are so many brilliant and hard-working families in our industry! This year, the McWilliams family is on the cover of our Lasting Legacies feature. Margaret, Mike Sr. and Mike Jr. tell us what it is like working with family, the challenges and benefits and much more. The Piersons, Masts and Haydons are also featured in Lasting Legacies on page 14. Change is constant in commercial real estate and we have learned to expect ebbs and flows. As more and more people move to Arizona for a better standard of living and businessfriendly environment, the multifamily sector has seen a major uptick. Multifamily to Watch on page 29 features experts from Berkadia, Marcus & Millichap, NorthMarq, Tower Capital and Wespac. These standouts share trends, deals, predictions and current projects to watch for in the booming multifamily sector. Another multifamily team that is hotter than ever is Brad Goff, Brett Polachek and Chris Canter with Newmark. I’ve known Brad for decades and is a dear friend. It is a pleasure to witness his team’s ongoing success. Paul Engler from Alliance Bank of Arizona shares three trends that were accelerated due to the pandemic. His article on page 6 is packed with valuable insight. Lastly, I’d like to thank all of our supporters of the magazine. Karen, Celina and I are grateful to those who continue to advocate for CEM. We hope everyone stays cool this summer! Enjoy the issue,

Mandy Purcell

Founder & Publisher Commercial Executive Magazine

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BANKING UPDATE

ALLIANCE BANK OF ARIZONA The economic shocks precipitated by COVID-19 disrupted commercial real estate in profound ways. Market segments performed differently, as demonstrated by booms in industrial and multifamily, and construction in office and hospitality. With the contagion receding and economic conditions improving, Paul Engler, division chief operating officer, Alliance Bank of Arizona (a division of Western Alliance Bank, Member FDIC), forecasts that the industry and its sectors will resume a vibrant growth cycle. “At the onset of the pandemic, CRE was showing firm signs of stability across the board,” he says. “Now, 18 months later, we see three particular trends that are emerging as a result of COVID-19: An increase in urban centers, a push to redevelopment within the retail segment and wider demand for e-commerce.”

Paul Engler, Division Chief Operating Officer

STARTING POINTS

Engler, a 30-year veteran in banking and finance, is responsible for Alliance Bank’s commercial lending group, commercial real estate department and treasury management sales team, according to the company’s website. Clients are benefiting from his years of experience and knowledge across a range of industries and verticals. “On the residential front, Alliance Bank is most active in both for-sale and for-rent products, which includes both © MPmedia, LLC 2021

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traditional multifamily and build-torent,” he says. “On the commercial side, the company is most active in the industrial and office sectors.”

URBAN CENTERS

TRENDS

The three currents that Engler identifies were present before the pandemic, but took on an acceleration during the crisis, and now after. E-commerce certainly defines this dynamic, as the U.S. Department of Commerce details that first quarter 2021 volume increased 39.1% from the first quarter of 2020. This surge comes on top of overall e-commerce sales steadily increasing as a percentage of overall retail transactions. In 2012, purchases accounted for 5% of traffic, and in 2021 reached 13.6%. "An incredible number of people turned to online shopping during the pandemic," he says. "With the convenience of shopping from home, third-party logistics business and warehouses are growing and expanding." Staying in the retail space, the brick-and-mortar presence is also transforming. “Retail developers are reimagining their properties based on how residents’ lifestyles have changed,” he says. “Many are transitioning to a mixed-use format that will allow retail, grocery, restaurants, multifamily and office to coexist within a redevelopment.” The third trend, growth in urban centers, is particularly interesting given migration activity and © MPmedia, LLC 2021

RETAIL

work-from-home options during COVID-19. According to Bloomberg, “82% of urban centers saw more people moving out than in, while 91% of suburban counties saw more people moving in than out.” Despite this pattern, Engler does not see a mass exodus from the urban core. “The market is still very much alive, and we are still seeing significant growth in Phoenix as luxury rental developments and several mixed-use projects take shape,” he says. “As a case in point, with more than 700 employees, Western Alliance Bank is just one of the businesses that is actually growing its footprint in the downtown core.”

BUSINESS CONDITIONS

Post-pandemic, Engler predicts durable expansion for the Valley economy, because of solid fundamentals. “The Phoenix market has been extremely strong for several years now and continues to be one of the

fastest-growing metropolitan areas in the U.S. The Valley is attracting residents from across the nation, and especially California, who are in search of quality employment, greater affordability, an unmatched quality of life and a desirable climate,” he says.

SEGMENTS

The rising tide of economic strength should lift all boats, and this includes the beaten-down hospitality and experiential retail spheres. In addition, Engler points to health care, warehouse, logistics and manufacturing as intriguing areas for investment and development. “Alliance Bank offers business specialized financial services for a wide variety of industries and sectors, with deep expertise in CRE,” he says.

FUTURE

A flourishing Greater Phoenix economy points to exciting opportunities in CRE, and Engler and Alliance Bank are at the ready to facilitate transactions. “As CRE continues to grow, especially as Arizona attracts more Fortune 500 businesses, the reliance on financial institutions to help them expand, reach new markets and pivot their businesses is anticipated to remain strong,” he says.

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Congratulations In recognition of

Brad Goff, Brett Polachek and Chris Canter Selected as Commercial Executive Magazine’s Broker Team of the Month.

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BROKER TEAM OF THE MONTH Brad Goff Brett Polachek Chris Canter

More brothers than professional colleagues, Brad Goff, Brett Polachek and Chris Canter of Newmark Knight Frank (“Newmark”) have formed their own personal and business family. “We enjoy each other’s company,” says Polachek, senior managing director. “Our motto is work hard, work smart, and bring the most value to our clients,” says Canter, managing director. “We have been friends for a long time and bring the best out of one another,” says Goff, executive managing director.

Brad Goff, Chris Canter, Brett Polachek © MPmedia, LLC 2021

STARTING POINTS

As one of the Valley’s premier multifamily teams, Goff, Polachek and Canter bring over 50 years of commercial real estate experience to the table. They have called ARA then Newmark home for 16, three and eight years, respectively. “The company is a global leader and consistently provides us all the tools we need to succeed,” says Goff. The trio has utilized the Newmark platform, and their expertise, to finalize transactions accounting for over 140,000 units with value exceeding $20 billion. “Multifamily continues to be very active,” says Polachek.

SIMILARITIES

The three brokers share a great camaraderie, which starts with their Grand Canyon State roots. “We all are born and raised in Arizona,” says Canter. The parallels extend from there as the men all earned degrees from Arizona State University and University of Arizona, and now find themselves living in the same neighborhood. “We live within a mile radius of each other,” says Polachek. “Our families spend time together, and care for one another,” says Goff.

MULTIFAMILY 2021

Based on the stellar performance of the Greater Phoenix multifamily segment, the trio has benefitted from the market’s dynamic fundamentals. “This is a robust market. We closed over $1 billion in deals in the last 12 months,” says Canter. “Cap rates are still compressing, rents are increasing, property values are rising and the investment market is very active,” says Goff. The numbers confirm this dynamic environment, according to Newmark Research. Vacancy rates finished Quarter One 2021 at 3.7%, average asking rates reached $1,286, and average sales price/unit were $203,151. “This market is like a rocket ship,” says Canter. “We are hearing from owners that they are surprised at the rent increases given the demand for rentals,” says Polachek. “Sellers are coming to the table because of rising values, and buyers are eager as they eye the growth trajectory,” says Goff.

with a massive Quarter Three and Four. “The strong finish to the year just pushed through into 2021,” says Canter.

MACRO

The fundamentals driving the dynamic multifamily sphere are directly tied to population inflows, job growth and the supply/demand equilibrium in units. U.S. Census data reports that Maricopa is the nation’s fastest-growing county. “We added 98,000 individuals to the metro,” says Goff. According to the Office of the Governor, there will potentially be 325,000 new jobs added to the economy by the middle of 2022 from the beginning of this year. “A strong economy and favorable business climate are keys to this expansion,” says Goff. As for the supply/demand balance, the narrative here is one of demand outstripping supply. Absorption closed in on 8,000 units in 2020, while new construction edged just above 6,000 units. “The fact is that there is a lack of supply in both multifamily housing and single-family homes,” says Polachek. “There is an eight-day supply of single-family residences in the metro, and the equilibrium is six months, so that is fueling the rise in rents and sale prices,” says Goff.

“We have been friends for a long time and bring the best out of one another.”

DEALS

The first half of the year has been a busy deal period, with major transactions closing, including two in May. “We finalized 372 units, Daybreak Portfolio,” says Polachek. “And 435 units, The Urban, sold at 36th and McDowell,” says Canter. “Right now, our group has eight listings on the market,” says Goff. That figure, though, does not fully reflect the vibrancy in the space. “We are seeing off-market deals, and buyers and sellers connecting on price,” says Goff.

—Brad Goff

MULTIFAMILY 2020

The booming situation of the first months of 2021 stands in sharp contrast to the moribund activity in Quarter Two of 2020. “April and May, there was fear in the market as concerns over delinquencies intensified,” says Goff. “Transactions seized up and there were waves of uncertainty,” says Canter. “But the market did prove resilient and activity really rebounded after about Labor Day last year,” says Polachek. The sector returned to growth and exploded to the upside

FORWARD

The Newmark team sees an acceleration of the multifamily expansion trend over the next several quarters. “The growth is there when you consider low interest rates, the supply/ demand situation and liquidity available,” says Polachek. “Our most important goal is to bring the highest and best value to all of our clients,” says Canter.

FUTURE

With an impressive record of multifamily achievements, the trio is looking forward to long-run success. “We will continue to operate with integrity and place people above of the transaction,” says Canter. “Our mission, as always, is to do well by our clients,” says Polachek. “There are great opportunities for this team in the coming years,” says Goff. © MPmedia, LLC 2021

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Lasting Legacies Tradition. Inspiration. Legacy. In Commercial Executive Magazine’s annual families in commercial real estate feature, Lasting Legacies features four outstanding Phoenix families. The McWilliams, Piersons, Masts and Haydons not only have strong family values, but they also bring respect, compassion and teamwork into their professional lives. They are the first to admit it isn’t always easy having their work and personal life coincide, however in an industry where reputation goes a long way, these families are committed to their work and lucky enough to have each other to lean on along the way.

The McWilliams Family

Starting Points

Mike McWilliams, retail leasing agent, De Rito Partners, and Margaret Lloyd, senior vice president of Brokerage Services, Plaza Companies, take pride in their son’s and daughter’s commitment to the CRE sphere—Molly is a broker in Charlotte, North Carolina. “It is fun and rewarding to be able to help Mike and to watch him grow,” says Margaret. “He is dedicated to his clients and continually improving his performance as a broker,” says Mike Sr.

Background

At the start of their careers, Lloyd and McWilliams worked for competing firms in the retail sector, for Grubb and Ellis and Coldwell Banker, respectively. There was a catch however: They were also dating. “I will never forget when my manager at the time told me I had to choose between dating Mike or the job, because my peers would not trust me,” she says. “So, I broke it off with Mike. Thankfully, calmer heads prevailed, and we convinced our co-workers that we could be trusted and would not break their confidence. The rest is history.”

Sectors Margaret, Mike Jr. and Mike Sr.

Following the successful career path of a father or mother can be a daunting challenge for a son or daughter. For Mike McWilliams Jr., associate of brokerage services, Plaza Companies, his professional journey in commercial real estate tracks not only his dad’s 37 years in the business, but also his mom’s 38 years. “My parents have always been respectful of the fact that I need to make my own way in this business, and they are there to offer support,” he says. “That has been important, because I am able to make mistakes and learn, while also having a support system behind me.” © MPmedia, LLC 2021

Mother and son work in the health-care brokerage team at Plaza Companies, while Dad continues to serve clients in the retail segment at De Rito Partners. With the differentiation of their market niches, the family now has more latitude to discuss deals than the couple did years earlier. “There was a line that could not be crossed. We could never mention ongoing deals in our offices or betray the trust of our colleagues. As young agents, we understood that our careers depended on

LASTING LEGACIES

it,” Mike Sr. says. “Today, with Margaret and Mike Jr. working in the medical office sector, we can still talk. We ask each other questions and offer our suggestions and guidance regarding transactions when needed.”

she says. “My business has been doing very well, and I credit that to my team. We all collaborate and work very well together, which has helped me find more leads and close more deals,” he says.

Approach

Personal

For the young professional, the work ethic and commitment to excellence displayed by his parents has certainly rubbed off on him. “They are role models on how to act and conduct business,” he says. “I think all three of us have the same morals and ethics in dealing with people. Our reputations and integrity in the industry is the most important thing—more than money or recognition,” says Margaret. “We all know that relationships are the key to success in this business, and we genuinely enjoy and value developing those relationships.”

Opportunities

Every sector of CRE has performed differently amid COVID, and even within sectors there are variants. E-commerce has boomed, while experiential retail suffered during closures and restrictive measures. “I feel there is definitely a recovery underway for the retail sector, due to the pent-up demands as the pandemic tails off, and the tremendous growth the Valley is experiencing,” Mike says. As for medical office, Mom and Mike Jr. are benefiting from strong demand for properties across the metro. “The market is great for medical leasing and sales right now. This has been an exciting few years to be in this part of the business,”

Outside of work, the family takes to the links for relaxation and even some competition. “Our whole family loves to play golf. We have a big family golf outing, the ‘McWillie Open,’ every year,” Mike Jr. says. On the course, their distinctive personalities also emerge. “Mike Jr. has a great sense of humor, which he got from his Dad, which always makes it entertaining to be around him,” she says.

Future

Mother, father, son and daughter are all accomplished brokers and enjoying their profession. “Having success in this business is great, but when you can share that with family, it is even better,” Mike Jr. says. “We joke that people probably think we brainwashed our kids into CRE … but not true. They are just naturals for it,” says Margaret.

Get to know the McWilliams: Do you talk business during family get-togethers? MARGARET: When we get together with extended family, I like spending a few minutes with my nephew, Michael Dupuy, who is with Kidder Mathews in medical, to catch up on how things are going with his team. But I believe it’s best to just enjoy family time. MIKE JR: We try not to, but we always do.

Mike Jr., Margaret and Mike Sr.

LASTING LEGACIES

The Piersons For the Pierson crew, one of their defining conventions is the lineage of commercial real estate over the decades. “Our father was a real estate attorney, and I pursued CRE lending,” says Jim Pierson. “I entered the profession at 27 as a tenant-only office broker,” says Jim’s brother, John. And as for Jim’s son, Joe, he followed in his father and uncle’s footsteps. “I had my sights set on this profession since I graduated from high school,” Joe says.

Starting Points

John and Jim serve as managing directors at JLL and Walker & Dunlop, respectively, while Joe serves as an associate at Lincoln Property Company. “Working in the same industry as my brother and nephew is incredible,” says John.

Background

Growing up in Southern Louisiana, Jim and John found their way to Greater Phoenix in the early 1990s with the assistance of a close friend, John Smeck. “I began working for John in 1990 as an analyst,” Jim says. “When I relocated to Arizona in 1994, I was working in residential lending but looking for a new career,” says John. “Because of Jim’s connection, John S. introduced me to Greg Kilfoyle who co-founded KBK Real Estate

Advisors, and that provided my entry into tenant representation.” As for Joe, the young professional has intelligently tapped into the robust CRE network developed over the decades by his father and uncle. “Joe and I recently attended Best of NAIOP together, and it was so much fun to introduce him around,” says Jim.

Family Affair

The Triple JPs share a strong bond built on a commitment to family and a belief in each other. “We pride ourselves on being honest, ethical and treating everyone we meet with respect,” says Jim. The close relationship between the men traces back to Jim and John’s Bayou State roots. “We have a lot of fun stories, and our background with food and

John, Jim and Joe

culture pops up regularly in our everyday lives,” says John. “From cooking jambalaya for friends to hosting crawfish boils, our past has been a big part of our present in Arizona.”

Opportunity

Fueled by the business achievements of his father and uncle, Joe is excited to tackle the development sphere and make his own mark. “With only a few months under my belt at Lincoln Property Company, I have a lot of learning left

to do, but it is an amazing place to do that,” he says. For John and Jim, their sectors diverged dramatically during the pandemic. “I focus on construction, bridge and permanent financing for apartments, and business has been off-the-charts good,” says Jim. “Our team has closed billions of dollars in loans over the past couple of years, and we are financing projects from coast to coast.” As COVID-19 unfolded, the office sphere underwent major disruption with © MPmedia, LLC 2021

Get to know the Piersons: remote working taking a prominent role. “It goes without saying that office tenant representation has been challenging during the pandemic. It has caused the evolution of office occupancy to go through more changes in the past 12 months than in the 20 years prior,” says John. “Now that we are starting to emerge from this trial, companies have enough quality data to start making educated decisions on their plans moving forward. It may be different than before, but I expect © MPmedia, LLC 2021

the market to continue to improve for the remainder of 2021.”

Future

John, Jim and Joe talk about the possibility of another Pierson entering the business. “I have two daughters, who have yet to finish college, so there may still be an opportunity for them in CRE,” says John. “The future is bright for women in our industry. I would love to see at least one of my daughters in the industry, if that is some-

thing that interests them.” Dedicated to each other and their family, the three men also appreciate the connection of working in the CRE world. “It is awesome to have my brother and now my son in the business,” says Jim. “Having family members in the same industry gives us the opportunity to interact more often at business and social events, and to share relationships in the marketplace,” says John. “It is a blessing to have them in the same field,” says Joe.

JIM: John and I are 20 months apart (I am older and wiser) but we are two peas in a pod. JOHN: My brother and I have very similar voices and mannerisms – so much so that I used to trick his wife into thinking I was him when I called his house. JOE: Our favorite things are good food, good company and good sports!

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LASTING LEGACIES

The Haydon Family In 2021, Haydon Building Corp celebrates 30 years in the commercial real estate sphere. “The firm is one of the largest general contractors in the Southwest with the unique ability to perform building, heavy civil and landscape construction,” says Founder and President Gary Haydon. Through the decades, Haydon has helmed the organization though economic cycles and created a sterling best-in-class brand. Continuing that legacy of success will fall on the shoulders of his daughter, Katie Haydon Perry, executive vice president. “We have really been working on looking down the road and gearing ourselves up for the next 30 years,” she says. “That means looking internally to strengthen ourselves from within, reflect on who we want to be as a construction organization and more importantly how to want to get there.”

Katie and Gary

Starting Points

Name the market segment − industrial, office, infrastructure and retail − and Haydon is involved in the pre-construction, design and build. “I always wanted to construct buildings. I started out in the horizontal side, but have always been fascinated by the vertical side,” Gary says. “Later as the company expanded, I started to move into commercial construction. I have never left construction but have really enjoyed all facets of CRE.” As for Katie, her career in the business began in the accounting realm after graduating from Arizona State University. “I ended up joining familiar industries, first residential construction then later commercial land

development,” she says. “I was comfortable in the real estate environment, but flash forward all these years later, and I see that I was destined to participate in the family business.”

Interaction

Father and daughter have been working side by side for 11 years, and both agree on the uniqueness of the journey. “Challenging and rewarding. No one pushes your buttons like family. They know how to get you fired up, fast. But there is a comfort in knowing that your family is the purest form of partner. They want you to succeed, and there is not an ulterior motive. You both want the same result. It is a blessing to be able to share your

professional and personal lives with family in a family business,” she says. “Well said. Challenging and rewarding,” he notes.

Transition

When you have been working before your teen years, change can be a daunting proposition. “My dad is exploring what retirement may look and feel like. For someone that has been earning W-2 wages since he was 11, that is certainly an unfamiliar territory. We will continue to work alongside each other in the near future and continue to focus our efforts on a successful generational transition,” she says. “My focus now is to operate in a mentor role, share my experience, offer my suggestions and guide this next generation. They do not do things the way I would, and for the first time in my life I have to be OK with that,” he says. “This has been the hardest role of my life but has also been the most rewarding.”

Personal

The Haydons have also found the right work-life balance in their relationships and interactions. “We

have a rule that at Sunday dinner we are not to talk about work, but … we do, until our spouses shut it down,” she says. “It is much healthier to have separation. With a family business, the lines are very blurred. Even for those not working in the business, it is very much a part of our family.” When not conquering the world of construction and development, the Haydon family is a traveling group. “I have visited 27 countries, and every other New Year we take a big international trip with all 13 of our immediate family,” she says. “Our most recent trip we ventured to Ecuador. Talk about an amazing time. However, I do not recommend 13 related people in the same van for eight days.”

Future

Haydon Building Corp will be in good hands when Gary does decide to call it a career. “Construction has been a part of my life for as long as I can remember,” he says. “I know and trust that Katie will continue the tradition of excellence we have built over the last 30 years.”

Get to Know the Haydons: GARY: Katie was running around right after we had poured the concrete for a driveway expansion for our house in Tempe − she must have been 3. Right after the finisher was done, Katie ran right across the wet concrete and left footprints all along it. As they started to get the tools out to fix it, I thought, “Let’s just leave it.” I loved having her little feet as a reminder of that day. Once we moved out of that house, my mother moved in, so we got 20-plus years of those little footprints.

LASTING LEGACIES

The Mast Family In the Mast family, commercial real estate is a part of growing up and learning the tenets of hard work, ethical behavior and commitment to excellence. “My father Ken and my uncle Fred had both a union and non-union construction company in my hometown of Waterloo, Iowa,” says Greg Mast. “I worked summers for the union construction company, building the John Deere Tractor Works Plant, hospitals, meat-packing facilities, shopping centers and commercial office buildings.” For Greg’s son, Will Mast, CRE also came to him through his father. “I used to sit in his office at night and listen to him dictate contracts, leases and loan documents,” he says. “He would have me read the documents and help him find certain items from each. I found it fun and interesting, and this set the wheels in motion for me pursuing a career in the industry.”

Starting Points

Greg Mast, founder of Mast Law Firm PC began practicing law in Arizona in 1979 and has represented clients on transactions across the spectrum of CRE assets. “Over the past decade, my work has changed from primarily new development matters to acquiring, re-positioning, financing and selling properties, with the vast bulk of that work being in the multifamily area,” he says.

Will, first vice president, CBRE, began his profession in 2005 at Opus West Corporation, and assumed his current position in 2010. “I specialize in the acquisition and disposition of office properties, land and storage facilities across the Metro,” he says.

Intersection

Over the years, father and son have collaborated on deals and produced great

outcomes. “I have worked with Will on a number of projects since he entered the business, and they have all gone uniformly well,” he says. “When I was at Opus, my Dad and I worked on more than $1.5 billion of sales and financings together. More recently, he and I have worked on deals totaling more than $500 million in total value, including the largest deal of my career, a $330 million storage portfolio across multiple states a few years ago,” he says. And it is not just the pair that are in on the action. “My brother Jeff has been involved in real estate or real estate related matters for over 30 years in Phoenix,” says Greg. “I have worked with my uncle on multiple deals,” Will says. “Working with family is a lot of fun − well, that is, as long as we are on the same side of the transaction.”

Values

The Masts bring expertise, a dedication to clients and a winner’s mentality to their respective roles. “Both my Dad and Jeff are as hardworking and smart as they come. Every transaction I am able to work on with them, I learn so much. I am very lucky they are both mentors of mine and I consider them both close friends,” he says. “My dad and uncle were always very hard working, always with the view that hard work would lead to successful results,” Greg says. “Jeff and Will are similar in ensuring that they spend the needed time to lead to a successful result.”

Personal

At one time, Will aspired to a life as a professional golfer and played in tournaments across the country to test his skills under pressure. “Will was (and still is) a terrific golfer, and I spent an

awful lot of time dictating real estate agreements and documents from golf courses across the country on which he was playing national events,” he says. “We spend several weekends a year, still, playing in various father-son golf events. Although my skills have diminished, we enjoy the hang and the competition.”

Future

Be it in the boardroom or at their North Scottsdale golf club, father and son enjoy their work and recreation time together. “We are very blessed. We get to see each other weekly, and these days, many of our visits and time hanging out are centered on my daughter,” says Will. “We look forward to many terrific years together as a family and continued good times,” Greg says.

Get to know the Masts: How often do you see each other? GM: Quite often, and after the onset of the pandemic, several times a week. We also get to see my brother, Jeff, on a regular basis, whether for business or also when he wants to prove he is a better golfer than I am. Are you similar or different? WM: In my family, we use the phrase “dogs don’t have cats.” I have watched and mimicked my dad my whole life, and as such, we are very similar in nature. Not only in our personal lives, but how we conduct ourselves in business. © MPmedia, LLC 2021

Will and Greg

Ryan Companies builds incredible spaces. We believe every space needs a pet. Thank you, Ryan Companies, for your generous donation Thank you Ryan Companies for your support and partnership in building the Arizona Humane Society of Arizona Humane Society. animal welfare campus of the future.

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Forward by Adam Finkel CCIM | Principal, Tower Capital The pandemic wreaked havoc on the economy and psyche of Americans, yet beneath the turmoil opportunities emerged. There was an unexpected acceleration from high-cost to low-cost markets, as well as product types. Smaller and more affordable cities with lower densities rose in prominence. That transition, which had started a decade earlier, was on steroids in 2020, largely due to COVID-19. As a result, the U.S. housing market flipped 180 degrees over the year, going from a “sky-is-falling” market that had stalled when the pandemic arrived and quickly transformed into one with soaring home sales and record demand. That demand was challenged by a lack of supply in both new and existing home categories. Those factors also resulted in Phoenix rising as an attractive relocation market. The Phoenix multifamily market is drawing considerable attention, which is driving market demand, creating strong fundamentals, robust activity and attracting new people. In Multifamily to Watch, Commercial Executive Magazine profiles five companies on the front end of the booming sector. Experts from Berkadia, Marcus & Millichap, NorthMarq, Tower Capital and Wespac share trends, deals, predictions and current projects to watch for. © MPmedia, LLC 2021

ADAM FINKEL

CCIM PRINCIPAL TOWER CAPITAL

Co-founded by Adam Finkel, CCIM, and Kyle McDonough in 2015, Tower Capital has totaled more than $1.3 billion in customized structured financing since inception. The firm remains on the leading edge of Phoenix’s exploding apartment market and an expanding multifamily build-for-rent trend that first gained a footing in Phoenix.

CEM: Can you provide an update for our readers on how the multifamily market is doing currently in Metro Phoenix? AF: The multifamily market in Phoenix is on fire due to a lack of supply in housing, both for multifamily and single-family units. At the same time, our population is growing quickly because people relocate from more expensive states, and because of a boost in immigration from south of the border. Consequently, all property classes, A, B, and C, are showing very low vacancy (less than 5% in most cases) while rents are increasing at a much faster pace than had previously been projected. With interest rates remaining at historic lows, Arizona continues to be an attractive area for out-of-state investors to place capital. Although we are experiencing continued cap rate compression, the returns are still higher relative to neighboring states like California, and other metros, where they also contend with more burdensome landlord-tenant laws.

Tower Capital arranged $14.2 million in non-recourse construction financing for 19 North, a build-to-rent townhome community in Phoenix.

Tower Capital advised $22 million financing on TOWN Germann, a 207-unit singlefamily build-for-rent townhome development in Gilbert.

CEM: Do you see any trends from the pandemic having a permanent impact on the future of multifamily?

CEM: What challenge have you overcome regarding financing multifamily properties during the past year?

AF: As is the case with trends across many asset classes and industries, the pandemic accelerated the push out to the suburbs. Phoenix has also experienced growth in the new single-family, build-forrent asset class, which can have a wide a stratification of look and feel depending on the developer or region.

AF: The greatest challenge to overcome during the past year has been coping with uncertainty. It can be difficult for clients to make decisions when they are not sure how quickly the economy will recover, where the prices of materials will end up, how new laws affecting taxes and landlord-tenant rights will impact their portfolio, if

financing coming mainly from out-of-state buyers, along with those coming out of 1031 exchanges. Some sellers, being weary of potential future tax increases, are entering back into the market. cap rates will continue to compress, whether interest rates stay low … and all this coupled with a new administration.

CEM: What opportunities have you found in the multifamily market during the pandemic? AF: Initially we were seeing greater demand for cash-out refinances where interest rates have remained at historic lows. As the market recovers, we are experiencing increased demand for acquisition

CEM: What’s next for Tower Capital in multifamily? AF: Tower Capital is continuing to grow organically. We recently added a seventh loan originator and have an additional analyst starting soon as well. Last year, we exceeded $400 million in origination volume and are looking to push that to around $750 million for 2021. Our goal is to be a $1-2 billion-peryear company in the next couple of years.

PAUL BAY

FIRST VICE PRESIDENT, INVESTMENTS MARCUS & MILLICHAP

Paul Bay, first vice president, investments with Marcus & Millichap’s Phoenix office, entered the commercial real estate industry as a multifamily investment sales broker in 2017. Bay currently has 55% of the market share in the Phoenix West Valley and was ranked #39 of nearly 2,100 agents last year in just his third year with Marcus & Millichap.

CEM: Can you provide an update for our readers on how the multifamily market is doing currently in Metro Phoenix? PB: We’ve seen resilience within the market and rental collections throughout the last 12 months. The growth is driven largely by net migration into Phoenix and the consistent operational performance across the spectrum of multifamily, resulting from local economic factors.

CEM: What are some of the main features your clients are interested in when investing in multifamily properties? PB: Features that people are looking for these days are location and value. Core and prime locations have seen a lot of attention, and inventory is scarce in such locations. When those deals become available, there has been a lot of interest and significant non-refundable deposits at contract execution. The cap rate has become a

less-important feature. Active investors are focused on the basis of the acquisition and optimism of future growth based on their outlook on the future of Phoenix rents.

CEM: What challenge have you overcome in multifamily during the past year? PB: In a time where fewer people were traveling to see properties and lenders were more scrutinizing of the loans they were giving out, we had our most active and productive year to date. This is largely due to Phoenix’s relative performance while being seen as a growth market in comparison to other MSAs. Dealing with the changes in the lending world and the collections issues that properties had to contend © MPmedia, LLC 2021

with was challenging. Other nuances were related to people being able to see the real estate. Buyers have adjusted to the expectation of seeing less of the property prior to committing. However, such changes have not impacted values negatively.

CEM: What's next for your team in multifamily? PB: My success reflects the performance of our market as a whole. Our team’s private client division’s achievement of approximately 25% market share in 2020 is certainly a noteworthy accomplishment. But I am confident that 2021 will be an even bigger year in terms of market share and velocity, which will likely eclipse 50 transactions. In partnership

with my IPA colleagues, we will continue to better manage and dominate the continuum of Phoenix multifamily.

CEM: What’s your prediction for the future of the multifamily market in Arizona? PB: I predict that we’ll see a continued surge in transaction velocity and growth in price-per-unit. Phoenix has a spotlight on it right now. As growth continues to occur, there will likely be a point at which the price-per-unit grows so much that it is competitive with other major markets, which will bring certain new challenges. Prospects may begin to ask why “If I’m paying that much for a property in a traditional primary market, why would I invest in Phoenix?”

Recent Closing: Peppertree Place in Scottsdale. Paul Bay, Cliff David, Darrell Moffitt and Steve Gebing, investment specialists in Marcus & Millichap’s Phoenix office, represented the seller, a private investor. The buyer, also a private investor, was procured by Bay, David, Moffitt and Gebing.

BRANDON HARRINGTON

MANAGING DIRECTOR, MULTIFAMILY DEBT & EQUITY NORTHMARQ

NorthMarq’s Phoenix office has its sights set on exponential growth. The firm has grown from four employees in 2017 to now more than 30. Brandon Harrington, managing director, Multifamily Debt & Equity with NorthMarq, says the company is well on its way to financing over $1 billion in multifamily debt and equity in Arizona this year.

CEM: Can you provide an update for our readers on how the multifamily market is doing currently in Metro Phoenix? BH: Building on a very healthy 2020, the Metro Phoenix multifamily market got off to an even stronger start in 2021. Net absorption in the first quarter of this year was up 40% when compared to the same period in 2020, and vacancies continued to tighten. Year over year through the first quarter, the marketwide vacancy rate has improved 90 basis points to just 4.5%, and rents have spiked 6.8% to $1,279 per month. The heightened demand is fueling new development. Projects totaling approximately 12,000 new units were delivered in 2020, and nearly 23,000 units are under construction.

Stratford Apartments in Phoenix.

Only about 2,000 units were delivered in the first quarter, although the current forecast calls for approximately 11,000 units to come online in 2021.

CEM: Do you see any trends from the pandemic having a permanent impact on the future of multifamily? BH: The biggest long-term impact of the pandemic on the multifamily market will likely be a demand for greater privacy for renters. In recent years, there has been a push for greater density in multifamily housing, and the live-workplay dynamic fueled development. The pandemic highlighted some of the benefits of greater space. With work from home becoming a trend that will be more common and widespread, housing that is close to job corridors could become less of a priority. We have already seen some of this trend emerge in the single-family buildto-rent space. These projects are generally in outlying suburban areas but are popular with renters who value a little more distance from their neighbors, a yard, and are willing to trade some commute time for a little more space in their home. With traditional apartments, garden-style units in suburban locations have always been popular in Phoenix. That should not change in the years to come. © MPmedia, LLC 2021

Haven on Peoria in Glendale.

CEM: What challenge have you overcome regarding financing multifamily properties during the past year? BH: We have been extremely fortunate here in Phoenix compared to many other markets when it comes to multifamily financing. Given the strong job and population growth over the last year or so, multifamily occupancy and rent growth have outpaced the nation. That has allowed lenders to underwrite more aggressively in Arizona. One thing we have really had to keep track of

over the last 12 months is rental delinquency at properties. Lenders were hyperfocused on delinquency due to COVID-19. Luckily, due to the strong market fundamentals mentioned above, as a whole the Phoenix market has not seen widespread issues with rental collections.

CEM: What opportunities have you found in the multifamily market during the pandemic? BH: I think one of the positive takeaways is that there is a lot of new money entering our market. That

has given us the opportunity to work with new clients and show how we differentiate ourselves from their previous relationships.

CEM: What’s your prediction for the future of the multifamily market in Arizona? BH: I’m bullish on multifamily long term in Arizona. As Gov. Ducey has stated, “Arizona has become a magnet for jobs,” with 500,000 jobs expected over the next 8-9 years. The multifamily market will continue to see outsized returns when compared to other markets.

TYLER MARK

LEED AP BD+C PRINCIPAL/VICE PRESIDENT WESPAC

Tyler Mark, principal/vice president helping lead the Multifamily Division at Wespac has had his work cut out for him in the past year. With the pandemic bringing various challenges in the construction industry, Tyler has been taking it in stride and ensuring that each and every component lines up for the many successful projects Wespac is working on in Arizona.

CEM: How is the multifamily market is doing currently in Metro Phoenix? TM: The market is volatile at the moment – while activity is at near all-time highs from a pipeline perspective, the short-term outlook has taken a bit of a turn as of late. Materials pricing and availability have produced the potential for projects to either be shelved or paused. This isn’t just a lumber issue; nearly every major component for a building of this type has seen substantial increases (some, multiple substantial increases) in the past six months. The hope is that the summer months and on into fall will cool these cost escalations and keep some projects from simply going away.

Callia Apartments. Rendering courtesy of Biltform Architecture Group.

Scottsdale Residences. Rendering courtesy of CCBG Architects.

CEM: Do you see any trends from the pandemic having a permanent impact on the future of multifamily? TM: Many of our clients have been looking into touch-free devices, more Wi-Fi enabled equipment, more open flex space and other options. However, the public space within these buildings is tough to navigate completely touch-free. I wonder if these trends will stick in the long run.

CEM: How are rising construction costs affecting your ability to complete multifamily projects? TM: It’s an extremely difficult topic to navigate. We are active with our trade partners in the conversation – we need up-to-date information, but sometimes that information is “old” within as little as a few days in many instances. Early procurement, at-risk releases from owners and stockpiling of materials can help mitigate some portions of the risk, while aggressive buyout and procurement aids in the process. Ultimately, it all comes down to direct communication and active management day to day. © MPmedia, LLC 2021

Rising material costs and availability is our number one risk. This is challenging, as just 365 days (or so) ago it was labor … which still isn’t fully back in line.

CEM: What's next for Wespac in multifamily? TM: Wespac is extremely strategic in the type, location, timing and overall feel of the project team when we look at taking on any multifamily projects. It is quite literally one of the (if not the) most difficult

market sectors we work in. While we enjoy a large multifamily project, all the pieces must line up, and our ownership group/ partnership is a major key in the decision-making process. We cannot be everything to everybody and value our relationships with certain select ownership groups; we prefer to spread our workloads over many market sectors. These multifamily projects are a two- or three-year commitment we must

make; it needs to be well thought out, planned and dialed in to be successful.

CEM: What’s your prediction for the future of the multifamily market in Arizona? TM: It looks to be very strong over the next three to five years. People continue to migrate to Arizona for many of the same reasons my parents did 50 years ago – the “5 C’s” of Arizona continue to sell well to folks from out of state.

BERKADIA

MARK FORRESTER, SENIOR MANAGING DIRECTOR

RIC HOLWAY, SENIOR MANAGING DIRECTOR

Berkadia’s Phoenix office has a multifamily team comprised of top producers and highly regarded experts in their field. Mark Forrester, Ric Holway and Dan Cheyne are a dynamic force that continue to lead the way in multifamily in the Valley.

CEM: Can you provide an update for our readers on how the multifamily market is doing currently in Metro Phoenix?

DAN CHEYNE, SENIOR DIRECTOR 38

MF: Multifamily sales and activity are stronger now than before the pandemic as far as the number of transactions and pricing. Additionally, many more buyers and investors are gravitating to Phoenix. Phoenix continues to lead the Sunbelt states © MPmedia, LLC 2021

Lunaire Pool

as the number one rent growth market since 2018. On average, we generally see rent growth around 8.4%. But thus far in 2021, we have seen double-digit rent growth on both renewals and new leases.

CEM: Do you see any trends from the pandemic having a permanent impact on the future of multifamily? RH: While urban apartments are performing well in our market, we do believe there is a possible permanent shift for certain tenants to move to suburban locations with larger units that offer more privacy. Many new construction projects were conceived or started construction in urban downtown locations with high-density design. These projects have seen higher concession than suburban projects post-pandemic.

CEM: What are some of the main features your clients are interested in when investing in multifamily properties? DC: Two groups of investors: one looking for a clear ability to implement a value-add strategy (via new hard-surface countertops, appliances, adding in-unit washer and dryer capabilities, etc.) and others looking for Class “A” assets. Regardless, features such as smart home technology, amenities for pets, garages (whether attached © MPmedia, LLC 2021

or not) and open space are becoming increasingly important.

CEM: What challenge have you overcome in multifamily during the past year? MF: For a while, it was difficult to conduct investor property tours given the COVID-19 pandemic, but these issues are now much more in the rearview mirror. Investors are also traveling again as we emerge from the travel prohibitions that have been in place during much of the past year. Additionally, coming out of COVID, it was difficult to underwrite to how multifamily assets were going to perform, and new requirements from agencies for additional COVID reserves also presented a challenge. That said, our biggest hurdles

right now are in finding enough development sites or existing apartments to meet the increasing investor appetites.

moving forward, in addition to being one of the premiere multifamily mortgage banking firms in the industry.

CEM: What’s next for Berkadia in multifamily?

CEM: What’s your prediction for the future of the multifamily market in Arizona?

RH: Earlier this year, we acquired the apartment brokerage practice of Moran & Company and as a result have formed Berkadia Institutional Solutions, powered by Moran. This partnership has deepened our foothold in the institutional multifamily arena, and we have an expanding presence in affordable, student, seniors and hotel advisory services. We are an industry leader given our experience in the recently emerging singlefamily-for-rent sector of multifamily. We continue to focus on technology

DC: We believe the multifamily market will be very bright as Phoenix continues to grow into an increasingly diversified regional metropolitan area with more than 5 million people. Phoenix is on a course for continued growth for the foreseeable future with our robust population and job growth. The multifamily sector is primed to continue to benefit from our housing shortage and overall affordability when compared to competing Southwest markets.