An ambitious plan to build a $200 million, 1 million-square-foot mixed-use convention center and hotel in
The property where the
Lender Stearns Bank filed the notice of trustee sale with the Maricopa County Recorder’s Office last month on several parcels north of
The borrower, University Square Investors LLC, is headed by veteran Valley developer Jim Riggs, president of
Riggs declined to comment about the pending foreclosure on the original acquisition loan of $22.1 million. The auction is scheduled for Oct. 23.
“I am not permitted to comment on the record regarding this deal at this time,” Riggs said in an e-mail to the Phoenix Business Journal.
Chris Salomone,
“I can’t predict what will happen, but there is the possibility that a new buyer will purchase it at auction and build it. The project is entitled,” Salomone said.
At a standstill
Just west of
Centerpoint has been at a standstill for more than a year after negotiations proved unsuccessful with primary lender
A statement issued by
But Mark Winkleman, who heads up ML Manager LLC and is attempting to rework existing Mortgages Ltd. real estate loans with numerous developers in town, said
“There’s no way that property is worth anywhere close to $135 million,” Winkleman said.
Nevertheless, Salomone said
That’s also what Mary Ann Miller, president and CEO of the Tempe Chamber of Commerce, heard. She expects the project to be finished eventually.
“I was with the Esplanade when it was just two buildings. That took more time than expected,” she said. “Centerpoint will take longer before they’re successful.”
Still, a judge needs to approve the conversion to Chapter 7 and any subsequent deals.
A mixed bag
The eight-story Tempe Gateway office project on
The court-appointed receiver, Sam Womer of
As for developments that had been planned for the rest of downtown
• Tempe Land Co. had an agreement with the city to preserve and redevelop the historic Hayden Flour Mill at the southeast corner of
“We own the land, the flour mill. We have total control,” Salomone said.
• To maintain the validity of a permit it pulled last year to build a third office tower at Hayden Ferry Lakeside, at the northeast corner of
“The building is ready to go when the market and the economy are ready to support preleasing and construction of a 250,000-square-foot, 10-story, Class A office building,” said SunCor President and CEO Steve Betts.
A potential hotel across the street, part of the master plan, is still in the works, Salomone said.
“They’ve brought in some other partners, and they fully expect the hotel market to come back. They are reworking the deal,” Salomone said.
• The redevelopment of Centerpoint on Mill at the northwest corner of
• The city has no current information regarding the Lumina Tempe high-rise condominium project that had been proposed at Veterans Drive and College Avenue; the 100 Mill Avenue mixed-use project, proposed for the site surrounding Monti’s La Casa Vieja at the northwest corner of Mill Avenue and Rio Salado Parkway; nor the Mosaic project, which was to have included a Whole Foods grocery store, at the northwest corner of University Drive and Ash Avenue.
Salomone said he has not heard from anyone associated with those three projects in months.
Homegrown
Today, 11,000 real estate agents are operating under the Realty Executives banner in 17 countries. About 1,300 are in the
Rector, meanwhile, is not going away any time soon. He stays on as executive chairman.
Melton has been with Realty Executives since 2005. He previously managed Mercedes-Benz dealerships, including Mercedes-Benz of
The tough economic climate is not slowing down the firm’s aggressive growth. This month, Realty Executives licensed a company in the
Scott Hurlock, president of franchise development, is focusing on midsize markets in Southern California, southern
Realty Executives’ international headquarters are near Interstate 10 at
For more: www.realtyexecutives.com.
Phoenix real estate experts expect publicly traded real estate investment trusts, or REITs, to play a significant role in stabilizing the death spiral that is wreaking havoc in the commercial real estate market.
At this moment in
“A lot are coming back in and looking at this market,” said Bob Young, senior vice president of
Though none of the largest publicly traded REITs are based in
• Liberty Property Trust, which has a regional office here and specializes in office and industrial properties.
• Apartment Investment and Management Co., Camden Property Trust and Equity Residential, all owners of apartment complexes.
• Developers Diversified Realty and Kimco Realty, owners of neighborhood shopping centers.
• Macerich Co., owner of large shopping centers and regional malls.
• Prologis, owner of industrial and warehouse properties.
• Public Storage, owner of self-storage facilities.
• FelCor Lodging and Host Hotels & Resorts, owners of hospitality properties.
• HCP and Health Care REIT, owners of health care facilities.
What is a REIT?
Outwardly, REITs buy and sell properties just like any individual or company, but underneath the traditional transactions are certain market dynamics that put them in a league of their own.
For starters, REITs are capitalized through stock offerings, with the lion’s share traded on the New York Stock Exchange and a handful traded on Nasdaq and the American Stock Exchange. With that money, REITs buy properties that they manage and later sell at an optimal time. Most REITs acquire property-specific portfolios. For instance, many of the large national apartment property owners are REITs.
Dionisio Meneses, managing director of real estate investments and research at
There are several reasons most REITs have money on hand. The stock market has been gaining ground for months, so they have been able to raise capital through stock offerings.
In addition, REITs generally have weathered the commercial real estate crisis better than other investors because federal laws govern the amount of leverage they can apply to any given transaction. Thus, as other players raced headlong into a pitch of overinflated deals, REITs were unable to join the frenzy.
Beside being hemmed in by rules and regulations, REITs also are beholden to their shareholders and thus tend to be more conservative.
While REITs may have been forced to walk away from the table during the height of the commercial real estate bidding wars three and four years ago, REIT executives now may be secretively relieved. That restraint, welcome or not, preserved them from the fates of many private real estate companies now facing extinction.
“The story here is that REITs are able to meet debt obligations. They’re not going to go bankrupt,” said Brad Case, vice president of research and industry information for the
Steady gains
That’s not to say REITs have not had their own roller-coaster ride. Publicly traded REIT stocks hit a historic average low on March 6, but since then have enjoyed steady gains as a whole.
“We see that as being the low that will not be tested,” Meneses said.
He does not believe there will be a huge increase in REIT stock prices — “they’ve already had such a good run-up” — but he still thinks they will continue to be a good buy for investors.
“They’ve outperformed other stocks this year … there still is value to be had,” he said.
While the news looks good for shareholders, how will the REITs’ relative vitality play into the local commercial real estate market?
“The public companies will take advantage of private companies that are in distress. We haven’t really seen that so much yet, but when the private companies have to refinance a property, that’s where the distress will come in,” Meneses said.
Thus, local commercial property owners in danger of defaulting on loans may look to REITs to buy them out.
But the property would have to be among the tops in its class. REITs typically purchase elite properties in specific categories in larger metro areas. They own an estimated 10 percent to 15 percent of the national commercial real estate market, according to several sources, and could gain increasing market share during the expected slow economic recovery.
Valley players
REITs will benefit even if there isn’t a wave of distressed commercial properties, as many economists and analysts fear.
“If the market starts to get better, then the REITs will be in a better position to raise capital,” said CBRE’s Young.
In fact, Young has high hopes for REITs becoming even larger players in the
“I expect them to be one of the earliest back in the market buying substantial properties,” he said.
Back in the early 1990s, when the commercial real estate market was reeling from the effects of the savings-and-loan collapse, REITs jump-started the local market.
“They were one of the largest buyers in the market then, and I fully expect that it will be the same this time,” Young said.
In the coming months, expect to see more publicly traded REITs enter or re-enter the
“Transactional volume has been very weak, but the driver now will be debt obligations,” Case said. “There will be buyers.”
Related Event
What: REITWorld 2009, the National Association of Real Estate Investment Trusts annual convention for all things REIT
When: Nov. 11-13
Where: JW Marriott Desert Ridge Resort & Spa, Phoenix
Why: To meet and network with senior management representatives of REITs and publicly traded real estate companies representing more than $500 billion in assets. Sessions will cover topics ranging from the state of the industry to re-equitized and post-modern REITs.
For more: National Association of Real Estate Investment Trusts, www.reit.com
Glossary of Terms
REAL ESTATE INVESTMENT TRUST: Investment vehicle created by an act of Congress in 1960, designed to provide investors with the opportunity to participate directly in the ownership or financing of real estate projects through a tradable interest in the pool of real estate-related assets. REITs pay dividends on income produced by the properties they own.
Listed public REIT: A REIT that is registered with the U.S. Securities and Exchange Commission and trades on a public exchange.
Unlisted, nonexchanged REIT: A REIT that has filed a registration statement with the SEC and files periodic reports, but is not publicly traded on an exchange.
Private REIT: Privately held REITs are not subject to public disclosure and have no obligation to register with the SEC. They are not traded on any exchange and have no public market.
Yields: REIT stock investors are motivated mostly by the annual dividends paid by REITs, which on average outperform other dividend-paying stocks. Typically, REIT stocks return between 6 percent and 7 percent
a year, compared with other Standard & Poor’s
dividend-paying stocks, which average a 2 percent yield. REIT dividends are fully taxable, however.
Share gains: Earnings growth historically is slower than with other stocks, but REITs have posted above-average share price increases in recent years and have produced above-average returns for decades, both in strong and weak markets.
Risk: REITs are not without risk. The run-up in REIT stock prices may not be supported if fundamentals in the real estate market continue to be weak or erode further. Be selective in picking REIT stocks by examining both dividends and share appreciation. REITs with long track records of steady dividend growth are probably the best picks.
Source: StreetAuthority.com
They’ve been likened to a gang of bullies, terrorizing lenders with threats of public humiliation, lawsuits and blacklists in their effort to secure better loan-modification agreements for their clients.
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The owners of Biltmore
Real-estate experts said securing a refi for
The real-estate bust that has pummeled
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A
Arcus-Lucia LLC, a company formed by Arcus Private Capital Solutions in partnership with
The land had been owned by
Element Homes had been formed by former Del Webb Corp. executives and was doing well at the height of the housing market. The local home builder fell on hard times in 2008 and scrambled to hold the business together.
In October 2008, the Phoenix Business Journal reported that JP Morgan Chase had foreclosed on a $125 million loan to Element Homes. Various subdivisions and land were taken back by the bank and placed into a company called EHJP Property Holdings, LLC.
Land Advisors Organization had the assignment to sell the bank-owned portfolio of 695 total lots, representing eight Element Homes subdivisions.
According to Land Advisors, Element Homes did not file for bankruptcy, but no longer exists as a company.
Scottsdale is looking at ways to help the southern part of the city bounce back from the recession’s impact on car dealerships, retail and real estate.
But don’t expect
Lane and some members of the Scottsdale City Council oppose incentives and breaks for specific businesses.
“I’m not an advocate of it,” said Lane.
The city can look at zoning and invest in infrastructure such as roads, but it is less likely to roll out a new set of tax breaks and subsidies. The mayor said the legal battle over the city of
The city has put together a McDowell Road/South Scottsdale Task Force to formulate ideas to help the corridor. The group had its first meeting last month and will send recommendations to the city early next year.
Tom Sadvary, chair of the task force and CEO of
Sadvary said his task force is looking at planning and zoning as possible ways to help spur economic development, but he acknowledged revitalization efforts likely will be more market driven.
“It’s going to need a shot in the arm,” he said.
Rick Kidder, CEO of the
“It’s going to need help probably more quickly than the market by itself will allow happen,” Kidder said.
He wants the task force and city to keep the door open to a number of options that could help the area.
“I haven’t seen a tremendous appetite at City Hall to do something dramatic,” Kidder said.
The mayor said he’s optimistic about
“We’re trying to connect a bunch of dots,” Lane said.
The mayor doesn’t hold much hope in car dealerships — which have been hit by the pullback in consumer spending save a brief respite brought by the federal “Cash for Clunkers” rebate program — bouncing back anytime soon.
One idea floating around is realigning McDowell Road between Papago Park and Scottsdale Road slightly to the north perhaps to create a new commercial corridor and better leverage commercial parcels in the area.
Lane and Kidder both are open to looking at that proposal. Scottsdale turned away plans by Westgate City Center developer Steve Ellman to build a hockey arena and then big-box stores, including Wal-Mart, at the former Los Arcos Mall site. The
SkySong hosts some small technology and health-related companies as well as operations for Ticketmaster. SkySong officials say 300,000 square feet of space have been developed at the site, which opened in 2008 and was envisioned to encompass 1.2 million square feet. About 700 workers are employed there though the center has not had the desired spillover benefits to South Scottsdale.
Lane said that while South Scottsdale has its challenges, “the area itself is not outlandishly depressed.”
Get Connected
ASU SkySong: www.skysongcenter.com
Scottsdale Area Chamber of Commerce: www.scottsdalechamber.com
Phoenix Business Journal - by Mike Sunnucks Friday, September 18, 2009
While much of the commercial real estate market, both locally and nationally, has been in lockdown since the global banking collapse, the apartment segment is gaining momentum this summer.
Things were dead in 2008, said Brad Cooke, vice president of multifamily investments at Colliers International in Phoenix. But so far this year, 18 transactions of apartment communities with 100 or more units each have closed, and 10 more are under contract, he said.
“Our market is moving,” said Cooke.
Bobby Bull, managing director of investment sales for
“Now that we’ve had about 20 deals in the market and there’s agency financing out there, we’ll see more sales in fourth quarter and even more in 2010,” Bull said. “Multifamily is going to be the preferred commercial real estate investment vehicle going forward.”
Even though apartments are selling at prices far below the high marks of early 2007, buyers and sellers are lined up to do business for several reasons.
Unlike other commercial properties, multifamily investors have access to financing through the Federal National Mortgage Association (Fannie Mae) and the Federal Home Mortgage Association (Freddie Mac). Multifamily investment traffic also is moving in part because of the nature of publicly traded real estate investment trusts, or REITs, many of which own large apartment portfolios.
Because REITs by law are required to meet certain financial criteria and pay dividends to shareholders, many of them have been selling properties to increase equity and to position themselves for a new round of buying. Another factor driving apartment transactions is the growing cache of lender-owned properties that banks want off their balance sheets after taking them back at foreclosure auction.
One such deal is the Wachovia portfolio, which included three apartment complexes — one in Gilbert, one in
“We had 230 signed confidentiality agreements and 60 bidders,” Bull said.
Cooke represented one of the potential buyers. “We had a buyer with deep family money from the East,” Cooke said.
Though Cooke thought he had a strong offer, Transwestern and Eastdil settled on a bid by HSL Properties of Tucson, which paid $40.5 million for the three apartment properties. Total time of the deal: 180 days. Wachovia’s loan to SJ Management was for $81 million.
“HSL did their appraisal before the call-for-offer date, which made them even stronger,” said Bull, adding it was a sweet deal for the buyer.
Banks willing to sell distressed properties at much lower prices will drive more activity, said Nick Ingle, director of capital markets for
“Asset values have declined dramatically, allowing investors to acquire properties at a low basis. Obviously that is extremely attractive but not overly unique in a market governed by foreclosure forces. What is unique is that apartment properties are performing rather well relative to office and retail properties,” he said.
Ingle also cites the availability of Fannie Mae and Freddie Mac money for greasing the transaction wheel.
“We believe when the market is down is the best time to buy,” said Ken McElroy, principal of MC Cos. in
A year ago, when most commercial real estate investors were in a panic, McElroy and partner Ross McCallister shifted into a counter-market, aggressive mode, a strategy it has employed for years. Though the company as it exists today was formalized in 2001, the partners have been involved in real estate development and investment since 1985.
In 2001, MC put most of its eggs in the condo-conversion basket.
“We got out of that before the crash. Then we got into work force housing. What we call work force housing really is something that was very nice in the 1980s and is very well located but needs some updating,” McElroy said.
That’s why MC was interested in Wickertree, the 226-unit complex in
Aimco has been selling assets across the country in response to lackluster stock performance this year. The company cited declining occupancy rates and rents for a 48 percent drop in funds for operations in second-quarter 2009 compared with the same time period last year.
McElroy said many other larger apartment REITs are selling assets in inland markets in order to invest more heavily on the East and
“There’s some nice properties being marketed (here) now. Wickertree had exactly what we were looking for,” he said.
MC paid $9.5 million for Wickertree with a down payment of nearly $2.4 million. The deal closed Aug. 24. With a 91 percent occupancy rate at closing, “this was a cash-flow play for us,” McElroy said.
The company is looking for more good deals, and so are plenty of others, Cooke said. “We have no problem finding buyers if you have a good property that is priced right,” he said.
Get Connected
MC Cos.: www.mccompanies.com
Colliers International: www.colliers.com
Transwestern: www.transwestern.net
Hendricks & Partners: www.hpapts.com
Apartment Sale Comparisons
Largest Sale 2007 (the largest apartment deal ever in Arizona): Bascom Portfolio
Sale Price: $428 million
Sale Date: June 2007
Properties: 12
Units: 5,178
Avg. Price Per Unit: $82,561
Avg. Grade of Property: Class B
Seller: Bascom Arizona
Seller Broker: Colliers International
Buyer: The Bethany Group, California
Buyer Broker: None
Largest Sale 2009: Wachovia REO Portfolio
Sale Price: $40.5 million
Sale Date: August 2009
Properties: 3
Units: 592
Avg. Price Per Unit: $68,412
Avg. Grade of Property: Class A
Seller: Wachovia (Wells Fargo)
Seller Broker: Transwestern, Eastdil
Buyer: HSL Properties, Tucson
Buyer Broker: None
Source: Colliers International
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