Arizona Real Estate News Access
All the real estate and mortgage news you need to know in Arizona

September 2009
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Tempe’s University Square project, others in jeopardy
Filed under: General, Real Estate
Posted by: Lillian Wong @ 6:12 pm

An ambitious plan to build a $200 million, 1 million-square-foot mixed-use convention center and hotel in Tempe looks to be dead, and several other projects there are struggling to get off the ground or be completed or leased.


The property where the University Square project was to be built a few steps away from City Hall is facing foreclosure auction.


Lender Stearns Bank filed the notice of trustee sale with the Maricopa County Recorder’s Office last month on several parcels north of University Drive between Forest and Myrtle avenues, adjacent to Arizona State University.


The borrower, University Square Investors LLC, is headed by veteran Valley developer Jim Riggs, president of Saxa Inc.


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, Tempe’s community development director, said the foreclosure auction may bring in a new developer that can make good on the city-approved plan for a hotel, convention center and retail development.


“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 Mill Avenue and north of University Drive, the Centerpoint high-rise condominium project sits unfinished. Developer Tempe Land Co. has estimated it needs at least $80 million to complete the residential and retail project. Attorneys for the developer filed a motion Sept. 15 in U.S. Bankruptcy Court to convert its Chapter 11 reorganization plan to Chapter 7 liquidation.


Centerpoint has been at a standstill for more than a year after negotiations proved unsuccessful with primary lender Mortgages Ltd., now operating as ML Manager LLC following its own Chapter 11 reorganization.


A statement issued by Tempe Land officials said the motion to convert action would allow construction to resume more quickly than continuing with a reorganization plan.


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 Tempe Land owes his firm $135 million and would have a tough time finding additional lenders given the liens on the property.


“There’s no way that property is worth anywhere close to $135 million,” Winkleman said.


Nevertheless, Salomone said Tempe Land co-principal Ken Losch told him the Chapter 7 status would force a quick sale at a discounted price and thus allow for quicker completion of the project.


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 Mill Avenue between Second and Third streets also remains empty, though mostly complete. The developer, Opus West, filed for Chapter 11 bankruptcy in early July.


The court-appointed receiver, Sam Womer of CB Richard Ellis, said he’s hired a company to finish detail work and expects to obtain a certificate of occupancy in the latter half of October. Womer is negotiating with two tenants that would occupy most of the building. He said one is a health care company and the other is an automotive business.


As for developments that had been planned for the rest of downtown Tempe, the current outlook is a mixed bag. Here’s a snapshot, based on information provided by the city of Tempe:

• Tempe Land Co. had an agreement with the city to preserve and redevelop the historic Hayden Flour Mill at the southeast corner of Mill Avenue and Rio Salado Parkway. The city owns the land, and terms of the development agreement included performance benchmarks. Salomone said city attorneys will meet with the City Council in executive session Oct. 8 to discuss whether those benchmarks have been met, or whether the agreement is null.

“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 Mill Avenue and Rio Salado Parkway, SunCor Development Co. recently installed a water meter there, which legally extends the permit time frame.

“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. Valhalla Development Group is the owner.

“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 Mill Avenue and University Drive, owned by DMB Associates, is not what was originally planned. But the Madcap Theater operating in the former Harkins Theatre site is doing well, and DMB is negotiating with tenants to fill surrounding retail space, Salomone said.

• 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.

Phoenix Business Journal - by Jan Buchholz Friday, September 25, 2009

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Realty Executives taps new CEO, licenses foreign franchise
Filed under: General, Business, Real Estate
Posted by: Lillian Wong @ 6:09 pm

Homegrown Realty Executives International named Glenn Melton CEO. Melton takes the reins from Rich Rector, whose father, Dale, started the residential brokerage firm in 1965 in Scottsdale with four agents.


Today, 11,000 real estate agents are operating under the Realty Executives banner in 17 countries. About 1,300 are in the Phoenix metro area.


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 Chand­ler, where he worked before becoming Realty Executives’ chief operating officer.


The tough economic climate is not slowing down the firm’s aggressive growth. This month, Realty Executives licensed a company in the Dominican Republic to open a franchise there. The company also is growing its domestic business.


Scott Hurlock, president of franchise development, is focusing on midsize markets in Southern California, southern Florida, the northern Midwest and the New York/New Jersey metro area.


Realty Executives’ international headquarters are near Interstate 10 at Chand­ler Boulevard.


For more:

Phoenix Business Journal - by Jan Buchholz Friday, September 25, 2009

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Despite bumps, some public real estate investment trusts have access to capital and are ready for action
Filed under: General, Real Estate
Posted by: Lillian Wong @ 6:03 pm

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 U.S. economic his­tory, some REITs are poised to take action. Unlike many private real estate investment firms or large investment funds that have been hit by the lingering credit freeze, REITs can generate spending money by selling new shares of stock. And those that shunned Phoenix in the past or left during the last heated market cycle are taking another look.


“A lot are coming back in and looking at this market,” said Bob Young, senior vice president of CB Richard Ellis in Phoenix. “REIT transactions are way down, but REITs probably are more active than other groups. They’re trying to be proactive and to have cash on hand.”


Though none of the largest publicly traded REITs are based in Arizona, several have significant holdings in the Phoenix market, including:


• 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 Charles Schwab in Phoenix, said REITs are more flexible than other investment vehicles because they have access to capital, though probably less than before.


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 National Association of Real Estate Investment Trusts. “Investors don’t have concerns about bankruptcies and defaults with publicly traded REITs.”

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 Phoenix market.

“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 Phoenix market with the prospect of landing prime properties that owners are selling under duress.

“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,

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.


Phoenix Business Journal - by Jan Buchholz Friday, September 25, 2009

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Home-loan aid arrives
Filed under: General, Mortgages
Posted by: Lillian Wong @ 1:11 pm

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.

They’ve also been hailed as the most effective organization in the country at helping distressed borrowers stay in their homes, and on Friday they’re coming to Phoenix.   more…

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ING Direct exec offers tips
Filed under: General, Finance
Posted by: Lillian Wong @ 1:07 pm

When savings bank ING Direct made its debut in the United States in 2000, company leaders faced a specific challenge: How could they get a spend-happy nation hooked on socking money away?  more…

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Group of 20 summit reins in executive pay
Filed under: General, Finance
Posted by: Lillian Wong @ 1:01 pm

PITTSBURGH - Leaders of the world’s most developed economies agreed late Friday to restrict runaway executive pay in the financial sector, give emerging powers a bigger role in global institutions and create a new structure to promote global economic growth.

“In short, our financial system will be far different and more secure than the one that failed so dramatically last year,” President Barack Obama said at the close of the Group of 20 summit.  more…

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Biltmore Fashion Park gets rare deal: Refinance
Filed under: General, Real Estate, Mortgages
Posted by: Lillian Wong @ 12:51 pm

The owners of Biltmore Fashion Park, the Valley’s original luxury shopping mall, have managed what commercial developers say is virtually impossible lately: They’ve refinanced the property’s mortgage.

Real-estate experts said securing a refi for Fashion Park was akin to dodging a bullet in the current commercial-lending environment.   more…

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Beach-home bargains surface in San Diego
Filed under: General, Real Estate
Posted by: Lillian Wong @ 12:35 pm

The real-estate bust that has pummeled San Diego’s downtown condo market and wreaked havoc in its outlying suburbs has hit its once-impregnable beach communities.

That’s good news for heat-struck Zonies whose idea of paradise is boogie-boarding all day at Pacific Beachmore…

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Fed slows aid efforts, shows hope in recovery
Filed under: General, Mortgages, Finance
Posted by: Lillian Wong @ 12:30 pm

WASHINGTON - With the economy on the mend, the Federal Reserve said Wednesday that it is slowing the pace of a program to lower mortgage rates and prop up the housing market.

The Fed decided to stretch out its goal of buying $1.45 trillion in mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae until the end of the first quarter of 2010.   more…

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‘First Look’ aids home purchases
Filed under: General, Real Estate, Mortgages
Posted by: Lillian Wong @ 12:13 pm

Arizona home buyers trying to tap federal funds to help them purchase foreclosure homes now may find it a little easier.

Mortgage giant Fannie Mae recently launched a program called “First Look” that bars investors from bidding on its foreclosure homes for the first 15 days that they go on the market. In metropolitan Phoenix, first-time buyers typically lose out to investors on the best foreclosure homes.   more…

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Lennar posts wider loss, but shares rise
Filed under: General, Real Estate, Finance
Posted by: Lillian Wong @ 12:07 pm

NEW YORK (Reuters) - Lennar Corp (LEN.N), the No. 2 U.S. home builder, said on Thursday its fourth-quarter loss widened, orders for new homes fell 50 percent, and that the ailing U.S. housing market could worsen in the near term.


But the company’s shares rose nearly 8 percent as analysts said Lennar was very successful paying down its debt, and generating cash to be in good position when the market turns.  more…

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AIG shares soar 20% after talk of reducing bailout package
Filed under: General, Finance
Posted by: Lillian Wong @ 11:59 am

Shares of American International Group Inc. jumped more than 20 percent Monday after the head of the House Committee on Oversight and Government Reform said that panel will examine a plan to reduce the company’s massive bailout package.

The stock surge occurred despite a report from congressional investigators that cast doubt on whether efforts by AIG to restructure its operations and fully repay the government the billions it received will ever prove successful.  more…

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Short sales not a long shot, experts say
Filed under: General, Real Estate, Mortgages
Posted by: Lillian Wong @ 11:35 am

Home builders, real-estate investors and other home sellers say they have seen a boost in interest as a Nov. 30 deadline approaches for first-time buyers to receive a federal income-tax rebate of up to $8,000.

But one growing segment of the Phoenix-area housing market has not benefited from the impending buyer tax-credit cutoff.  more…

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Arizona puts feds’ money to work building homes
Filed under: General, Real Estate
Posted by: Lillian Wong @ 11:15 am

Arizona is receiving $66 million from the federal stimulus package to revive more than 30 stalled affordable-housing projects for families, seniors and the disabled.


The developments are expected to create at least a thousand homes for residents who cannot find housing they can afford, as well as at least 2,000 construction, government and service jobs.  more…

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After crash, loan officers are reined in
Filed under: General, Mortgages
Posted by: Lillian Wong @ 3:46 pm

Most of the blame for the loans that led to the housing crash has been leveled at big lenders and Wall Street investment firms. However, all those high-risk mortgages that led to record foreclosures and fraud cases wouldn’t have been as popular without the loan officers who sold them.  more…

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Cities blast impact-fee freeze
Filed under: General, Real Estate
Posted by: Lillian Wong @ 3:34 pm

A newly imposed two-year freeze on development-impact fees is a win for Arizona’s battered construction industry but a blow to cities eyeing fee hikes to pay for services tied to new projects.

“It definitely changes the definition of growth paying its own way,” Gilbert Town Manager George Pettit said. “It just pays most of its own way.”   more…

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Element Homes lots sold for $3.6M
Filed under: General, Real Estate
Posted by: Lillian Wong @ 6:16 pm

A Mesa private equity firm purchased 102 residential lots in Queen Creek for $3.6 million.


Arcus-Lucia LLC, a company formed by Arcus Private Capital Solutions in partnership with Arcus Equity I, bought the land located on the northeast corner of Ocotillo and Sossaman roads.


The land had been owned by Element Homes, but was taken back by the lender, JPMorgan Chase Bank NA earlier this year.


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.


Phoenix Business Journal - by Jan Buchholz Monday, September 14, 2009, 11:28am MST

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Scottsdale explores ways to help hard-hit southern area
Filed under: General, Real Estate
Posted by: Lillian Wong @ 6:08 pm

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 Scottsdale Mayor Jim Lane to get behind special tax breaks or subsidies as part of that effort.


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 Phoenix’s $97 million subsidy for parking at the CityNorth development next to Desert Ridge Marketplace could put an end to many government incentives.


South Scottsdale has been hit hard by the recession with several car dealerships on McDowell Road closed and others struggling. Areas near Scottsdale and McDowell roads also suffer from empty retail space and redevelopment plans that haven’t panned out.


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 Scottsdale Healthcare, said Scottsdale, like other cities, is facing financial challenges that could preclude municipal financial assistance for businesses in South Scottsdale.


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 Scottsdale Area Chamber of Commerce, said the city is facing budget constraints and political opposition to subsidies, meaning a good portion of South Scottsdale’s redevelopment will be dependent on a rebound in real estate, consumer and business spending and credit markets.


“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 Arizona State University’s SkySong office park and technology center fostering companies that may grow and locate operations elsewhere in south Scottsdale. He’d also like to see the area become home to more solar energy and biomedical companies to replace the struggling car dealerships and retail.


“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 ASU Foundation bought the Los Arcos site from Ellman in 2005 for $41.5 million and sold it the city, which leases it to ASU for SkySong. Lane was not in favor of that deal, which was completed under former Mayor Mary Manross.


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:

Scottsdale Area Chamber of Commerce:

Phoenix Business Journal - by Mike Sunnucks Friday, September 18, 2009

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Multifamily sales creeping back as bargains abound
Filed under: General, Real Estate
Posted by: Lillian Wong @ 5:53 pm

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 Transwestern, expects the momentum to continue.


“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 Mesa and one in Phoenix. The properties were purchased by SJ Management of Seattle using short-term loans from Wachovia Bank, now Wells Fargo. Wachovia foreclosed on those notes and hired Eastdil Securites, based in New York, to market the properties. Eastdil hired Transwestern to handle the transaction locally.


“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 Hendricks & Partners in Phoenix.


“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.

MC Cos. recently took advantage of Freddie Mac financing and depressed market dynamics.


“We believe when the market is down is the best time to buy,” said Ken McElroy, principal of MC Cos. in Scottsdale.

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 Phoenix near Loop 101 and Interstate 17 and north Valley employment centers. Built in 1983, the complex had been owned since late 1997 by Aimco, a Denver-based REIT.

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 West Coasts.

“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.:

Colliers International:


Hendricks & Partners:

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

Phoenix Business Journal - by Jan Buchholz Friday, September 18, 2009

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Watch those 401(k) fees
Filed under: General, Finance
Posted by: Lillian Wong @ 2:57 pm

Arising stock-market tide over the past half year has lifted most boats, but many vessels are still springing leaks.

No matter what the markets are doing, high costs can siphon off performance for investors, including participants in 401(k) retirement plans.

With about half of all workers covered by 401(k) programs, these plans have faced growing scrutiny. The fees borne by participants are one key area of concern.   more…

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