Scottsdale Arizona Real Estate Blog

A Canadian real estate investment trust has purchased north Scottsdale’s MAX at Kierland office building for $79 million, a broker involved in the deal said Wednesday.

Artis REIT, based in Winnipeg, Manitoba, purchased the six-story, 258,000-square-foot “green” building, according to commercial real-estate firm CBRE.

CBRE brokers Barry Gabel and Mindy Korth in Phoenix and Kevin Shannon and Ken White in Los Angeles represented the seller, a joint venture between New York-based Clarion Partners and Dallas-based Trammell Crow Co.

MAX at Kierland, 16220 N. Scottsdale Road, was about 90 percent leased at the time of sale and garnered the highest price per square foot of any Phoenix-area multi-tenant office property sold since 2008, CBRE said.

Two coyotes are sunning themselves on the Silverleaf Club golf course on a recent morning as DMB President Charley Freericks looks on from inside the clubhouse.

Breakfast guests are admiring the animals, and Freericks jokes that it is not going to be appetizing if a jackrabbit makes a run for it across the emerald fairway.

As a Valley real-estate veteran of nearly 30 years, Freericks is well aware that only the strong survive in the wild and in development.

DMB Associates Inc., developer of Silverleaf, DC Ranch and One Scottsdale, has emerged from the steepest canyons of the real-estate crater with plenty of vacancies in its office and retail space. But new tenants are moving in, new homes are going up and more than 500 apartments are planned at One Scottsdale and east of the DC Ranch Crossing shopping center.

“The recession slowed things down but a lot of people kept chugging along,” he said as he drove through Silverleaf, among the Valley’s most exclusive addresses, at the foot of the McDowell Mountains, just east of Pima Road on Thompson Peak Parkway within DC Ranch.

It’s not uncommon for valets at the Silverleaf clubhouse to find themselves at the wheel of a Bentley, Rolls-Royce, Porsche 911 or Mercedes SL63 AMG.

Many of DC Ranch’s residential neighborhoods southeast of Pima Road and Thompson Peak Parkway were completed by the time the recession hit four years ago.

Meanwhile, DMB’s Market Street commercial district has long searched for the right mix of tenants. The economic downturn of 2008 did not help. Restaurants and retailers fled, leaving the strong like Herb Box,Fleming’s and Armitage to survive.

At the same time, DMB opened its Canyon Village, with 92,427 square feet of offices and retail space.

The timing was a perfect storm that made it a challenge to fill the space, said Freericks, who was promoted to DMB president in April.

Zog Media is Canyon Village’s biggest tenant and DMB is working to bring medical tenants into the complex.

The Sterling Collection Development Group is moving into Canyon Village, said Nathan Day, company president.

Sterling revived a stalled villas project in November east of Canyon Village in Silverleaf. It sold five of its nine villas for an average price of $465 per square foot. The villas start at $1.29 million.

A second phase is planned with one- and two-story options.

Ciao Wine Bar and Bistro is set to open in September at Canyon Village.DMB also faced stiff headwinds in opening DC Ranch Crossing in late 2008. The Scottsdale-based development company sold the shopping center last June for $16.5 million.

Now Archstone, an apartment developer, plans to build 224 units on 9.2 acres east of the shopping center, which is located at Pima Road and Legacy Boulevard.

Freericks said DMB is marketing a 2.3-acre site south of DC Ranch Crossing for a limited-service hotel.

 One Scottsdale, 362 apartments

Another planned apartment project would bring new life to DMB’s One Scottsdale project northeast of Scottsdale Road and Loop 101. Henkel North America opened its headquarters there in December 2008 but the remainder of the site has been vacant.

TDI Real Estate Holdings LLC of Irving, Texas, plans to build 362 apartments in its first phase on 10.62 acres south of Thompson Peak Parkway and 74th Street.

The land deal for the project is set to close at the end of June. TDI hopes to have its building permit by then and complete a rental office by the first quarter of 2013, Freericks said.

The 120-acre One Scottsdale includes excavation for a parking garage to support a planned retail development. But lenders pulled back on the project.

Freericks said he regrets that the garage was not finished but it could have been worse if DMB had gone ahead with retail development as the recession hit.

“It reminds me of the Garth Brooks song with the line ‘thank god for unanswered prayers,’ ” he said.

DMB is patiently optimistic about the future of One Scottsdale, Freericks added.

New to Market Street

He also expressed optimism about the changes and new tenants at Market Street. That includes new signage along Pima Road that makes it easier for motorists to find the shopping center, which is tucked amid desert landscaping southeast of Pima and Thompson Peak Parkway.

An Italian restaurant, Mia Francesca, opened in February and Grimaldi’s has expanded.

Plus, a former hotel food-and-beverage executive, Paul Keeler, said he plans to open the Market Street Kitchen by mid-August in the space formerly occupied by the Beauregard restaurant and Krispy Kreme doughnut shop.

On the downside, the Heirloom restaurant has closed and Eddie V’s restaurant space remains vacant after it moved last year to the Scottsdale Quarter.

“Eddie V’s is a big hole in the doughnut,” Freericks said.

WASHINGTON – — Home prices rose in March from February in most major U.S. cities for the first time in seven months. The increase is the latest evidence of a slow recovery taking shape in the troubled housing market.

The Standard & Poor’s/Case-Shiller home price index shows that prices increased in 12 of the 20 cities it tracks.

Three of the weakest markets reported signs of improvement. Prices increased in Tampa and Miami, while prices in Las Vegas were unchanged.

The biggest month-over-month increases were in Phoenix, Seattle and Dallas. Prices dropped sharply in Detroit, Chicago and Atlanta.

The increases partly reflect the beginning of the spring selling season. The month-to-month prices aren’t adjusted for seasonal factors.

The overall index of 20 cities was essentially unchanged in March, after falling 0.8 percent in February.

According to data released last week, the worst effects of the housing crisis are beginning to wind down. RealtyTrac’s latest report shows the number of foreclosures in the U.S. in April is down 13 percent to 188,780 from 219,258 a year ago. However, some of the largest cities in the U.S. continue to lag behind the rest of the country, and still have long to go before the housing crash has fully run its course.

RealtyTrac published the number of new home foreclosures in April in the 50 largest metropolitan statistical areas in the U.S. Of those 50 areas, 10 had more than double the national foreclosure rate, which is one out of every 698 new homes.

In California’s Inland Empire metropolitan area, the rate was more than triple that. Using RealtyTrac’s foreclosure rates and and home price data from Fiserv Case-Shiller, 24/7 Wall St. reviewed the metropolitan areas with the highest foreclosure rates.

The continuing high rates of foreclosures in some areas is a disturbing trend, says RealtyTrac’s vice president, Daren Blomquist. Although the national foreclosure rate appears to have peaked, he explains, the massive number of remaining properties yet to be foreclosed may continue to hurt the U.S. market in the long term. The large number of new foreclosures “means that distressed property sales will continue to represent a large portion of overall sales for at least the remainder of this year, which in turn will keep a lid on any robust home price recovery,” Blomquist says.

After reviewing the markets with the highest foreclosure rates, it is clear that regions with the most foreclosures to date are the ones worst affected by the housing crisis. Seven of the 10 metro areas on this list had among the top 10 largest declines in home value from their pre-recession peaks. In six of the 10 regions, houses lost more than half their value in less than six years. In Las Vegas, home prices plummeted 61.8 percent between the beginning of 2006 and the end of last year.

24/7 Wall St. examined RealtyTrac’s latest foreclosure figures of new homes for April 2012, as well as the changes in the number of new foreclosures from a month prior and a year prior. In addition, we reviewed historical, current, and projected home price changes, provided by Fiserv-Case Shiller.

These are the five cities with the most homes in foreclosure:

5. Atlanta-Sandy Springs-Marietta, Ga.

Foreclosure rate: 1 in 298 homes

 Number of homes: 2,165,495 (9th most)

Foreclosures (April 2012): 7,271 (4th most)

Home price decline from peak: -35% (14th largest decline)

By the fourth quarter of 2011, home values in Atlanta fell 35 percent from their peak. The Atlanta area has the ninth most housing units of any region on the list, and the median price of these homes was just $110,000 in the fourth quarter of 2011. Things may be on the upswing, though — the number of homes in foreclosure fell 11 percent from the prior month.

 4. Sacramento-Arden-Arcade-Roseville, Calif.

Foreclosure rate: 1 in 277 homes

Number of homes: 871,793 (23rd fewest)

Foreclosures (April 2012): 3,147 (12th most)

Home price decline from peak: 54.7% (5th largest)

With home prices down 54.7 percent from their high at the end of 2005, the Sacramento area registered the fifth-largest decline in home prices. However, foreclosures are down by 39.01 percent from last year, when April 2011 had 5,160 homes in foreclosure. Additionally, the number of foreclosures also decreased by 26.7% from the previous month, from 4,294 to 3,147. Fiserv expects home prices in the area to rise 6.3% annually through the fourth quarter of 2016.

3. Miami-Ft. Lauderdale-Pompano Beach, Fla.

 Foreclosure rate: 1 in 273 homes

 Number of homes: 2,464,417 (5th most)

Foreclosures (April 2012): 9,031 (3rd most)

Home price decline from peak: 54.2% (7th largest decline)

The Miami metro region topped all Florida regions in the number of new foreclosures. It also ranks third in new foreclosure rates among the 50 largest metros with 9,031 foreclosures in April 2012. While foreclosures in the area decreased between March 2012 and April 2012, to the tune of 9.2 percent, the future appears gloomy. Prices in this region are forecast to fall another 3.8 percent between the fourth quarters of 2012 and 2013.

2. Las Vegas-Paradise, Nev.

 Foreclosure rate: 1 in 249 homes

Number of homes: 840,343 (22nd fewest)

Foreclosures (April 2012): 3,378 (10th most)

Home price decline from peak: 61.8% (the largest decline)

Home prices in Las Vegas, the poster child of the housing crisis, plunged by 61.8 percent from their peak in early 2006 through 2011 — the greatest decline of any of the nation’s 50 largest metros. Although new foreclosures in the Las Vegas-Paradise region declined by 66.1 percent to 3,378 over the past year, the number of foreclosures in April represents a slight increase over March, when 3,301 new homes were in foreclosure. Making matters worse, prices are expected to fall by another 3.3 percent between the fourth quarter of 2012 and the fourth quarter 2013, according to Fiserv.

1. Riverside-San Bernardino-Ontario, Calif.

Foreclosure rate: 1 in 213 homes

Number of homes: 1,500,344 (14th most)

Foreclosures (April 2012): 7,049 (5th most)

Home price decline from peak: -56.6% (2nd largest decline)

As of the fourth quarter of 2011, prices in the Riverside metro area fell by 56.6 percent from their peak, the second largest drop among top 50 metros. In addition, this region is first in terms of new foreclosure rate, at one in 213. While the number of homes (1.5 million) ranks 14th of the 50 largest regions, the area’s new foreclosure count for April 2012 reached 7,049 — fifth highest overall. It appears, however, that, the situation is improving; between March 2012 and April 2012, foreclosures dropped 10.8 percent.

Three of Fountain Hills’ four golf courses are bracing for financial hard times this summer because of a possible shortage of reclaimed or effluent water used for irrigation.

The Fountain Hills Sanitary District, a separate entity from the town of Fountain Hills, collects, treats and disposes of wastewater and its byproducts. Once treated, it is designated as reclaimed or effluent water.

The district provides reclaimed water free of charge to the town for three parks, and has contracts to sell the water to SunRidge Canyon Golf Club, Eagle Mountain Golf Club and FireRock Country Club for irrigation. Desert Canyon Golf Club has its own well.

In years past, the district had an overabundance of reclaimed water, but that has changed, because of increased demand by Eagle Mountain, drought conditions and poor economic conditions since the end of 2008, said Ron Huber, the sanitary district’s manager.

Foreclosures and a lack of construction have reduced the amount of wastewater available for treatment. Although the district is not required to find an alternate source for the golf courses and town, Huber said he is focused on finding a solution before July 1, when the district could run out of stored reclaimed water.

“With the alternative of having a golf course go out of business and the impact to the community, we’re going to do whatever we can to make this problem go away,” he said.

Jeff Lessig,SunRidge Canyon’s general manager, said the golf industry is a “huge driver” of tourism and the town relies heavily on sales-tax revenue provided by the golf courses.

“I don’t know what industry in Fountain Hills generates more tax dollars than golf courses,” he said.

The town collected more than $6.56 million in sales-tax revenue from July 1, 2011, through April of this year, and anticipates collecting nearly $7.8 million during the next fiscal year, said Julie Ghetti, deputy town manager/finance director. The town is prohibited by state law from disclosing the amount in sales taxes collected from individual taxpayers, such as golf courses.

Millions of gallons

The sanitation district’s average daily flow of wastewater into its treatment plant is about 1.91 million gallons, Huber said. In the summer, the average golf course uses slightly less than 1 million gallons of reclaimed water each day, he said.

Eagle Mountain had been mixing drinking water with reclaimed water for irrigation, but in 2008 began using reclaimed water only as the cost of drinking water from Chaparral City Water Co. increased 110 percent since 2005, said Joe Miller, Eagle Mountain’s golf course superintendent.

The district stores reclaimed water underground when demand is lower, and then recovers it when demand is higher, Huber said. The district has been tapping into its storage of reclaimed water since Eagle Mountain increased its use, he said.

“Ron’s been pulling out more water than he’s been able to put in with the drought and heat, so since then it’s been a gradual decline in the amount of water he’s been able to bank,” Miller said. “The golf courses use 90 percent of the water he produces at the plant.”

Geary Goss,FireRock’s general manager, couldn’t be reached for comment.

The town uses reclaimed water to irrigate turf and plants at Fountain Park and Fountain Lake, Desert Vista Park and Golden Eagle Park.

“It is possible, should there be a shortage of (reclaimed water), some parks will be required to go onto (drinking) water through the Chaparral City Water Co. for certain park facilities that have access to Chaparral,” Town Manager Ken Buchanan said. “If ultimately (drinking) water is part of the solution, then there would likely be a cost and a budgetary impact.”

 Overcoming shortages

The most viable option to avert a shortage is the sanitary district pursuing a short-term, non-agricultural groundwater right lease, Huber said. He is confident he can secure a lease before July 1.

“With development down right now, there are probably developers who have purchased water rights and who are not using them,” he said. “I am aware of at least several entities that have groundwater rights that they are willing to lease in the short term.”

The right doesn’t have to be on a piece of property in Fountain Hills, Huber said.

“If somebody has a groundwater right on a piece of property that is over on the west side of Phoenix, I can still pump the water out here as long as it’s within the active management area for the Arizona Department of Water Resources.”

The golf courses are anxiously awaiting news that Huber has found an alternate water source.

“Before, SunRidge, Eagle Mountain and FireRock, Fountain Hills had a problem with (reclaimed) water,” Lessig said. “They were producing more than was needed, so the issue was what do we do with all this water? Now, the pendulum has swung back and there isn’t enough. How are the golf courses going to survive if they have to pay a higher rate for (drinking) water?”

Phoenix development officials have given preliminary approval to several site plans in northeast Phoenix, signaling the possible reignition of economic growth in the area.

The site plans are for the following developments:

Valley Desert Ridge Apartments, northeast corner of 56th Street and Deer Valley Road. The site plan is for the northern half of the two-phase project, which, when finished, will have more than 700 units. The apartments likely will command high rents, as the developer, Westfield/Greystone Master Partnership, paid more than $1 million an acre for the 26-acre parcel. The land is vacant.

Cactus 42 Apartments, 4232 E. Cactus Road. The 200-unit apartment complex would replace a medical-office building that is less than half-occupied. Plans show parking surrounding two L-shaped buildings with a courtyard in the center.

Hospice of the Valley’s Sherman Home addition at Mayo Clinic Hospital, 5801 E. Mayo Blvd. The Sherman Home is Hospice’s first inpatient hospice home. It opened on the grounds of Mayo Clinic Hospital in 2006. The facility has 12 rooms for patients. The home will more than double in size with a 13,527-square-foot addition that will include 16 patient rooms, a kitchen, family spaces and staff areas. Groundbreaking is set for September, with anticipated completion in March 2013.

Enclave at Lone Mountain, Cave Creek and Lone Mountain roads. The site plan is for 18 homes. The Enclave developer previously had submitted plans showing 11 homes but did not follow through. Since then, the plans changed, necessitating another site-plan review.

All four plans were approved this month, the first step in a process that ends with breaking ground on the projects.

Each of the projects, along with several others in the area, comes at a time when the economy is showing signs of life.

Among the signs are numerous requests for site-plan approval, a pronounced difference from the depths of the recession when months would go by with no such projects.

A luxury hotel development and management company is in negotiations with the owner of the Mountain Shadows resort to help brand the long-shuttered hotel and keep it from foreclosing.

Officials say Solage Hotels and Resorts is planning to invest a “substantial amount” of money in the historic resort.

The 68-acre Paradise Valley property, at 56th Street and Lincoln Drive, went into default on a $32 million loan in April, according to Ion Data, a Mesa-based real-estate analysis company.

A trustee’s sale has been set for July 26.

Mountain Shadows owner Robert Flaxman said he has reached a preliminary agreement with the Solage group that will keep the sale from happening.

According to the agreement, Solage also would manage the property.

Flaxman said both sides are committing eight-figure sums to the project.

“We would become joint-venture partners of the entire product, with more than enough equity going to pay off the loan,” he said.

Robert Watson, president of Solage Hotels and Resorts, said he wants to bring a very social environment to the resort and make it a large amenity for the surrounding community.

Solage and its sister company, Auberge Resorts, have at least eight resort properties in North America, including Solage Calistoga and Auberge du Soleil in northern California, as well as Esperanza in Los Cabos, Mexico.

Watson said this includes more than 20 restaurant groups within those resorts.

Watson said the independently branded luxury resorts are approachable, and he has similar plans for Mountain Shadows.

“We don’t like our resorts overly exclusive. We intend to make Mountain Shadows very much a part of the community, and expect locals to take advantage of the resort, and look at it as their’s,” Watson said. “From the guest’s perspective, it will be a more engaging environment.”

Flaxman said Solage has been involved with the development of Mountain Shadows since 2006, but got more involved in April and now is deep in the planning process.

On Thursday, the Paradise Valley Town Council will review a revised special-use permit application to develop the resort. The plan will include specifics about the site plan and other aspects of the proposed project. The vetting process will include two additional council work-study sessions, June 7 and June 28.

The Planning Commission will have about 75 days to review the application, with a Sept. 11 deadline to submit a recommendation to the town council.

Jones Lang LaSalle is marketing an 8.5-acre site along the Arizona Canal in downtown Scottsdale that is planned for a hotel and multifamily residential use.

It is one of the last large parcels of commercial land near Scottsdale and Camelback roads, said John Cunningham, a broker for Jones Lang LaSalle, which is handling the property for IMH Financial Corp.

Scottsdale Canal Development had planned a 240-room Solis Scottsdale hotel and 140 condominiums on the site.

IMH foreclosed on the property a year ago.

AZ-Waters Edge LLC, an affiliate of IMH, bought the property late last month at a trustee sale for $30 million.

Scottsdale Canal Development filed for Chapter 11 bankruptcy protection last fall.

Village Health Clubs has submitted plans for a 10-court tennis center southwest of Copper Ridge School at DC Ranch.

The project, which involves 3 acres leased from the Scottsdale Unified School District, must be reviewed by the Scottsdale Development Review Board.

No date has been set for the hearing, said Meredith Tessier, a city planner.

Village Health Clubs would pay the school district $40,000 annually to lease the site and allow Copper Ridge students to use the tennis courts at selected times. The lease is for five years with five, 5-year renewal options, said Rick Erdenberger, DC Ranch Village Club general manager.

“It’s a good public-private partnership,” he said. “The school obviously benefits. Our membership benefits and the taxpayers aren’t paying for it.”

The Village Health Clubs tennis courts eventually would be used by students at a district high school adjacent to Copper Ridge School. The district’s sixth high school is planned as a biomedical academy for as many as 800 students.

DMB Associates Inc., which is developing DC Ranch, donated an 18-acre high- school site with a clause requiring construction to start by 2018 or the land reverts to DMB.

District voters will be asked in November 2013 to approve a bond issue to fund the new high school and elementary-school renovations, with a cost estimate of $25 million for the high school, said Rick Freeman, district director of facilities and operations.

The tennis center site originally had been planned for a football stadium if the campus had been a traditional high school, he said.

Courts could open in 2013

The Village hopes to get its tennis-center plan before the Development Review Board by September, said Kurt Jones, a senior planner with Ridenour, Hienton & Lewis PLLC, which is working with the club on its plans.

If approved, construction of the tennis center could start by year’s end with completion targeted for late spring or early summer of 2013, Jones said.

The courts would be just south of three baseball fields at Copper Ridge and less than a mile from the DC Ranch Village Club at Legacy Boulevard and Thompson Peak Parkway.

The tennis center, with a clubhouse and storage building, would be lit until 10 p.m. with lights on 20-foot poles. No direct light would spill into a residential area to the south, Jones said.

The ballfield lights on 75-foot poles would be more noticeable in the adjacent Arcadia neighborhood at DC Ranch than the tennis lights, he said.

Fewer than half the 100 homes planned for Arcadia have been built and the closest lot is 70 feet from the tennis center, Jones said.

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Erdenberger, the club manager, said adding the tennis courts will enhance the recreation options at the DC Ranch Village Club and attract new members.

The club’s fees start at about $150 per month with an initiation fee of $500, said Erdenberger, adding that the tennis fee would be about $25 per month.

The Village’s courts would be designed to resist cracking by using post-tension-slab construction with steel cables running through the concrete to make the surface more flexible.

DC Ranch has two tennis courts at its Desert Camp community park and six courts at the DC Ranch Country Club.

Scottsdale has long planned a tennis center and community park north of Copper Ridge School but there is no current funding for construction.