Phoenix Real Estate Market Analysis Tour

Phoenix Real Estate Market Analysis Tour

So today we’re in Phoenix, it’s about 105
but it’s only the morning time, so I think it’s going to get up to 108. I’m with
Tom Briney who covers the West for Origin as well as Dave Welk who’s flown
in from his Charlotte office, and obviously I came in from Chicago. Really
excited about Phoenix; growing city net added 40, 50,000 people last year (metro area)
Lots of new jobs, they’re laying new train line you can see here. They’ve set
up a temporary memorial for 9/11 since it is 9/11 today, 17 years later. And so
we’re near downtown, really close to the airport. You can see planes flying over probably
five minutes from the airport at this point. Arizona State University is a big
driver here they’ve expanded to over 70,000 students and we’re going to take a look
at some projects both here but also in the downtown core where they have 12,000
of their students now. Office and multi-family, and then we’re going to
tour another multi-family later in the day and potentially a recapitalization
opportunity later. (Tom) That’s Sun Devil Stadium where Arizona State plays too right there… (Dave) And that’s us running a red
light (Tom) that was yellow (Dave) It was deep yellow. (Tom) Pull up the camera, we’ve got footage. The northeast and the southwest of town
are all surrounded by Native American tribal lands which cannot be built on so
although it looks like there’s a tremendous amount of land to build on
you can’t actually build on it. Unless they ground lease it to you – they can’t
sell it, they’ll ground lease. Any development you see is going to be
commercial of some kind because even with a ground lease they’re not allowed
to build residential so you get resorts, you get commercial, you’ll get office
buildings. This site that we’re going up to see right now is a ground lease site.
We had a opportunity to build spec office on it, again not resi, but numbers
didn’t pencil out but there’s now a value-add opportunity in the same
micro pocket which I wasn’t terribly interested at first until I heard what
they’re projecting as returns, so we’ll see. (Dave) Tom I’m rolling up my sleeves. (Tom) I like it we’re getting into it now tomorrow I’m wearing short sleeves There’s not a lot to do here.
There’s not like a bunch of capital to spend now so is it just you’re buying a
high cap rate you’re trying to lease it up? (Tom) Yeah and so right now you’re in the
mid-seventies percent occupied you’re not gonna put a ton of money into it
you’re gonna kind of work with what you have here and lease it up to the low 90s. You know, what’s consistent with the rest of the park, and that’s where you’re
generating your return is through lease up and cash flow. We are leaving Pima Center area right now. We’re headed to a project that’s on
the market right now It’s a multi-family deal that looks interesting.
It’s a light value add in a really high demographic high barrier to entry
location in McCormick Ranch. So this is a multi-family we’re touring in Phoenix
today, originally it was built in 1980 What we like about this asset is if you
look at the density you’ve got office across the street,
retail across the street, bars, restaurants etc. This is in the high
demographic of Phoenix Scottsdale and you’ve got really close access to the
highway, to Highway 101. We just finished the tour. All in I would say this asset
is extraordinarily well located real barriers to entry meaning you can’t
build multifamily in this neighborhood which is positive, but on the negative
side I don’t think this property is ever going to truly hit the demand set which
is a higher end consumer who wants really nice stuff. I really feel like
this property is sort of destined to never achieve a high enough quality
due to the limitations it has. So we’re going to go next door now to tour a
competitive site that’s 14 years newer but my hunch is this site has the bones,
the actual ceiling heights, walls, amenities, even the exterior you can see
with the Spanish tile roofs. Much more interesting that we have on the other
side here and when you drive up you’re going to feel visually much more that
it’s a home and a community than maybe this one. (Tom) We’re not truly competing against these
guys locationally competing, totally fine with that, but in terms of trying to
compete on a finish level and a feel we need to be below that. (Dave) So the 80s were all about racquetball courts that never get used. The 90s were all
about volleyball courts that never get used. (Tom) Top Gun did that to us (Tom) We’re in the retail across the street
from the subject property which is substantially more extensive than we
expected it to be when you just drive by both in quality and quantity. (Dave) We talked a
lot about where to eat and my question was who serves the biggest dishes, I was
told that this is buffet-style huge. I haven’t eaten in eight hours
let’s do this. So we just wrapped up lunch Dave is
finally satisfied again. We are headed from central Scottsdale west over to
North Phoenix, we’re going to look at a property that has potential recap
opportunity meaning we’re gonna take out one partnership group and replace their
position with new cash and continue a renovation process, so we’re gonna go
check out now and see if the area is something that we’re interested in. (Dave) We’re in North Phoenix now this is an example of an asset that we’re trying to purchase
for eighty thousand eighty five thousand dollars a unit the last multifamily we we’re
looking at was roughly two and a half times that it was more like two hundred
thousand a unit. We have a lot of experience in this property type as well.
We’ve done thousands of units in this demographic. So what you try to do here
is when you rehab the units you try to do it in a value oriented way where you can provide a clean safe place for the
renter to live. (Tom) We just came from the property in North Phoenix, we’re on Central Boulevard now, headed south towards downtown Phoenix.
Central is kind of the dividing line between east and west Phoenix, running
north and south all the way from downtown up to the north side of Phoenix.
This deal is interesting for a couple of reasons the first is the path of growth
that it sits in right now. So as you mentioned downtown which is having a
huge revitalization from Arizona State and some redevelopment sort of occurred
down there and it’s really moving up central that we’ve just drove down
because of the light rail and so we’re (Dave) The light rail is right here. (Tom)
Light rail is right here, and you can see as a result of the light rail you’ve got
new construction multifamily right here and new construction across the street. So you’re really in the path of growth right now. (Dave) We just finished our tour of the building. Big picture: we’re four blocks from downtown Phoenix. There’s
clear growth in this direction you can actually see right across the street is
the new multifamily rental just got built the scaffolding still up. Right
across the rail on the other side is another product so clearly the
city’s growing this direction. This is a 35 year old building but we’re also able
to buy it at a good price and we see a lot of problems that we’ve fixed in the
past and we think we can probably fix them here too. So we’re going to roll up
our sleeves on this deal. Tom is going to take a hard look at the numbers and
we’ll get back to you if we make progress on it.
And now we’re going to the Smoothie King because this camper right here needs to eat five meals a day and I’m only on two. Now we’re gonna say goodbye from Phoenix and hopefully we shared a little bit about what we do on the road

4 thoughts on “Phoenix Real Estate Market Analysis Tour

  1. Love the content guys. Keep ‘em coming!

  2. We currently invest in mobile homes & real estate the Phoenix area. It has been growing like crazy over the past 5 years that we have lived here! Thanks for sharing so much info on the market!

  3. That’s Tempe.

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