Property Performance Analysis

Post Sponsored by Mary Jo Kirk

What is the current state of commercial property ownership, user potential, performance and values in the Prescott, Arizona area?

Where is the commercial real estate market headed in 2009 and beyond and what should property owners be doing to focus on property performance going forward?

At Arizona Commercial, we believe it is critically important for owners of commercial property within the tri-cites of Prescott, Prescott Valley and Chino Valley to consider executing a thorough “Property Performance Analysis” or PPA, based upon changes taking place in the general market but especially with respect to changes taking place in commercial mortgage lending.

The Myth of Immunity

The tri-cities commercial real estate market is not immune from the impact of the economy on property performance in larger metro markets such as Los Angeles and Phoenix.

The local commercial market is directly impacted by the strength of the general ecomomy, unemployment, housing and most importantly, lending.

The decline in residential property values, a slowdown in new construction, the reversal of commercial appreciation rates and unemployment are all contributing to changes in the performance of all segments of the commercial real estate market.

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Property Performance Analysis

Arizona Commercial is currently engaged in conducting “Property Performance Analysis” (PPA) with commercial property owners as a FREE service designed to guage an owner’s financial objectives, the current financial performance of a property and the short and long term financing needs associated with the property.

Because we anticipate new challenges to commercial property performance as a direct result of the general conditions of the economy we think it imperative that owners assess their property performance situation sooner rather than later, and that they develop a sound financial plan going forward.”

Jim Pullaro – Broker, Arizona Commercial

Arizona Commercial’s PPA includes an assessment of and owners’s financial objectives measured against the quality of tenant mix, correct property use, lease performance, operating cost analysis, mortgage situation and estimations of user demand through 2010, with specific recommendations in each category.

Arizona Commercial’s PPA is like a property physical, in a sense. It measures and evaluates the critical components related to the health of a commercial property and sets forth prognosis and treatment before problems begin.

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Refinancing and Replacing

Commercial property owners and investors are keenly aware of the need for quality “R and R” or, refinancing and replacing. These are the two keys to perpetuating long term performance.

Lenders are currently tightening requirement for new commercial loans and refinancing. Qualification requirements are more stringent and under-performing properties or, select segments (property types) within the commercial real estate market are finding it more difficult to secure financing.

A PPA can signal issues an owner may face before they become critical and assist with pre-planning for mortgage refinancing, property replacement or, both.

Commercial real estate investments require monitoring, adjustments and sometime immediate changes in order to keep them performing. A PPA can flag areas where an owner can and should make adjustments in order to keep performance healthy.

Until recently, many properties were performing as a result of a strong demand and easy financing. Therefore, many owners ignored or postponed the need for regular property analysis. In today’s economy there is no guarantee that a property will appreciate or perform without careful “hands-on” attention and management of the components of performance.

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Your may contact any of our Commercial Associates for a confidential Property Performance Analysis or, if you prefer, call Arizona Commercial at 928.776.8460 or use our contact form.

Office Space Leasing Services

Office space leasing and lease representation represents a large part of Arizona Commercial’s brokerage activity. Arizona Commercial’s brokerage professionals specialize in tenant and landlord needs in regard to office space leasing services.

We are knowledgeable on all local market aspects regarding office leasing. We are well versed in office leasing within Prescott, Chino Valley, Prescott Valley and all of Yavapai County.

We are are supported by unique, industry-leading econometric forecasting and market research tools to ensure clients make strategic and informed decisions.

Each year we negotiate many office transactions on behalf of our clients involving. Transactions include new properties, business and office parks, multi-tenant buildings, and mixed-use projects.

Tenants and landlords both benefit from the unmatched experience, local market knowledge, and integrity of our office professionals. Our transaction services are provided to major corporations, developers, entrepreneurs, small and midsized companies, and financial institutions.

Arizona Commercial will assist both landlords and tenants in every aspect of the office relocation process:

• Market research
• Finding area population and growth trends
• In-depth study of availabilities locations and rates
• Targeted marketing to prospective tenants
• Building property reports and scheduling tours
• Economic and Functional Analysis
• Calculate values
• Compare and evaluate proposals and contracts
• Lease negotiations
• Assist with build-out plans
• Assisting in premises inspection

Commercial Land Acquisitions

Future development opportunities begin with site selection, i.e., the land.  At Arizona Commercial our Associates are able to assist a business with site determination based upon a predefined business criteria.

Site selection for development project starts with analysis of all aspects of the location such as, transportaion, ingress and egress, shipping, other approved development plans, demographics, anticipated future growth and more.

7.71 Ac., Cordes Junction – Frontage

The property is located in Cordes Junction, Yavapai County, Arizona with frontage on the Prescott bound side of Highway 69 just west of Interstate 17.

The Cordes Junction interchange is 67 miles north of downtown Phoenix, 81 miles south of Flagstaff and 35 miles east of Prescott.

Cordes Junction is the central Arizona traffic interchange serving Prescott and Prescott Valley traffic and north-south interstate travel between Phoenix, Sedona, and Flagstaff.

Offering Price: $671,000
Total Site Area: 7.71 Acres
Price/sf: $2
Parcel: 500-06-015B
Zoning: RCU 2
ADOT Access

Description: Approximately 7.71 acres of undeveloped land gently sloping from the midpoint towards the highway with elevated 360 degree views, stunning to the north. Vegetation is light brush overgrowth.

Access: The Property is accessed by the frontage road on the westbound (Prescott) side of Highway 69, with a dedicated eastbound left-turn lane giving full ingress and egress to the highway. The current frontage road access to the property is Kennedy Drive on the eastern front parcel boundary.

Zoning: Currently RCU-2A, Residential with two (2) acres minimum. Due to the proximity to the interchange, Yavapai County is very interested in the commercial development of bordering and nearby properties and welcomes re-zoning with a formal site development plan. Quail Ridge, a 5-Acre parcel directly across Highway 69 from the subject property, evidences this by being recently rezoned to C1 commercial with a 27-unit “KOA style” RV Park currently under development. C1 zoning is a broad category encompassing gas station, hotel/motel, retail, restaurants, fast food, travel related services as well as neighborhood sales and services for the nearby communities.

Utilities: Utilities are existing on adjacent property. Water wells are in the area.

Traffic: From Cordes Junction to Spring Valley, the nearest community 2.75 miles to the west, 2008 traffic counts are 13,000 daily with predictions to double by 2020. The Interstate 17 traffic to the south counts 26,000 and to the north 17,500. The Arizona Department of Transportation (ADOT) in conjunction with the Federal Highway Administration (FHWA) is in the process of a $53 million Interchange Improvement Project scheduled for 2010-2011 to upgrade and improve the interchange and provide secondary access to the Cordes Lakes community.

Population Centers: The westbound Highway 69/Interstate 17 Interchange is the major artery to the Prescott MSA (82,500) which is the largest Arizona MSA north of Phoenix with growth that exceeds the regional and national averages. It serves the communities of Prescott (47,400), Prescott Valley (41,900), Chino Valley (17,000), and Dewey-Humboldt (4,500). Communities in the property’s immediate vicinity include Mayer, Spring Valley, Cordes Lakes and Arcosanti with a combined population of 6,700. Other major population centers of Phoenix Metro (4.3 million), Flagstaff (65,000) and Sedona (11,400), are within 25 to 75 miles of this location.

Yavapai County: Yavapai County encompasses 8,125 square miles. The current population is approximately 241,000 making it the 4th largest county in the state. It is one of the fastest growing counties in the U.S. and the second fastest in the state, experienced a population growth of 205% from 1990 to 2003.
AZ Dept. of Economic Security and U.S Census Bureau

Tenant Rights in a Risky Market

Arizona Commercial has represented small and large tenant who are locally based and national name brands.  Being a tenant can be a risky proposition in today’s complex real estate market fraught with foreclosures and decreasing cash flow to owners.

Representing a tenant is more than than showing property and executing a lease document. Questions about what rights a tenant has in the event of a property foreclosure, obligations for maintenance on the part of owners and issues such as personal guarantees, tenant improvements and other issues require the expertise of Arizona Commercial.

Relocating to Prescott, Arizona

Business Relocation can be a complicated endeavor with many factors that influence the destination, timing and logistics.

Arizona Commercial is uniquely qualified to assist your business with the analysis of your anticipated relocation including personnel, business assets and of course location of your business in a new environment.

In additon, Arizona Commercial is prepared to assist you with negotiating your relocation with the city, county and state representatives with an eye on the economics of the transition and the future economic advantages your business must have in order to remain competitive.

Site location, whether ownership or tenancy, is a huge factor in the relocation planning process. In the case of ownership, every effort is put into evaluating all of your business options and the same is true with leasing. Careful consideration must be given to your location and the compliment of transportation, foot traffic, employees, signage, community integration, distribution and much more.

Contact Arizona Commercial by email, our contact form or, if you prefer you may call us at 928.776.8460.

Challenging Property Tax Values

Posted by Donald Teel – Arizona Commercial.

In today’s commercial investment environment, property taxes can be lethal. Many investors are still paying property taxes that are reflective of the market run-up of 2000-2006 and not necessarily on the current valuations of their investments.

The questions are what can you do about inflated tax valuations, where do you turn and more importantly, how can investors challenge property tax values successfully?

Property Tax Analysis. Create an analysis of the assessed value of your property for the previous five years to determine the trend line. The analysis should show the assessed values and compare those with a legitimate Broker Price Opinion (BPO) to show market value trend compared to assess valuation trend. It might look something like the following (Download the FREE sample spreadsheet here).

Commercial BPO. Secure a commercial property broker price opinion (BPO) for your property to help determine the market value trend line. Arizona Commercial can do this for you for a nominal fee. The report includes photos, recorded sales values, spreadsheet analysis and conclusion.

The BPO must include such detail as location within the market, property style, age, square footage, lot size, parking, vacancy/occupancy rates, number of leasable office/areas, and other issues that demonstrate the empirical value of the property.

Appraisal Approach. If the first two suggestions demonstrate that you have a potential tax overcharge, the final requirement may be to secure a full appraisal with detailed analysis of comparable properties. Appraisals are expensive and should only be used if the economics of the situation warrant such a measure. However, when push comes to shove, a certified appraisal will carry more weight than a commercial BPO.

Challenge Process and Procedure. States have specific procedures for challenging property taxes and the process must be respected in order to be successful.

The process will include forms, time frames and details that must be completed prior to consideration of a claim. Following these procedures and time limitations will be a critical factor. Most likely you will be required to pay the taxes while challenging their validity and if taxes are not paid in a timely manner, other negative consequences can occur in the form of interest and penalties and in severe cases, assessors may sell the delinquent taxes with a lien or even sell the property after a specified time.

Appealing a tax bill is not easy and may include several layers of review including a hearing for the property owner and even judicial recourse. Ask your County Assessor’s office for a copy of their appeal process.

Failure, Refusal or Inability to Pay Taxes. It is unlikely that a refusal to pay property taxes pending the outcome of a challenge will carry any weight and may further exacerbate the problem by creating a hostile situation.

Philosophical, political or principles of conscience are irrelevant to the process. However, in some cases, hardship may be considered as a factor in when and how the taxes are to be paid. Hardship exemptions are difficult when it comes to commercial property and typically are more successful when the property is a primary residence.

Generally speaking if an owner cannot pay the commercial real estate property taxes that owner should immediately communicate with the County Assessor’s office where the property is located and seek advice.

If a challenge is in order, owners may want to contact a competent lawyer with experience in real estate property tax law.

Declining Commercial Values. Most property types have declined in value and this naturally leads to an examination of all expenses related to market value and the cost of the property, including property taxes.

Declining values are now creating a backlog of challenges and yes, it can get very nasty, as some governments are deliberately protracting the challenges and the court cases to their advantage.

There is no doubt about it, however, that some owners are still paying taxes based on unsupportable valuations from previous years. Despite the declines, property taxes have continued to climb in far too many markets. As an example of the lagging, for the first time in 12 years, property taxes in some areas of Los Angeles County declined up to 15% while others increased.

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Donald Teel is Senior Associate with Arizona Commercial a central and northern Arizona commercial brokerage firm. Need more information call 1-877-777-9100 or, if you prefer, you may email Donald Teel

Two Buildings, Incentive & Upside

PRICED TO SELL! 7,564 sf Business Park located in the Chino Valley Business Park & Marketplace. Two single story buildings constructed on 1 acre in 2004-2005 with peeled pole detail and rock facing. Buildings are currently 56% occupied.

Owner will pre-pay rents for one year on half of the vacant space. Previously traded at 1.3M, priced now well below replacement. Huge upside on this property, 10% CAP when fully occupied. Currently in Foreclosure proceedings. Great opportunity for Owner/User.

Other Marketplace tenants include Family Dollar, Pizza Hut, Liquor Barn and other office tenants. Located Just off Hwy 89 with substantial parking in private off-street lot.

See this property on LoopNet. Email Bebe Wright, CCIM, Arizona Commercial or, if you prefer call her at 928.776.8460, extension 14.

Industrial Space Lease and Investment Services

Find industrial space lease and investment services in Prescott, AZ. Our Industrial Services professionals are some of the best in Central and Northern Arizona. If you are in the market for, or considering, industrial space leasing or commercial real estate investment in the Prescott, Prescott Valley, Flagstaff or any other Central and Northern Arizona community, please call us.

Our Industrial professionals have a deep understanding of current and emerging technologies, production processes and business practices. As a result, our team is able to meet the precise space utilization needs of our clients for manufacturing, assembly, research and development, distribution and warehouse facilities and land assignments.

With a proven track record in successfully marketing client properties for sale, lease or sublease, Arizona Commercial is also particularly well versed at representing companies in relocation and/or expansions.

Prescott Area Manufacturing, Distribution, Land and Other Industrial Real Estate

We offer consulting on land planning, infrastructure design, and marketing of speculative buildings and are also skilled at arranging build-to-suits for industrial facilities, providing site selection options, and handling land acquisitions/ dispositions.

Supported by up-to-date knowledge of local, regional, and national industrial markets, we match the financial, operational and qualitative needs of clients with appropriate real estate opportunities.

Strategic Services and Capabilities:

• Arizona Commercial’s professionals are skilled at representing both tenants and landlords.

Owner Representation Includes:

• Sale/lease of existing facilities
• Sale/leaseback transactions
• Valuation studies
• Property management referral
• Land acquisitions
• Property valuations
• Consulting services

Tenant Representation Includes:

• Current situation and business plan analysis
• Build-to-suit transaction services
• Access to national market data for comparative studies
• Lease versus buy analysis
• Comparative lease analysis
• Land acquisitions
• Comprehensive property availability studies

Multi-Family Investment Opportunities

Like the rest of the nation, Arizona has seen a decline in multi-family transactions due to the severity of the economy.  Arizona Commercial believes we are at or, near the bottom of the decline cycle and multi-family real estate opportunities will once again begin to attract prudent investors.

Arizona Commercial can guide your multi-family investment from start to finish by understanding your financial objectives and preparing a property performance analysis that will serve as the blueprint for your endeavor.