Following the Retail Panel was the Capital Markets Panel.  Key characters from this group were: Mike Forsum, Starwood Land Ventures; Ben Greazel, BGC Real Estate Capital Partner; David Sotolov, iStar Financial; moderated by Michael Straneva, Earnest & Young.

This was the final panel to end a marathon of a day!  Overall, the panel was optimistic about their prospects of either placing debt or equity into opportunities.

Here are a few of the bullet points:

• CMBS spreads have tightened and bond buyers are back
• 45% change in volume between 2011 and 2012.  Expect $70B in 2013 (up from 2012)
• Life Companies  – not uncommon to see sub 4% interest rates if an A property and low leverage.  Their annual allocations for loans have increased.  They have putting in more flexible prepayments.  Phoenix is considered a Primary Market for them.
• CMBS will focus on the cash flow of the property
• Banks are coming back to the market with nonrecourse debt
• Bridge Lenders are starting having problems in 2012 because of the competition
• Starwood  – private equity – went in as a principal because of the below replacement costs acquisitions and are now realizing some of the gains.
• Everything lives in a Fund.  The question is, what was the Fund about?
• Coinvestment occurring but is sponsor dependent
• Lenders are becoming more aggressive
• Obstacles today – financing new construction – largest barrier is the geography
• New project in TX – oil & gas – $270M loan, nonrecourse bank debt in 2012 for office and land
• Apartments are the easiest to finance and Hospitality is the toughest
• LNR deal is expected to close in April 2013
• Phoenix is well received right now for pricing debt as a Primary Market.  Even though Phoenix is known for Boom & Bust, it is an important market for the Home Builders.
• Caution Flag – Inflation – haven’t seen it yet, but they are expecting it.

The panel finished with a few comments about how a year ago, everyone thought the recovery would look like a hockey stick.  They still don’t see that for the recovery.  They all believe that debt pricing should remain relatively stable over the next couple of years and all believed that the best opportunity is cheap bank and life company debt.

If you are there, what did you takeaway?

Following the Office/Industrial Panel was the Retail Panel.  Key characters from this group were: Judi Butterworth, Velocity Retail Group; Mike Ebert, RED Development; Sam Fox, Fox Restaurant Group; moderated by David Larcher, Vestar.

Optimism seemed to be the tone of this group.  2012 was the start of the turnaround for Retail.  The two key indicators are Employment Growth and Housing.

Here are a few of the bullet points:

• 8% increase in retail sales from 2011 to 2012
• 2M SF was absorbed in 2012
• Big difference between A/B vs C/D properties.  C/D Retail properties may never be retail again after becoming vacant
• 2012 there was over 12K new retail stores opened and 3k retail stores closed
• Projects will be smaller this next development cycle
• Future of C/B Malls is redevelopment to other uses.  Examples: Borgata – Senior Hoursing; Town & Country – mixture of apartments; Metro Center Mall – new owners plan to change the use
• Competing against the internet – retailers are focused on the experience
• Big Boxes – new users are fitness related, petfood, grooming, value oriented retailers
• Companies with company loyalty programs are 80% more successful
• Movie Theaters have had the best 2 years
• Outlet Centers – impact is destination focused and now they are coming into town and want to be in prime shopping areas.  13-14 will open across the country in 2013
• Phoenix is no longer “permanently damaged” – Mike Ebert.
• 2005-2007 – cap rate compression occurred.  Now, A properties are back to those prices and cap rates again (6%)
• Oak Tree Management name Phoenix as a Top 5 Market

Sam Fox currently has 13 different restaurant concepts.

• He focuses on unique, one of a kind properties
• Focused on buying vs leasing now
• Looks at the “soul” of the neighborhood
• Most of the growth will be outside of AZ in 2013

If you are there, what did you takeaway?

Following the Land Panel was the Office/Industrial Panel.  Key characters from this group were: John DiVall, Liberty Property Trust; Kurt Rosene, The Alter Group; Dave Warren, DW Capital Partners;  moderated by Craig Coppola, Lee & Associates.

Craig did a good job leading the discussion and tried to get the inside scoop when he could from the panelist when the discussion would turn to specific projects in town.

Here are a few of the bullet points:

• The Build-to-Suit Premium today is about $2-3/SF/Year vs retrofitting a property
• Office space is becoming more shared environments and more workers are mobile
• Anchor Center – 350K SF office building – was renovated and has completed over 110K SF of new leases since renovation
• Infill locations are still key because of the live/work/play demand from employees
• Tech is leading the comeback in office – this user likes to “fall out of their cube/desk and land in their bed”
• In sourcing is the new trend in Industrial Manufacturing
• Very few Corporate HQ’s in Phoenix – typically have been organically grown (ex Medicis, US Airways)
• Discussing of the Liberty Property Trust acquisition of the 100 acres in Tempe and the plans for back office space.  The tenants they are attracting are going to be existing tenants wanting to relocate to new facilities vs new tenants from outside the market
• Trend from tenants is still the upward movement from B to A buildings.  A property vacancy is about 17% vs market of 26%
• Corporate America has cash and will take advantage of a deal
• 5K SF Office and 30K SF Industrial users are still very weak (small business)
• Labor costs are going up
• Construction costs hit a bottom in 2010 are slowly inching up
• 2012 – most expensive office sale was the Max at Kierland ($300/SF), the cheapest office building sale was $7/SF
• Parking Obsolescence is occurring in the office stock in Phoenix.  New office buildings were planned at 4:1,000; now they need to be 6:1,000.  Prediction is that older buildings will just never fully lease once the parking is absorbed by existing tenant mix.  B/C office buildings will have to become something new.
• Prediction is that 2015 will be the Landlord driven market
• Areas of interest: N Tempe, N Scottsdale, Central Scottsdale, Camelback corridors

If you are there, what did you takeaway?

Following the keynote speaker was the Land Panel.  Key characters from this group were:  Ed Hanley, William Lyon Homes; Ryan Huffman, Mattamy Homes, Michael llesCremiuex, Meritage Homes; David Viger, Richmond American Homes; moderated by Nate Nathan, Nathan & Assocates.

I did not have a lot of notes from this panel because of the focus being on residential new home construction.

Here are a few of the bullet points:

• There is a focus by the builders on the “tri-city” area: Mesa, Chandler, & Gilbert in the SE Valely.
• The “Recovered” Home buyer is coming back to the market.  It has now been 3 years since the foreclosure or short sale.  FHA is lending to them.
• Biggest challenge facing the homebuilder today is trades and affordability.  Labor costs have risen significantly because of a lack of qualified labor to build homes
• The prediction for new home permits ranged from 16K to 20K.  This is still well below the average of 35K new home permits.

If you are there, what did you takeaway?