Mortgage And Real Estate News

Sunday, December 18, 2011

SEC charges ex-Fannie, Freddie CEOs with fraud - BusinessWeek

The Securities and Exchange Commission on Friday brought civil fraud charges against six former top executives at Fannie Mae and Freddie Mac, saying they misled investors about risky subprime loans the that mortgage giants held when the housing bubble burst.

Those charged include the agencies' two former CEOs, Fannie's Daniel Mudd and Freddie's Richard Syron. They are the highest-profile individuals to be charged in connection with the 2008 financial crisis.

The federal government has faced criticism for not bringing charges against top executives who may have contributed to the worst financial meltdown since the Great Depression.

Mudd, 53, and Syron, 68, led the mortgage giants in 2007, when home prices began to collapse. The four other top executives also worked for the companies during that time.

The lawsuit was filed in federal court in New York City.

"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, SEC's enforcement director. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk."

Fannie and Freddie both entered into agreements with the government on Friday, accepting responsibility for its conduct without admitting or denying the charges. The government-controlled companies also agreed to cooperate with the SEC on the cases against the former executives.

The Justice Department has opened up probes into Fannie and Freddie but has not charged anyone with a crime.

In a statement released through his attorney, Mudd said the lawsuit "should never have been brought" and said the government reviewed and approved all of the company's financial disclosures.

"Every piece of material data about loans held by Fannie Mae was known to the United States government to the investing public," Mudd said. "The SEC is wrong, and I look forward to a court where fairness and reason -- not politics -- is the standard for justice."

Syron's lawyer couldn't be immediately reached for comment.

According to the lawsuit, Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings.

Mudd told a congressional panel in March 2007 that Fannie's subprime business represented less than "2 percent of our book." He also said the company held subprime mortgages "very carefully." A month later, he told a separate congressional panel that subprime loans represented less than 2.5 percent of Fannie's books.

Freddie told investors in 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books. The SEC says its holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.

In a May 2007 speech in New York, Syron said Freddie had "basically no subprime exposure," according to the suit.

Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default and then sell them to investors around the world. The two own or guarantee about half of U.S. mortgages, or nearly 31 million loans.

During the financial crisis, the two firms verged on collapse. The Bush administration seized control of them in September 2008.

So far, the companies have cost taxpayers almost $150 billion -- the largest bailout of the financial crisis. They could cost up to $259 billion, according to its government regulator, the Federal Housing Finance Administration.

Mudd was fired from Fannie after the government took over. He's now the chief executive of the New York hedge fund Fortress Investment Group.

Syron resigned from Freddie in 2008. He's now an adjunct professor at Boston College.

The other executives charged were Fannie's Enrico Dallavecchia, 50, a former chief risk officer, and Thomas Lund, 53, a former executive vice president; and Freddie's Patricia Cook, 58, a former executive vice president and chief business officer, and Donald Bisenius, 53, a former senior vice president.

Lund's lawyer, Michael Levy, said in a statement that Lund "did not mislead anyone." Lawyers for the other defendants declined to comment Friday morning.

Fannie and Freddie had traditionally purchased a small number of subprime mortgage loans, which involved borrowers with credit problems who could not qualify for cheaper prime loans. But starting in the late 1990s many firms started purchasing subprime loans, and Fannie and Freddie followed suit.

Legal experts say the cases, while unusual, might not yield much in penalties against the former executives.

In July, Citigroup paid just $75 million to settle similar civil charges with the SEC. The company's chief financial officer and head of investor relations were accused of failing to disclose more than $50 billion worth of potential losses from subprime mortgages. The two executives charged paid $100,000 and $80,000 in civil penalties.

A federal judge in the case said she was "baffled" by the low settlement.

Fines against executives charged in SEC civil cases can reach up to $150,000 per violation. SEC Chairman Mary Schapiro has asked Congress to raise the limit to $1 million.

Mudd made nearly $4 million in salary and bonuses in 2007, and Syron made more than $18 million, according to company statements.

The SEC has charged more than 80 people, including 40 CEOs and senior executives, with violations stemming from the 2008 financial crisis.

by Derek Kravitz Associated Press Dec 16, 2011

SEC charges ex-Fannie, Freddie CEOs with fraud - BusinessWeek

Monthly median Scottsdale home prices are 'encouraging'

Scottsdale's median home prices in 2011 have ranged from a high of $359,000 in August to a low of $317,000 in September, according to monthly reports from Arizona State University Realty Studies.

As the year draws to a close, the median price in November of $345,000 was up 1.5 percent from a year earlier and 1.12 percent higher than it was at the start of 2011.

Throw out the high and low prices of August and September and Scottsdale's average monthly median price was $342,797 through November.

• Scottsdale home, condo prices through the year

For most of the year, the monthly median prices were down year-over-year from 1 percent to 10 percent. Only September and November recorded price increases of 3.6 percent and 1.5 percent, respectively.

"All of the numbers are encouraging," said Jeffrey Smith, West USA Realty vice president.

The inventory of houses is about 19,300 homes in Maricopa County, down from 54,000 less than two years ago, he said.

"There is demand for housing even though the demand is on vacation right now" until after the first of the year, Smith said.

Good homes, priced right are selling quickly in Scottsdale, he said.
Foreclosures a factor

Foreclosures are still a drag on the Scottsdale housing market but that could be changing.

In January, 29 percent of home sales were foreclosures and by November that declined to 16 percent, a low for the year.

That is far below the foreclosure figure for Maricopa County, which was 29 percent in November. The median home price countywide last month was $126,000, down 6.7 percent from a year earlier.

Jay Butler, ASU business professor emeritus, said another surge of foreclosures is possible in the spring if low consumer confidence prompts more people to give up on their homes.

"However, the key issue in the coming year will be whether investors become less of a factor and the homeowner-occupant market begins to improve," said Butler, author of ASU's monthly report on resale homes.

ASU tracks resale home prices, total sales and foreclosures in a monthly report. The latest report was released this week. The median price is the midpoint of all the sales.
Home sales on rise

Scottsdale home sales through November were 5,810, up 5 percent for the same period a year earlier.

Previously foreclosed houses accounted for 40 percent of sales countywide in November and were 18 percent of sales in north Scottsdale.

Scottsdale's median price for condominium and townhouse sales in November was $125,000, down 1.7 percent from a year earlier.

Condo prices started the year at $146,825, dipped to $115,250 in August and declined every month year-over-year except for September, which saw a 5 percent jump in prices.

Foreclosures accounted for a third of the condo sales in January and February but fell to 18 percent in November, the lowest figures this year.

Buyers purchased 3,214 condos through November, down 6 percent from 2010.

The median price of condo foreclosure sales in Scottsdale last month was $98,450. That is the first time the price has fallen below $100,000 in recent years.

Maricopa County's median price for condos and townhouses was $80,825 in November, down 0.2 percent from a year ago.

by Peter Corbett The Arizona Republic Dec. 16, 2011 08:58 AM

Monthly median Scottsdale home prices are 'encouraging'

Valley rises in economic rankings -

The Phoenix region, which had one of the worst-performing economies among the nation's 100 largest metro areas, finally is moving rapidly in a positive direction.

Metro Phoenix rankings

This is how the Phoenix region ranked among the nation's 100 largest metro areas for improvements from the second quarter ending in June to the third quarter ending in September.

Real-estate owned properties:* Second.

Housing prices: Seventh.

Unemployment rate**: 19th.

Employment: 26th.

Gross metropolitan product: 94th.

*This refers to the properties owned by banks or other lending institutions per 1,000 properties that have mortgages.

**This ranking is based on a one-year percentage-point change in the rate. The Phoenix-area rate in the third quarter was 8 percent.

Source: Brookings Institution's Mountain Monitor report

A Brookings Institution Mountain Monitor report being released today puts metro Phoenix among the top 20 of the metro areas for its overall economic performance and improvement between the second and third quarters.

That's a dramatic turnaround from its placement among the 20 or 40 worst, where it has been for the past year.

The finding is based on four indicators: changes in the number of jobs, unemployment rates, economic output (gross metropolitan product) and housing prices. The time periods for the changes varies with each indicator and ranges from several months to several years.

Mark Muro, a Washington, D.C.-based senior fellow at Brookings' Metropolitan Policy Program, credits the turnaround to the national growth of two segments of the Phoenix area's economy, high-tech and manufacturing, which help offset Phoenix's real-estate crash, as well as subtle improvements in housing and employment.

"The Phoenix area has a lot of wreckage from the real-estate mess, but you do participate in those important technology and manufacturing segments," he said.

In contrast, the Tucson area, with fewer of those industries, remained in the bottom fifth for its overall economic performance. It is also more dependent on now-stagnant federal dollars.

"They (Tucson) have just as significant real-estate shrapnel, but they have a thinner economy. They have fewer drivers to offset the real-estate crash," Muro said of Tucson.

The Brookings report ranks the Phoenix area 26th among the metro areas for job gains between the second and third quarters, with a gain of 0.6 percent, compared with a national metro average of 0.1 percent.

"It (job growth) may not feel great, but it's something and it's better than what is going on in a lot of places," Muro said.

Arizona State University economist Lee McPheters said Wednesday that job growth in the second half of the year has come faster than in the first half and that the region will probably end the year in 10th place for the most job gains among metro areas.

Although the Phoenix area's housing market remains in pain, Muro said a drop in lender-owned properties and rise in housing prices over the quarter helped boost Phoenix's overall ratings.

Brookings research shows that the Phoenix area's housing prices have fallen 56 percent from when they peaked in the fourth quarter of 2006 to the third quarter of 2011.

But since hitting their low point in the second quarter of 2011, prices have risen almost 2 percent.

The number of lender-owned properties per 1,000 properties that have mortgages has fallen to 9.3 in the third quarter from 11.4 in the previous quarter.

The third quarter not only brought progress for the Phoenix area but for the entire intermountain West, which consists of Arizona, Colorado, Utah, New Mexico, Nevada and Idaho.

All the states began to see signs of recovery after idling for most of the year, Brookings said. And even struggling Las Vegas landed in the middle.

By Betty Beard, The Arizona Republic Dec 15, 2011

Valley rises in economic rankings -

Maricopa County foreclosures improved in November

The foreclosure rate was down slightly in November compared with the same month of 2010, as Maricopa County entered the final month of a year that has brought mild recovery to the housing market but not as much bounce as analysts had hoped, according to a report issued Monday by Arizona State University.

Detached, single-family home foreclosures made up 29 percent of existing-home transactions in the Phoenix area in November, up from 26 percent in October but down from 31 percent in November 2010, the report said.

W.P. Carey School of Business Professor Emeritus Jay Butler, the report's author, said the increase in foreclosures from October to November was not surprising, because the same seasonal pattern occurred a year earlier.

"The foreclosure rate's movement is more of a cha-cha-cha, with a few steps forward and couple of steps back," Butler said. "Most people thought 2011 would be a better year for the housing market than it was, but it's a good transition year."

There were 5,030 existing, single-family home sales in November and 2,075 foreclosures for a total of 7,105 transactions, the report said.

October's activity was slightly better, with 5,315 existing-home sales and only 1,900 foreclosures, but in November 2010 things had been even worse, with 4,750 existing-home sales and 2,095 foreclosures, it said.

The median home-resale price in Maricopa County was $130,000 in November, up from $125,000 in October but down compared with the November 2010 median price of $134,000, the report said.

That's not a tremendous amount of progress, but Butler said the housing market's overall picture was just a shade rosier than it had been a year earlier.

"I think we're on our way out of this mess unless something major happens," he said. "We might see another surge in foreclosures in the spring after holiday foreclosure moratoriums by banks end and low consumer confidence possibly prompts more people to give up on their homes."

Butler said it's likely the housing market will experience a more significant recovery period in 2012.

One indicator to watch for, he said, is the loosening of foreclosure-home investors' iron grip on the market and a commensurate increase in sales to regular, primary-home buyers, often referred to as owner-occupants.

"The key issue in the coming year will be whether investors become less of a factor and the homeowner-occupant market begins to improve," Butler said.

The townhouse market also experienced mild recovery in November, according to the report.

There were 260 townhouse and condo foreclosures in November, nearly identical to the 265 foreclosures in October, and down slightly from 300 foreclosures in November 2010, the report said.

The median price for a townhouse or condo resold in November was $80,900, it said, up slightly from $79,125 in October and from $75,000 in November 2010.

by J. Craig Anderson The Arizona Republic Dec. 12, 2011 06:17 PM

Maricopa County foreclosures improved in November

Mountain Shadows Resort owner will sell property to JDM Partners

The owner of the shuttered Mountain Shadows resort in Paradise Valley has agreed to sell the property to a well-known local development company co-owned by Jerry Colangelo, town officials said.

California-based Crown Realty & Development Inc. has entered a purchase agreement for the sale of the resort to JDM Partners LLC.

The high-profile developer's projects include Chase Field, US Airways Center and Comerica Theatre. A recent project was the renovation of the Wigwam resort in Litchfield Park.

The resort at Mountain Shadows, 56th Street and Lincoln Drive, on the northeastern side of Camelback Mountain, closed in September of 2004.

Tom O'Malley, chief operating officer for JDM Partners, said the group is looking forward to restoring Mountain Shadows' reputation as a top destination.

"We have the same interests with Mountain Shadows as we do with the Wigwam,'' he said. "There are certain properties in Arizona that are iconic, and Mountain Shadows and the Wigwam are two of them. We want to bring those properties back to their prominence.''

Paradise Valley Mayor Scott LeMarr said the agreement will bring in a company with a proven track record.

"Many people have wanted to develop Mountain Shadows, but few have gotten permission to do so," he said. "Now, we have a reputable and capable company to do it."

The resort aspect of the property is closed because of a lack of available equity in the economy, LeMarr said. However, the 18-hole executive golf course and residential components remain open.

"Our residents have had to endure the condition of Mountain Shadows for too long," LeMarr said.

Crown Realty, developer of the Montelucia Resort and Spa, bought the 68-acre Mountain Shadows from Host Marriott Corp. for $42 million in January 2007. Host Marriott Corp. is now known as Host Hotels & Resorts.

Later that year, owner Robert Flaxman proposed a boutique-style resort and residential project for Mountain Shadows that included 320 rooms and 26 resort patio homes. However, the plan never moved forward and the resort remains shuttered.

Flaxman put it on the market near the end of 2008, citing a desire to spend more time with his family after his work on the Montelucia resort.

Mountain Shadows originally opened in 1959.

by Philip Haldiman The Arizona Republic Dec. 7, 2011 06:34 PM

Mountain Shadows Resort owner will sell property to JDM Partners

Development fees revised

Admonishing state lawmakers and the homebuilders' lobby for interfering in city business, Goodyear officials reluctantly revised an ordinance that allows the city to collect development fees.

The anger stemmed from a state law signed in April that made substantial changes to how cities and towns collect and spend development-impact fees, which homebuilders pay for each new home built.

The fees play a significant role in funding city efforts to keep up with growth, and they have been used for things such as public works, technology projects, and building neighborhood parks and municipal buildings.

Reducing the fees will mean a drop in city services, City Council members argued. In the future, libraries and other facilities may have to be built in phases.

"I just want to say how disturbing it is that the state thinks they know what we need best," Councilman Bill Stipp said. "There are so many city facilities and operations that our citizens have expected from us that we are now going to have to either eliminate or greatly reduce."

The council unanimously voted for changes that must be made by Jan. 1 to conform with a revised definition of "necessary public services."

The law, Senate Bill 1525, eliminates the city's ability to assess fees for general government and public-works needs. It also restricts the amount of fees that can be collected for libraries, swimming pools and parks.

Also, impact fees cannot be used to buy equipment that supports public services, except for police and fire.

Goodyear officials estimate most of the development fees the city collects will be reduced under the law.

The fees for new homes north of Interstate 10 will be reduced by 44 percent, from $5,553 to $3,104. Fees for new homes south of the freeway would see an 18 percent decrease, from $15,198 to $12,434.

by John Yantis The Arizona Republic Dec. 9, 2011 02:14 PM

Development fees revised

Lofts planned near stadium

A proposal for a $100 million-plus apartment complex along Miller Road just east of Scottsdale Stadium and the San Francisco Giants training complex has some residents complaining that it will be too tall and too big for the property and their neighborhood.

Scottsdale-based Continental Group wants to build Bristol Stadium Lofts, which would tentatively include 224 units with nine stories closest to the stadium and descending to five stories on the Miller side. The complex would be built on a 1.7-acre lot west of Miller and north of Osborn Road. There are four vacant buildings there now.

The complex could include three levels of underground parking with more than 370 parking spaces. The only entrance to underground parking would be on Miller.

Continental Group's proposal is seeking a building-height increase and other amendments to existing development standards under the city's downtown infill-incentive district and plan. The developer already has scaled back the maximum height from 125 feet to 85 feet after speaking with residents and city planners.

"The property as it now stands needs to be redeveloped -- it's past its prime," said Terry O'Neill, project manager. "You have (Scottsdale Healthcare Osborn Medical Center) expanding with the new tower going up, and there is a need for rental accommodation for Scottsdale and especially for the new employees of the hospital."

"We think that the neighborhood has fallen into a dilapidated state, and it's time to make a change," said John Lupypciw, Continental Group's CEO. "We don't need a larger parcel to develop this fabulous opportunity. It's about the design and how you structure to fit the property."

The developer met with more than 20 residents at the site recently to explain the plans and receive input. Several residents said they like the concept and design, but it's just too big for this

by Edward Gately The Arizona Republic Dec. 9, 2011 02:13 PM

Lofts planned near stadium

After drop, home prices on the rise in Valley

In August, as metro Phoenix home prices dipped to another new low, some real-estate analysts predicted the area's home values would keep falling. Other analysts disagreed, saying all the indicators, besides home prices, were heading in the right direction for values to climb before year's end.

The median price for an existing Phoenix-area home climbed to $119,900 in November, according to a new report from the Information Market. It's the region's highest median home price since November 2010.

In October, Phoenix's median home price was $115,000, which is where it had hovered most of the first half of this year. But when it fell to $112,000 in August, some market watchers thought it would drop all the way down to $100,000 by the end of this year. Of course, some panic ensued.

But the housing analysts who were watching foreclosures fall, sales climb ahead of last year's pace and listings plummet, stood firm in their opinion that home prices would begin to rise again.

During the past few months, not only short-sale prices but the prices for foreclosure resales known as REOs, or real-estate owned, have been steadily climbing. In some areas of metro Phoenix, REOs are now selling for more than houses sold through lender-approved short-sale deals. In 2008 and 2009, REOs were dragging down the area's home values as lenders took back houses through foreclosure and then resold them quickly for bargain prices to get the properties off their books.

Home prices are also climbing at foreclosure auctions, also known as trustee sales, held daily in front of the Maricopa County Courthouse. The auctions are Arizona's method for lenders to foreclose.

In 2008, when foreclosures started to climb, few properties sold at these trustee auctions. Back then, lenders weren't lowering prices beyond what was owed on a house, so investors weren't interested in purchasing a house for at least twice what it was actually worth. But once lenders started lowering prices to much less than what they were owed, bidding picked up quickly.

Competition is also driving up prices at the trustee auctions. Each month this year, more than 1,000 foreclosure homes have been bought at Maricopa County trustee auctions. That compares with 100 per month at the beginning of the crash.

by Catherine Reagor The Arizona Republic Dec. 9, 2011 04:04 PM

After drop, home prices on the rise in Valley

Housing plat OK'd for proving-ground land -

The first residential project on land formerly occupied by the General Motors Desert Proving Ground is on the books in Mesa.

The Planning and Zoning Board has approved a preliminary plat for 796 single-family homes on the northwestern corner of Ray and Signal Butte roads. The site is about 2 miles south of a large First Solar Inc. panel-fabricating plant under construction.

Mesa has fought several battles in recent years to keep housing away from the nearby Phoenix-Mesa Gateway Airport and from tracts in the area that are deemed more suitable for business.

But this parcel is 2 miles from the airport's eastern border and would be part of the 15,000 dwelling units envisioned in a plan for the DMB land that the City Council approved in 2008.

John Wesley, Mesa's planning director, said the housing tract does not require City Council scrutiny because no rezoning is involved.

Councilman Scott Somers, who represents southeast Mesa, said he visited DMB's Scottsdale headquarters on Monday and is encouraged by the company's plans.

"From what I see so far it looks pretty good," Somers said. "They have lived up to the Gateway area plan. They're looking for a different look."

The neighborhood will be lushly landscaped and will offer a break from the block walls that typify many Valley neighborhoods, he said.

Somers said high-quality housing is essential for the former GM property. "I'm looking for something more eclectic or that has a theme to it," he said, mentioning Phoenix's historical Willo district.

The DMB project narrative did not list a prospective developer for the site.

It notes that according to the community plan for DMB's Mesa proving-grounds development, the property "will form the basis of the social fabric of the community and will be designed as intimate neighborhoods that encourage walking and social interaction."

The document promises small neighborhood parks, narrow streets to encourage slower traffic and strong connections to other portions of the DMB property, including what has been called the Great Park in the center of the 5-square-mile development.

DMB and Mesa believe the GM site will develop in stages over the next few decades and has the potential for future high-rise business centers at, for example, the intersection of Ellsworth and Elliot roads.

DMB spokeswoman Cassidy Campana said the company is talking with several homebuilders about the newly approved tract but that no deals have been made and there is no timetable for construction.

"We're working real hard to be prepared for when the economy comes back," Campana said.

Somers said it will take a while to lay infrastructure, and the development might not be ready to launch until 2013.

The inaugural project for DMB's property was supposed to have been a ritzy Gaylord resort and conference center, another upscale resort, a championship golf course and high-end shopping about a mile east of the Ellsworth-Elliot intersection.

Groundbreaking for the Gaylord originally was scheduled for no later than this coming New Year's Eve. But within days of the project being announced in September 2008, the economy spun into recession, decimating the travel and convention industries.

Mesa granted Gaylord a three-year extension for its groundbreaking deadline. The Nashville-based company has told the city that its project here is still alive and will proceed when the economics pencil out.

Tempe-based First Solar Inc. jumped to the front of DMB's line in March when it announced plans for a 1.3million-square-foot solar-panel assembly plant. The plant is to open in 2012.

Wesley said Pacific Proving LLC, which bought the southern portion of the former GM facility, also has a couple of housing proposals, but they have not been brought to the Planning and Zoning Board.

By Gary Nelson The Arizona Republic Dec 10, 2011

Housing plat OK'd for proving-ground land -

Scottsdale buys nearly 2,000 acres for Sonoran Preserve

Scottsdale was the winning and only bidder Wednesday for 1,937 acres of state trust land that will be added to the McDowell Sonoran Preserve.

State Land Commissioner Maria Baier said the city paid the appraised price of $41 million for the land. That amounts to $21,165 per acre.

The Scottsdale Preserve South parcel is on both sides of Rio Verde Drive between the alignments of 122nd to 136th streets.

Scottsdale hopes to buy another 2,482 acres of state trust land for its preserve next Wednesday. That land, valued at $45 million, is northeast of Pima Road and Dynamite Boulevard and along Lone Mountain Road to 136th Street.

by Peter Corbett The Arizona Republic Dec. 7, 2011 03:19 PM

Scottsdale buys nearly 2,000 acres for Sonoran Preserve

U.S. household wealth takes biggest hit since 2008

WASHINGTON -- Americans' wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value.

At the same time, corporations increased their cash stockpiles to record levels.

Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the October-December quarter of 2008 and was the second straight quarterly decline.

Household wealth, or net worth, is the value of assets like homes, bank accounts and stocks, minus debts like mortgages and credit cards.

The value of Americans' stock portfolios fell 5.2 percent last quarter. Home values dropped 0.6 percent.

Lower net worth can hurt the economy. When people feel poorer, they spend less. That slows growth. Businesses typically then cut back on hiring and expansion.

Corporations held a record $2.1 trillion in cash at the end of September.

Stock market declines have held back Americans' long, slow quest to recover losses from the 2008 financial meltdown.

The Standard & Poor's 500 stock index tumbled about 14 percent in the July-September period, ending a streak of four straight quarterly increases. The decline was driven by worries about Europe's debt crisis and the U.S. economy.

Stocks have rebounded about 10 percent since last quarter ended. But the S&P index is still down about 20 percent from its peak four years ago.

Roughly half of U.S. households own stocks or stock mutual funds. Stock portfolios make up about 15 percent of Americans' wealth. That's less than housing but ahead of bank deposits, according to the Fed's report.

Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending.

The average balance in company-run retirement plans managed by Fidelity Investments, the largest workplace savings plan provider, dropped nearly 12 percent in the July-September period.

Thanks largely to workers' added contributions and company matches, about 92 percent of people who have company-run retirement savings plans now have more money in their accounts than at the market top in October 2007, according to the Employee Benefit Research Institute in Washington.

A rise in housing prices would help increase net worth by increasing home equity. But that still hasn't happened.

Home values have fallen sharply since the Great Recession began in December 2007, and people have less equity in their homes. Home values fell to $16.1 trillion in the July-September period, down from nearly $21 trillion in 2007, before the recession began.

Most economists expect prices to fall further, as banks resume foreclosing on millions of homes with past-due mortgages. Many foreclosures have been delayed because of a government investigation into mortgage lending practices.

When their declining wealth is combined with stagnant incomes, many Americans are less likely to spend. That's a drag on the economy, since consumer spending accounts for 70 percent of economic activity.

Average household income, adjusted for inflation, fell 6.4 percent last year from 2007, the year before the recession, the Census Bureau said this week.

The Fed's quarterly report documents wealth, debt and savings for corporations, governments and households. It covers most of the financial transactions that take place in the United States.

by Derek Kravitz AP Business Writers Dec. 8, 2011 12:17 PM

U.S. household wealth takes biggest hit since 2008

Late Arizona mortgage loans may fall in 2012

A credit-tracking firm predicts mortgage delinquencies will fall more sharply in Arizona next year than in any other state.

Credit bureau TransUnion expects the proportion of past-due Arizona home loans will drop nearly in half by the end of 2012, albeit from high levels.

At the end of the third quarter of 2011, 7.46 percent of residential mortgages in Arizona were 60 or more days past due, the third-highest level among the states behind those of Florida (14.08 percent) and Nevada (12.39 percent).

TransUnion predicts 7.15 percent of Arizona loans will be delinquent at the end of 2011, falling to 3.84 percent by the end of 2012.

Arizona's credit-card delinquencies are expected to change minimally, rising from 0.72 percent currently to 0.78 percent by the end of 2011 before easing to 0.75 percent at year-end 2012.

TransUnion randomly samples 27 million consumer-credit records on an anonymous basis to evaluate trends.

Its findings are based on various economic assumptions, including gross state product, consumer sentiment, unemployment rates and real-estate values. The company said its forecasts would change in the event of unanticipated shocks to the economy or real-estate market.

The predicted improvement in Arizona mortgages reflects several factors, including an expected stabilization of housing prices and much more conservative underwriting standards on new loans, said Charlie Wise, director of research in one of TransUnion's business units.

He said a high proportion of troubled loans in Arizona has been charged off by lenders.

Nationally, TransUnion expects mortgage delinquencies to decline from about 6 percent at the end of 2011 to about 5 percent at year-end 2012.

Favorable factors could include rising credit quality on new mortgages, improving consumer confidence and gains in gross domestic product.

After Arizona, TransUnion expects the biggest mortgage-delinquency improvements to occur in Wisconsin and Colorado. All told, the company predicts delinquencies will fall in 38 states and rise in the other 12, plus the District of Columbia.

Nationally, credit-card delinquencies, accounts 90 or more days past due, are expected to ease from 0.74 percent at the end of 2011 to 0.69 percent at the end of 2012.

"In today's uncertain economy, consumers have found that credit cards are among their most-valued assets due to the flexibility they provide," Steve Chaouki, a TransUnion vice president, said in a statement. "As a result, consumers have made a concerted effort to make on-time payments and maintain relatively low balances."

National credit-card debt per borrower stands at $4,762, down roughly $1,000 from mid-2009, according to TransUnion.

by Russ Wiles The Arizona Republic Dec. 8, 2011 05:48 PM

Late Arizona mortgage loans may fall in 2012

Tuesday, December 13, 2011

Scottsdale infill projects to begin in 2012

Scottsdale residents are expected to get their first glimpse next year of construction resulting from the city's controversial downtown infill-incentive district and plan.

Construction on the first phase of Blue Sky, Gray Development Group's apartment complex near the northeastern corner of Scottsdale and Camelback Roads, is to begin late in the second quarter. It will include more than 700 units, three buildings and a maximum building height of 128 feet.

The proposal originally was filed in summer 2010, just after the City Council narrowly approved the district and plan. Those allow property owners downtown to request amended development standards, such as increased height and density, in exchange for public benefits, such as investment in public art and amenities.

The changes established a building-height maximum of 150 feet north of the Arizona Canal and surrounding Scottsdale Healthcare Osborn Medical Center.

Five proposals have been filed under the changes, the latest being Bristol Stadium Lofts, a multistory apartment complex north of the northwestern corner of Osborn and Miller Roads, and just east of Scottsdale Stadium and the San Francisco Giants training complex. It would tentatively include 224 units with nine stories closest to the stadium, and descending to five stories near Miller.

Dan Symer, senior city planner, drafted the downtown infill-incentive plan. He said Blue Sky, along with the second phase of the Safari Drive condominium complex and other projects, likely wouldn't have been brought forward had it not been for the district and plan.

In August, the council approved ST Residential's proposal for the second phase of Safari Drive, just east of the Blue Sky site. It includes an increase in maximum building height to 105 feet from 65 feet.

"Blue Sky and Safari are doing canal improvements, and those are big-ticket items that if they didn't do them the city would have to do them," Symer said. "For an infill-incentive district to offset those costs, I think it is successful. Blue Sky's canal improvements ... are estimated to be $400,000-$500,000, and we get the street improvements, which are quite a bit of money."

Coming up

Last month, Gray Development submitted its design-review application, which could go before the Development Review Board and the council during the first quarter, said Brian Kearney, Gray's chief operating officer.

"The overall design is consistent with what was presented to the council in April, although it has been enhanced in several ways,'' he said.

They include materials that enhance the exterior, development of all lower roof decks as integrated, active spaces and an improved architectural and shade feature at the top of the main building on Scottsdale Road, he said.

The Development Review Board will look at the proposal at its Dec. 15 meeting, but won't take action until a later meeting, Symer said.

He added that Safari Drive is working on its design-review application.

"They're coordinating with Blue Sky on utilities and things like that because they're right next to each other," he said.

Other applicants who have benefited from the infill-incentive changes still have a way to go in terms of specific plans.

In June, the council approved an infill-incentive proposal that increases the maximum building height from 50 feet to 90 feet on the property that now houses the U.S. Egg restaurant on the southwestern corner of Scottsdale Road and Angus Drive, and vacant property to the north.

The proposal didn't include a specific site plan or building elevations, said John Berry, the property owners' zoning attorney. The zoning change and amended development standards are needed to make the property more marketable and accelerate development, he said.

Interest in the site is expected to pick up as the economy slowly improves and the banks are willing to lend on good, quality projects, he said.

Scottsdale-based Continental Group, which wants to develop Bristol Stadium Lofts, has been meeting with residents and city planning officials to obtain feedback on its proposal. The proposal will be considered by the Development Review Board at an upcoming meeting.

Numerous residents have said the complex would be too big and tall for the property and the neighborhood. Terry O'Neil, project manager, said the height has been scaled down from 125 feet, and that more changes may be made before the proposal goes to the council.

"We don't need another public outreach, but if any resident would like more information, I'm open to meeting anywhere," he said.

Higher they go

The owner of a partially demolished building near Scottsdale and Camelback roads wants even more building height than originally requested in its infill-incentive proposal.

The original proposal called for replacing the building with a taller, mixed-use development including restaurant and office space along with one residential unit. The owner and developer is CF Waterfront Investments LLC.

The original proposal asked the city to increase the maximum building height to 65 feet from 36 feet.

The application hasn't progressed through the city's approval process, and has expired, Symer said.

"They would have to resubmit," Symer said. "I haven't heard anything. That was one of the ones we were hoping to first come out of the ground to show that this is what can be done, and unfortunately it died."

Bill Wisniewski, who owns Realty Unlimited, represents CF Waterfront Investments LLC. He said the project is far from dead.

The developer plans to ask for a maximum building height of about 90 feet, he said. It purchased the property just east of the site and wants to locate a parking structure there for tenants and patrons of the mixed-use building, he said.

However, the city doesn't want a parking facility on that lot, and that has delayed the project, Wisniewski said.

"We're ready to move forward on that project," he said. "There's plenty of money for the construction and the blueprints are ready to go."

Current zoning does not permit a parking garage as a stand-alone use on the property, Symer said.

by Edward Gately The Arizona Republic Dec. 8, 2011 08:26 AM

Scottsdale infill projects to begin in 2012

Scottsdale City Council rejects airpark apartment complex

A divided Scottsdale City Council Tuesday rejected a proposal to build an apartment complex in the Scottsdale Airpark despite assurances from the property owner's attorney that it wouldn't harm operations at Scottsdale Airport.

The council voted 4-3 against adopting a non-major General Plan amendment to the Greater Airpark Character Area Plan that would have allowed a 605-unit apartment complex south of Hayden Road and west of Northsight Boulevard.

Sunrise Luxury Living, a multifamily residential developer, wanted to develop a complex on the site, which was vacated by an auto dealership more than two years ago.

"We're obviously disappointed, especially with some of the changes that we had agreed to," said Michael Curley, an attorney representing property owner Joe Cardinale. "We thought that we addressed the council's concerns, but reasonable people can reasonably disagree. You win some, you lose some."

Mayor Jim Lane, and council members Lisa Borowsky, Bob Littlefield and Ron McCullagh voted for a motion to reject the proposal. Vice Mayor Linda Milhaven and council members Suzanne Klapp and Dennis Robbins, who favored the proposal, voted against the motion.

The council has approved two other plans to build apartments in the airpark. One will be a complex near the northwestern corner of Greenway-Hayden Loop and 73rd Street, and the other will be a mixed-use development on the site that currently houses CrackerJax Family Fun and Sports Park.

Opponents of the proposals, including Littlefield, members of the Airport Advisory Commission, pilots and others, have said allowing residential at the airpark will constitute a violation of land-use policy approved by the council and the Federal Aviation Administration, and therefore jeopardize existing and future grants to the airport.

Last month, Curley asked the council to postpone consideration of the Hayden-Northsight proposal because his client wanted to get more information from the FAA. On Tuesday, he told the council FAA officials via conference call said none of the three proposals would be a threat to federal-grant assurances.

He also told the council the site plan would be revised to move all residential units out of the 55-decibel, day-to-night average noise level contour surrounding the airport. Doing so would reduce the number of units and no residential would be located along Hayden, he said.

Littlefield said Curley assurred the council that he would bring back a letter from the FAA, and instead relayed information from a phone call with the agency.

"Why are we threatening the airport for apartments?" Littlefield said. "Even if those grant assurances were not in danger, the vitality and survivability of the airport are threatened."

Lane said Airport Advisory Commission Chairman Gunnar Buzzard spoke with FAA officials and was told grant assurances wouldn't be threatened by the Hayden-Northsight proposal. However, the mayor said he couldn't support the proposal because it represented an "encroachment" of the noise-level contours and is an incompatible land use in that area.

Milhaven said it comes down to a "matter of opinion" as to whether residential should be located in the airpark, and that the city can't afford to wait for the economy to rebound before the airpark sees improvement. If the city doesn't provide housing in the airpark, "businesses will relocate elsewhere."

by Edward Gately The Arizona Republic Dec. 7, 2011 12:44 PM

Scottsdale City Council rejects airpark apartment complex

November debt filings in Phoenix area hit 3-year low

Despite a sluggish economy, fewer metro Phoenix residents are seeking bankruptcy protection, with November filings marking the lowest level in 33 months.

The 1,747 filings in November reached the lowest mark since February 2009 and represented a 30 percent drop compared with November 2010, reported the U.S. Bankruptcy Court in Phoenix.

Bankruptcies also have been sliding across the nation, but that doesn't necessarily mean people are feeling more financially secure. It could actually indicate the opposite, lawyers say.

"I have a sense that a lot of people have kind of given up or don't have anything for a creditor to garnish," said Diane Drain, a Phoenix bankruptcy attorney.

That includes some people who probably don't have the $1,500 or so needed to hire an attorney to file a claim.

"Many of those who could afford to file and thought they needed to file have already done so," Drain said.

Whatever the reasons, metro Phoenix bankruptcy filings have dropped in six of the past eight months. Compared with year-earlier levels, they have declined for 10 straight months, with November's tally marking the sharpest decrease since before the recession began.

A similar trend is occurring throughout Arizona, where the 2,341 November filings were down nearly 29 percent from the prior year and also were the lowest total since February 2009.

Chapter 7 filings, which allow debtors a fresh financial start and thus are relatively friendly to borrowers, accounted for more than 80 percent of bankruptcies for metro Phoenix and Arizona overall. Chapter 13 debt-reorganization plans accounted for most of the rest.

Nationally, the 100,980 consumer filings for November were down 12 percent from November 2010 and 5 percent lower compared with October of this year, according to the American Bankruptcy Institute, using data from the National Bankruptcy Research Center.

"The drop in consumer filings throughout the year reflects the continued deleveraging of the U.S. consumer after years of expanding consumer debt," said the ABI's executive director, Samuel Gerdano, in a statement.

by Russ Wiles The Arizona Republic Dec. 7, 2011 06:18 PM

November debt filings in Phoenix area hit 3-year low

Mortgage battle vs. bank gets new ally -

Phoenix resident June Geffre has found an ally in her fight to stop the bank from taking her home.

How to seek help

The Homeowner Advocacy Unit will accept clients referred by the Arizona Foreclosure Prevention Task Force as well as those referred by other community organizations that work with distressed homeowners.

Homeowners with mortgage problems or facing foreclosure can contact the Arizona Foreclosure Prevention Task Force for assistance at 877-448-1211 or

Geffre, a 69-year-old widow who says Bank of America refused to honor a loan-modification agreement it had negotiated with her late husband, is being represented in court by a new homeowner-advocacy group at Arizona State University's Sandra Day O'Connor College of Law.

The ASU Homeowner Advocacy Unit, a student-faculty initiative launched in August under which law-college students litigate real cases, chose Geffre as its first client.

"This case is an example of why this clinic is so important," said Mary Ellen Natale, director of the unit. "The bank's conduct is egregious."

Under the guidance of faculty supervisor M. Robert Dauber, who is licensed to practice in Arizona, the unit filed a lawsuit Monday in Maricopa County Superior Court against BofA on Geffre's behalf. The complaint demanded that the Charlotte, N.C.-based lender cease its pending foreclosure, reinstate the loan-modification agreement and compensate Geffre for damages, including extreme emotional distress.

The Arizona Republic e-mailed a copy of the lawsuit to BofA early Tuesday at the request of a bank representative. The bank representative later said the company could not comment because of the pending litigation.

Law-school advocacy

The litigation program is one of two to be created by the ASU law school in the 2011-12 academic year in response to issues created by the region's housing-market meltdown.

The Phoenix area experienced a record 58,157 home foreclosures in 2010. Jim Belfiore, president of Belfiore Real Estate Consulting, said the area is on pace to have about 54,000 foreclosures by the end of the year and predicted about 38,000 foreclosures in 2012.

The Homeowner Advocacy Unit, which opened in August, allows students to litigate on behalf of clients who believe they have fallen victim to illegal mortgage-related activity.

The college's Foreclosure Mediation Unit, scheduled to open in the spring semester, will put students to work as impartial mediators assisting in the resolution of mortgage-related disputes.

Both programs are funded by a grant from the Arizona Attorney General's Office, ASU officials said.

Loan-modification dispute

According to Geffre's complaint, her late husband, Thomas Geffre, had been approved for a trial home-loan modification under the federal Home Affordable Modification Program in summer 2009.

In January 2010, BofA approved a permanent modification and mailed documents for Thomas Geffre to sign and return to the bank, the lawsuit said.
However, Thomas Geffre had died in November 2009 from complications of pancreatic cancer, the lawsuit said.

When June Geffre received the loan-modification forms in the mail, she said she signed them and mailed them to BofA, along with a copy of her husband's death certificate.

The lawsuit alleged that the lender refused to accept June Geffre's signature, saying that her late husband's signature was required for the permanent-modification agreement to become effective.

Geffre explained to BofA representatives on multiple occasions that her husband was dead and therefore unable to sign the documents and that she repeatedly sent copies of the death certificate as proof he had died, the lawsuit said.

Meanwhile, the lender continued to accept Geffre's modified-loan payments, the lawsuit said. The original monthly mortgage payments were roughly $1,200, Geffre said, and under the modification agreement, they had been lowered to about $800.

After accepting 18 payments at the modified amount, BofA rejected Geffre's July payment and told her she owed about $20,000 for incomplete payments and penalties, she said.

"They dropped the bombshell on me," Geffre said.

The bank initiated foreclosure proceedings in September, she said.

Bid to stop foreclosure

Along with the complaint, the ASU unit filed a motion Monday for a temporary restraining order to stop the foreclosure sale of Geffre's home, which had been scheduled for 10 a.m. Tuesday.

Judge John Rea granted the order, temporarily halting the sale. A preliminary hearing on Geffre's request for a permanent injunction against BofA is scheduled for Thursday morning, court documents show.

Natale, the advocacy unit's director, said Geffre's case is a perfect example of why the unit is needed.

"Here we have an elderly widow willing and able to make the agreed-upon payments, and the bank would rather take her home and render her homeless," Natale said. "It makes no sense, and it is just wrong."

Student attorneys are seeking to have the loan modification deemed valid and enforceable, have the foreclosure sale canceled and garner compensatory and punitive damages for Geffre.

Geffre is grateful for assistance.

"I'm just amazed at the help they are giving and what they're doing for me," she said.

By J. Craig Anderson The Arizona Republic Dec 7, 2011

Mortgage battle vs. bank gets new ally -

Sunday, December 4, 2011

Apartment investment firm to target Phoenix in 2012

One of the most prolific investors in Phoenix-area apartment properties this year said it plans to spend $100 million on real-estate acquisitions in five Western states with a likely focus on the Phoenix area in 2012.

BH Properties LLC, a Los Angeles-based real-estate investment firm, has spent about $40 million this year to acquire six commercial properties and two promissory notes on commercial properties in the Phoenix and Tucson areas.

The company also named Andrew Van Tuyle its director of acquisitions, to spearhead the company's aggressive portfolio-expansion plan in the Western U.S. Van Tuyle, of Los Angeles, is a 15-year veteran of the real-estate investment market who has handled the closing of more than $2 billion in transactions in over 20 states.

"Our 2011 acquisitions position us well for continued portfolio expansion and growth in 2012," said Steven Jaffe, executive vice president and general counsel of BH Properties. "Andrew Van Tuyle will be integral to us sourcing and closing $100 million in new acquisitions in the Western states during the next calendar year."

In January, BH Properties acquired the 320-unit Fiesta Park apartment complex, 1033 S. Longmore, in Mesa, for $5.5 million. It was the company's first purchase in the Phoenix area in nearly three years, Jaffe said at the time.

"Our last acquisition was in April 2008 -- that's when we put the brakes on," he said.

A sense of confidence that the market for multifamily-housing had become relatively stable prompted the company to resume its investment activities in Arizona, Jaffe said.

The company is interested primarily in Phoenix-area apartment properties but also has purchased a shopping center in Phoenix and a fast-food restaurant in Douglas, about an hour southeast of Tucson.

Jaffe said BH Properties also would consider investing in industrial properties for the right price.

The company targets underperforming, commercial properties can be repositioned to make them more profitable by investing in various capital improvements.

BH Properties is focused on $2 million to $15 million acquisitions in Arizona, Nevada, Colorado, Washington and Southern California, including both properties and promissory notes on loans backed by commercial real estate.

The company's Arizona purchases in 2011 include:

Sunpointe, a 152-unit multifamily property in Phoenix.

Thunderbird Plaza, a 79,380 square foot retail center in Phoenix.

Church's Chicken, a fast-food restaurant in Douglas.

Biltmore on the Lake, a 420-unit apartment complex in Phoenix.

Casa Bella, a 410-unit multifamily apartment complex in Tucson.

2020 Bell, a multifamily development in Phoenix.

by J. Craig Anderson The Arizona Republic Dec. 3, 2011 05:24 PM

Apartment investment firm to target Phoenix in 2012

Who exactly are the wealthiest 1%? Study takes a look -

WASHINGTON — American households with taxable incomes over $343,927 -- the wealthiest 1percent of the country -- are in the national spotlight.

So who are these people?

CEOs, other executives, Wall Street bankers and other financiers make up 45percent of the 1percenters, according to a 2010 review of tax returns by three economists.

The study, by Bradley Heim of Indiana University, Jon Bakija of Williams College and Adam Cole of the Treasury's Office of Tax Analysis, was the first to closely analyze occupations of households at the top of the income ladder.

It supports the argument that dramatic increases in executive compensation and stock options have played a significant role in the increase in income inequality, Bakija said.

Between 1979 and 2005, finance professionals in the top 1percent tripled their share of national income -- from 0.82percent to 2.77percent.

Executives and CEOs increased their share by 74percent -- from 3.65percent to 6.35percent.

"Looking at the evidence, I think it's fair to say it looks like tax policy has very little to do with this increasing concentration at the very top," Heim said.

Even within the 1 percent group, there are wide variations in income, with billionaires at the top end and dual-income professionals such as physicians and lawyers on the bottom, economists say.

"I think there's this kind of perception that the top 1percent are made up of high-flying finance people," Heim said. "The group is a lot more heterogeneous than you might expect."

The study by Bakija, Heim and Cole found the top 1percent includes medical professionals (15.7percent), lawyers (8.4percent), computer, mathematics, engineering and technical workers (4.6percent), salespeople (4.2percent), workers in blue-collar and miscellaneous service jobs (3.8percent) people working in real estate (3.2percent) business operations workers (3percent), entrepreneurs (2.3percent), professors and scientists (1.8percent), and arts, media and sports professionals (1.6percent).

Some in the top 1percent are superstars within their profession, the study's authors say.

Only 12.5percent of the 1percenters studied by Bakija, Heim and Cole didn't have a spouse. Among the 38percent who listed an occupation for their spouse on their tax returns, the top occupations were executives and medical professionals.

Understanding income equality and the reasons behind the growing gap have major public-policy implications, Bakija said.

"The government has promised huge spending for the future, especially on health care for the elderly, and we're going to have to pay for it somehow," he said. "How do we pay for it? Do we raise taxes or do we cut spending? How much can we raise taxes before it becomes counterproductive? This is part of that debate."

by Brian Tumulty USA Today Dec 4, 2011

Who exactly are the wealthiest 1%? Study takes a look -

Ex-McCain home fetches $1.8 mil in short sale

The former home of Sen. John McCain and his wife Cindy on Phoenix's Central Avenue has sold for $1.8 million.
Courtesy Bobby Lieb The former home of Sen. John McCain and his wife Cindy on Phoenix's Central Avenue has sold for $1.8 million.

The former home of U.S. Sen. John McCain has sold for $1.8 million through a short sale after being listed for $12 million only a few years ago.

The home, located in north-central Phoenix, has been rented for the past few years.

Actor Steven Seagal signed a lease to move into the estate last year but never did.

Christopher and Katinka Bryson bought the almost 10,000-square-foot home on 3 acres. Katinka Bryson is an agency vice president at State Farm Insurance in Phoenix.

Las Vegas investor Jane Popple bought the estate from the McCains for $3.2 million in 2008 and put more than $1 million into renovations.

After not being able to sell the property, she leased it out and kept trying to find a buyer. At one point, Popple was asking more than $12 million for the home.

In 2009, she tried to sell it through a private auction and turned down a $6.5 million offer.

Phoenix real-estate agent Bobby Lieb of HomeSmart Elite brokerage negotiated the sale of the home for Popple and the McCains in 2008.

This year, the property was listed for short sale with an asking price of $3 million.

Lieb said the home sold for less because recent renters had "trashed it," and the Brysons will need to fix it up before moving in.

He said Seagal never moved in and broke his lease but still paid Popple several months' rent.

Before the sale, Popple almost lost the estate to foreclosure.

She owed more than $4.5 million on it.

A trustee's auction was scheduled for Aug. 15. The short sale was delayed a couple of times.

The McCains listed the home in 2006, but it took two years to sell to Popple.

The McCain family moved to a penthouse at 24th Street and Camelback Road in Phoenix's Biltmore area.

by Catherine Reagor, and John McLean The Arizona Republic Dec. 2, 2011 03:28 PM

Ex-McCain home fetches $1.8 mil in short sale

Housing is in last phase of 'bubble,' expert says

Nishu Sood, director of Wall Street's Deutsche Bank Securities, used the term "revulsion" to describe the current phase of metro Phoenix's housing market.

"Revulsion," as in many people are averse to the very product that got the nation in trouble in the first place.

Sood was the lead speaker at the Scottsdale-based Land Advisors' third annual housing forecast for the Phoenix area, presented to a group of the region's top real-estate executives.

He was quick to point out that revulsion was the last phase in the "bubble" cycle before recovery for the region's housing market.

He said if Land Advisors would have asked him to speak about Phoenix's housing market in the years between 2006-10, everyone attending would have needed a shot of bourbon to make it through his negative evaluations and projections.

This week, Sood said he felt more positive about Phoenix's housing market and its oncoming recovery than he did about many other parts of the country.

That's something that made the executive sitting next to me smile with relief. This is the same man who brought in a Corona at the start of the 3 p.m conference because he thought he would need it to get through another negative forecast.

Sood's evolution of the housing bubble includes these cycles:

A change in the mortgage business and upgrades in technology during the 1990s made it easier to make and obtain loans.

In 2002, home prices started to climb, though most people were more concerned about stocks.

By 2004, housing euphoria had begun, and home prices were soaring.

Then, in 2005-06, came the explosion of the housing market. One later speaker said that's when "anyone who could fog a mirror with their breath could get a mortgage to buy a home."

In 2007-08, the painful market reversal hit. Some had expected it, but few were prepared for its carnage.

The financial crisis followed in 2008-09. It continues to shake the world.

And the current situation: revulsion. Sood said many people now are distrustful and averse to housing.

But, he said, the next and, one hopes, the last phase of housing bubble will be the recovery.

Speakers also included Land Advisors CEO Greg Vogel, Avatar Properties President Carl Mulac, Cromford Report founder and analyst Mike Orr, and the CEO of homebuilder Taylor Morrison, Sheryl Palmer.

None of them believes full recovery will come in 2012. But most agree it could start next year and be in full swing by 2014.

by Catherine Reagor The Arizona Republic Dec 2, 2011

Housing is in last phase of 'bubble,' expert says

15 indicted in elaborate Ariz. telemarketing fraud operation

The calls started with an opportunity to work from home and earn $1,000 to $3,000 in the first month.

The scripts were varied, but most pitched the chance to make a lot of money fast and from the comfort of home. "I'm the national recruiting manager with Global Fortune Network and the reason for my call is we've had a position open up in your area ... what Global Fortune Network does is pay you to help people get out of debt," according to the script.

In reality, it was all an elaborate Arizona-based telemarketing fraud operation that stole millions of dollars from thousands of victims nationwide, according to the Maricopa County Attorney's Office.

Fifteen men and women were recently indicted in Maricopa County Superior Court and face charges that include fraud schemes and artifices, aggravated taking identity of another, illegal control of an enterprise and unlawful telephone solicitation, county Attorney Bill Montgomery said at a news conference Friday.

Scottsdale police worked with the Arizona Electronic Crimes Task Force, a multi-agency group that includes the Secret Service, to take down the complex fraud scheme. Operation Reload started in February when Scottsdale police arrested some people with stolen credit cards.

"It was a joy to put these people away," said Scottsdale police Lt. Jamie Buckler, who oversees the property-crimes unit.

Most victims were out of state and the partnership with the Secret Service was key to go after the crooks, Buckler said. Six fraudulent telemarketing call centers were shut down in Maricopa County, officials said.

Here is how it worked: The telemarketer would persuade the victim to invest in the program with a credit-card number, with the promise that the victim would receive the get-rich information. When the information didn't arrive, the telemarketer would persuade the victim to invest more money. If the victim wasn't interested, the telemarketer maxed out the victim's credit card.

Then the card information was sold at the street level, where, if the victim hadn't canceled his credit card, the criminals used it to make more purchases or withdraw money.

In a recorded conversation, Adam Arnold, who is charged with one count of fraudulent schemes and artifices, is heard on tape saying, "It's going to be anyone that pays $29.99. Any moron, essentially, and I say this term because anybody that believes this is a (expletive) moron ... And honestly, do I feel like we're scamming them? No, because if you're (expletive) stupid enough to believe ... I have no sympathy for mankind anymore."

Montgomery called Arnold a "dirt bag" for his "predatory instinct" to go after vulnerable victims.

Officials showed two plastic bags filled with papers with stolen credit-card information and said they had collected 50 bags of information. During a five-day sting operation in September, investigators watched as suspects Jason Woolridge and John Cargal set up a sham account that processed nearly $92,000, officials said.

by Ofelia Madrid The Arizona Republic Dec. 2, 2011 09:53 PM

15 indicted in elaborate Ariz. telemarketing fraud operation

Innovations help Desert Ridge Marketplace in northeast Phoenix succeed

Shopper stroll through Desert Ridge Marketplace on Sunday, Nov. 27, 2011, in Phoenix.
A decade ago, Valley developers opened an outdoor shopping center north of Loop 101 designed to combine entertainment with dining and shopping.

Ten years later, the success of Desert Ridge Marketplace has proved that an innovative mall concept can thrive even under the toughest economic conditions.

"We did our community outreach with the Desert Ridge community and gained an understanding of what the folks wanted to see up there," said David Larcher, executive vice president of Vestar, a Phoenix-based developer. "They did not want to see a typical regional, enclosed mall that shuts down at night and provided shopping but was never the center of the community."

The $180 million Desert Ridge Marketplace, at Loop 101 and Tatum Boulevard, opened Nov. 30, 2001, to great fanfare. Developers sought to create an open-air space over 1.2 million square feet that would become a gathering spot for the community.

"In the original planning for the whole area long before there was a freeway or anything up there, this was always planned to be the regional destination for that part of the Northeast Valley," Larcher said.

Phoenix Deputy City Manager David Krietor said the financial impact of Desert Ridge Marketplace goes far beyond northeast Phoenix.

"The Desert Ridge master-planned community really evolved into a beautiful mixed-use community, and I think it's been very important to the city of Phoenix," he said. "It was able to incorporate major employers, so it became a major employment center and allowed the city to collect a significant amount of retail sales tax to support city services."

Although customers were ready for something different, retailers weren't quite sure how to adjust to the new business model, Larcher said.

"At the time we developed it, we were asking the retailers and users to do things they had never done before, quite frankly, anywhere in the country," he said.

Learning how to do promotions that encouraged customers to enter a store wasn't easy for some of Desert Ridge's first retailers. The layout of Desert Ridge was not comparable to any of the enclosed malls where many of them had previously operated.

"When we first opened the project about 10 years ago, in the specialty area we probably had about 70 percent turnover within the first couple of years," Larcher said. "Some retailers didn't know how to respond to that environment. The tenants that flourished are the ones that adapted to an outdoor environment."

Another concern for some retailers was climate. Enclosed malls offer shoppers respite from triple-digit temperatures in Phoenix summers. Businesses weren't sure that people would come to a shopping center that required them to go in and out of the heat, Larcher said.

"Once we opened, people understood that in the environment we were creating, there could be shading techniques, mist systems and other environmental things," he said. "We could control the environment to the point where it was very, very comfortable in all seasons."

Retailers also learned that customers across the country were demanding shopping centers that allowed them to get to the store of their choice with greater ease than in many enclosed malls.

"People are more pressured for time and people have less time to shop," Larcher said. "That open-air environment has proven to be successful. There's a huge convenience factor versus an enclosed mall. You go in and out."

Not just shopping

Desert Ridge Marketplace puts on more than 300 performances a year.

"Because of the positive result and impact that the project has had, we've now seen this model being copied time and time again across the country," he said.

Locally, one of the more high-profile shopping centers influenced by Desert Ridge Marketplace is Tempe Marketplace. The project was also developed by Vestar and opened in 2007 at Loop 202 and McClintock Drive.

Although it is in Phoenix, Desert Ridge Marketplace has a suburban feel but isn't "sterile" and "stale" like many shopping centers outside of a city, Larcher said.

But being within city limits did not spare the project from the housing crisis that affected much of the Valley and other parts of the country. Some housing developments near Desert Ridge Marketplace remain incomplete years after construction began. Numerous homes in the area have been affected by foreclosure.

Larcher said the shopping center's focus on entertainment has kept shoppers coming.

Customers "may not feel like spending like they used to, but they want to come out and be in the environment, so they can enjoy the facility in many ways," he said.

Krietor believes those customers will start spending again because the Desert Ridge community will become increasingly attractive to homeowners as the economy rebounds.

"I think Desert Ridge is very sustainable in the long term. And I think it's going to provide a retail and entertainment court in that area. I think it's very well positioned," he said.

CityNorth's impact

A further blow to Desert Ridge was the slow development of the CityNorth project.

The $1.2 billion mixed-use shopping development, within walking distance from Desert Ridge, hoped to make the area north of Loop 101 one of the Valley's premier shopping destinations. CityNorth would have added 6 million square feet of residential, office and retail space to northeast Phoenix. But only 175,000 square feet of retail has been developed since CityNorth opened in 2008 near 56th Street and Loop 101.

"It's an unfortunate example of how sometimes when an out-of-state developer comes in and doesn't understand the market and tries to do something, it just doesn't work," Larcher said of the Klutznick Co.

Vestar envisioned CityNorth complementing Desert Ridge Marketplace, but despite a handful of successful restaurants at CityNorth, that has yet to be fulfilled.

"It hasn't had any negative impact on us, but it hasn't had any beneficial impact," Larcher said. "It's an incredible piece of property and location. It's been such a missed opportunity to really enhance the whole area."

Krietor said there's still time for CityNorth to turn around.

"I think the story is totally unwritten on CityNorth. I think it's a great piece of real estate. I think at some point in the future you'll have viable developers interested in coming there and you'll see quality development come in there," he said.

"It just isn't going to happen until we're in a stronger period of economic recovery."

Not all development near Desert Ridge Marketplace has been a bust.

"The positive impact that the (JW Marriott Desert Ridge Resort and Spa) has had on us has exceeded our expectations," Larcher said. "It was there after us and has had a very, very positive impact on the project."

Few enclosed malls have been built nationally in the past five years, and he expects them to eventually phase out altogether.

"People are organic. They like to feel the wind and the sun and the elements. They like to be outdoors," Larcher said. "And it's significantly less expensive than operating an indoor center because of air-conditioning operating costs."

by Eugene Scott The Arizona Republic Dec. 2, 2011 12:14 PM

Innovations help Desert Ridge Marketplace in northeast Phoenix succeed

New SkySong leases increase occupancy to over 90 percent

SkySong, the Arizona State University Scottsdale Innovation Center, has announced three new leases, including one that will more than double the size of one of its largest tenants.

The three leases total about 20,000 square feet and will bring the south Scottsdale campus' occupancy to above 90 percent. Pre-leasing has begun on SkySong III, the next building to be constructed on the campus.

The 42-acre, mixed-use development is at the southeastern corner of Scottsdale and McDowell roads. It now has 93 tenants, including companies with either a direct or virtual presence, and student companies in the Edson student entrepreneur initiative. Its workforce totals 750.

"The creating of this magnet for great jobs and creating an example of the new industries that will be the foundation for the future of Arizona is very significant," said Sharon Harper,president and CEO of Plaza Companies, SkySong's developer in partnership with ASU and USAA Real Estate Co.

Current tenant Yodle signed a lease to expand its space by 12,000 square feet, to a total of 26,521 square feet. The company, a New York-based local online advertising firm, located an office at SkySong in early 2009. It has more than 100 workers at SkySong and will be nearly doubling that amount with the expansion.

"It's been a good market for us," said Michael Gordon, Yodle's chief financial officer. "We've grown multiple times there. We're fortunate to be a very dynamic, fast-growing company. We're hiring in all of our departments ... and we have found the Scottsdale labor pool to be very attractive."

Yodle plans to complete the expansion during the first quarter, and is hiring sales, client services and corporate personnel to occupy the additional space.

"The sales jobs we have are calling over the phone, so we could locate them anywhere," Gordon said. "The reason why we've been so excited about Scottsdale and why it's worked so well for us ... is we've had a lot of success in recruiting."

Also, the ASU Foundation has helped the company tap into the ASU community for recruitment, he said.

Two new companies have signed leases to locate at SkySong:

Pearson, an online learning company, has expanded its partnership with ASU and is leasing 5,000 square feet of new space.

WebFilings, a private firm that helps companies meet federal financial reporting requirements, is leasing 2,000 square feet with an additional 2,500 square feet for expansion. ASU President Michael Crow serves on the company's advisory board.

To date, SkySong has completed two, 150,000-square-foot buildings consisting of research and commercial space. Technology-based companies located there represent industries ranging from information technology to solar, as well as foreign direct investment to the Valley.

While pre-leasing has begun on the third phase, the development plan has not yet been finalized, Harper said. At build-out, SkySong is expected to encompass 1.2 million square feet.

"We have been in discussion for a long time with companies wanting to expand at SkySong, but if you look at Yodle, we won't be able to accommodate another quantum leap in the existing building(s), but there could be in a future building," she said. "We can accommodate a headquarters where a company occupies the total building, or build to suit for specific needs."

by Edward Gately The Arizona Republic Dec. 1, 2011 11:10 AM

New SkySong leases increase occupancy to over 90 percent

Vestar forming fund to purchase retail real-estate projects

Vestar Development Co. announced the formation of a $250 million opportunity fund to bankroll the shopping-center developer's acquisition of retail real-estate projects throughout the West that now are selling for bargain prices.

Vestar partner David Larcher said the $250 million could be leveraged into $700 million to $800 million in real-estate acquisitions.

He said Vestar Strategic Retail Partners will target retail properties in the $20 million to $100 million range that can be enhanced by the company's experience and management.

Over the past two years, Phoenix-based Vestar has partnered with institutional investor Rockwood Capital of New York City to acquire shopping centers valued at more than $400 million. Last month, the group paid $79 million in cash for a landmark Las Vegas-area retail development. It was Vestar's first acquisition in the Las Vegas area.

Larcher is optimistic the company can raise the prescribed $250 million by mid-2012 and is working with Dallas-based Stephen Inc. to market the fund to investors. Once funded, Vestar Strategic Retail Partners will become the company's exclusive vehicle for financing acquisitions.

Vestar currently manages more than 21 million square feet of retail property with an average occupancy of 97 percent.

"We believe this is a great time to invest in value-add retail properties," said Bob Cavanaugh, Vestar's chief investment officer. "With our firm's track record of acquiring and stabilizing struggling assets, we are confident that our in-house capabilities will create meaningful value for the fund's investors."

by Max Jarman The Arizona Republic Dec. 1, 2011 06:22 PM

Vestar forming fund to purchase retail real-estate projects

Real estate dominated Valley business in the 90s

Arizona Mills Mall opened in Tempe in the 1990s.
The Arizona Republic Arizona Mills Mall opened in Tempe in the 1990s.

The 1990s was a watershed decade for Arizona and metro Phoenix that saw a cadre of Old Guard power brokers and movers and shakers swept out by collapse of the commercial real-estate market and the subsequent savings-and-loan debacle.

But the financial tsunami that swept over the state in the early 1990s created opportunities for a new breed of community leaders and businesses that were able to capitalize on the downturn and leave their mark on the area's economy and landscape.

Robert Sarver's Southwest Value Partners and Francis and Jahm Najafi's companies got starts early in the decade. DMB Partners emerged as a major Phoenix area developer. Vestar Development was a pioneer of the big-box power center and helped Target and Walmart expand in the area.

The new wave of entrepreneurs took the places of long-time bankers such as Gene Rice and Gary Driggs, whose MaraBank S&L and Western Savings & Loan Association were seized by the government, and high-flying developers such as Charles Keating and Conley Wolfswinkel, who were sued by the government and put out of business.

High-profile business leaders such as Keith Turley and Karl Eller lost footing when their respective companies, Pinnacle West Capital Corp. and Circle K Corp., made missteps and ran into trouble.

Vestar founders Lee Hanley, Rick Kuhle, David Larcher, Paul Rhodes and Peter Thomas borrowed $100 million to buy the commercial-building division of Tucson's Estes Homes in 1989 just as commercial real-estate prices were starting to fall and savings and loans to fail.

The deal included 35 commercial properties developed by Estes Development Co., including the partially completed 1.2 million-square-foot Scottsdale Pavilions retail center at Pima and Indian Bend roads, arguably the nation's first power center.

The Vestar partners at first couldn't believe their bad timing as they watched commercial real-estate values plunge in metro Phoenix and around the country.

But their luck would soon change.

Their deal with Estes was financed by the pension plan of Chicago-based "Baby Bell" Ameritech Corp., which was looking to build up its real-estate portfolio in the West. Instead of financing the venture, Ameritech came in as a capital partner.

As a result, Vestar had access to a vast amount of capital at a time when there was virtually no conventional money available for real-estate developments and acquisitions.

Larcher, Vestar's executive vice president, said that Ameritech's backing enabled the company to take advantage of depressed real estate and make key acquisitions. It also positioned Vestar to develop relationships with retailers such as Target and Walmart, which were looking to expand in Arizona and Southern California.

Vestar built dozens of Walmart- and Target-anchored retail centers during the decade.

Ameritech's deep pockets helped finance the second phase of Scottsdale Pavilions and to build Scottsdale Towne Center, Deer Valley Towne Center and numerous other power centers.

"The 1990s was a decade where it was very hard to finance real-estate projects and the fact we were able to secure a long-term source of capital allowed us to jump ahead of our competitors and grow rapidly," Larcher said.

Vestar emerged at the end of the 1990s as one of the nation's largest and most respected shopping-center developers -- a status it continues to hold more than a decade later.

by Max Jarman The Arizona Republic Dec. 1, 2011 05:15 PM

Real estate dominated Valley business in the 90s

Thursday, December 1, 2011

Asian stocks soar on joint central bank action |

BANGKOK (AP) — Asian stock markets soared Thursday after major central banks acted in concert to lower borrowing costs, hoping to prevent a global credit crisis similar to the one that followed the collapse of Lehman Brothers in 2008.

Benchmark oil rose above $100 per barrel and the dollar fell against the euro but rose against the yen.

Japan's Nikkei 225 index jumped 2.4 percent to 8,638.72. South Korea's Kospi surged 4.2 percent to 1,925.17 and Hong Kong's Hang Seng vaulted 5.9 percent to 19,041.36. Benchmarks in Australia, India, Singapore and Taiwan all rose more than 2.5 percent. Mainland Chinese shares on benchmark indexes in Shanghai and Shenzhen rose more than 3 percent.

On Wednesday, the central banks of Europe, the U.S., Britain, Canada, Japan and Switzerland reduced the rates that banks must pay to borrow dollars in order to make loans cheaper so that banks can continue to operate smoothly.

"The moves were cheered by markets as it shows central banks are willing to work together to ease Europe's sovereign debt crisis," Stan Shamu of IG Markets in Melbourne said in a report.

Separately, China's central bank also acted to release money for lending and help shore up slowing growth by lowering bank reserve levels for the first time in three years. The action late Wednesday signaled a key change in monetary policy, analysts said.

"I think the government has the faith now that inflation has peaked, and that now it's time to change the monetary policy from a tight one to a loose one," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.

Chinese banks soared on the news. Hong Kong-listed Industrial & Commercial Bank of China, the world's largest bank by market value, surged 10.4 percent.
By easing reserve requirements, the central bank made available some 350 billion yuan ($55 billion) that otherwise would have been locked up in reserves. Given typical investment trends, much of that money could find its way back into the property sector.

Hong Kong-listed China Resources Land rose 11.6 percent and Poly Real Estate Group added 8.7 percent.

Steel and industrial shares also jumped. Japanese steel producer JFE Holdings shot up 9.6 percent and South Korean steel giant POSCO gained 7.5 percent.
Worries about Europe's financial system — and the reluctance of the European Central Bank to intervene — have caused borrowing rates for European nations to skyrocket. Central banks will now make it cheaper for commercial banks in their countries to borrow dollars, the dominant currency of trade.

But it does little to solve the underlying problem of mountains of government debt. Analysts said that unless there is dramatic action at an upcoming summit of European leaders on the debt crisis, markets are in for further shaky times.

"Until we see some definitely agreed on and, when necessary, legislated initiatives from Europe, optimism can be premature," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "Until we see that sort of thing, there will be a ceiling on the rally."

The central banks' move sent the Dow Jones industrial average soaring 490 points, its biggest gain since March 2009 and the seventh-largest of all time.

The Dow rose 4.2 percent to close at 12,045. The Standard & Poor's 500 closed up 4.3 percent at 1,247. The Nasdaq composite index closed up 4.2 percent at 2,620.

In energy trading, benchmark crude for January delivery was up 39 cents to $100.75 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 57 cents to settle to $100.36 on Wednesday.

In currencies, the euro rose to $1.3463 from $1.3435 late Wednesday in New York. The dollar rose to 77.67 yen from 77.56 yen.

by Associated Press Dec 1, 2011

Asian stocks soar on joint central bank action |

Wednesday, November 30, 2011

Banks Revising Foreclosure Procedures

The Office of the Comptroller of the Currency (OCC) has reported that all banks targeted for investigation and review into foreclosure and lending practices have submitted letters detailing their plans for auditing said practices, which the OCC demanded be completed before the beginning of the new year. Bank of America, Citibank, JPMorgan Chase, Citigroup, Wells Fargo and a handful of others have so far entered into OCC compliance, although auditing has yet to be completed. Independent auditing firms involved in the overhaul include Deloitte & Touche, Ernst & Young and PricewaterhouseCoopers. For more on this continue reading the following article from TheStreet.

The Office of the Comptroller of the Currency said on Tuesday that the nation's largest mortgage servicers would "complete much of the work" required to clean up their loan servicing and foreclosure practices by early next year.

The OCC slapped the largest U.S. mortgage loan servicers, including Bank of America (BAC), Citigroup (C) subsidiary Citibank, HSBC (HBC), JPMorgan Chase (JPM), MetLife (MET) unit MetLife Bank, PNC (PNC), U.S. Bancorp (USB) subsidiary U.S. Bank, and Wells Fargo (WFC), with cease and desist orders in April, requiring the group to hire independent consultants to "conduct a multi-faceted independent review of foreclosure activities in 2009 and 2010," and "to correct deficient and unsafe or unsound practices in their mortgage servicing activities," along with beefing-up their oversight of third-party service providers, and their activities related to Mortgage Electronic Registration Systems, or MERS.

The regulator said that, as required, all the servicers had submitted "independent consultant engagement letters and servicer action plans" in July, and that the "OCC closely evaluated and approved consultants to prevent conflicts of interest."

The agency said work was "well under way on the actions necessary to comply with the consent orders," and that efforts "to correct deficiencies in foreclosure processes, management oversight, and internal audit [were] furthest advanced."

In Bank of America's updated engagement letter from Sept. 6, Promontory Financial Group said it would "conduct an independent review of certain residential foreclosure actions regarding individual borrowers with respect to BAC's mortgage servicing portfolio," including Bank of America's foreclosure actions as a lender, servicer, within 423 days.

Promontory Financial Group is also conducting the servicing and foreclosure audits for PNC and Wells Fargo.

Other independent consultants include Deloitte & Touche for JPMorgan, Ernst & Young, for HSBC and MetLife Bank, and PricewaterhouseCoopers, for Citibank and U.S. Bank.

The OCC said that on Nov. 1, "an integrated claims processor began mailing letters to borrowers who were in any stage of foreclosure on their primary residences between January 1, 2009 and December 31, 2010," describing the process "borrowers should follow for requesting reviews of their cases if they believed they suffered financial injury as a result of servicer errors, misrepresentations, or deficiencies in the foreclosure process."

The reviews of borrower petitions are expected to take several months.

by Philip Van Doorn Nuwire Investor Nov 25, 2011

Banks Revising Foreclosure Procedures

Warehouse sales are booming

Investor interest in warehouse distribution-center properties in the Phoenix area continues to defy both the recession and the otherwise dismal real-estate market, with the closing of a $33.3 million sale on Monday in west Phoenix, brokers involved in the deal said.

The joint sale of two massive warehouses in Phoenix totaling about 640,000 square feet was the area's largest transaction involving industrial real estate since the second quarter of 2008, said Don and Payson MacWilliam, senior vice presidents at Colliers International in Phoenix who represented both buyer and seller.

The MacWilliams are brothers who have worked as a team brokering industrial real-estate deals in the Phoenix area for more than 20 years.

The seller was Alliance Beverage Distributing Co., a large alcoholic-beverage distributor, which occupies all 450,000 square feet of the larger of the two warehouse properties sold. The adjacent 190,000-square-foot property is occupied by Updike Distribution Logistics, which provides warehousing and supply-chain logistics services.

Aside from being the largest sale of its kind in years, the deal was significant because its sale price per square foot of about $52 was more than what it would cost to build a similar facility today, Don MacWilliam said.

Most types of commercial real estate in the Phoenix area have been selling recently for far less than their original construction costs, with warehouse distribution centers being the only significant exception.

The exceptionally high value of such properties, particularly those in the West Valley, is due primarily to a surge in demand among e-commerce providers and large, traditional retailers for relatively inexpensive warehouses situated within a day's drive of the Southern California coast, where a wide variety of Asian products are offloaded for U.S. consumption.

According to a recent report from Colliers, users of industrial real estate snapped up 1.6 million square feet of empty space in the third quarter, which marked the seventh consecutive quarter of rising demand.

The Colliers report said industrial tenants have absorbed about 9.3 million square feet of vacant space during the past seven quarters.

The surge in demand is likely to continue as large e-commerce providers continue to seek out additional space for order-fulfillment and distribution centers to serve Arizona, California and other Western states.

Seattle-based online retailer Amazon announced plans in July to open a 1.2 million-square-foot distribution center at 800 N. 75th Ave. in Phoenix, its fourth such facility in the Phoenix area.

Other retailers, including Home Depot, Macy's and Dick's Sporting Goods, either have signed leases on large existing warehouses in the West Valley this year or announced plans to build their own distribution centers.

The vacancy rate among industrially zoned properties has plummeted at an unprecedented rate, from nearly 18 percent in the first quarter of 2010 to 14.6 percent at the end of the third quarter this year, Don MacWilliam said.

High demand also is driving new construction, according to Colliers' third-quarter analysis, with nearly 3.7 million square feet of warehouse and distribution-center space currently under development.

Alliance Beverage had just recently purchased the two buildings it sold Monday, inside Papago West Business Park near 47th Avenue and Roosevelt Street in west Phoenix, from developer and former property owner RJB Development.

RJB had granted the beverage distributor first right of refusal on any attempted sale of the property as part of a 20-year lease agreement signed in 2007, Don MacWilliam said.

Alliance Beverage then sold the properties for an undisclosed profit to CreXus AZ Holdings I LLC, a New York-based real-estate investment trust. The buyer and seller also negotiated a new 17-year lease agreement, he said.

REITs pool money from a group of investors to purchase and hold commercial properties, using the lease revenue they generate to pay the investors regular dividends.

Local real-estate analysts say investor interest in Phoenix-area distribution centers could help spur economic recovery, put construction crews back to work and bring much-needed jobs to the region.

"This transaction further confirms the leasing strength and investor confidence in the southwest Valley submarket and in Phoenix as a whole," Don MacWilliam said.

by J. Craig Anderson The Arizona Republic Nov. 29, 2011 06:20 PM

Warehouse sales are booming

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