Seattle firm sees potential in Valley

by Derek Quizon The Arizona Republic July 6, 2010 12:00 AM

The company that recently purchased the Gateway building in downtown Tempe says it's looking to make more investments in the Valley's depressed real-estate market.

The $35 million purchase of the eight-story building at Mill Avenue and Third Street is the first acquisition by Vulcan Real Estate outside its home city of Seattle. Lori Mason Curran, a spokeswoman for Vulcan, said the company is interested in buying more property in the Phoenix area.

"We see Phoenix as an area that has good growth prospects going forward," Curran said. "We see that it's poised for growth and a rebound, and we think it's a good time to get into the market."

Vulcan, headed by Microsoft co-founder Paul Allen, is not alone in its interest in Valley real estate.

Brent Moser, executive vice president of real-estate firm Cassidy Turley BRE, said the wave of foreclosures in metro Phoenix could lead to opportunity for real-estate developers. Developers expect banks to sell foreclosure properties for bargain-basement prices, he said, which provides ample opportunity to make a profit by restoring the properties and leasing them out.

"A lot of these banks are going to want these bad assets off the books by the end of the year," he said. "In fact, that cleansing is going on right now."

Cassidy Turley and other real-estate firms are banking on projections for population growth.

Economic forecasts from the University of Arizona's Eller College of Management's Economic and Business Research Center, which were cited in a report published by the firm last month, predict population in the Valley will climb at an increasing rate over the next four years.

The growth could bring property values back up as demand grows, Moser said.

"There's an opportunity to make money in short order," he said. "The growth in value is going to be staggering over the next 10-20 years."

Vulcan was a key part of the redevelopment of a Seattle neighborhood known as South Lake Union, an old industrial neighborhood that is the site of many of the company's properties.

Although Vulcan isn't planning to give such a face-lift to any Phoenix-area communities, Tempe Mayor Hugh Hallman said its interest in Tempe is a good sign and could attract more investment in the area.

"It's a bellwether for the investment market to take note of that we have one of the most well-heeled real-estate investment groups making an investment in Tempe," Hallman said.

Tempe Gateway was developed by Opus West, a Phoenix-based real-estate developer that filed for Chapter 11 bankruptcy in 2009, the same year the building was opened.

Vulcan purchased the property from a banking syndicate through CB Richard Ellis.

Hallman has taken a special interest in the sale of the building, which he sees as a link between two of Tempe's biggest attractions: Mill Avenue and Town Lake.

"Getting it activated is important to our efforts to bring those two geographic elements together and link them closely," he said.

Curran said filling the vacant building with tenants wouldn't be a problem for Vulcan, which is looking to rent out the building's office space before exploring the possibility of adding retail shops on the first floor.

"We've got a track record of leasing space here in Seattle," she said. "We've got good relationships, and we're looking forward to using those relationships to get that building leased in the coming months."



Seattle firm sees potential in Valley