Horizon, Host: Ted Simons

April 9, 2012


Host: Ted Simons

Commercial Real Estate Recovery

  |   Video
  • A new 10-story high rise is coming to Tempe Town Lake. It’s good news for Tempe, but is it also a signal that the Valley’s commercial real estate market is finally recovering after taking a beating during the recession? Mark Winkleman, chief operating officer of ML Manager LLC, provides a market update.
Guests:
  • Mark Winkleman - Chief Operating Officer, ML Manager LLC
Category: Business/Economy   |   Keywords: commercial, real, estate, housing, economy, recovery, market,

View Transcript
Ted Simons: Last week on "Arizona Horizon," we took a look at signs that the valley's housing market is improving. Tonight we hear about the commercial real estate market. This in light after developer's plan to build a high-rise office building in Tempe. Does the project mean the commercial market is making a comeback? Here with some answers is Mark Winkleman, president of MGS Realty Partners and chief operating officer of M-L Manager, the successor to Mortgages Limited. Good to see you again. Thanks for joining us.

Mark Winkleman: Good to see you Ted. My pleasure.

Ted Simons: Let's talk about this big project now, because we heard nothing was going to happen for quite a while as far as big projects, commercial or residential. But this is a 10-story building on Tempe town lake, surprised?

Mark Winkleman: Well, yes and no. I wish I could say this is the signal everything is going to get better and we're going to get back to the way things were, we're all tired of being beat up for the last four years. But it does in a signal for the overall market but it's a unique situation in Tempe. They have a lot of things going for them, and it's a start. I think you're starting to see this in various aspects of commercial real estate. A few positive things happening and this is certainly one of them.

Ted Simons: What does Tempe have going for it in terms of this particular property it sounds like the high end class A if you will, office space is going big down there at the lake. Correct?

Mark Winkleman: It's a very attractive area. You've got terrific transportation, freeway, light rail, you're close to the airport, you've got ASU there, a lot of excitement, a lot of activities. The lake, so the amenity package and the attributes of the area are really somewhat unique for the valley. You've got -- and the ownership is also unique. You've got a large national reach, that has acquired the existing buildings there, you had Paul Allen, Microsoft's founder that bought the empty building just across the way, it's now 80% occupied. The two at the Hayden Ferry Lakeside are virtually 100%. Even the first solar building on the other side of the lake has come up. So now that little pocket doesn't have a lot of space left. Yet with the amenity, it's a very attractive area.

Ted Simons: So you've got that area doing very well. Let's talk about the status of the office leasing market in general. What's going on out there valleywide?

Mark Winkleman: It's pretty rough. The vacancy rate is still in the mid 20s, which historically is very, very high, huge amount of empty space. And what you’re seeing are tenants moving from class B, class C to better location, better space. Maybe an example of this is a law firm, they've been in mid town Phoenix for the last 15 years, they just leased space at 24th Street and Camelback. You look at the tenants, what my lease was several years ago when I signed it, where I can go now for the same rate, you can improve. So a lot of them are doing that. You're seeing things a little better in class A, class B and C are starting to suffer.

Ted Simons: When you see class A doing well and B and C suffering, what does is that say, is that healthy for the market overall? Someone is doing well, but at the expense of others.

Mark Winkleman: That's just the way the real estate world works. It happens in every cycle. The better locations will come out first. And what we really need is jobs. We need that to drive the economy. Especially for office space. If you don't have increasing jobs, it's hard to have significant positive absorption. So the job picture is getting a little better, but it's far from a dynamic and the numbers are not that big. When those numbers get bigger you'll see the office market improve dramatically.

Ted Simons: I imagine you'll see the retail market improving as well. What are you seeing retail market right now?

Mark Winkleman: It's pretty soft too. You need rooftops for retail, we've got a lot of vacant space, a lot of turmoil in the retail world. So there's certain areas that are doing OK, a little better, but overall retail is pretty flat.

Ted Simons: The idea of the four corner, it’s fascinating because in the past four corner retail, every corner of an intersection retail. Is that a thing of the past? It seems like almost every corner there's at least one or two sides not doing well.

Mark Winkleman: Right now there's as much apartment land as possible. That's one part of the market that's done well. You've got apartment developers that have had access to sites that they've not had in the past when they had to compete with retailers and office building, hotels. So that has been on fire. And the other area that's done pretty well are the big industrial sites. We've had a lot of large companies come in and chew up what seemed like a huge overhang of space, and now there's a shortage of these big industrial buildings. So those -- there's some bright spots overall things are still slow, but I think they're starting to improve. I don't think it's going to get worse.

Ted Simons: The idea, I want to get back to retail, the idea of online purchases and online stores kind of taking stuff away from bricks and mortar. How much of an impact are you seeing as far as the real estate market?

Mark Winkleman: There's a lot of opinions on that. I think look no farther to best buy, which just announced they're going to close a huge number of big stores and do these mobile stores. Some people have said best buy has just become a show room for amazon. That may be true. So you certainly can't ignore that. There's a certain segment of the population that's always going to want to go in and touch and feel and certain types of retail are more lend themselves to that than others. But it will definitely affect it. I don't think anybody knows for sure what the ultimate outcome is going to be.

Ted Simons: So apartments, up. Ware house and distributing up to a certain degree. Retail hurting, office leasing in general hurting, Tempe doing very well. Overview. Are things getting better, or are we treading water here?

Mark Winkleman: Things are getting slightly better. I think we've added jobs, we've been through a lot of the foreclosure mess. And so I don't think it's going to get worse absent some meltdown with our currency or the world economy, Europe, if we have something like that, all bets are off. But I think if we don't have that disaster, you'll see things get better. The best numbers I've seen, two to three years we'll get back to a more normal situation in terms of jobs and housing starts and things will be what we're used to as normal, and I think Arizona will do very well relative to the rest of the country when we get to that point.

Ted Simons: I can't let you get out of here without an update of the mortgages. What's left of mortgages limited. We've had you here so many times on that story. What's the latest?

Mark Winkleman: Well, one of the good things in Tempe is we sold the center point project, that's fully occupied, and that's helped the mill Avenue area. We're pretty well through. I've been busy selling properties over the last couple years, we should be virtually done selling the properties this calendar year. So I've got about 15 properties left that are in the market, and we're trying -- as a matter of fact this weekend we send out a lot of money to our investors, over $20 million, for the people that put this up. It's a big chunk of change, so we're happy to be able to send that money out and wrap this up. We got some favorable treatment from the IRS on some things that allowed them to get refunds, and we're hoping to collect money from the attorneys and the accountants. So we're working hard, we're making progress, but I will be out of the real estate business for mortgages limited later this year.

Ted Simons: Wow. Congratulations. It's a difficult process, I know you went through all sorts of stuff trying to handle that. Congratulations on getting out of that particular account. And thanks for the insight. We'll keep an eye on the corners and the retail market. Thank you for joining us.

Revising Arizona’s Recall Law

  |   Video
  • Fountain Hills resident Paul Ryan is asking state lawmakers to consider revising Arizona’s 100-year-old recall law that allows citizens to remove elected officials from office. He won support from Republicans and Democrats who are requesting that a committee be formed to revisit the law. Join Ryan, Senator Michele Reagan and Senator David Lujan as they explain why the recall law might need an update.
Guests:
  • Paul Ryan - Fountain Hills resident
  • Senator Michele Reagan
  • Senator David Lujan
Category: Government   |   Keywords: revising, arizona, recall, law, government, ,

View Transcript
Announcer:At the entrance of bullhead city's community park on state route 95 is a marker honoring northeastern Arizona's vital relationship with the Colorado river. Nearly 30 years in the mid 1800s, commercial steam ships served the mining communities of northern Arizona. Hauling supplies from as far down river as Yuma. Cargo was unloaded at nearby hardyville, often returning downstream with barge loads of local ORE. Bullshead rock from which bullhead city derived its name, was located just upstream. It was used as a navigation marker and the point where the Indians Forted the river. Bullshead rock was submerged in 1953 with a building of Davis dam. Today the Colorado is still bullhead city's lifeblood. Jet skis have replaced the steam ships. And Laughlin, Nevada's casinos have replaced the mines. Mining tourists wallets instead of the ORE from the mountain.

Ted Simons: Concern over a local recall election led a fountain hills resident to convince a bi partisan group of lawmakers to join him in trying to update Arizona's recall laws. They're asking senate president Steve Pierce to appoint a committee to study the issue and make recommendations. Here with more is senator Michele Reagan a Republican from Scottsdale, senator David Lujan a democrat from Phoenix and Paul Ryan, the Fountain Hills resident who took up the cause after investigating attempts to recall members of the Fountain Hills town council. Thank for joining us. This recall, these laws, 100 some odd years old, why update them?

Sen. Michele Reagan: Why update them, we're not asking merely for an update, we are asking they be looked at and see if anything needs to be changed. A lot has changed in our state since statehood, and these have not been updated or even looked at since statehood so you know these are the kinds of things that we do.

Ted Simons: Some folks would say if you're going to look at something you probably want to look at something in particular. What's being looked at?

Sen. David Lujan: Well, you know Paul’s done a lot of the research and brought it to us and really raise some things about making recall elections more transparent, in terms of the financial reporting, looking at the signatures and the notary requirements, some things actually that don't apply just to recall, but to all elections in general in terms of paid circulators. I think he’s raised some good concerns about how we conduct elections and particularly recall elections.

Ted Simons: Before we get more into those concerns, what got you started in this?

Paul Ryan: Fountain Hills recalls. They were of two council members, one independent, one a democrat, interestingly enough. I looked at the petition sheets and found that 80% of the people that were bringing the petition into town and getting them to sign them were paid by special interest groups, in this case Lincoln strategy group. And that bothered me as a citizen. I kind of assumed recall would be my local citizenry, especially in a small town, trying to get the council to change. And it wasn't, they were paid outsiders. And there was no other motivation except to get paid for each signature they get on a piece of paper.

Ted Simons: Have they not always been paid outsiders, at least some involved?

Sen. Michele Reagan: Oh, sure. There's always some involved paid outsiders. We've seen that in every election, whether it's recall or regular election. Some of the interesting things that Paul has also discovered through this journey is the difference in the rules for recall elections versus regular elections. And I think that was the part that really struck me, and really got me to start digging into this with him. Why are there differences in the statutes when they -- the end result is an election? But they're drastically different requirements for these two different types of elections.

Ted Simons: I guess the question coming from I guess the critics are those who would say leave well enough alone, why is this necessary? Has there -- are there abuses out there that are new, different, has the climate changed? Why is this being approached?

Sen. David Lujan: Well, I think the Fountain Hills recall is a good example of things where I think there were some issues in terms of the paid circulators, and the money that's put into these things. I think if you compare and contrast, the Russell Pearce recall, for example, which is one I supported and was involved with actually raising money for, but I think that was a grass-roots recall, I think that's what recall were meant to be in terms of how that was run. There might have been some concerns with that one too, I don't know, but I think in terms of how the Fountain Hills recall in particular, just the lack of transparency and the lack of the same type of rules have you in other elections.

Ted Simons: What happened in the Fountain Hills recall? Were politicians removed from office?

Paul Ryan: One was -- didn't get enough votes to have a campaign and the other one did have a campaign. And they actually defeated the recall 2-1. I want to bring up one point you asked about the paid circulators. Referendum initiative in this state have a requirement that if you -- if the referendum petition must have on their paid circulator, so people know when they're signing it that this folks -- the folks having them do that are paid. Recall does not. You don't know if that person is a member of your town or not. You have no idea if he's being paid or not. Every other thing in elections you do. So I found that to be a huge difference in recalls. The other thing is campaign limits. There are no campaign limits on recalls. None. Zero. Different than other campaigns which I think Michele referred to which have limits.

Ted Simons: And now that corporations are people too, is that a concern regarding these particular laws?

Sen. Michele Reagan: It should be, because that's allowed in recall elections. Again, just like Paul said, there are things that are involved in -- allowed in recall elections that aren't allowed in other types of elections. And vice versa. For instance, in regular elections you don't have to have all your petitions notarized. I'm not asking for that or advocating for that, but there are differences in the statutes. And I'd like to make it clear, if you don't mind, we came together as a bipartisan group, and not just senator Lujan, but senator Linda Lopez, senator Frank Antenori and senator Steve Smith, because this isn't about one particular candidate or one recall or one party. It's not about Russell Pearce. And it's not about what happened in Fountain Hills. It's about the process. And how if these two could happen, don't we owe the public a chance to look at this and see if anything needs to change?

Ted Simons: Yet critics will say because it happened to Russell Pearce and in Fountain Hills it didn't succeed, that it is restrictive. It is difficult to remove people from office. It's intended to be that way, nothing is changed except for one incident, and I know most folks don't want the Russell Pearce -- but that, let's face it, that recall election hangs over this issue and anything that deals with recalls. Why change it? Where's the problem?

Sen. David Lujan: I think you take a look, for example, in a Fountain Hills, or any small town, what you don't want is where you have people that are in office where you have special interests, maybe they vote against a waste management issue, or something, and you have an industry that comes out and puts a lot of money to try and recall a candidate just because of a policy issue not necessarily how they're performing in office. And you have these special interests that are able to actually fund a recall. I think if that's the case and maybe it hasn't happened yet, but why not look at it and see that these elections are just as transparent and just as fair as any other election.

Ted Simons: If there's one thing you would like to see changed or updated if you will, what would it be?

Paul Ryan: I think it needs to be a modernized -- I think what happens, 100 years of patched-up law reflects to me that the original founders, which didn't have special interest groups to worry about, that the laws are so open now, that what's happening is these larger corporations and special corporations like this Lincoln strategy group come in with money and they can win things in town, elections, by outspending people. That bothers me a lot, because I think the original intent was to have this a people's movement, not a special interest corporations movement.

Ted Simons: So again, if there were an idea, what would you suggest? One biggie, one overriding idea.

Sen. Michele Reagan: I'd like to look at the signature requirements and why on -- why they're different for a recall election where they need to be notarized, you need to identify or you don't need to identify paid versus unpaid, wherein other elections, why is that different? We're talking about the same thing.

Paul Ryan: I don't think it's one issue. What Michele said earlier was right. This commission is intended to look at the whole recall. And there are probably 15 to 16 issues that I've introduced to the senate that need to be looked at. So I think it's a big subject.

Ted Simons: All right. We've got to stop it there. Thank you for joining us. Tuesday on "Arizona Horizon," a decision in a discipline case of former Maricopa County attorney Andrew Thomas is expected. We'll bring you legal analysis. And learn about a nonprofit that's teaching valley residents how to practice sustainable living. That's Tuesday on "Arizona Horizon," 5:30 and 10:00, right here on eight HD. That is it for now. I'm Ted Simons. Thank you so much for joining us. You have a great evening.

Tuition Freeze at ASU

  |   Video
  • For the first time in about 20 years, the Arizona Board of Regents voted to freeze undergraduate in-state tuition at ASU. Glen Nelson, the Board’s chief operating officer, explains the current tuition plans at ASU, UA and NAU.
Guests:
  • Glen Nelson - Chief Operating Officer, Arizona Board of Regents
Category: Education   |   Keywords: ASU, tuition, money, economy, freeze, NAU, UA, regents, board,

View Transcript
Ted Simons: Good evening and welcome to "Arizona Horizon." I'm Ted Simons. For the first time in two decades, the Arizona board much regents voted to freeze tuition for in-state undergraduate students at ASU. The board approved a steep tuition hike in recent years to offset large cuts in state funding, In-state tuition at ASU will now stay at just over $9700 a year, still a 96% increase from 2007. Here to tell us how the Universities are holding the line on tuition this year is Glen Nelson, the chief financial officer for the Arizona board of regents. Good to have you here. Thanks for joining us. So how was this accomplished?

Glen Nelson: Well, there was a lot of hard work that the University presidents put into looking at the budgets for next year, attaining, is this good fiscal management, looking for appointing -- operating efficiencies they can attain. And just concern for the residents of Arizona and trying to keep tuition as affordable as we can.

Ted Simons: And now for graduate students and out of state students they'll see an increase, correct?

Glen Nelson: Slight increase at approximately 3%.

Ted Simons: And why was that?

Glen Nelson: Graduate students, the graduate student population as well as the nonresident population, those prices are normally set via market -- more of a market-based pricing model. We have to be careful it doesn't price individuals out of the market but it does recover the costs and it is competitive with other programs.

Ted Simons: The U of A also has a tuition freeze but something else happened as far as a rebate is concern, so there will be added costs.

Glen Nelson: There will be an added cost, last year the regents approved a tuition increase at the U of A, but at the same time institute added $750 rebate per in-state undergraduate student. And that was to draw down reserves the U of A had built up. So rather than putting those dollars somewhere else, the decision last year was to rebate that to the students. The rebate is now gone away, the institution is drawn down some of those reserves, so those students will see an increase although the published rate will not increase.

Ted Simons: NAU, 9% increase for incoming students, but that's locked in that’s for all four years? Correct?

Glen Nelson: That's for all four years, and I believe it's only 5%.

Ted Simons: Good. How long can a tuition freeze last? What does the future hold?

Glen Nelson:That's a really good question. I think there's several factors. First of all, the stresses that the University are under right now are unprecedented. We're not going to compromise on the issue of quality. But at the same time, our funding levels are 50% less than what they were on a per student basis just in 2008. And so how long can we sustain this? I'm not sure. That would be a great question for the three University presidents. I'm sure they would tell you they've squeezed almost as many dollars out of their infrastructure as they can. One of the items that was brought up last week was at Arizona State University, the cost of a four-year degree, to deliver that degree is less than half of what state university of New Jersey cost is. And so we're already attaining a number of operational efficiencies, so the question is, how much more of those efficiencies can we garner without the state kicking in more dollars? We're happy to see Governor Brewer wanting to invest those dollars.

Ted Simons: Indeed. I was going to ask you to compare what's happening in Arizona with other states other regions. In terms of budget cuts, in terms of tuition hikes.

Glen Nelson:In both of those we're leading the nation. If we aren’t leading the nation, we're number two or three. If you look at the last three or four years. It's really a sad state of affairs, but at the same time we understand the stresses that the Arizona economy is going under. We're part of that community and we realize we have to take part in that, and we're doing what we can to at least reduce the expenditures.

Ted Simons: Last question, we've talked on the program about something called performance-based funding. It's an idea that's getting some traction, I know it's an objective as far as higher education communities is concerned. What is it, what's the status?

Glen Nelson: Performance based funding was the third of our three primary goals from the board this year. The first being funding the college of medicine in downtown Phoenix, the second being dealing with disparity funding. Performance funding is, you -- the state don't invest any more money in us than what we produce. In other words, we have targets to increase the number of graduates, to increase the people that we can put into the economy to help start the economy, to help our economy grow, and in doing so, we achieve -- if we achieve those metrics, you the state will invest more in us. So if we don't achieve the metrics, we don't get additional funding.

Ted Simons: I mentioned traction on this. How much traction?

Glen Nelson: Well, as I mentioned, it's one of the three goals the board has had, and it's also one of Governor Brewer's objectives for higher education, and currently as you know, the budget is still in negotiation between the legislature and the governor's office, and we'll just have to wait a couple weeks to see where that falls.

Ted Simons: But no wait as far as the tuition freeze at ASU is concerned the kids know exactly what they'll pay next semester and it’s the same as this semester.

Glen Nelson: Exactly.

Ted Simons: Good to have you here. Thanks for joining us. We appreciate it.

Glen Nelson: Thank you, Ted.

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