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| Special Inserts: | Greater Phoenix CVB | Arizona Association of Industries | |
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| Billion Dollar Gamble |  By Todd Trickle |
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| Investment takes off along a two-mile corridor in Mesa | |||||||||||
 ith all the Valley development talk surrounding thousands of new condos, hotel and office square feet in Tempe, Chandler and Gilbert, investors tend to forget about the largest, most progressive community in the East Valley—Mesa. As Arizona's third largest metro area, the city has a larger population than Miami, St. Louis and Pittsburgh. Taking a second look at Mesa, investors will notice a rebirth and rejuvenation happening below the radar. |
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| Mesa is surging in key industry sectors with a flood of development occuring in the Williams Gateway, Mountain Vista Marketplace and Mesa Dobson Riverview projects. The real story behind Mesa, however, is the $1 billion being invested in the city’s flagship project—a two-mile stretch of land along Southern Avenue and US 60, between Loop 101 and Country Club Drive, known as the Fiesta District.
After voter’s denied the property tax levy in 2006, several private stakeholder’s in the community stepped up to preserve the investment in the Fiesta District and it is now fully funded and moving forward. A consultant was recently hired to re-brand the area to create more of a district atmosphere. The thought is that re-branding the district will make strong headway toward re-branding the city as a whole. So, where is the opportunity? Real investment opportunities in the Mesa area are in the two-mile radius surrounding the unbridled development occurring in the Fiesta District. There is a 60/40 ratio of mom-and-pop stores, versus regional and national credit properties in the metro area, and most of these small retailers are along this two-mile stretch. Several hundred thousand square feet of leased space is below market rent and ripe for refinishing, redevelopment and resale as the district continues to revamp its image. Scarcity of six-cap national credit tenant deals becomes greater each year and even more costly to get into. Industry experts estimate that in actuality a non-credit retailer pays 50 percent to 100 percent more rent than a credit tenant. As developers and landlords in Arizona leverage more of their rights to get long term leases with what seems to be a less risky investment, current deals are leading to lower paying rent and an even more convoluted lease structure. As a result, these smaller family-owned retailers in pockets of Mesa are becoming safer and more lucrative investments. Leasing space to a credit tenant protects you in case of default, but most of the leases with credit tenants expose an investor to short term operating covenants, no personal guarantee and an inability to increase rent to offset future adverse market conditions. There may no longer be an upside deal of the century but there is a surplus of opportunity in taking advantage of the re-branding happening in Mesa’s Fiesta District. Todd Trickle is an associate with the Private Capital Advisors Group of Colliers International, specializing in single and multi-tenant retail investments. |
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Mesa Fiesta District Living and working Development in the |
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