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Phoenix deal rises from the ashes for SKB

by Wendy Culverwell
Portland Business Journal

ScanlanKemperBard Cos., a Portland based real estate investment firm, celebrates its 20th anniversary on Monday.

The big date comes just one week after SKB and its Minnesota equity partner Wayzata Investment Partners LLC closed a $67 million deal to acquire High Point, the first phase of CityCenter of CityNorth, a broken development in Phoenix, Ariz., that fell into foreclosure in 2010. The 628,000-square-fooptr operty includes condominiums, Class A office space, retail space, a parking garage, surface parking and undeveloped land. It is CAPMARK FINANCE about 50 percent leased. Inc.,the Chicago Lender that foreclosed on a $290 million development loan in 2010, was the seller.

The Business Journal asked SKB Principal Bob Scanlan to dissect the deal:

Portland Business Journal: What does this mean for SKB?

Scanlan: It’s going to be a great one. It cost $460 or $470 a square foot to build. It failed because of the economy. The project itself is great. We think we made the best buy in SKB history.

PBJ: Why get involved in such a troubled project?

Scanlan: Phoenix is on fire. Residential prices are up 35 percent over the last year. The project has 99 condominiums that are leased as apartments. We think selling them in four years could generate $20 million to $40 million for the bottom line. SKB Principal and Chairman Bob Scanlan, left, is working on another big deal in the Bay Area. That’s the key to the deal.

PBJ: What challenges must you overcome in a project with such a tangled history?

Scanlan: The property has been under the control of four people at two separate banks since 2010. They haven’t been able to close deals because they’re bankers, not real estate people. SKB and Wayi.ata are real estate people. We know if we want to lease 50,000 square feet of office space, we have to write a check for $2 million for the tenant improvements to get the deal We’ll do that.

The reason this was available and such a great opportunity is it was a foreclosed property. The banks weren’t getting leases done.

PBJ: What will prevent things from going south for you?

Scanlan: We don’t think they will. The potential upside on the condos alone is enough to drive the property. But Phoenix is taking off. We’re a few Tiger Woods drives away from Mayo Clinic Hospital and USAA Insurance, both of which recently announced big expansion plans. I can’t tell you how bullish we are on this project.

PBJ: There must have been other investors competing to buy this. How did you prevail?

Scanlan: We made our best offer, and we made it with cash.

PBJ: What is your exit strategy?

Scanlan: The proforma says four years, but I would be surprised if we didn’t get a great offer before then.

PBJ: Are you on the lookout for more opportunistic deals?

Scanlan: That’s why I’m in San Francisco. But I can’t talk about that yet.

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