Solutions - A Publication of Ensemble Real Estate Soutions - Q214

s o lu t i o n s2nd Quarter a publication of ensemble real estate solutions 2014

Greetings! Some say all work and no play makes for a dull office… That hasn’t been the case at Ensemble this spring. We’ve enjoyed sponsoring and attending some fun charitable events, sent staff to a BOMA conference in Nashville to learn the latest trends in healthcare real estate, and our employees were treated to several FUN activities throughout the spring including: a spring training game, a round of putt putt golf and a Fiesta luncheon of sorts!

On the business side of things it has been a busy second quarter providing unique solutions to our clients and we’re thrilled to see the results they’re experiencing. In this issue of Solutions we’ve highlighted the renovation of Santa Fe Plaza and how Ensemble conducted a detailed financial analysis, presented scenarios to our client, managed its construction and recently celebrated the completion with an open house to reintroduce this beautiful facility to the market.

I hope your summer is off to a great start and everyone finds time to enjoy those long sunny days with your family and friends!

Welcome

contents3 Feature Article

5 Market Conditions

6 Regional Transactions

7 Insider News

8 Faces of Ensemble

10 Out and About

12 Perspectives

14 Ensemble Fun

Bill MolloyManaging Director, CEO

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For More Information:

888/428-2228

www.ensemblere.com

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Ensemble guides clients through every point in the property lifecycle using the best available technology, systems, and most of all, its people. The following case study is a prime example of how Ensemble is able to assist our clients in meeting their objectives.

Santa Fe Plaza is a unique medical office property that was built in 1985. The adobe, Spanish-style, 25,241 SF building has excellent visibility from two major thoroughfares — 90th Street and Mountain View Road. Having direct access from the Loop 101 and being just minutes from Scottsdale Healthcare Shea Medical Center are big pluses for its medical tenants and their patients.

Ensemble Real Estate Solutions became the building’s leasing agent and property management company in 1999.

OppOrtunityThe market for medical office properties in the Phoenix/Scottsdale area is improving but remains highly competitive with ample available space. Santa Fe Plaza was at a crossroad with a few concerns:

■ The project had been hovering at 50 percent occupancy for several years after losing one large tenant;

■ The building was “tired” and lacked the curb appeal necessary to compete effectively in a tough market; and

■ Competing space within the market was more “move-in” ready, allowing other property owners to capture prospects looking for a quick turn-around.

After reviewing current market conditions, Ensemble Real Estate Solutions developed a detailed financial analysis that compared

the feasibility of three possible scenarios for the building’s owner:

■ Sell the building now in its as-is condition/occupancy;

■ Continue to hold the building with minimal investment and accept slower lease-up and lower rates; or

■ Invest in a comprehensive building renovation including the build-out of spec suites to generate a positive impact to leasing velocity and rate structure, and then sell or hold.

SOLutiOnAfter thoroughly reviewing each of the three scenarios with ownership and closely examining all of the underlying assumptions, ownership opted to move forward with the third option to inject significant capital to renovate the building and build out the spec offices.

The analysis was predicated on good market data and Ensemble’s

major renovation Gives new Life to Santa Fe Plaza - Quickly Leads to New Tenant for Building

Before

ability to model how the building might perform with or without the incremental investment. The analysis was boiled down to a very straight-forward return on investment scenario, providing the client with the ability to make an informed decision.

The objectives of the major renovation were to return the original “appeal and attractiveness” of the building and bring it back to high standards.

The renovation included the following elements:

1. Re-doing the central courtyard.

Santa Fe Plaza had a wonderful central courtyard but over the years, the ficus trees had grown too large and were attracting a large number of birds that left a big mess. The trees were removed, smaller plantings were installed and colorful cloth awnings were added to provide shade that the ficus trees previously had provided. A relaxing, bubbling fountain also was added.

2. Improve the landscaping.

Landscaping had been done “piecemeal” over the years so there was no longer any unified plan. Some trees and shrubs were removed and others trimmed to return the landscaping to its original plan.

3. Improve building signage and lighting.

These building elements were no longer consistent so changes were made to unify them. Signage also was added

to more clearly identify the pedestrian and vehicle access points for the building.

4. Re-paint the exterior.

The exterior of Santa Fe Plaza had been painted all one color. To highlight its unique architecture, it was repainted in several southwestern colors.

5. Improve the parking structure.

The covered parking canopies, with their unique vega construction, also needed attention. Although replacing them was considered, Ensemble decided to repair the split pole coverings to keep the theme of the architecture.

Ensemble put together a detailed, comprehensive construction plan for the renovation. Prior to commencing with the project, an event was held to introduce the tenants to the renovation plan where Ensemble staff explained the process and how the design was developed. This event vested the tenants in the project and helped Ensemble complete the entire project in seven weeks with little effect or inconvenience to the existing tenants.

The renovations were done on time and under the budget of $250,000. The spec suites are under way with a budget of $250,000.

quiCk rESuLtSAn open house was held several weeks after the renovations were complete to introduce the changes to the market. The event included the existing tenants who were encouraged to show off their suites as well.

Most importantly, a new tenant signed a lease before the renovation was even complete.

For a copy of the new leasing brochure or for more information about Santa Fe Plaza, contact Marina Hammersmith or Autumn Storm at 602-277-8558 or visit www.ensemblere.com.

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Ensemble real Estate Solutions 1st quarter closed with

29 Medical Office transactions ±61,844 SF total

2014 Q1 transactions

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Ensemble recently hired Curtis Robertson as Controller. As Ensemble’s Controller, Curtis serves as the final point of contact for any client concerns or issues, implements clients’ processes, oversees clients’ cash management including cash receipts and disbursements, provides financial reporting for tax and audit purposes, and participates in the preparation of clients’ annual budgets. He additionally has final responsibility of all of Ensemble’s corporate accounting and treasury functions.

Curtis has a Master of Professional Accounting from University of Texas at Austin and is a licensed CPA in Arizona and Utah. Curtis brings over a decade of accounting experience beginning in 2002. Prior to joining Ensemble, he spent six years working for a private equity company that owns and manages over $3 billion in real estate holdings in 10 states.

ensemble real estate Solutions rolls out new technology

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Ensemble is excited to announce it will be rolling out Yardi Voyager 7S over the next few months. Yardi Voyager 7S is the next generation of Ensemble’s current property management and accounting software platform.

“Investing in this platform is key to our ability to adapt to our clients’ needs and our delivery of unrivaled value to them“ said Jason Hammersmith, Executive Director, Internal Operations for Ensemble. “Ensemble recognizes the needs of our clients to continually measure the financial health of their assets and we feel our clients will immediately benefit from the new features in Yardi Voyager 7S.”

One feature of the new platform, Yardi Advanced Budgeting and Forecasting, will enable Ensemble to eliminate imports from and exports to other budgeting programs or spreadsheets and quickly make accurate and flexible forecasts informed by real time detailed property data. The advanced features also provide a browser-agnostic, mobile-enabled platform with more intuitive functionality enabling users an enhanced experience they can access virtually anywhere.

ensemble real estate Solutions Hires Curtis robertson as Controller

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Fac e s o F e n s e m b l e

Kym OsmundsonProperty administrator

Phoenix, arizona

When did you join ensemble and what do you do?

I joined Ensemble in April 2004 as an administrative assistant for the East Valley portfolio and now work at the corporate office

as a tenant services coordinator for Ensemble’s Arizona and Nevada Portfolios. My job is tenant relations which includes submitting tenant work orders, suite signage, coordinating tenant appreciation events,

maintaining current tenant/vendor certificates of insurance and other administrative duties.

Faces of Ensemble was created as a way to get to know our employees. Each month Ensemble highlights an employee by having them respond to a series of questions. The following individuals were featured in the last quarter. Please visit Ensemble’s Facebook page to see the full responses from our team members.

When did you join ensemble and what do you do?

I officially joined Ensemble in August 2012. Initially I started with basic administrative duties; however, my role has grown

into not only administrative responsibilities, but internal operations as well. I make sure the corporate office runs

as smoothly and efficiently as possible. Brina Weissmangeneral office

administrative assistantPhoenix, arizona

When did you join ensemble and what do you do?

I started at Ensemble on April 1, 1999. I wasn’t sure if it was an April fool’s joke or not, but fortunately it wasn’t. I am the

Property Accountant for buildings in Arizona, Nevada and California. I also do the Ensemble billings for management fees and construction fees as well as handling employee and broker

commissions.Jessie AgostaProperty accountant

Phoenix, arizona

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Tracy Altemus, Marina Hammersmith and Autumn Storm of Ensemble’s Phoenix office represented the seller in the transaction. The seller was Camino Del Sol One, LLC. The buyer was Geiger Boulevard Spokane, LLC.

“We see this transaction as an example of a continued interest in medical office properties”, said Tracy Altemus, Executive Vice President of Ensemble. “Savvy investors recognize this market is beginning to strengthen due to several conditions such as new healthcare laws and an aging population – both contributing to a demand for medical office space. “

Built in 2000, Camino Del Sol Plaza is located in the heart of Sun City West’s commercial core and is close to the Del Webb Hospital. At the time of sale, the building was occupied by four well-established dental practices including general dentistry, prosthodontics, periodontics and endodontics. The building was 100% percent leased at the time of sale.

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Sale Price $2,400,000 Price/SF $288.88 Sale Date April 26, 2014

If you are considering selling, give us a call for a Free Market Analysis

camino del sol dental Plaza

13802 W Camino Del Sol ■ Sun City West, Arizona

marina hammersmith, ccim602/954-8414

[email protected]

tracy altemus, ccim602/443-4022

[email protected]

autumn storm602/385-2854

[email protected]

JUST SOLD

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11/21 pcH - annual Golf tournament

Catch ensemble at these Upcoming events!

Tracy Altemus stops for a break to try her hand at playing the guitar at the BOMA conference in Nashville

Ensemble sponsored the JCL Gold Ball

Deborah Tussing Spencer (far right) serving on the Southern Nevada CCIM Panel

2014 BOMA Medical Buildings and Healthcare Facilities Conference

For more information visit these links:

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Randy McGrane speaks at Lamda Alpha International on “Medical Consolidations and Impact to Real Estate”

Ensemble employees delivering donations from the office’s clothing and household goods drive

Randy McGrane visits with children at Phoenix Children’s Hospital following Ensemble’s recent donations

Ensemble at the at the JCL Gold Ball

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Ensemble sponsorship at the Nevada Healthcare Forum TournamentEnsemble sponsorship at the PCH Beach Ball

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tips for Building out a medical Centerby tracy altemus and jamie Krahne

Tracy Altemus and Jamie Krahne recently authored a chapter in “The Textbook of Urgent Care Management” by John Shufledt M.D. J.D., MBA, FACEP. While this was orginally written for an urgent care center audience, we feel that the following tips apply to any medical build out. The following is an excerpt from the chapter.

Building out a space involves the careful coordination of several different entities including: landlord, lender, architect, contractor; city, state and/or county licensing and permitting departments; signage, equipment, and furniture vendors; the insurance company and the attorney. It can be very beneficial to hire an experienced construction manager to help you navigate the process, especially if you have no prior experience in opening an urgent care center.

Plan at least six to eight months from start to finish if you have selected an existing building and always build in enough time for any unexpected issues when scheduling your grand opening.

10 key points

1. If financing your project, meet with your lender before choosing a construction manager and contractor. Once you choose a construction manager and contractor, meet to outline loan draw procedures. Your lender will have certain procedures the construction manager and contractor will have to follow to properly comply with your loan documents. Find out if your lender has any qualifying policies you should be aware of before the project is bid out.

2. Choose a contractor with medical build-out experience and require that each contractor complete the AIA A305 Contractor’s Qualification Statement. The build-out of a medical office has nuances and requirements to which contractors experienced in general office build-outs or residential developments are not accustomed.

3. Arm yourself with information regarding the types of permits, licenses, and inspections you will need for your center and share the information with your contractor at the beginning of the project. Acquiring information from all governing bodies in advance will tie in to your completion time.

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Ensemble Donation Helps Bring Smiles to Children

Phoenix Children’s Hospital recently received a donation that is bringing entertainment options and more smiles to patients of all ages. A $52,000 donation from Ensemble Real Estate Solutions provided an update to the Hospital’s CATV. This upgrade allows for high definition content being delivered directly to the patient rooms.

“Ensemble has been a valued business partner with Phoenix Children’s Hospital for many years, while also being a generous supporter of the hospital through many philanthropic donations,” said Steve Schnall, the Hospital’s Senior Vice President and Chief Development Officer. “We are so thankful to Ensemble for their ongoing support and are grateful for their generosity.”

The recent donation was a direct result of unused contingency funds set aside for Ensemble’s development of the Phoenix Children’s Southwest Valley Center, a specialty and urgent care center, completed last year.

“We’re proud of our work with Phoenix Children’s Hospital and the 35,355 square feet developed on their behalf for the Phoenix Children’s Southwest Valley Center. This particular donation was rewarding because it embodied Ensemble’s philosophy of working together,” said Randy McGrane, Ensemble Managing Director.

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4. Include monetary fines in your construction contract for failure to complete on time. Money motivates; ensure your contractor understands he will be required to come out of pocket should your project not be delivered on time.

5. When value engineering your project, confirm with your contractor (and respective sub-contractor) if the savings upfront could result in increased maintenance costs in the future. Many times owners are so focused on saving cost on the build-out that they fail to realize installing high quality components saves them on maintenance in the future. Never compromise quality/efficiency; understand the difference between price and cost and ask yourself “Will the price now cost me later?”

6. Establish realistic goals with your contractor for completion time. Avoid creating an environment that could lead to contractors’ paying less attention to quality simply to deliver your project on time.

7. Never pay your contractor without receiving unconditional lien waivers for the work previously compensated for. This will ensure no mechanic liens will be filed against your project.

8. Hold weekly meetings and work off a three-week look-ahead for the duration of the project. Regular meetings keep your contractor accountable to you and the schedule. Every three weeks a new three-week look-ahead meeting should be established to ensure timelines are being met.

9. If you are leasing your center, once the project is completed, forward the certificate of occupancy to your landlord. Many leases have “drop-dead” dates to obtain the allowance; review your lease closely and communicate with your contractor to hit those dates.

10. Require your contractor prepare a warranty and operations manual for your project. This should include everything related to your project and will serve as a reference for years to come.

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spring training

game

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FUN

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east Side

West Side

All Around The Valley

We Have tHe

PerFeCt SPaCe For

yoU!

Chandler Medical Center

Gilbert Health Center

Sun Lakes Health Center Ahwatukee Foothills Health Center

McAuley Medical Center

For more information: tracy altemus

marina hammersmithautumn storm

602/277-8558www.ensemblere.com

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at ensemble real estate solutions, our in-house

expertise is built upon 30 years of maintaining a

sole focus on the healthcare real estate market.

this translates into providing you the industry’s

most knowledgeable and trusted resource for an

all-inclusive service provider.

888/428-2228www.ensemblere .com

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888/428-2228

www.ensemblere .com