By Tim J. Randall
Dave Fogler has sold multifamily properties in Arizona since the mid ’80s. Steve Nicoluzakis worked for Colliers selling multifamily properties for two years before moving to JPI Apartment Development in 1997, where he worked on the development of multiple luxury apartment communities in Phoenix. The combination of their sales and development experience created a powerful team when Nicoluzakis joined Fogler in 2000 at Insignia, ESG. Three years later, they joined Cassidy Turley (formerly BRE Commercial) and for the last 10 years have been one of the top producing teams within the company.
The duo has experienced the typical ebbs and flows of the commercial real estate business.
“I worked through the RTC days in the late ’80s and more recently Steve and I dealt with the economic challenges everyone felt in 2007, 2008 and 2009,” Fogler says.
Even during challenging years, the team remained focused on its core business – selling multifamily properties – and the result has been sales of more than 50,000 units. But Fogler and Nicoluzakis have always taken an innovative approach to their business, and in 2009 and 2010 saw opportunities where others saw challenges. Building on their brokerage and development experience, they were able to create a new business model that fundamentally changed the multifamily development landscape through a tertiary of transformative projects: 26th Street and Camelback Road, Portales and the Scottsdale Waterfront.
The Catalyst for Change
In 2010, Dave and Steve, along with several other colleagues at Cassidy Turley, gained the listing of 4.7 acres on the southeast corner of 26th Street and Camelback, a location Fogler describes as “extremely high profile.” It was the site of a former Hard Rock Café, a vacant retail center and was once proposed by Donald Trump as a hotel. With the real estate market still facing countless challenges, including investment paralysis, Fogler and Nicoluzakis proposed a contrarian and innovative concept. Rather than think along the lines of historic and traditional use, which was assumed would be office, retail or a hotel, the team considered what the property would look like as a multifamily high-density, urban community.
The idea was to build a completely new luxury rental property type in Phoenix, a high-density product of 50 to 60 units per acre, as opposed to the traditional 20 units per acre, in a high profile location surrounded by premier amenities and employment. Developing a luxury multifamily building with this level of density, in high profile locations in Metro Phoenix had not been done before, Fogler says, because the rents could previously not be justified and the land typically had a higher and better use. The team had to look outside Arizona to find comparables that could confirm the new multifamily usage would be successful. They found examples in the downtown areas of San Diego, Denver and Seattle, and knew they had a winning formula. Fogler and Nicoluzakis outlined their plans for marketing the 4.7 acres to local and national multifamily developers. In the commercial real estate space of 2005 this concept would not have moved an inch, but location, timing, ingenuity and a lot of hard work resulted in a $10.5 million sale to Alliance Residential in 2010 of this once retail/office space that would soon be turned into a Camelback multifamily community.
Success Breeds Success- Portales and the Scottsdale Waterfront
The 26th Street and Camelback sale was an immediate jolt to the industry, setting the stage for the team to parlay its winning formula again. In 2012, the team approached ML Limited about creating a similar marketing plan for the Portales site between Highland Avenue and Chaparral Road in Scottsdale, on the north side of Scottsdale Fashion Square. Working under the same model of building a high-density, luxury rental project on the 9.7 acres, the team sold the property to JLB for $13.87 million. With two highly successful transactions completed, Fogler and Nicoluzakis approached Starwood about their 3.5-acre parcel adjacent to the Scottsdale Waterfront at Goldwater Boulevard and Camelback Road. Starwood had already gone through the entitlement process, but the team was able to demonstrate how their new model for rental projects could achieve a record price tag if they were willing to sell to a multifamily developer. Starwood agreed.
“We had overwhelming interest in this property, more than any other site we had ever worked on,” Nicoluzakis says. “This was considered to be one of the top development sites west of the Mississippi,” adds Fogler.
In the end, Alliance secured the property for $13.5 million.
“Alliance was ultimately chosen both because of the strength of their offer and the strong relationship we had with them from previous sales,” says Fogler.
The three parcels set land sale records, invigorated the team and provided a torrent of interest in Phoenix. The underlying success of these three projects was Fogler and Nicoluzakis’ belief that the multifamily sites would attract a “new apartment customer, a renter by choice” who wanted the luxury and access to premier amenities.
The achievement of these three property sales has allowed the team to carve a new niche in their already accomplished business model. While these three deals have been the most visible, Fogler and Nicoluzakis have closed several other land sales for future multifamily projects.
“The success we have had with land sales is due to our experience, selling existing properties and working with developers,” Nicoluzakis says. “Understanding and successfully working in all three arenas gives us a competitive advantage since we can confidently talk about land prices, rental rates for multifamily units, exit cap-rates and financing.”
The team sees great opportunities.
“In development, multifamily is still below the historical norms,” says Fogler. “We will have more units delivered in 2013 than in 2012 and more units delivered in 2014 than 2013.”
When speaking about their partnership, Folger and Nicoluzakis cite their passion to compete as key to their success. Both agree there is no specific division of labor and they are equally capable of handling every aspect of a transaction.
While their goals depend on daily commitment to selling existing multifamily properties, there is no doubt the niche Fogler and Nicoluzakis have pioneered in selling land for multifamily developments has proven to be a unique signature for the team in the Metro Phoenix landscape.