"We had looked at the Phoenix market for some time," Zaya Younan, chairman and CEO of Younan Properties, tells GlobeSt.com. "The office market was oversold and it had bottomed out. We felt like it was being repositioned for major recovery."

Central Plaza, Younan's first venture into Phoenix, was built in 1982 and is located at 4041 N. Central St. The 20-story structure was 60% occupied at closing, though Younan expects that number to be closer to 95% once the property stabilizes.

"Population growth is high. There is a tremendous infrastructure in place. There is also a tremendous relocation of corporate America to Phoenix," says Younan, who competed against six other potential buyers during the 60-day closing process.

The building's proximity to Scottsdale and its potential to become a class A property helped seal the deal for the buyer. Younan plans a $5-million renovation to help bring the building up to class A status, including repainting the exterior and rehabilitating the common areas, main lobby and landscaping.

The quoted rental rate presently stands at $15.50 per sf, though it could go up post-stabilization. With so many national-credit tenants presently occupying space, Younan says he hopes to find smaller local tenants like CPAs and law firms to help balance the building's occupancy. Trammell Crow Co. will handle leasing at Central Plaza and Lincoln Property Co. will serve as the property manager.

The building's tenancy was under the magnifying glass by portfolio lender, Imperial Capital Bank of La Jolla, CA, which put up $13.5 million toward the acquisition, David A. Burt, district manager and loan originator in the Glendale office, tells GlobeSt.com. Younan secured a 10-year loan with a 25-year amortization, with the first 36 months at interest only, in a 30-day start-to-finish turnaround on the financing vehicle, Burt says. The loan was cleared with a prime plus 1.25% floating interest rate.

"The challenge to this deal was the occupancy. When you take out the tenants who aren't going to renew, the occupancy is 53%," Burt explains. The other "challenge" is Denver-based Qwest Communications occupies 31% of the office space and accounts for 60% of the income flow. "We know Zaya. We know he's a good operator," he says. "We know he can turn it around." And, he adds, the bank's loan is tantamount to $35 per sf or just one-fifth of the replacement cost.

Younan says the company intends to pursue an aggressive acquisition strategy for Phoenix officeproperties, with a goal of obtaining one million sf by year's end. "We noticed a lot of outside investors had moved into that market," Younan says. "I feel that people from outside the market have realized the potential here."

Instant Insights /

Younan Antes Up $21M for Phoenix CBD Office Building

Related Stories

Recommended For You