Hines Plans New Apartment Development in Phoenix
Along with its joint venture partner, Hines acquires 11 acres to develop a 325-unit luxury for-rent residential property in north Phoenix.
“The fundamentals in this location are very strong and stable and there are no other new apartment communities in the Stetson Hills community because vacant land is now built out,” Robert Trujillo, managing director at Hines, tells GlobeSt.com. “The site is walkable to the Safeway grocery store and many other retail options as well as quick access to I-17, Norterra shopping area and major employers.”
Hines has only just closed on the land site and is still in the early planning and development phase, helping to mitigate the current economic disruption. The project will not kick off until quarter three 2020 with leasing occurring in late 2021/early 2022,” says Trujillo. “Hines is closely monitoring the effects of COVID-19 as it relates to permitting, construction pricing and availability of construction labor and materials; however, we expect Phoenix to be in a relatively good position to justify our Happy Valley construction start in Q3 2020.”
In addition, Hines sees the market challenges as temporary, particularly compared to the multifamily construction pipeline. “Multifamily projects take several years to construct and lease, and Hines is focused on the long-term performance of our Happy Valley development,” says Trujillo. “The COVID-19 challenges we face today are temporary, and we believe the Phoenix market will continue to grow with demand for high-quality multifamily communities as we get through the challenges we face today. Phoenix as a whole was already experiencing strong in-migration from high-density urban cities like Chicago, New York and Los Angeles before COVID-19, and I imagine this will continue—if not accelerate—now that these cities are struggling with COVID-19.”
The North Phoenix market is particularly well positioned, according to Trujillo, due to strong demand for luxury apartment living. “Demand is very good given the stable employers, family friendly neighborhoods, good schools and easy access to I-17 and Loop 101 nearby,” says Trujillo. “The north Phoenix submarket, primarily between the I-17 corridor and Scottsdale, is generally performing better than any other Phoenix suburban submarket relative to multifamily rents and occupancy. Multifamily lease-up velocity near the Norterra area has also been some of the best in the Phoenix MSA over the past year.”
Despite some reports of challenges securing funding, Hines doesn’t expect to have a problem securing debt. “We will be funding the project with a combination of equity and debt,” says Trujillo. “We don’t anticipate issues with debt financing when we go to the market and secure it given the financial strength of Hines as a global company with over 60 years of history.” Hines expects to lease the property quickly once construction is complete, and it will sell upon stabilization.