Santa Fe Plaza is a unique medical/general office property that was built in 1985. The adobe, Spanish-style, 24,883 sqare foot 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.
The 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 was hovering at 50% 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.
• Competing space within the market was more “move-in” ready, allowing other property owners to capture prospects looking for a tight turnaround.
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 in its as-is condition/occupancy.
• Continue to hold the building with minimal investment and accept slower lease-up and lower rates.
• Invest in a comprehensive building renovation including the build-out of a spec suite to generate a positive impact to leasing velocity and rate structure, and then sell or hold.
After thoroughly reviewing each of the three scenarios and closely examining all of the underlying assumptions, the ownership opted to move forward with the third option to inject significant capital to renovate the building and build out the spec office.
The analysis was predicated on good market data and Ensemble’s ability to model how the building might perform with or without the incremental investment. The analysis was boiled down to a very straightforward 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 plan included several elements:
1. Courtyard and Landscaping: Messy trees were removed, smaller plantings were installed and colorful shade awnings and a bubbling fountain were added.
2. Exterior Paint: To highlight Santa Fe’s unique architecture, it was repainted in several vibrant southwestern colors.
3. Signage and Lighting: Both were redesigned to comply with the building’s architecture, and to better identify the pedestrian and vehicle access points.
4. Parking Structure: The covered parking canopies, with their unique exposed vega split pole coverings, were repaired, keeping the theme of the architecture.
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 inconvenience to the existing tenants. The renovations to the property were done on time and under the budget of $250,000. The spec suite was leased before it could be built, and the new tenant’s space is drawing rave reviews for its design.
After seeing the improvement plan, a new tenant signed a lease before the renovations were even completed. With the enhanced curb appeal, two additional leases were signed within just a few months. An open house was held a few weeks after completion to introduce the changes to the brokers in the marketplace. The event included the existing tenants who were encouraged to show off their suites as well. The market has responded with renewed interest in Santa Fe Plaza.