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Posted on November 30, 2012

by Roger Yohem

A vacant 28,000 square-foot church building near the University of Arizona campus will be redeveloped as an innovative “urban storage” facility by its new owner, Peach Properties. The company, led by renovation specialist Ron Schwabe, has purchased the former Baptist Church Education Building, 222 E. Fifth St., for $1.1 million.

“This infill project is a great adaptive reuse opportunity. The urban storage concept means it will be more than basic, traditional storage. It will have higher amenities that cater to the UA student market and people living downtown,” said Schwabe.

One of the more creative uses of the building will be for wine storage in the basement. That makeover will be designed to maintain a constant 58-degree temperature.

Some offices will be available with a focus on co-working space. Basically, this is a shared-work environment where professional office space is made available to independent workers, consultants and small business owners who otherwise would be working from home.

Schwabe will apply this trendy co-working feature based on his success at Spoke6, another Peach Properties redevelopment project at 439 N. Sixth Ave. For a daily or monthly fee, Spoke6 customers have access to desk space, two conference rooms, wireless Internet and copy machines.

Throughout the three-story former church building, about 430 storage spaces are being planned. Typical sizes likely will be 4-feet by 5-feet up to 10-feet by 15-feet. The building’s interior already is gutted.

University students are projected to be a strong customer base, especially those from out of town. Plus, the site is directly north of the 760-bed The District on Fifth student housing complex.

“For three months in summer, they need smaller storage for items like bikes and a few boxes. This caters to that new generation of users,” said Schwabe.

Outside, plans are to convert the 42-space parking lot into a secure storage area for motorcycles, vehicles and other larger items.

The steel-and-concrete building was constructed in 1952 by the Baptist church as a school and meeting “wing.” While in use by the church, it had 55 offices, six conference rooms, a full kitchen and lunchroom, and a 2,640 square-foot multi-use “chapel” room.

In recent years, the abandoned building has become a neighborhood eyesore, marred by broken windows, trash and graffiti on the exterior walls. Currently, the site has been fenced off for security and to prevent trespassing.

The solid steel-concrete construction appealed to Schwabe’s expertise in preservation and redeveloping old buildings with “good bones.” He expects renovation costs to run about $1 million and plans to open about the second quarter of 2013.

The premium location is also near the Fourth Avenue entertainment district, downtown, and Sun Link, the modern streetcar route. In July 2007, developers Chris Kemmerly and Steve Quinlan bought the building for $3 million with the announced intent to convert it into loft-style apartments. But it fell into foreclosure and Peach Properites acquired it from BOKF National Association, the parent company of Bank of Arizona. The transaction was handled by Bob Kaplan and Allan Mendelsberg with Picor Commercial Real Estate Services.

Contact reporter Roger Yohem at ryohem@azbiz.com or (520) 295-4254.

http://www.insidetucsonbusiness.com/news/downtown-restaurant-revival-pours-more-than-m-into-economy/article_1c90b844-083d-11e2-9943-001a4bcf887a.html

August 05, 2012 12:00 am  •  Carli Brosseau Arizona Daily Star

An area on the edge of Tucson’s warehouse district is quietly becoming a commercial hub for creative entrepreneurs.

Several businesses recently leased commercial space there, on the west side of North Sixth Avenue, two blocks from the Fourth Avenue shopping district and just an underpass away from downtown.

“I knew I wanted to be downtown,” said Rebecca Safford, a longtime downtown resident who plans to open Tap & Bottle, a bar and craft beer and wine bottle shop, in the area this fall.

She looked at spaces on North Fourth Avenue and on East Congress Street, then saw the storefront she ultimately leased.

“I knew right away that this was the environment I wanted,” she said. “I wanted something a little different … I wanted a neighborhood feel.”

Customers are already strolling and biking through the area.

Meanwhile, the denizens of this creative outpost are bringing each other comfort and comraderie as well as business.

Safford uses Exo Roast Co., a coffee shop that’s also a tenant at 403 N. Sixth Ave., as a virtual conference room while she plans the build-out of the bar.

She and Noel Trapp, Exo’s director of education, talk about collaborating on tastings. If he can’t get away over the lunch hour, she’ll bring him something back.

“It’s great to have them because they bring their client base,” said Carly Quinn, owner of Old Market Inn Tile Shop. Of this batch of tenants, she has been in the building longest – a year and a half.

Quinn was referring to Margaret and Michael Joplin, who moved their landscape design, glass art and retail businesses into the building this spring.

“The coffee shop opened, and we were just in heaven,” Margaret Joplin said, noting that her walk-in business has been growing dramatically. She sells plants, pots, scrap steel and glass garden accents as well as plant-themed textiles and prints.

The coffee shop’s May opening accelerated the flow of potential customers for all the tenants.

There’s no sign, and there’s been no advertising, but coffee lovers and baristas found it and brought their friends back.

The shop is about high-quality and ethically sourced coffee. It highlights social programs associated with the farms it uses; it downplays anything not otherwise highlighting coffee. That means few pastries, no blends, no extra flavors and mild roasts.

“I think Peter (Wilke) said it best: When you do something right and you’re passionate and it’s honest, people will find you,” Trapp said. Wilke, Doug Smith and Chris Byrne together own the 4-year-old roasting company.

They all love history and downtown Tucson. “It’s a small town trapped in a big city,” Trapp said. “It has the right amount of grit.”

The Old Market Inn embodies the history, and the exposed brick walls capture something of the grit.

The business owners suspect the streetcar may result in a commercial area somewhat shinier. Being off the streetcar’s immediate route but taking advantage of the buzz about it seems to them a better bet.

“We wanted this to be a destination in and of itself,” Trapp said.

Quinn, who designs glazed tile murals, moved into the building before there was any foot traffic at all. “I always wanted to be in here,” she said. “It’s a great place to work aesthetically.”

Safford plans to capitalize on the location by marketing directly to the bicycling crowd. In addition to Tap & Bottle hats and T-shirts, she plans to sell boxes to transport a growler on a bike and leather straps to attach a wine bottle.

Other creative businesses have moved into spaces further north.

Longtime commercial artist and vintage and designer clothing seller Jane Pitts has leased a space facing East Sixth Street, just west of North Sixth Avenue. Her partner, art director and Web developer Tom Baumgartner, plans to run an art gallery in one of the rooms.

Pitts’ shop – called Ozma Atelier after the princess of Oz – is slated to open in mid- to late August, with a grand opening in October.

She has been in fine clothing resale since 1989 and has been selling clothes under the name Ozma for the past five years, with her trunk shows, advertised via email and social media, prompting an underground frenzy.

At the new store, Pitts plans to sell both men’s and women’s clothes and shoes for 10 percent of retail or less. That’s Chanel for less than $100, steamed, cleaned and tagged.

Crystal Rhinestone Boutique recently opened around the corner, at 439 N. Sixth Ave.

The store sells Swarovski crystal rhinestones and consignment goods, as well as holding rhinestone application workshops.

Peach Properties Inc. – landlord to many a Tucson artist – is landlord to each of these businesses.

“At one time, the buildings were used for raves,” owner Ron Schwabe said. “There are respectable businesses in there now … I think it’s the right time.”

Did you know?

The Old Market Inn building at the corner of North Sixth Avenue and East Seventh Street was likely built in 1914.

Ron Schwabe’s 403 N. Sixth Avenue LLC bought the building in 2007 for $380,000. The Eric Firestone Gallery briefly occupied it and put on a show of photographs of Andy Warhol’s world. Firestone has since moved his operation to New York. Previously, the building was home to Arizona Glass and Mirror Co. Inc.

Sources: Arizona Historic Preservation Office Historic Property Inventory Form, Pima County Assessor’s Office, Star archives

Contact reporter Carli Brosseau at cbrosseau@azstarnet.com or 573-4197.

During terrific and horrific economic times, evaluating business opportunities with “assertive consistency” can pay off.

That strategy is playing out for Alliance Bank of Arizona, which has financed some $25.5 million in construction and redevelopment projects that are shaping downtown Tucson’s revitalization.

Despite the Great Recession and the city’s troubled Rio Nuevo program, Alliance Bank ventured downtown in 2005. Several local clients with long and strong business relations with the bank saw intriguing opportunities there. Knowing that the bank was still lending, they brought proposals. Alliance Bank responded with a mix of 12 acquisition, construction and renovation loans to these “visionary” developers.

“We did not go out of our way to go downtown. We put the word out that we had financing available throughout the marketplace. It just so happened this group of loans were placed there, a significant clustering,” said Duane Froeschle, senior executive of Alliance Bank’s Tucson division, 4703 E. Camp Lowell Drive. “We do have extensive loans outside downtown.”

Officials financed the proposals based on each project’s merits and each developer’s positive history with the bank. Many are well-known downtown players, such as Ron Schawbe of Peach Properties; Rialto Block owner Scott Stiteler; Rob Caylor of Caylor Construction; and Ross Rulney.

Many of their undertakings are successful, creative, high-profile makeovers changing the face of Tucson’s urban core.

“The confidence of the relationship is a central theme in all these loans,” said Froehlich.

Alliance Bank’s first downtown-area venture was with Peach Properties, a $712,000 loan to redevelop new retail and office space at the Firestone Building, 439 N. 6th Ave.

“Look at the timeline, the first in June 2005 and from then, loans into 2011. That is indicative of our consistent ability to lend at the market peak and through the downturn. Each loan stood on its own, the underwriting parameters showed feasibility,” said vice president Joe Snapp.

“We also look at projects from the developer standpoint, not necessarily the downtown factor. We look for potential future upside and that upside has progressed steadily since we got involved,” he added.

With a “critical mass” cluster of 12 loans downtown, Froeschle said the bank took precautions to minimize risk. There is a mix of borrowers and “a diversity of occupancy and tenancy that gives us confidence. It mitigates much concern.”

During the due diligence process, Snapp also takes steps to reduce risk by walking properties with the clients. He talks to tenants, tallies up rent rates and vacancies, and tries to get a feel for the validity of the proposal.

His on-site intelligence is rolled into the loan evaluation. Then during the underwriting process, “we help them understand the risks we see in their investment as well as the potential,” he said.

Alliance Bank’s biggest downtown deal was $6.1 million in 2007 for the One North 5th/Depot Plaza. This loan to Schwabe and Stiteler was to revitalize the Martin Luther King Building, a former public housing project.

The renovation now features 85 market-rate and 11 low-income apartments. The makeover also includes 9,000 square feet of new street-front commercial space.

“That’s turned out to be the benchmark for future multi-family projects downtown. It became very successful. Others looked at it, saw it was viable, and decided to do other multi-family downtown,” Snapp said.

Two East (2 E. Congress) was another large loan for $5.5 million. Caylor received financing in 2007 to purchase and extensively renovate the historic Valley National Bank Building, built in 1929. J.P. Morgan Chase Bank is the current tenant.

Loans under $1 million have been used to restore the Old Market Inn at 402 N. 6th Avenue, and to buy and rehab 829 E. 17th Street for Hi-Speed Rods & Customs.

“Sometimes, renovations are a little more complex than straight construction. Often, we had to tailor a unique financing structure to the property,” said Froeschle, who helped found the bank in 2003 with native Tucsonan Robert Sarver.

Froeschle, based in Tucson, also is president of Sarver’s Western Alliance Bank headquartered in Phoenix, which includes Alliance Bank of Arizona and First Independent Bank in Reno, Nev.

“We characterize ourselves as a business bank, not a real estate bank,” he said. “We have a long vested interest here and operate essentially as a large community bank.”

Throughout the 2007-2010 financial crisis, he said they were able to lend due to “assertive consistency” whether the economy is red hot or stone cold. As real estate “turned south, the builders had confidence we had financing.”

“We were there when somebody else wasn’t,” added Snapp. “Based on relationships, they believed in our abilities to provide what they were looking for.”

The quality of the business connection however, did not guarantee funding. Some proposals didn’t pencil out. Others were rejected very early in the pitch. So far, the bank has only one underperforming loan downtown of concern.

“Our local understanding of the market allows us to understand these opportunities. We migrated through some difficult economic times more favorably than some of our competition,” said Froeschle.

Many factors are influencing downtown’s renaissance. Specifically, the University of Arizona’s expansion there, and the influx of apartments and student housing that the bankers characterize as “a critical mass of beds.”

Also, new mixed-use commercial space is evolving and the business community has high hopes for the modern streetcar initiative.

“Those all brought some long-term confidence to the stability of the downtown real estate market. We were able to make some of these loans as the economy and market was declining, something we’re very proud of,” Froeschle said.

Added Snapp: “In our decisions, the people are as important as the projects.”

Contact reporter Roger Yohem at ryohem@azbiz.com or (520) 295-4254.

Contact Patricia Schwabe for availability (520) 603-6103.

A combination of private sector investment, better land use planning, and the potential of the modern streetcar has created “horrendous interest” in economic development in Tucson’s urban core.

For the first time in about 20 years, real estate deals and development projects “actually pencil out. That’s really good news,” said Ron Schwabe, CEO of Peach Properties, to about 140 attendees at the Pima County Real Estate Research Council’s fourth quarter forum Nov. 10. “The private sector has stepped up, the street car is a plus, and probably the biggest help was the city finally adopting some programs.”

Schwabe’s company first ventured downtown in the late 1980s. It has redeveloped old buildings in the Toole Avenue warehouse district, the One North Fifth apartments, and the Providence Service Block at 44 E. Broadway.

For the University of Arizona, Schwabe is developing off-campus student housing at 246 E. Broadway.

“Everybody was counting on Rio Nuevo to bring downtown back. It has been a long slog, after years of pain, Rio Nuevo has gotten out of the way,” he said.

To spark private development along the 3.9-mile streetcar route, the city has stepped up its land use planning efforts. Jim Mazzocco, planning administrator for the city, said staff has been directed to have the entire route “ready by 2013 to encourage the type of land use that supports the streetcar, the ridership, the neighborhoods and all the mixed use development.”

It is an extremely challenging balancing act because the route runs through some historic neighborhoods between the UA campus and downtown.

“There are gaps and barriers. Where do you put transit-oriented development and how do you protect historic neighborhoods all at the same time?” he said.

The planning process divides the route into different sections: the university, transition, infill and downtown core. Each has special planning needs and challenges, such as building height and density restrictions.

In the infill district, for example, the very first project faced great resistance from nearby residents in historic neighborhoods. They challenged a high-density student housing development called The District, at 550 N. Fifth Ave.

“The reaction of the West University Neighborhood Association to this project was, they were appalled,” said Mazzocco. “At public hearings, they said the infill district is a bad idea, don’t allow this. They felt the project is not compatible with their neighborhood, they don’t like the height, its looks. They don’t want the students. They could have appealed it but did not.”

Jane McCollum, general manager of the Marshall Foundation, supported the city’s land planning efforts along the streetcar route because it will provide several benefits. Those advantages include land use certainty, reduced planning and development costs, faster plan reviews and construction timelines, more responsible development, and neighborhood stabilization.

“This planning will bring certainty to both the neighborhoods and developers,” she said. “Design is very important. You can’t put a crappy project in where people live and have it be accepted. Instead of accepting crappy projects, we as developers need to hold ourselves and the neighbors to a higher standard. When you do that, you stabilize neighborhoods.”

At the western terminus of the streetcar across Interstate-10, the Gadsden Company is developing 30 acres of mixed use projects. Company partner Adam Weinstein’s perspective on the streetcar and related economic development took a totally different route.

He considers it all to be development-oriented transit.

“Transit gives the ability to get on and off in a routine manner rather than necessarily taking it from destination point A to B,” he said. “Along a streetcar line, the park-once opportunity sets up the land use opportunities. All the wonderful projects we’re seeing from Jane and Ron are setting up the network, that really is the driving force.”

Contact reporter Roger Yohem at ryohem@azbiz.com or (520) 295-4254.

See all this grain? This is what the guys down at Borderlands Brewing Companywill use to brew their first batches of beer, which could be ready by early October.

Myles Stone said yesterday that the only thing between him and brewing that first batch of beer is getting the electricity turned on, which is expected to happen any day now. In the meantime, artist Joe Pagac is working on the sign for the front of the building while overseeing a mural being painted on the back of the building.

This work with Pagac is the beginning of a partnership between the brewery and local artists that I find fascinating. Tucson artists will design the labels and it has been said that there will be many partnerships between Borderlands and Dinnerware Artspace, which is located in the other half of the building at 119 E. Toole Ave.

Stone says he hopes to have a few kegs ready for the Tucson Beer Festival on Oct. 8. He also says work is underway on the “most kick ass beer garden in the Southwest.”

Are you excited? I am.

BONUS CONTENT! Dan Gibson went on the Fook morning show on KFMA to talk about Borderlands and other new local breweries:

http://soundcloud.com/fook-1/new-tucson-breweries

The microbrew craze took off in 1990s, but unlike Grunge Rock and dirty flannel shirts, it’s far from a remnant of that decade. In fact, while overall beer sales have fallen two years running, sales of microbrew products increased by double digits in 2009 and 2010.

“Microbrewers have been fighting for the same 5-percent of the market for 20 years,” said Myles Stone, 27, one-third of Borderlands Brewing Co., which will be Tucson’s newest microbrewery when it opens sometime next month at 119 E. Toole Ave. downtown.

Stone, a third-year medical student, doesn’t have a background in brewing, other than the home brewing he and a partner, Mike Mallozzi, 32, have done. Mallozzi, a microbiologist at the UA, has worked in quality control for Budweiser in Colorado.

Their other partner is Blake Collins, 25, who has worked at a home-brewing supply store.

Microbreweries are one segment of the larger craft brewing industry, which also includes brewpubs, regional craft breweries and contract brewers.

The distinguishing factor in all of these comes down to volume. Microbreweries typically produce less than 15,000 barrels of brew per year. A barrel equals 31 gallons, or about the size of two standard beer kegs.

Stone said Borderlands plans to produce about 500 barrels their first year and double that in the second.

Located just steps away from the Union Pacific tracks in an old produce warehouse, Borderlands will brew and pour at the refurbished building.

Since Arizona allows limited self-distribution, Stone said Borderlands can sell directly to bars and restaurants. That, he said, gives them the ability to fill customers’ orders at a moment’s notice.

That’s key to their business plan, Stone said.

And, he thinks getting their beer into eateries should be relatively easy because Borderlands has no plans to open a restaurant of its own.

“We talked about it for like 10 seconds, and we were like that’s not us,” Stone said.

Probably just as well, he added, the restaurants they’ve spoken with seemed much more receptive to carrying Borderland beer when they learned Stone and company don’t plan to serve food.

In addition, most of their investors advanced relatively small sums, several thousand dollars at most, and live in the area.

“We plan on making dividend payments to investors in about a year,” Stone said.

If industry statistics are any indication, it would seem the investment in a microbrewery is a pretty good bet.

Of the more than 1,700 microbreweries and craft brewers in the U.S. in 2010, only 41 closed, according to the industry group the Brewers Association.

Portland, Ore., is a city that is only slightly larger than Tucson but has more than 40 microbreweries. The entire Portland metro area has roughly 2 million residents.

Even Flagstaff, a city of fewer than 68,000 people, has four breweries, all within walking distance of one another.

For their part, the crew at Borderlands Brewing hopes they have found a recipe for success.

“What we were told early on,” Stone said, “is that breweries don’t fail because of the beer.”

Contact reporter Patrick McNamara at pmcnamar@azbiz.com or (520) 295-4259.

Story By Caitlin Harrington

The Tucson Pima Arts Council awarded its 2011 Small Business Partner Lumie to Peach Properties of Tucson for its support of artists in the community.

“There’s always something vacant, so artists approach us, and we’ve done openings, exhibits, movie sets … a lot of different venues,” says Ron Schwabe, owner of Peach Properties Inc.

Schwabe says he plans to continue to give venues to local artists while also being able to show off his properties to the public.

The UA is moving forward with two proposals that could provide housing for approximately 1,200 students along the Modern Streetcar line by 2013. The projects will expand the University’s presence downtown.

The University of Arizona has selected two development teams as potential partners to build much-needed student housing along the new Modern Streetcar line in downtown Tucson.

Both teams submitted proposals in response to a University RFP for public-private student housing partnerships that was issued last year.

The University hopes to construct housing that would include roughly 1,200 student beds along the streetcar route by 2013.

“This new student housing initiative will further increase the University’s community engagement while providing additional social and economic life to a renewed downtown redevelopment effort,” UA President Robert N. Shelton said.

“The Modern Streetcar serves almost as a campus extension into the downtown area, with students, faculty members and visitors being able to move back and forth within minutes, and without the need for a car and all of the challenges it presents.”

One of the selected proposals was submitted by the Capstone Development Corp. with local developer Jim Campbell and is located on East Congress Street at the North Fourth Avenue underpass.

A portion of the project is proposed to be constructed in conjunction with a city parking garage that is currently under construction.

The other selected proposal was submitted by local company Peach Properties and is just south of the Capstone project, at Fourth Avenue and East Broadway Boulevard.

Both of the projects likely would incorporate new retail facilities and benefit from other nearby downtown amenities. They also would be located close to a proposed streetcar stop.

These proposals add to the UA’s ventures downtown. The University will offer graduate programs in the county’s Roy Place Building at South Stone Avenue and East Pennington Street, and the National Institute for Civil Discourse will be adjacent to the Providence Building at Stone Aveune and Broadway Boulevard.

City and county support are integral to these projects.

“The City of Tucson and the University of Arizona share the same destiny. And we share the vision of downtown Tucson as the place where the city and the UA join together to build a brighter future for our region,” Tucson Mayor Bob Walkup said.

“Today’s announcement of hundreds of new UA residential units in the downtown is a big step toward implementing that vision. It will also help build th downtown economy and reduce the demand for mini-dorm housing in neighborhoods near the central campus.”

University officials will work to complete affiliation agreements with the selected development teams, allowing the design and construction of the projects to proceed.

The UA is taking an innovative approach to public-private projects by actively providing student referrals and branding and marketing assistance in lieu of financial participation. In this manner, the developers can improve their project financing positions while the University avoids additional budget impacts.

The UA will continue to look for other financially feasible opportunities to grow its downtown presence.

In Tucson over the past decade, the arts community and the city center have frequently worked together, albeit informally.

Now David Aguirre, executive director of the Dinnerware Gallery, and Myles Stone, co-founder of Borderlands Brewery, want to seriously develop a new partnership of arts and culture in the area between Congress and Sixth. They’re planning a symposium where Tucson’s downtown artists can come together to exchange and evaluate ideas. And in particular, one idea: the formation of a collective of artists’ collectives in the warehouse Aguirre and Stone share.

The new 16,000-square-foot space will include the brewery and gallery along with a full-fledged art center serving adults and youth. The syposium will help artists to develop direction for the “arts triangle” they envision incubating in the warehouse district.