Hanover Co.’s patience pays off…buying site next to west sixth in Tempe for 341 units

Tempe – It has taken The The Hanover Co. in Houston, Tex. (J.Murry Bowden, CEO) 12 years to find its second site to develop another one of its signature luxury apartment complexes in the Valley, but the patient privately-held firm appears to have struck gold in Tempe. Hanover has agreed to acquire a 2.76-acre parcel within the Centerpoint mixed-use project in Tempe that will allow the company to build 341 upscale multi-family units adjacent to the incredibly popular West Sixth towers. Those 22- and 30-story buildings are running at near full capacity and attract some of the highest rents in the state at roughly $2 per foot. That will explain why sources say Hanover will pay nearly $10 million to purchase the property, which is owned by a company formed by DMB Associates Inc. in Scottsdale (, pres.). Hanover has agreed to buy the prime parcel in a deal that is contingent on zoning approval. If all goes well with Tempe, the sale could be final by the end of February. The land, which is owned by Centerpoint Land LLC (the DMB entity) is being marketed through Brent Moser, Mike Sutton and Brooks Griffith of Cassidy Turley in Phoenix. The site is located at the southwest corner of Maple Avenue and Fifth Street. The parcel, which is now utilized as a public parking lot, is immediately northeast of the West Sixth towers. It has zoning in place for two, 30-story buildings. While some of the Tempe planners and council members might like the idea of the highest density for the site, the cost to develop those size structures in today’s world is not feasible. The success of the West Sixth towers was only possible because the developer of the project was foreclosed and the partially completed buildings were sold at a fraction of their cost. Originally developed as for sale condominiums, the West Sixth owner wisely decided to complete the structures and rent the units as high-end apartments. In February 2011, a venture formed by Zaremba Group in Cleveland, Ohio (Walter Zaremba, principal) and California State Teachers’ Retirement System (CALSTRS) paid $30 million to acquire the two partially built towers that now have a combined 375 apartments in both buildings. West Sixth is located just west of Mill Avenue and east of Ash Avenue between 5th Street on the north and Seventh Street on the south. When the West Sixth venture, called ZarCalRes Tempe LLC completed the purchase, it included the two towers and the 2.76-acre parcel Hanover is buying. The undeveloped parcel that is being used for parking, was approved for more than 400 multi-family units in two towers. On the same day of the $30 million sale of the West Sixth towers, records show ZarCalRes Tempe resold the parking lot land to the entity formed by DMB Associates for $875,000. DMB Associates has had an interest in the office-retail-residential Centerpoint development since 1985. The company developed the 22-acre Centerpoint project, which has 380,000 sq. ft. of office space, 113,000 sq. ft. of retail shops and a theater, the 160-room Tempe Downtown Courtyard by Marriott hotel, the West Sixth multi-family units and the parking lot. As it turned out, DMB had a right of first refusal to acquire the 2.76 acres and exercised the option. Centerpoint, considered to be the commercial hub of downtown Tempe, is located along Mill Avenue and north of University Drive. The project has been a huge success and will be even better if Hanover completes the land-locked Centerpoint with the top notch multi-family project it will develop. Eric Kenney of Hanover says the company is proposing a six-story structure with 341 apartments and a parking garage with 711 spaces. Of those, 440 stalls will be used by residents of the apartments and 271 spaces will replace the number of public stalls that currently occupy the 2.76 acres. Hanover wants to start construction this summer, with an opening to follow 21 months later. The urban living developer has hired Wallace Garcia of Houston to design the project. Plans call for one and two-bedroom units ranging from about 550 sq. ft. to 1,200 sq. ft. Hanover will be the general contractor. Development cost (land and buildings) estimated at $65+million. Hanover will take on a joint venture financial partner. Known for developing posh, high-end projects, the Hanover apartments will have an abundance of amenities. The Tempe apartments will only be the second project for Hanover in the Valley. In 2001, Hanover developed 298 apartments in Glendale called The Lodge at Arrowhead Town Center. The company wanted to build 235 apartments in old town Scottsdale in 2007, but that complex was denied by the difficult Scottsdale City Council. Reach Kenney at (480) 505-3377. Freericks is at (480) 367-7000. The Cassidy Turley agents are at (602) 954-9000.

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December 2012