FOR ALL TO REVIEW
Memo to All Arizona Republican Party State Committeemen:
RE: AZGOP Potential New Headquarters
Dear State Committeemen,
As Chairman of the AZGOP, one of the problems I have been trying to solve is the issue of the Arizona Republican Party not owning our own Headquarters office anymore. Under the prior Administration, the location we owned for decades at 24th St and Osborn Rd was sold, and the proceeds from the sale, currently $788,987.61, were placed into a savings account to be used only for the purchase of another home for the AZGOP.
Personally, I would have liked to have kept the prior place. It was old and in disrepair, but it was ours. We need a place to call home and have large gatherings. Our current office is much too small for our needs at only 2,500 square feet, with no capacity for a large meeting. It is also a ground floor unit, and every so often deals with interesting walk-in visitors. It is also in far North Scottsdale, much too far to be a resource for our legislators at the Capitol in terms of meeting spaces and such.
Since assuming the role of Chairman, I've been aware that our lease will expire in the first half of this year. Before considering re-signing for the same space, I conducted a thorough search for potential properties that could serve as our new headquarters. I had hoped to find a standalone building, but I was astonished by how limited our options were given our budget. The available properties lacked adequate parking and lacked the capacity to host large meetings, such as the LD meetings we used to hold at our 24th Street headquarters.
After an extensive search, we stumbled upon an unexpected find—a potential solution in the form of an "office condo." Essentially, it allows us to acquire our own space within a larger office building. Having bought and sold office condos in other parts of town before and even rented them out, I am well-versed in this concept and familiar with its nuances and advantages. Personally, I strongly endorse the unique benefits it offers: minimal maintenance responsibilities since the Association of all owners handles common areas, ample parking with access to a large attached parking garage, and heightened security for our staff and meetings.
Below, I am going to go into all the specifics of the opportunity to purchase this space. I welcome all feedback.
I have two requirements for giving feedback:
First: Please thoroughly read this entire write-up so you can address specifically what you like and don’t like about the potential office. There will be a test, if I ask you a question on it and you don’t know then you’ll have to read it again and come back to me. I took the time to write all this, I need everyone to read it.
Second: Have a counterproposal. The world is full of people who are great at shooting down the ideas of others but never put the work in to come up with better ideas. The only way to remove an idea you think is bad is by proving there is a better idea.
So, sit back, relax, and take notes about the possible new headquarters for the AZGOP and after you have read it, please let me know what you think.
Introducing the Potential New HQ: This opportunity offers a spacious and fully furnished office space spanning 12,000 square feet. It features a generous meeting area that can accommodate Republican groups and campaigns. Situated in a prime location, it is conveniently located approximately ten minutes north of the Capitol. The parking situation is exceptional, providing ample and convenient parking options. Security measures ensure a safe environment for staff and activities. Moreover, the rental income generated from the property offsets nearly all expenses, making it practically free of monthly expenses for the AZGOP. Additionally, the seller is highly motivated, offering us a favorable price and terms for the purchase.
Truly the most important and first requirement we have is finding somewhere much closer to the Capitol. We are in the political business; it makes no sense to me why we are in North Scottsdale. This potential new office is right on Central Avenue just north of downtown Phoenix. Roughly ten minutes from the Capitol.
Employees and Guests will be able to walk to either the café/coffee shop within the premises, or across the street to Starbucks, Jimmy Johns, Jamba Juice, and others. Many apartment buildings are also within walking distance.
A new Hilton is being built across the street, so any out-of-town guests, whether they are here for us, our tenants, or campaigns, will have easy walking access to lodging. It is along the light rail for easy access as well.
Should we decide to purchase, we also get signage on the monument sign along Central Ave.
Roughly 12,486 square feet of space. This is too large for our current needs, so why would we want to buy something with extra space? Let’s discuss:
The first and most exciting aspect of this space is the potential for RENTAL INCOME!!! The plan is to call the space something along the lines of “Arizona Freedom Center” with the secondary line of “Home of the AZGOP.” By making the extra office spaces available to other Republican groups, we can generate money to offset the expenses of the space and build a collaborative environment.
In some cases, we can very much help our candidates as well. I know from being in leadership on numerous campaigns how difficult it is to find office space for a campaign. Most commercial buildings want a minimum of 3-year leases, and even the ones that don’t very often turn down campaigns for all the baggage that comes with them. Now when we have our next Senate nominee for instance, or Presidential nominee, they can lease space from the party providing them with a move-in ready short-term solution so that can concentrate on the business of winning their race.
This will also give us a large gathering space again. We believe that the meeting area can comfortably hold 80 people, and if we pack it a little tighter maybe up to 100. LD meetings, Executive Committee (ExComm) meetings, County meetings, legislative meetings, the list goes on of potential uses. Keep in mind that we struggle at times to find places willing to rent space to political groups.
Storage will no longer be a problem. I was surprised to learn, as you may also, that we pay roughly $1,300 a month on top of our office to rent four storage units because of all the stuff we have for the big yearly meetings and such. No longer will we pay that if we buy this space, all of that will be housed here.
Currently we have multiple Conservative groups that have already said they will lease space. One group wants two window offices at $1,100 each ($2,200 total) and one cubicle for $550, and another group wants four window offices at $1,100 each ($4,400 total), three non-window offices at $900 each ($2,700 total), and four cubicles at $550 each ($2,200 total). This gives a grand total monthly income already of $12,050 a month with more space still available to rent out.
Clearly, a space this large will need TONS of furniture, how much will that cost? Well, that’s another unique aspect of this deal. Previously this space was rented to a large accounting firm, and when they vacated, they left behind all their furniture, which would become ours. Minus desk chairs which we will have to buy, everything else is there, desks, filing cabinets, conference table, and the like - basically comes fully furnished and move-in ready with an extensive collection of office furniture valued at over $200,000.
Our old 24th Street Headquarters had maybe 12-15 spaces (guessing from memory, email me if you know the exact number and I’ll edit this). Anytime there was a large gathering we would be parking down the neighborhood streets and sometimes having to walk a good distance in the dark.
Of all the places we looked, this office has BY FAR the best arrangement for parking. We get five reserved spaces in the underground garage, 7 more reserved parking spaces in the attached garage, and 37 unreserved parking spaces in the garage. ALSO, we get 3,000 (not a typo) validations to use in the visitor parking each month. That’s already way more than we could ever use, but just as an FYI there is also a large shopping complex directly across the street with a large free lot as well. I doubt there is anywhere else we could find with a better parking situation than this.
BILLS – POWER, WATER, ETC
Utilities in the new space will run roughly $1,200 a month. Much of the electricity is covered in the Association Reimbursement. The building uses a water chiller system. Here is the note from the Property Management Company:
There are two charges for electricity, the BTUs (chiller) and electricity bill coming from the Association.
The $11,248 (12 months) is the total paid last year for electricity for the third floor (usage not part of HOA). There is a separate billing from HOA for BTU chiller and electricity. The annual $3750 in the HOA budget is for a separate HOA account electricity.
Really one of the most exciting things about this space, besides the massive price discount relative to other potential offices, is the security. Our old HQ, and every other place we have looked at, is ground-level, with little to no barriers to walk-in traffic, as is the office we’re renting currently. I have already seen first-hand some of the weird things that walk through our door, and there are definitely some uneasy moments. It is a byproduct of the business we are in, but with the world getting crazier all the time it seems like if there is a chance to fix that we should look into it.
This office offers an immense upgrade over anything else we’ve seen in terms of being in an office tower, and not on ground level. Since we have the entire floor, we can lock off the elevator buttons so that only our traffic can access our office. Similar to when I was in Trump Tower as CFO & COO of the Trump campaign, visitors would wait in the lobby for someone to come down and get them. Here we have a very nice lobby they can wait in.
ASSOCIATION DUES, RESERVES, AND MAINTENANCE
I’ll address Maintenance first. We are responsible for everything INSIDE our suite, but everything outside of the suite (which is the bulk of maintenance issues) such as the lobby, elevators, roof, parking, grounds, are all taken care of by the Owners’ Association that we will be a part of and pay dues into. The nice thing about this is that we have a lot less to think about than if we owned a stand-alone building. And we won’t run into the same issue we ran into with our old HQ where maintenance issues kept getting pushed off and pushed off from Chairman to Chairman until the building was torn down.
Two questions that astute buyers of office condos will ask are these:
How much does the Association have in reserves to cover deferred maintenance?
How much do they know they will be spending on projects?
The Association is overfunded, with a current balance of $1,901,065.57. They have already undergone renovations in the lobby and have three major things left to do, the first being to replace the roof (6 floors above us) which is being covered by insurance due to previous hail damage.
The second is to update and renovate the elevators at a cost (to the Association) of roughly $500k.
The third is to paint the outside of the building, here is the note sent to us by the property management firm:
Our current balance is very healthy, we currently have $718,000 in reserves, plus we just received approximately $842,000 in insurance proceeds for roof damage from storm. Another $450,000 will be received after the roof is completed. It was noted in the meeting that the capital improvement budget will be reduced in the future as all major projects except the elevator will be completed in 2023. At the end of 2023 it is anticipated that we will have over $500,000 in reserves after completion of all the projects including roof replacement.
An official inspection was completed and found a few minor issues but nothing major. Things like a water heater pan not installed, a supply pipe needing to be replaced, air filters needing to be changed, a light that is out, etc. Probably the most expensive thing to be fixed is an exterior window that has a small crack in it, but anything exterior is the responsibility of the Association and they are already working on fixing that at their cost. We had a contractor give us a bid to fix all the small things in the report and the cost is $2,000, which we will schedule right away if we end up purchasing the space.
APPRAISED VALUE & COMPARABLE SALES (COMPS)
On February 15, 2006, the property officially appraised for $3,000,000. On April 14, 2006, the office sold for $3,098,888.24 to the current owner (a professional real estate investor, no relation to anyone we know) which included $672,565.19 in construction improvements to the inside.
Since the improvements were made it looks like it was one very long-term tenant, an accounting firm. They left the bulk of their furniture, so the office is move-in ready. We will be looking to eventually do some construction changes such as converting cubicle space into more rentable windowed offices, but that can be done down the road. If anyone would like to see the entire Comp report, please do not hesitate to email me and I will send it your way. The highlights are:
$243.96 Price/Square Foot A Standalone 12,502 SF building (built in 1985) sold on 12/30/22 for $3,050,000, or
- Address: 2727 N 3rd St – The Citadel
- Security – Accessible to street, no gate or security
- Address: 3216 N 3rd St – Marbella Professional Centre
- Security – Accessible to street, no gate or security
- Address: 1415 N 7th Ave
- Security – Accessible to street, no gate or security
The 12 Office Space sales near us in our official Comp sold for an average of $264.71/SF, ours is priced at $152.09/SF. We don’t know who the seller is but were told it is a professional investor who is motivated to sell and “likes us,” thus the good deal. If this office was priced at that level, it would be valued at $3,305,169, $1,406,169 in excess of our $1,899,000 purchase price.
THE MATH – a.k.a. Show me the Money
The number one question probably is: Can we afford it? To start off, let’s look at the math of our current 2,500-square-foot office space in North Scottsdale:
Monthly Expenses of Current Office:
Monthly Rent: $5,600
Monthly Storage Unit: $1,300
Monthly Avg Rental Expense for large gatherings: $700
TOTAL EXPENSE: $7,600
Monthly Income of Current Office:
Rental income from extra offices: $0
Rental income from meeting space: $0
TOTAL INCOME: $0
CURRENT NET TO AZGOP: -$7,600 MONTHLY EXPENSE
Now here’s the math on the Potential New HQ:
Monthly Expenses of New Office:
Association Dues & Monthly Parking Charge: $6,337.34
Reserve Contribution: $2,846.57
Utility Reimbursement: $936.66
Utilities – Electrical: $243.20
Property Taxes: $2,824.19
Monthly Storage Unit: $0
TOTAL EXPENSE: $13,520.42
Monthly Income of New Office:
Rental income from extra offices: $12,300
Rental income from meeting space: $400
TOTAL INCOME: $12,700
NEW OFFICE NET TO AZGOP: -$820.42 MONTHLY EXPENSE
Now this is after the carry-back loan is paid off, which I believe will happen by the end of this election cycle. Until that time, we have an extra $7,977 to pay each month, for a total of $8,797.42. So, an extra $1,100 per month until the seller carry-back note is paid, then when we own the office free and clear the AZGOP will have a great and secure office for a total expense of less than $1K per month.
In simple terms, a carry-back loan refers to a situation where the seller of a property acts as the lender and provides financing to the buyer for a portion of the purchase price. Instead of the buyer obtaining a traditional loan from a bank or mortgage lender, the seller extends a loan directly to the buyer. We were told the reason they would do this for us is because they “like you guys a lot.”
OK, you passed the test and got to the end. Thank you for being someone who cares!
Now, please email me at email@example.com with the phrase "New Office Thoughts" in the subject and tell me what you think.
Jeff DeWit, Chairman
Arizona Republican Party