Tilton Development-General Contractor and Construction Management in Tempe, AZ
  • Location: 2520 South Plaza Drive, Tempe, Arizona 85252
  • Units: 322-unit mid-rise apartment community
  • Year Completed: 2015
  • Services: Development & Construction
Product Type: Residences at Fountainhead (the “Project”) is a 322-unit mid-rise apartment community consisting of seven buildings, inclusive of a two-story clubhouse and six four-story connected apartment buildings together with various landscape, hardscape, and waterscape amenities occupying approximately 10.01 gross-acres at a density of approximately 32.16 dwelling units per acre. The apartment buildings consist of wood frame construction with structural steel bridge elements, while the clubhouse includes a superstructure made of structural steel and glass. The overall Project is serviced by six elevators and surface parking.

Location: Situated in south Tempe, Fountainhead Corporate Park is an existing 90-acre mixed-use master planned development consisting of office, multifamily residential, and retail land uses developed in a quiet park-like setting comprised of vast turf areas, Date Palms, Aleppo Pine trees, several fountains, and many large manmade lakes with interconnected walking trails. Fountainhead Corporate Park was originally conceived as a Class A office park in the 1980s by Amberjack, the development arm of State Farm Insurance. The Project is also only eight minutes from the downtown Tempe Mill Avenue District, Arizona State University, and at the confluence of three freeway arterials connecting Tempe to nearby Phoenix, Scottsdale, Mesa, Chandler, and the Town of Gilbert.

Project Description

Opportunity: In late 2011, with the prospect of renewed interest in metropolitan Phoenix by venture capital investment firms seeking ground-up, multifamily apartment development opportunities situated in suburban/urban infill areas, Tilton Development placed the underlying 10.01 acres under a purchase contract and began its due diligence investigations. Our Project business plan was founded upon the notion that substantial value for Tilton Development and its investors could be realized by carefully sourcing and entitling this infill apartment parcel in Tempe and thereafter creatively designing, developing, and constructing an upscale, mid-rise product with a lower overall cost basis than the competition, and, following completion, trade the stabilized asset at a much higher price point.

Approach: Consistent with its business plan, Tilton Development sourced the vacant 10.01-acre development parcel at the center of the Fountainhead Corporate Park office campus as a unique infill development opportunity consisting of a very walkable, office park submarket within the larger Tempe submarket.

Nearly all built-out, Fountainhead Corporate Park consists of 1.4M SF of office space and is home to 7,500 employees for various companies including University of Phoenix (corporate headquarters), State Farm Insurance, Concentrix, Arizona Business Bank, Sundt Companies, and Allegis.

The parcel was available at a significantly lower cost basis due to the then soft office market conditions. Additionally, the parcel required a substantial amount of entitlement work to become feasible as a multifamily development opportunity. These entitlements included obtaining the waiver of a commercial office deed restriction from the then current Declarant of the Fountainhead Corporate Park Association, along with a minor general plan amendment and a rezoning case through the City of Tempe.

The mid-rise product design was creatively forged to deliver a high-end multifamily living experience at a lower price point, using surface as opposed to structured parking. Moreover, the lower land basis combined with the cost effective mid-rise design resulted in a much lower all-in cost basis per unit. This design approach enabled the Project to compete very favorably with many other higher density structured parking projects with significantly greater all-in costs per unit, setting the table for higher risk-adjusted returns for Tilton Development and its partners.

Outcome: In June of 2016, Tilton Development and its partners Goodman Real Estate and The Carlyle Group sold the Project for a substantial return on their investment.