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COVER STORY, JULY 2005
LOOKING OUT FOR THE LITTLE GUYS
Mammoth Equities’ small-tenant focus produces big results.
Brian A. Lee
Companies that pay attention to the small details usually come up big in commercial real estate. For Mammoth Equities, a developer, buyer and manager of office and industrial properties from California to Texas, it’s more than just a credo. It’s the core of a very successful business approach.
“Our focus has always been that the underpinning of American business really is the small business owner, the small tenant,” says Tucker Lewis, vice chairman and chief operating officer of the Mission Viejo, California-based company. “It’s really where the strength of our country and our economy is. It’s where we focus.”
By the end of the summer, Mammoth Equities will own and manage more than 5 million square feet of property. Approximately two-thirds of the portfolio is office space. All of it caters to the small tenant. Where other owner-operator firms shy away, citing the lack of a credit tenant or the management-intensive work, Mammoth Equities provides a valued service.
“We don’t look at buying a big industrial project with one big industrial tenant or an office building with one credit tenant,” says Lewis. “We’re really like an apartment management company that turned into a commercial management firm. We focus on customer service. Our big game is keeping our small tenants happy so that they don’t leave when their lease comes up. [We treat] every tenant as a month-to-month tenant, even if they’ve got a 10-year lease.”
Despite lower yields at times, Mammoth Equities remains committed to buying and developing well-located office and industrial assets in high-growth, high-income markets such as Scottsdale, Arizona; Henderson, Nevada; and Houston. The benefit of this approach becomes obvious upon lease-up of the properties. The company prefers to purchase buildings where the largest tenant takes up no more than 15 percent of the space. In the company’s developments, the average tenant size is 1,100 to 1,200 square feet.
“Regarding our development deals, we fill in a niche very well,” says Matt Pipkin, senior vice president and Mammoth Equities’ director of acquisitions. “With our model, we can go into a master-planned community that already has an office developer. Our largest tenant, usually around 2,500 square feet, typically competes with their smallest tenant. Many developers don’t prefer tenancies below 2,500 square feet, so we fill a critical void and don’t really compete with other developers in master-planned communities.”
In Scottsdale last fall, Mammoth Equities completed the 77,000-square-foot Mammoth Professional Building-Scottsdale East within the Greater Scottsdale Airpark business center, which has direct visibility from the 101 Loop. By June 1, 2005, the property was 90 percent occupied with approximately 55 tenants. “Typically, wherever we develop, we experience that type of lease-up because very few developers cater to that size tenancy,” says Pipkin. “It’s too management intensive [for them]. It’s advantageous for us because we understand the model and we understand the tenants. We also find that the tenants we get are loyal to us because they’ve been turned down by other people.”
Last month, Mammoth purchased a 70,000-square-foot building, also in Scottsdale, and recently closed on a 160,000-square-foot industrial park in Las Vegas called Mammoth Airport Business Center. The company has 106,000 square feet of office space under development in San Juan Capistrano, California; 90,000 square feet in Temecula, California; and a 60,000-square-foot building underway in Henderson, Nevada. Development of an 80,000-square-foot building in Arrowhead Ranch in Phoenix will commence shortly.
Founded in 1996 by Bob Wish but based on more than 30 years of real estate investment and development experience, Mammoth Equities has grown from two to about 60 employees in the last 8 years. The company is made up of four groups — development, property management, capital and construction. Mammoth has fully integrated development services, and, according to Lewis, the company develops one property for every three it acquires. Mammoth looks to acquire office and industrial properties exceeding $8 million with last year’s biggest purchase totaling $60 million. Pipkin reports that the company did about $250 million last year alone in tenant-in-common (TIC) acquisitions, adding that Mammoth’s development background and ability to close such deals first with internal capital helps to separate it from the competition.
Mammoth’s versatility and breadth of expertise will certainly help it reach its goal of becoming a primary provider of small-tenant office and business space from California to Florida. Those things will also help the company surmount industry obstacles, and there are many. Patience is key when facing challenges like increasing construction costs and finding the right assets in a market overflowing with 1031-exchange capital. “The good news is that we typically slide in under the radar because our product model is so much different than people really want to deal with,” says Pipkin.
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