Inside Tucson Business reports: (note: this article went to press before announcement of HB2035)

The impending end of pay day loans in Arizona won’t mean the end of merchants such as Speedy Cash and PayDay Max. To stay in business, money store operators say they will be adjusting their services to meet the letter of the law and the financial needs of their customers.

Arizona’s law allowing payday loans is due to expire June 30 and efforts to extend the law — at the polls in November 2008 and twice in this year’s session of the Legislature — have failed to change that so as of July 1, Arizona will join 15 other states where laws prohibit payday lending.

In the Tucson region there are about 100 payday loan outlets, per YellowPages.com. Although some consolidation is expected after the law goes away, commercial real estate brokers say they aren’t expecting to see an exodus or large-scale dumping of buildings onto an already-stressed market.

Brokers representing the lending companies or properties with payday lenders as tenants say they’ve been told that most plan to keep their locations but change their business model.

“They are re-adapting to stay in business,” said Greg Furrier, a partner in Picor Commercial Real Estate Services.  “Some will survive and some won’t, but we won’t see a mass vacating of buildings. And even if they all left, it wouldn’t impact the market much. Most spaces are only 1,000 square feet. You could stick them all under the roof of Wal-Mart.”

Payday lenders provide short-term loans, typically secured with a postdated check tied to the borrower’s next payday.  For example, the borrower writes a $300 check, dated two weeks in the future, and receives $255 cash. The lender then cashes the check on the day it is dated, keeping the $45 difference as a fee and/or interest for the loan.

Despite the failure to extend Arizona’s law, payday lenders who were contacted said they intend to stay in business by offering other services, such as payroll check cashing, direct deposit, other loans, prepaid debit and phone cards, money orders and transfers, fax and copy services, pawn, and/or lottery ticket sales. None of those contacted disclosed specific plans.

One clerk, who didn’t want his name used, said payday loans account for about half of his store’s revenues.

Hank Amos, president of Tucson Realty & Trust, believes the few buildings that will be vacated shouldn’t suppress values.

“Prices have taken such a beating already, I don’t see a huge play there,” he said. “Many of those properties are desirable, high visibility. That would create opportunities for others to pick up a nice location.”

Tim Prouty, managing director of CB Richard Ellis Tucson, said any vacancies will be easier to absorb because the buildings are small and spread out.

“The impact will be negligible on the market overall. Many of these buildings are on free-standing pads which are more attractive to replacement tenants,” he said.

Although there isn’t a lot of “swooping” right now, the loss of any tenant in this economy “is painful for a landlord. Some small property owners may be put into hardship.” said Don Ahee, operations manager at CB Richard Ellis.

“Although most have long-term leases, what’s interesting is what they negotiated. In the event their industry is deemed unlawful, some have a clause that releases them without penalty,” said Andy Seleznov, leasing director for Larsen Baker. “We own all our properties, any increase in vacancies would be devastating.”

If money stores locations close, landlords will be hard pressed to replace the high rents they were getting. Furrier and other brokers said many quick-cash companies pay as much as double the market rate.

“Most payday loan operations took premium locations and paid good prices for that positioning. Great real estate is always in demand,” explained Nancy McClure, firest vice president at CB Richard Ellis.

She added that “a lot” of pawn shops, restaurants and “quality retailers” are looking for these types of sites and may pick up the best vacancies.

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

Copyright © 2010 Inside Tucson Business

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