125 acres, valued at $68.5 mil, to go on block again
Arizona Business Gazette
May. 10, 2007 12:00 AM
It wasn’t the first time the Arizona State Land Department held a silent auction, so to speak, in which none of the bidders offered a single dime for prime commercial land.
But State Land Commissioner Mark Winkleman still looked disappointed two weeks ago when developers took a pass on 125 acres of state trust land in the Scottsdale Airpark northeast of Loop 101 and Bell Road.
The land, valued at $68.5 million, or $549,000 per acre, is well-suited for multistory office buildings along Loop 101 in an area that has seen an office-building boom for the past five years.
So what happened?
“I don’t know,” Winkleman said as developers filed out of the Land Department’s basement bidding room.
The price was high, but the land commissioner said he thinks the problem may have been the size of the parcel and the complexity of getting it developed.
Scottsdale Airpark commercial Realtor Jim Keeley agreed.
“Ultimately, you would build about 2 million square feet, and that is a lot of office space to commit to one (developer),” said Keeley, founding partner of Colliers Classic Commercial Real Estate.
Plus, the office market, which has been good for about five years, could face a slowdown in the next few years, he said. Going once, going twice . . . Opus West, one of five registered bidders, said it liked the location but decided against bidding after weighing what it would take to get the necessary approvals to develop the site.
Other developers were not talking.
Only two groups, Scottsdale Pima LLC and Desert Troon Cos., showed up with the $2.8 million deposit check required for bidders.
“Occasionally, developers need more time, so our staff will continue working with those interested bidders and plan for the sale to take place next month,” Winkleman said, adding that a split of the land is an option.
A rescheduled auction will be held at 11 a.m. May 24 at the Land Department, 1616 W. Adams St.
The department still has high hopes for this parcel, which could generate a record $1 billion in revenue over the 99-year lease. That includes about $800 million in lease payments plus a percentage of revenue the project would generate, Winkleman said.
The sale or lease of state trust land goes to support Arizona schools and other state agencies.
Winkleman also noted that developers initially passed on bidding for state trust land in Deer Valley last year.
But in October, at a second auction, a Las Vegas developer agreed to pay $216 million for a long-term lease of 74 acres at Seventh Avenue and Rose Garden Lane.
Other state land auctions in the past year for residential development were initially rebuffed as well.Northern site up for bids The land commissioner said the department plans to go ahead with an auction this year of up to 1,700 acres of state trust land in north Scottsdale.
Tempe-based SunCor Development Co. applied last year to acquire the trust land that stretches northeast from Scottsdale and Happy Valley roads to east of Pima Road at Dixileta Drive.
SunCor is studying suitable uses for the land, which is zoned for low-density housing and has washes and power lines cutting across it.
Winkleman angered Scottsdale officials, who expected that the land would not be put up for auction for several years.
The city wants the land for its vast McDowell Sonoran Preserve.
Scottsdale will have to compete with the private sector for the trust land when it goes to auction in November or December, Winkleman said.
Andrew Holm – The Holm Group