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Auction of Arizona-controlled land includes unusual bidding rules
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Auction of Arizona-controlled land includes unusual bidding rules

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In what appears to be the first-of-a-kind auction, the state Land Department will be taking bids only from those with very deep pockets, experience building a planned community and other requirements.

PHOENIX — More than 4 square miles of state land in Apache Junction will be auctioned off in October for what might seem like bargain-basement prices.

But odds are you won’t be able to bid on it even if you have the $68 million minimum bid price — or at least the 10% down with 25 years to pay it off.

In what appears to be the first-of-its-kind auction, the Arizona Land Department will be taking bids only from those with unrestricted cash or equivalents of at least $40 million, have a net worth of not less than $400 million and have “relevant experience” in developing a planned community of at least 1,000 acres and at least 2,000 residential units.

The minimum bid price in the range of $25,000 an acre is not giving anything away, said top officials at the Arizona Land Department. Nor is it aimed at giving Brookfield Residential, the developer who made the request for the auction for the 2,783-acre parcel just inside Pinal County and adjacent to existing development, a leg up over others, they say.

Instead, state Land Commissioner Lisa Atkins says this unique arrangement is designed to maximize the revenue for Arizona, at least over the long haul, even if the up-front price tag is less than $25,000 an acre.

Some of it, Atkins said, is ensuring that whoever makes the successful bid actually can complete the project. There has been a history of buyers acquiring state land but defaulting when the plans fall through, Atkins said.

It’s even more complex than that, says Wesley Mehl, the agency’s special projects coordinator.

The deal requires whoever is the successful bidder to install all the infrastructure improvements — water, utilities and roads — not just on the parcel bought but on the entire 8,200 acres the state owns at the site. That, in turn, will make those adjacent properties more valuable when the state puts that up for sale, perhaps in the neighborhood of $250,000 an acre.

Mehl balked at describing the deal as a loss leader.

“It’s not a loss,” he said.

“We will make substantial revenue in this deal directly,” Mehl said of the $68 million minimum bid. “But then we will make better revenue on the adjacent land because of this deal.”

Jim Perry, the deputy state land commissioner, called it “an accounting thing.”

He said if those other parcels sell for $250,000 an acre, some of that likely should be attributed to this deal which installed all that infrastructure making the adjacent land more valuable.

There’s more.

The deal contains a kind of profit-sharing arrangement: When the developer sells off parcels to individual builders, the state gets 50% of the profits.

All totaled, Mehl said, the state could end up reaping about $150,000 an acre “depending on market conditions.” And that, Mehl said, doesn’t count the increased value of the remaining state land.

And Perry said even the financing works to the state’s benefit, with the developer given 25 years to pay off the balance — at 7% interest.

What the agency is hoping for is a planned community like DC Ranch in Scottsdale or, closer to home, the Eastmark development that Brookfield has put together west of the land involved here.

Mehl said the parcel might have been worth more had Mesa, along the western border on Meridian Road, agreed to annex it.

There already is a development on that side of the street. And that would have ensured there were services available.

But Mesa, he said, showed no interest. So that left the state coming up with a plan to have all of the land — what’s being sold and what’s being held back — annexed into Apache Junction.

Mehl said that $68 million appraisal, which is the minimum bid price, reflects all the conditions that the ultimate buyer has to fulfill, including the infrastructure to the adjacent state land.

Although Brookfield is the entity that requested the land be put up for auction, Perry said that does not guarantee that the company will get it — or that it will go for the minimum.

“We have another master planned community developer who’s displayed significant interest,” he said. “We believe they may bid.”

Two others, Perry said, also have displayed what he called significant interest.

“And there may be others,” he said.

All this comes amid concerns of the lack of affordable housing, particularly for first-time homebuyers. But Atkins said that is not a concern of her agency in auctioning off this parcel and the conditions attached to it. In fact, she said, it legally cannot be taken into consideration.

“Our responsibility is best and highest use of the portfolio assets, whether it’s land, water, minerals, whatever it is,” she said. Atkins said all that is left to the market.

But there is at least an indirect role for the agency, which controls 9.2 million acres. And that, said Mehl, requires the department to serve demand where it exists.

“Given the amount of land that the Land Department owns, you could influence prices if you fail to sell enough land, or if you sell too much land,” he said. “We’re trying to hit the right velocity and sell when there is quality demand for a parcel.”

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