Arizona state land auctions to generate more than $300M this fiscal year

Arizona state land auctions to generate more than $300M this fiscal year

Land Trust exec: 'We're offering financing on deals where we believe it will generate higher bidding'

By Angela Gonzales

The Arizona State Land Department is projecting more than $300 million in land sales for the fiscal year ending June 30, 2024.

That's up from $292.1 million in revenue generated during fiscal 2023 — across 13 transactions totaling 5,580.09 acres, according to the department.

Robyn Sahid, executive deputy commissioner of the state land trust, said she's seeing the highest demand for infill properties, especially those zoned and only requiring design review.

Currently, there are applications active at Vistancia in Peoria, Desert Ridge for retail and homebuilding as well as north Phoenix for commercial and homebuilding projects, she said.

"There is significant interest from homebuilders, but they are currently cautious due to current interest rates," she said.

As a result of that caution, the state is offering financing on deals it expects to generate significant bidding.

"Homebuilders in particular benefit from having non-recourse financing for their land acquisitions," Sahid said.

State land sales help the economy, she added, as the proceeds are invested into education, state prisons and the Arizona State Hospital.

"As state trust land is sold, it is added to the property tax rolls, increasing the taxable property base," Sahid said. "We work closely with the Arizona Commerce Authority, local jurisdictions, and the governor's office to help achieve various economic goals."

The department's land sales have helped spur major corporate development from companies such as TSMC, LG Energy and Nationwide, Sahid said — which in turn provide jobs and generate substantial tax revenue.

Big land purchases by Mayo Clinic, HonorHealth

For example, in December 2021, Mayo Clinic was the winning bidder in a state land public auction, paying $139 million for a 228-acre parcel next to its Phoenix hospital campus.

Less than two years later, on Oct. 18, Phoenix City Council unanimously adopted ordinances to move forward with Mayo's Discovery Oasis biotech corridor. That project is expected to add 2,000 new high-wage jobs and represents an estimated $250 million in capital investment.

"It's great to have an organization like the Arizona State Land Department that acts as good stewards of the land and tries to identify the highest and best use for those opportunities," said Aric Bopp, who was named executive director of Discovery Oasis in July. "The state land department has a wonderful track record of working with developers, private industry, nonprofits, etc., to utilize the land for the highest and best use for the residents of the state of Arizona."

Sometimes a state land auction garners even more revenue than expected.

An auction on Nov. 16, 2022, had set a minimum bid of $56.95 million for a 48-acre parcel at the northeast corner of Loop 101 and Hayden Road in north Scottsdale.

Phoenix-based Banner Health was the initial applicant that requested the auction. Many times, the applicant is the only bidder on the property and is able to secure the land at the minimum bid level.

Not this time. Scottsdale-based HonorHealth bid against Banner Health, ultimately winning the parcel for $84 million.

Bidding wars from homebuilders

State land also is popular with homebuilders, as large tracts of land in metro Phoenix become more scarce.

A separate bidding war was waged between homebuilders on Nov. 4, 2020 — ending with Arlington, Texas-based D.R. Horton Inc. (NYSE: DHI) paying $245.5 million for 2,783 acres in the far East Valley. By October 2021, Apache Junction City Council unanimously approved development of what originally was named Superstition Vistas, annexing the land for 10,000 new homes on the property.

Now, D.R. Horton is in the process of building 5,000 homes on that land at its master-planned community called Radiance at Superstition Vistas.

Meanwhile, Brookfield Residential is developing the other 1,400 acres next door at its master plan, called Blossom Rock at Superstition Vistas.

In August, Brookfield named the first homebuilders to build 554 homes in the first phase of development. Miami-based Lennar Corp. (NYSE: LEN), Houston-based David Weekley Homes, Atlanta-based PulteGroup Inc. (NYSE: PHM), and Nevada-based Tri Pointe Homes Inc. (NYSE: TPH) will be joining Brookfield as builders in the first phase.

Even dairy farmers have been known to get involved with the state land department. Now, efforts are underway for nearly 4,000 homes at Hawes Crossing, a master-planned community in Mesa, to be developed on land that once was a mixture of dairy farms and state land.

The state land department has about 9.2 million acres under its stewardship statewide, with 145,542 of those acres in metro Phoenix.

The Permanent Land Endowment Trust Fund has a market value of $7.87 billion, according to the Office of the State Treasurer of Arizona.

For a closer look at land transactions over the past 23 years, click on this interactive chart:

Sahid said it takes about 12 months from start to finish for an auction to occur.

"Many of the studies are performed by the applicant, so the timeline varies depending on the applicant," she said.

But not all developers are interested in bidding on state land.

Scottsdale-based Walton Global already owns 10,000 acres in Pinal County and about 400 acres in Buckeye.

"For us, our process is more methodical, raising capital from third-party investors," said Kate Kaminski, chief operating officer for Walton Global. "That process of going to auction, not knowing how much you're going to pay doesn't align with our business model."