National homebuilder outbid in back-to-back West Valley land auctions

Price war erupts as buyers look to scoop up prime land in Peoria

By Audrey Jensen

It just wasn't Lennar Corp.'s day.

The homebuilder fell short in back-to-back bidding wars at two state land auctions on Feb. 19 for prime acreage in the fast-growing city of Peoria.

The first property up for bid Wednesday was 72 acres surrounding Lake Pleasant Crossing, at the northeast corner of Lake Pleasant Parkway and Happy Valley Road.

After 56 bids between Lennar and K. Hovnanian (NYSE: HOV), the latter won the auction for $30.6 million, which was $5.6 million more than the starting bid.

The New Jersey-based builder has been eyeing the parcel for the better part of the past decade, said Michael Fulmer, division president for K. Hovnanian in Phoenix.

"The stars just aligned to finally get it done," he said. "We're really focused on the move-up market and we felt this piece of property really fit our strategy, we like the city of Peoria."

Currently the property is designated for traditional residential on the eastern portion of the site and for mixed-use commercial on the west portion in the city of Peoria's general plan.

The flurry of bids in both auctions show how the competition is heating up for state land parcels being auctioned off in the northwest Valley, where TSMC, Amkor and more are building multibillion-dollar employment centers.

Builder bullish on Peoria

Michael Lieb, president of Michael A. Lieb Ltd., who represented K. Hovnanian in the auction, said Peoria is attracting a lot of luxury development.

"The demographics of this intersection in Peoria are some of the highest demographics, income levels, housing prices, in the entire West Valley," said Lieb, who has recently won state land auctions in north Phoenix around the Mayo Clinic.

The next steps will be to rezone the property to set it up for development but the homebuilder has only had preliminary conversations with the city about how the property will be built out.

K. Hovnanian's Fulmer said the plan is to start the next steps "right away" is it works to determine specifics for the commercial side of development.

Alan Jones, president of Lennar's Arizona division, said it's a great location and that they really liked the property, but they could only bid up to an amount that was pre-approved.

"They were just willing to pay more," Jones told the Business Journal.

Lennar (NYSE: LEN) had planned to partner with Scottsdale-based Diversified Partners for the commercial component before it was outbid for the land. Lennar was represented by Nathan & Associates Inc.

Commercial firm wants in on property plans

Phoenix-based Capital Asset Management LLC (CAM) was the firm that had initially applied for the auction with the state.

The commercial developer and manager had been working on due diligence for the property for the past three years and had planned to partner on the project with another homebuilder.

But after learning about other interests in the property, that homebuilder ultimately backed out.

"Because my girlfriend left me at the altar, I've had to go and find a different suitor," said Jason Hersker, an executive vice president for CAM.

He said they were thrilled that K. Hovnanian ultimately won the auction despite the change in plans.

"It was expressed to us early on when we had discussions with [K. Hovnanian] that they were going to win this auction and they came out and did exactly that," he said.

Moving forward, Hersker said they are interested in partnering with the homebuilder on developing the commercial portion of the site and are having active discussions about the potential opportunity.

"We have the most information and knowledge on this site," he said.

CAM has so far submitted pre-applications to the city of Peoria to discuss early concepts for the site that could see 200,000 square feet of commercial space including retail, restaurants and more.

Lennar loses to D.R. Horton in second auction

About an hour after losing that first auction, homebuilder Lennar lost out on buying up another 200 acres in Peoria.

"We're building in this immediate area and having good success so just looking for additional opportunities here," Lennar's Jones said.

D.R. Horton showed up to the auction and outbid Lennar with a winning bid of $33.4 million, about $7.4 million higher than the starting figure.

The two builders placed a total of 74 bids before Lennar backed off.

The land is located close to the the multibillion-dollar Amkor Technology Inc. project in Peoria and the sprawling Taiwan Semiconductor Manufacturing Co. project in north Phoenix.

Patrick Brown, vice president of operations for D.R. Horton's Phoenix West division, placed the winning bid for the company at the auction. He said that Peoria has been a "strong market" for their company.

"The site is well located for potential homebuyers due to its easy access to Loop 303 and proximity to shopping and employment," he said in a statement.

Although the number of homes that could be built on the site has yet to be determined, D.R. Horton said it plans to immediately start processing entitlements.

Nate Nathan, president of Nathan & Associates, which represented D.R. Horton, said the property is very valuable because it has water and is close to the Loop 303 corridor.

"Everything south of the corridor other than a few state land pieces is sold out," he said.

Although Lennar missed out on Wednesday, Jones said they enjoy working with the state land department and look forward to doing more deals with them.

They've had success at previous state land auctions, including nearly 300 acres it's partnering with Shea Homes and Toll Brothers Inc. to build 700 homes on.

Lennar is also developing 250 home sites within the 5,300-acre Saddleback masterplanned community north of NorthPointe at Vistancia and plans to build more than 700 homes near TSMC.

Final Thoughts:

As Arizona continues to emerge as a prime destination for high-tech industries and master-planned communities, land auctions like these highlight the intense demand for development opportunities in the West Valley. With major employers like TSMC and Amkor investing billions, Peoria is quickly becoming a hotbed for job growth, infrastructure expansion, and premium housing developments. For out-of-state buyers considering a move, the region’s rapid transformation presents a unique chance to settle in a thriving community before prices soar. Whether you're looking for a luxury home or a convenient commute to Arizona’s booming tech corridor, Peoria’s growth story is just getting started.