In an eye-opening example of how far land prices have fallen in the Arizona area since the market peak, a 10,200-acre tract of land near Maricopa recently sold for roughly eight cents on the dollar.

The land, in the city of Goodyear, southwest of Phoenix, was bought in 2006 by a group of investors, including the California Public Employees Retirement System (CalPERS), for $400 million. It sold at the end of May for $32.5 million.

“It [the 2006 purchase] couldn’t have been timed any worse. No one knew the market could turn off overnight,” said James Pickett of The Benjamin Group, whose business partner, Bill Olsen, represented the sellers in the 2006 transaction and the buyers in the most recent one.

The joint venture put down $150 million on the land and took out two loans totaling $250 million to finance the purchase and development.

Under its ownership, the CalPERS group had the land, named Amaranth, annexed into Goodyear and entitled for 42,000 homes, 1,600 acres of commercial development, and 700 acres of industrial development before defaulting on the two loans, sending the land into foreclosure.

After the foreclosure in 2009, the parcel ended up in the hands of The Archon Group, a subsidiary of Goldman Sachs & Co., one of the lenders. Nate Nathan, president of Nathan and Associates in Scottsdale, Ariz., marketed the property to buyers who might be interested in it as a solar power generating farm or for its water rights, said Nathan. There was no thought that there would be any home developer or builder interested in more than 10,000 acres of raw land in that area anymore, despite the “incredible” entitlements that the land bears, he said.

The current purchasers, a holding company for ARCUS Private Capital Solutions in Gilbert, Ariz., and a company backed by a Houston-based funeral and cemetery company, don’t plan on putting homes on the land any time soon, reported Business Real Estate Weekly of Arizona. However, the new owners say they will continue with the entitlement process and are planning for future development.

“They are going to hold it long-term, maybe 10 years down the road,” said Pickett.

At a land cost of roughly $3,000 an acre, versus the nearly $40,000 an acre paid five years ago, the numbers might eventually work if demand returns to outlying areas in Arizona, Pickett said.

Pickett said Olsen's family owned a small portion of the Amaranth land, and in 2003 or 2004 Olsen initially started to get the land permitted for a landfill. However, at the same time nearby Maricopa County was starting to grow exponentially, so Olsen decided it might make more sense to try to buy more land in the area to create a parcel big enough for a large community of homes.

Olsen and his partners worked for two and a half years to buy thousands of parcels of land, combining them into what became Amaranth, Olsen said. Harry Elliott, president of Elliot homes in Sacramento, Calif., provided capital for the purchases.

By 2006 the land had been assembled and was sold to the joint venture that included MacFarlane/Weyerhaeuser Housing Partners (MWHP) and Montage Holdings in Scottsdale, which managed the property. CalPERS was the primary financial partner in MWHP, with Weyerhaeuser Housing, a subsidiary of Weyerhaeuser Co., also contributing.

During the foreclosure proceedings it took several hours to read through the legal descriptions of all 2,000-plus parcels, said Pickett.

Teresa Burney is a senior editor for Builder magazine.

Learn more about markets featured in this article: Phoenix, AZ.