SunCor Development Co. is seeking an investor to buy five of its residential building operations in four states.
The large master-planned communities in Boise, Idaho; Washington, Utah; Santa Fe, N.M.; and Prescott and Prescott Valley, Ariz., are already well established with amenities and infrastructure and are either a third to a half complete. SunCor is the captive builder in all of them, says SunCor president and CEO Steve Betts.
He thinks it is most likely that an investor would buy SunCor's development rights in the communities, then leave the existing home building operations in place, taking the on-site employees with the deal.
"We think likely the purchaser is more of an investor than a home builder," said Betts.
Betts said the company is at the beginning of the sales process, qualifying bidders over the next month, selecting a stalking horse bidder later in the spring, and negotiating the deal over the summer. It is using Barclays to handle the deal.
"We will take the cash proceeds from that transaction to then pay off all our debts and put cash in pocket to be a leaner, meaner, more focused developer in Phoenix," he said.
SunCor is a highly diversified developer and builder. In addition to large master-planned communities, it develops mixed-use urban infill projects, does commercial development and construction, builds golf courses, and operates its own finance company.
"We've been doing all of this fairly well, but it is difficult and stretches your resources," said Betts.
SunCor's parent company is a utility holding company, Arizona Public Service, the state's larges electrical company, which is a subsidiary of Pinnacle West Capital.
"So my parent company is a utility holding company that is looking for managed earnings," said Betts. "Commercial development is a little more stable than residential home building is, even though we have been a very successful residential community home builder for over 10 years with 18 master-plan communities and built homes for more than 13,000 families."
So the company made the decision to concentrate its efforts on commercial development in Phoenix, where it is based and already owns 2,000 acres of commercial land. It has plans to buy more in the slumping market.
"We will be one of the largest commercial land holders and developers in Phoenix," he said.
In response to the question that it might be a tough time to sell residential land, Betts said the communities it is selling have bottomed and are on their way back to normal. And, as far as buying more commercial land in the clearly ailing Phoenix market, Betts said that market has a long-term potential for growth.