Newland Communities late Monday confirmed the purchase of roughly 3,000 acres of land in the metro Phoenix-area planned community of Estrella. The company says the sale reflects its ongoing commitment to expand in the development, which is located in the city of Goodyear.
The acquisition price for the property was $51.3 million, or $17,000 per acre. The price represents a new floor for the area, which had been fetching $21,000 to $23,000 per acre.
"At $17,000 an acre, that's barely above agricultural prices for the area," said John Fioramonti, senior managing director of Meyers Builder Advisors, who is familiar with pricing in the area.
In May of 2005, at the top of the market, Newland struck what was considered one of the biggest land deals in the history of the state when it structured a five-year take down arrangement for more than 18,000 acres.
Local businessmen Bill Pope and Arte Moreno were principals of the selling entity, Sun MP, LLC in a deal brokered by Greg Vogel at Land Advisors. The first transaction included 3,750 acres. At the time, no details on the purchase price were released, but later the Phoenix Business Journal reported that Maricopa County court documents showed a sales price of $250 million, or roughly $67,000 per acre.
The following year, Newland took down another 2,700 acres and in June of 2007, added an additional 2,800 acres to its owned portfolio. By this time however, the shift in the market had reduced the purchase price to $62 million, or roughly $22,000 per acre.
This past year, the Phoenix market has seen an influx of foreign money, primarily Canadian, buying up large tracts of land in both the East and West Valley. Given the intense level of interest from buyers representing hundreds of millions of dollars, Fioramonti speculated that it's likely the Estrella land owners likely had back-up offers to consider in case Newland and Sun MP couldn't come to re-negotiated terms and the developer decided to opt out. "I wouldn't be surprised, and chances are they were more in the $20,000 per acre range," he said.
Newland now owns about 12,500 acres in Estrella. Of those, approximately 5,000 acres are currently developed.
The land use plan for Estrella calls for approximately 50,000 homes, about 1,600 acres of commercial and a build-out of approximately 25 years (about 2033). The company declined to comment on the undewriting of the deal, but was candid about why it is spending money on land today. "At the values we acquired this land, and given its strategic importance, it makes all the sense in the world," said Greg Bielli, president of Newland's Western Region. "You have to look at this long-term. A project of this size and scope is likely to go through a couple of downturns."
Estrella is considered by many in the market to be a premier location in the metro's West Valley, about 17 miles from downtown Phoenix. The secluded setting provides a lakeside mountain oasis nestled in the Sierra Estrella Mountains in the Sonoran Desert Valley. Some of the big builders active in the development include Ashton Woods, TW Lewis, William Lyon Homes, and Morrison Homes.
A persistent problem has been a lack of commercial development to support the existing and planned rooftops. Of late, Newland has focused on the retail, commercial and other property critical to job formation in Estrella.
Late last year Newland formed a partnership with Kitchell Development to build a specialty retail center set to open in 2009. And earlier this year, Newland sold off more than 35 acres of commercial property in Estrella to the Peoria-based Bade Cos., which plans to develop amenities, including restaurants and shopping, on the parcels.
"This is a long-term land acquisition as we plan to develop Estrella for the next approximate 25 years," said Robert McLeod, Newland chairman and CEO. "For the long-term, the Phoenix market is forecasted to continue with strong population and job growth. Our confidence and commitment to residential and commercial development in Phoenix is demonstrated by this acquisition."
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