Arizona Land Sells for 8% of 2006 Purchase Price

By John Gittelsohn
Bloomberg
May 30, 2011
A 10,200-acre (4,100-hectare) desert site in Arizona sold for $32.5 million this week, five years after a group with investors including the California Public Employees’ Retirement System paid $400 million for the land.
Arcus Property Solutions LLC, a private-equity fund with about $100 million under management, paid cash for the property in Goodyear, about 60 miles (97 kilometers) southwest of Phoenix, said Kent Kleinman, a spokesman for the Gilbert, Arizona-based company. The site, now called Amaranth Land LLC, had been planned for a 42,000-home community by the Calpers- financed group when it was purchased in 2006.
The deal shows how property investors are taking advantage of a plunge in values after the real estate bubble burst in Arizona. A group of lenders, led by Goldman Sachs Group Inc., seized control of the Amaranth site in 2009 after the bust halted development, said Jeff Garrett, owner of Garrett Development Corp., the land’s manager after the foreclosure.
“Five, six years ago, people were spending $200 million or $300 million or $400 million,” Garrett said in a telephone interview. “This just sold for about eight cents on the dollar.”
The 2006 buyers were a joint venture of MW Housing Partners III LP, a real estate fund with money from Calpers and Weyerhaeuser Co.; and Scottsdale, Arizona-based Montage Land LLC, according to Arizona Corporation Commission records. The deal was funded by a $250.1 million loan and $150 million in cash, according to Terry McDonnell, publisher of Business Real Estate Weekly of Arizona in Scottsdale.
Speculative Deals
“Of all the speculative deals I’ve seen here, this was right at the top,” McDonnell said in a telephone interview. “It’s hard for me to think of a more speculative deal of this magnitude in Maricopa County.”
Calpers, the nation’s largest pension fund, had investments valued at $209.7 million in MW Housing Partners III in the fiscal year ended June 30, 2007, according to its annual report. The next year, the investment had a negative market value of $102.9 million, the fund said. MW Housing wasn’t listed as a Calpers investment in fiscal 2010, its most recent report.
Calpers doesn’t discuss individual real estate deals, said Wayne Davis, a spokesman for the Sacramento-based pension fund, which had $234.5 billion of assets as of May 24. Bruce Amundson, a spokesman for Federal Way, Washington-based Weyerhaeuser, said MW Housing invested the $150 million cash in the Amaranth purchase.
Newhall Ranch
In October 2009, Calpers severed ties with Macfarlane Partners LP, the San Francisco investment firm led by Victor Macfarlane that managed MW Housing Partners. MW Housing also led Calpers’ $970 million investment in Newhall Ranch, a master- planned community north of Los Angeles that filed for bankruptcy in 2008, wiping out Calpers’ stake.
Garth Wieger, a founding partner at Montage, the managing partner of the development, said he couldn’t comment because of a confidentiality agreement. Michael Duvally, a spokesman for Goldman Sachs in New York, declined to comment.
The listing agent for the Arizona property was Nathan & Associates Inc. in Scottsdale. The land is now used for cattle grazing with future revenue possible from selling its water rights or letting Goodyear expand a nearby landfill, said Kleinman of Arcus Property.
“This won’t be developed in my lifetime,” Kleinman, who gave his age as “mid-50s,” said in a telephone interview. “Our plan is basically buy and hold and resell after the market appreciates.”