AZ state land sales are up this year. A peek inside how these auctions work
Demand is up for Arizona's state land. The Arizona State Land Department is projecting more than $300 million in land sales for the next fiscal year. That’s up from last year by a good chunk and it’s adding up to thousands of acres of sales.
Angela Gonzales is a reporter for the Phoenix Business Journal and she’s joined The Show to tell us more.
LAUREN GILGER: So first explain a little bit about how this works. like how does the state sell off this land?
ANGELA GONZALES: OK. There's two ways. One an applicant can say, "hey, we're interested in that parcel. We know it's state land, we know you're in charge of it. Can we bid on it? We'd like for you to create an auction for it." And so that's that developer or company will go out and they have to pay for all of the you know, the studies beforehand and they submit that to the state land. So they, they invest a lot of money before they even get a chance to bid on it. That's one way. Another way is the state Land Department will say, "hmm, we think this parcel of land will do really well. We think it's ready for development and they will actually put it out for bid and then see who comes to the table."
GILGER: And these are parcels of land sort of all over the state in the city and out of the city or, or mostly out of the city?
GONZALES: It's all over Arizona. I think there's like 9.2 million acres across Arizona that they're responsible for that. But in around the Valley though, there's far less than that ...
GILGER: ... and it's getting eaten up pretty quickly.
GONZALES: 145,000 acres are in the Phoenix metro area. and so most of that state land is the out outer outskirts of the Valley, surrounding the Valley. There are some infill pockets with actually that are within a city, and those are pretty popular too because they already zoned.
GILGER: That was like infill land. So when we say demand is up by how much, what, what did it look like last year, For example?
GONZALES: OK, So last year, for fiscal 2023 that ended in June, $292.1 million were sold and that was ... 5,000 acres. And that's so for this year, they're expecting to sell $300 million for the end to, you know, the end in 2024.
GILGER: So it's really spiking. Tell us a little bit about what drives this like. It sounds like housing is a lot of it. So when we need demand for housing, we're seeing these kind of sales go up. Is that what happens?
GONZALES: Yes, housing. the home builders are very interested in state land because we're running out of land to build on, and people are moving here so rapidly that they just need to find other places to build. And so they're applying for these permits to go ahead and bid on that state land all around the outskirts of the Valley.
GILGER: And so much so that you, you wrote, we've even seen bidding wars between home builders, right?
GONZALES: Those bidding wars have been so fun. Yeah, that's been crazy. I remember back in November 2020 when there was a, a bidding war with Brookfield, which is a big public home builder and some other home builders. And it was, it was insane. Within 15 minutes, That bid started at $68 million and it went all the way up to $245.5 million within 15 minutes. And so usually the bidding increments is only $100,000. so you have to go up by $100,000, you know, when you're competing, sometimes they went up as high as $5 million increments, like boom. They were just really serious about that.
GILGER: These are big chunks of money, OK? And and this is, of course, the same pot of money we just talked about with Howie Fisher that state lawmakers want to use again for Prop. 123. So break that down for us. Where does most of this money go right now?
GONZALES: Right now, 90 2% of the money goes to education. So you have your K-12, your universities and there's also the Arizona School for the Deaf and Blind. So that's the majority of it goes there to education. Now we have some money going to the state hospital, the state prisons and then there's the Arizona pioneers home as well, where the money goes to as well.
GILGER: OK, tell us a little bit about some of the big projects that we probably have all heard of that are on state land in the past and the state land sort of made possible.
GONZALES: Oh, yeah, for sure. Nationwide, They're building a huge commercial project up there on along the 101 in north Scottsdale. That's a big commercial project for me because I cover health care and residential real estate. I'm focusing on those more. So I just wanted to tell you about another fun bidding war that happened recently with with Banner Health. So this was the example where Banner Health actually filed an application they were interested in 48 acres and that's at the northeast corner of Loop 101 in Hayden Road. So they're interested in that land. They spent a million dollars on getting all of that ready. All the feasibility studies, they had already talked to the Scottsdale City Council about getting that zoned. They were really spending a lot of money on getting that ready. And so when I went to the, the, the bid, the actual auction date, downtown at the state Land Department, I was just thinking, you know, they would, you know, put their paddle up and they get that minimum bid, which was, I think, $56 million, $56.9 million. And I just figured it'd be that and I get a chance to talk to them about their project. But boy, I was surprised it was standing room only, and I didn't even know there was going to be somebody bidding against them. And then pretty soon those paddles were going up, you know, this one, that one, this one and that one and it was crazy. It was just like the $100,000 increment that has to go up. It was going up by $2 million. And I mean, it was done, and the winning bidder was $84 million, starting at $56.9 million. And it was Honor Health, which, that's their territory, that's their turf. Scottsdale is their turf and they're like, "not in my backyard. You're not going to bid here." So they won that land, and Banner's like, "that's all right. We have we have other options and they just went across the street" and now they're building a $400 million campus across the street.
GILGER: That is the Phoenix Business Journal's Angela Gonzalez, giving us a peek into how the auctions work for state land. Angela, Thank you so much for coming in. Appreciate it.
GONZALES: Yes, Thank you.