Scottsdale-based El Dorado Holdings Inc. has plopped down $82.7 million for 4,150 acres of vacant land at a time when the economy has caused land deals to come to a screeching halt.
Plans call for developing a master-planned community that will include 12,000 homes as well as commercial space, including industrial and retail, on the site that’s an hour’s drive southeast of Phoenix.
Currently called Merrill Ranch, the project represents between $600 million and $700 million in infrastructure costs and $3.6 billion in home sales, said Jim Kenny, a partner with El Dorado Holdings.
The two parcels are within the town of Florence, near growing employment hubs in the area, including Procter & Gamble’s manufacturing plant and Nikola’s factory in Coolidge as well as Lucid Group Inc.’s (Nasdaq: LCID) campus and Taiwan Semiconductor Manufacturing Co.’s semiconductor suppliers in Casa Grande.
The proximity to Phoenix-Mesa-Gateway Airport in Mesa and its growing employment hub also was a reason this area appealed to Mike Ingram, founder of El Dorado Holdings.
“It’s a perfect timing for a major new master plan,” Ingram said.
Florence seen as growing employment hub
As the Valley continues to mature, it’s starting to develop potential employment centers outside of Phoenix, said Chris Grogan, a partner at El Dorado.
“A lot of longtime Arizona people still wonder who would live that far from Phoenix, but if you’re working at one of Phoenix-Mesa Gateway Airport’s new industrial campuses, it’s seven minutes away and you may not be that interested in where downtown Phoenix is,” Grogan said.
The proposed North-South Corridor would run through the property, providing quick transportation to major employment hubs. The North-South Corridor spans more than 50 miles between U.S. 60 in Apache Junction and Interstate 10 in Eloy, passing through Coolidge and Florence, according to the Arizona Department of Transportation.
Even without the proposed North-South Corridor, it’s a 10 to 15-minute drive on State Route 287 between Merrill Ranch and Phoenix-based Nikola’s manufacturing plant in Coolidge.
The acquisition of this property comes at a time when El Dorado’s other master-planned communities in the southeast submarket are either sold out or well underway.
“This is the next opportunity as you continue down the corridor,” Grogan said.
Bella Vista Farms and Arizona Farms each have about 1,000 acres left for development, Kenny said, adding to the 4,000 acres of Merrill Ranch in that southeast submarket.
“We would like to think that El Dorado, while we don’t have a monopoly on that market, we can become a steady, reliable provider of choice for lots to builders,” Kenny said. “They can have a one-stop shop here and can pick up a number of different locations that are in the same area but wouldn’t be in direct competition with each other. We hope to make their lives a little bit easy.”
It will be three or four years before the first homeowner moves into the community, Ingram said.
“We’re starting right now on the planning, meeting with the city and others in the area,” Kenny said. “We’re probably a couple years from being ready to put a shovel in the ground.”
Construction timeline depends on how economy fares in 2023
The time frame for construction also will depend on how soon the market bounces back.
“We met with a major homebuilder today,” Kenny said. “They felt that by the end of the second quarter there should be some clarity on where interest rates and costs will be. Hopefully they’ll be able to start moving toward purchasing lots again. We’ll be ready in two years to go and we’re confident the market will be there at that time for us.”
Ingram said he really wasn’t planning on buying more land to develop another master-planned community. He figured he would be focused on the company’s growing build-to-rent division until this opportunity came up.
“In the past, we’ve had past mayors approach me wondering when we were going to ever build a development in Florence,” Ingram said. “We finally found something that fit our business plan.”
The land is adjacent to PulteGroup Inc.’s (NYSE: PHM) Anthem at Merrill Ranch, which has closed on 3,750 homes and has another 4,300 lots left, according to a Pulte spokeswoman.
It took the better part of 2022 to get the deal done, said Chris Grogan, a partner with El Dorado Holdings.
Much of that time was spent in due diligence, working with the city on water issues and others, including discussions with Pulte to share infrastructure costs, Ingram said.
“Pulte now has somebody they can do some cost sharing with on infrastructure, like roads, sewer, water, things like that,” Kenny said.
The area already has a hospital, retail, and school district, Kenny said.
“Sometimes when it feels like you’re this far away from downtown Phoenix, you get out there and realize it already has its own downtown,” Kenny said.
Nearby land not likely to come to market soon
Sold by Southwest Value Partners and New York-based GTIS, the deal was negotiated by the Nathan & Associates Inc. team of Nate Nathan, David Mullard and Casey Christensen, representing both buyer and sellers in the deal.
“New employment is exploding along State Route 24,” said Nate Nathan, president and designated broker for the Scottsdale-based land brokerage.
Plus, he said, most of the land in that area is controlled by the Arizona State Land Department.
“None of that is coming on the market anytime soon,” said Nathan, who also negotiated the $600 million sale of 37,000 acres in Buckeye to The Howard Hughes Corp. (NYSE: HHC) in October 2021.
The town of Florence will provide water and sewer services to Merrill Ranch, at a time when nearby areas are having trouble accessing water.
While the name of the community is currently Merrill Ranch, Grogan said it’s too early to determine if they will change the name.
The community originally was being planned by Harrison Merrill, an Atlanta billionaire who secured a $100 million loan in 2007 for Merrill Ranch from a syndicate of more than 60 lenders, led by Peoples Bank in Winder, Georgia.
When the Great Recession hit, People’s Bank’s loan syndicate had foreclosed on Merrill Ranch, according to reports.
Later, Southwest Value Partners and New York-based GTIS bought the parcel out of foreclosure.
Article originally posted: