"We paid too much, and now we need help!"
This time the cry isn’t from "bamboozled" subprime borrowers, but from developers who bid too much for state land purchases:
At least three developers who purchased land in northeast Phoenix’s Desert Ridge area when times were good are seeking relief from the terms of their purchase from the Arizona State Land Department.
The first, Meritage Homes, bought a 288-acre parcel between 56th and 64th streets for $92.2million in July 2005. It was reported in December that the company was attempting to change its payments, but no agreement has been reached.
The others seeking help:
• Gray Development Co., which recently missed an infrastructure payment on its 32-acre parcel at 56th Street and Loop 101 that it bought in May 2004 for $33.4million. The company got a 90-day extension last week.
• Toll Brothers, which is seeking relief for the 81-acre parcel it purchased for $19.7million in April 2006.
L’s comment:
Now lets look at this. Other bidders were shut out because of a few idiots that ran the price up and got the land. Now these guys want relief and term modifications? What happens to the realistic bidders that would have had cash or other financing in place?
How much help is likely here?
State Land Commissioner Mark Winkelman said the department is limited in what relief it may provide. It can defer interest payments, he said, or postpone infrastructure requirements. Typically, infrastructure is not needed if no homes are being built, he said. Talks are ongoing, he added.
Is there no limit to the stupidity the government is now willing to reward?
[Thanks L!]
“Is there no limit to the stupidity the government is now willing to reward?”
Exactly!!!
This post isn’t necessarily intended to express an opinion about the AZ State Land Dept. or the developers who “won” the bids.
Going to the ASLD website and looking under “NEWS & INFO,” you can see by the headlines of the articles that the ASLD was bubbling with glee over the ever increasing sales prices each time an auction was held.
When you read the headlines alone, you get the impression that the writer from the ASLD thought they were running a company, selling a product or service that they could keep manufacturing on an increasing basis as long as the demand (and the price) kept going up.
I’m also guessing that as the prices kept going up, they didn’t really think about the idea that at some point the bidders would renege, or want “assistance.”
If they’re bragging about all the money they raise for schools in some articles… then what budgetary bag does the money come back out of to help the developers?
All right, there’s probably an opinion in there somewhere.
Here are a few headlines, just from 2006.
http://www.land.state.az.us/
$102.5 Million Day!! State Trust Land In Peoria Sold
SOLD FOR $1,000,000 AN ACRE!
Land Department Aims to Break 2005 Sales Record With $33.45 Million Sale
Desert Ridge State Trust Land Sells for $19.7 Million
It’s looking like he government is trying to give away everything including the house. Let them fail and go after them but please do it early before they are bankrupt.
Hopefully the politicians involved will realize that someone heading for BK won’t be making political contributions. But I’m sure some politically connected vulture will make a mint on this eventually, the way Chase got Bear with the help of the Fed thanks to conflicts of interest.
If these developers are defaulting on their agreements, they should be debarred from future land bids and all other government contract work. Full stop. This is exactly what the government contracts/debarment rules were set up for.
When the price of land was going through the roof, I didn’t see the state asking for a share of the gains from the developers. What a bunch of hooie!!!
Manfred – yes you did see the state asking for a share of the gains. In the form of increased prices later.
As to the businesses – why fault them. Corporations are not geared towards moral/immoral. They are geared towards profit/loss, and/or share price. So if they can get relief, why shouldn’t they ask for it?
If we don’t like the system, then we can change it. But when you plant an onion don’t expect a strawberry.
Further, It might be in the states interest to provide some relief. They can withold interest, or defer payments, and get the $1mil an acre – or default and be stuck with the land and nothing.
They can ask all they want, but the government should not say yes.
Rather, (a) they should take note of companies that attempt to screw the taxpayers and then not do business with them again, since, as you point out, those companies will no doubt attempt to do so again, and (b) in the process of collecting the debt, they should levy against the assets of the corporation to get the money, just as any other corporation would.
The taxpayers should be harder to screw than private parties, not easier.