Here’s another lender that is looking at some big dollar defaults- the State of Arizona. [Thanks M!]
In 2005, the state of Arizona sold a land parcel for it’s highest price ever- $135 million. Two years later 269 acres sold for $149.5 million- but it’s been downhill since then:
[B]oth of those record sales, along with roughly 20 others, have either defaulted or are teetering on the brink of collapse, propped up by multiple payment extensions granted by the land department to the developers who agreed to pay top dollar at public auctions over the last six years.
Almost $970 million worth of sales from the land department made since 2003 have been canceled or had at least one extension, according to an analysis of agency records by the Tribune. Some have already failed. Others have had default notices issued. Many remain viable only because the land department has agreed to delay the deadlines on principal and interest payments on sales it financed.
The land department has issued notices of default or canceled the deals on properties that sold for a total of about $554 million, according to an analysis of agency records.
The properties that have either failed or are in jeopardy represent more than half of the land sales made by the state in the last six years when figured on the basis of price.
The state of Arizona, like so many others, got greedy during the boom:
The land department went on an aggressive sales binge since 2003, during a time when Arizona ranked among the fastest growing states in the country. In the last six years, almost $1.84 billion in state trust land has been auctioned off to the highest bidder. In the prior 90 years since statehood, about $1 billion of state land had been sold.
And the result of the state’s greed?
Of the 13 most lucrative land sales the state has made since 2003, nine have either had default notices issued or payments extended. Four of the top five sales fall into that category.
The main recipients of funds from these land sales are the schools of Arizona. Guess then who’s most likely to suffer from the bust?
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Why in the hell was the state financing purchases by private developers rather than letting them go through banks and getting its money at the time of the transaction like any normal seller? If the state went on a land sale binge during the boom, it should have made money by the truckload, not lost money.
This sounds very fishy to me – were the people responsible for these sales in bed with the developers? (Can I buy goods or land from the state and have the state finance the purchases?)
Jim-
Now, now. Surely you know by now that in Arizona, legislators, special interests, developers, etc., all sleep in one very large bed?
Igor’s “confused”, but I’m not. When money talks, AZ government listens.
Sounds like this was a great way to fund schools. It’s right up there with the State Lottery. It only goes to prove that there are suckers at every buying level.
Igor say phooey.
Sounds like Arizona thought they could have their cake and eat it too. Sell it, and get interest payments to boot!
See what happens when you get greedy?
Chuck
Slim’s been a resident of the Grand Canyon State for almost 22 years. I came here from Pennsylvania, which wasn’t exactly known for cutting-edge thinking during the late 1980s.
However, when it comes to sheer stupidity in policymaking, I can’t say that Pennsylvania comes close to what I’ve seen in Arizona. The selling land to fund schools being a classic case in point.
Okay, lest you think that I’m letting PA off too easily, don’t get me started on the persistent life of the Liquor Control Board. Just one of the many symptoms of PA’s stupid liquor laws. (And, no, they haven’t controlled drinking in the Keystone State. Far from it.)
Seller financing was something never published. I bet the sate already allocated and spent the funds. Earmarked for roads, schools etc. Sound like the AZ taxpayer will be on the hook. Do I hear higher property taxes?
The treasurer should be investigated for signing away these sales. Wasn’t he investigated for other strange dealings?
“Now, now. Surely you know by now that in Arizona, legislators, special interests, developers, etc., all sleep in one very large bed?”
Which is why, although it is definitely a moral victory to get pay cuts for politicians to pass (like California just did), it does not really matter – the politicians aren’t making their living off of salaries.
i’m with jim! i’ve never invested in real estate but i know enough to know that you NEVER carry the note when lenders are available to cut you the lump sum!!!! i just don’t get it. they coulda made ALL of those deals for cash??? they’d be (or should i say we’d be) soooooo much better off right now.
“”This sounds very fishy to me – were the people responsible for these sales in bed with the developers? “”
I find this amusing now that I no longer live in Phoenix.
Molly Ivins once called Texas the ‘laboratory of bad government ideas’… but she didn’t spend enough time in Arizona.
… even agressive seller financing requires 30% down. AZ State financed 90%!!!
“This sounds very fishy to me – were the people responsible for these sales in bed with the developers? (Can I buy goods or land from the state and have the state finance the purchases?)”
Without as much as a quick Google search, I recall the goofy name Winkleman as the man in charge of these land sales/auctions. Just to be sure, I Googled Winkleman Arizona land and guess what, State Land Commissioner Mark Winkleman resigned his position, effective May 22, 2009.
Seems like Mr. Winkleman’s personal finances and future employers might merit a look-see. (Wouldn’t it be interesting if he ended up in the employ of one of the developers who got this deal or an affiliate, or perhaps of a company owned by a friend or relative of someone running one of these companies? Or starting a “consulting” or similar firm that ended up hired by them?)