Part I - Land barons have locked up empty fields from Mesa to Florence - East Valley Tribune: Thespeculators

Part I - Land barons have locked up empty fields from Mesa to Florence

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Posted: Sunday, October 9, 2005 6:47 am | Updated: 7:40 am, Fri Oct 7, 2011.

NOTE: The Tribune used public records to identify the owners of the large tracts in a 450-square-mile area bounded by U.S. 60 on the north, Gilbert Road on the west, state Highway 79 on the east and Florence on the south.

But nothing about the site has been random since the day Bill Lund bought it in January 1999. On paper, the land has been carefully carved up and sold through a chain of interrelated partnerships. Millions of dollars have been pumped into it, not just to buy it but to prepare for the day that it is paved over and turned into a premier auto mall surrounded by a high-end shopping center and medical complex.

The reasons this particular patch of ground in Gilbert is so precious are all around. Upscale homes are clustered behind stucco walls in a sea of subdivisions to the north. A hospital, crafted in a style reminiscent of an old Spanish mission, is being built to the east. And a few hundred yards to the south is the ultimate money-multiplier when it comes to real estate — a freeway.

The channel for the Santan Freeway stretch of Loop 202, the artery that is feeding the land boom in the south East Valley, has already been cut.

Lund is one of a cadre of savvy investors who had the foresight and cash to lock up large blocks of land in the area in the last 10 years. They bought when land was cheap, when the freeway was just a line on some planner’s map.

A decade ago the far south East Valley was little more than raw desert and plowed fields, a refuge where those fleeing the crush of urban sprawl could still find open spaces and affordable homes.

Today, land barons hold thousands of acres in the nation’s hottest growth corridor. Each of those acres would have sold for about $30,000 in 1995. Today an unimproved acre can be worth $150,000 or more.

While hundreds of investors own land in the area, most of the major blocks of undeveloped properties can be tracked to a dozen or so individuals, families or investment groups, a Tribune analysis shows.

The East Valley’s land speculators generally fall into three categories:

• There are the old farm families whose parents and grandparents locked up large blocks of desert and converted it to fields. Streets throughout the East Valley bear many of their names: Ellsworth, Dobson, Lesueur, Sossaman and Schnepf.

• There are the traditional development companies that buy land with plans to cover it with houses or shopping centers. John Graham has been one of the most ambitious builders through his company, Sunbelt Holdings Inc. In 1995, Graham began building the 2,150-acre Power Ranch that runs for three miles south of Pecos Road along Power Road.

• Finally there are the pure land speculators. They are investors who use the land as a commodity. They have no ties to a particular patch of ground, as the farmers do; nor do they have plans to build on it themselves, as the developers do. They buy land and hold it. Some master plan it and get it zoned. Ultimately they sell it to builders and either pocket the profits or plow it into their next venture.

Sometimes the speculators form partnerships with the builders to share profits. That’s what Lund is doing with some of his most valuable properties as they are being readied for commercial development.

Lund is one of the most successful speculators in the East Valley. He bristles at the label, preferring to be called an investor or developer.

"Usually speculators want in and out in relative short terms," Lund says. "We are long-term investors. Maybe I’m not smart enough to find all the quick-buck deals."

But another major player in the development of the area, Kevin Petersen, is more blunt about the nature of the land business being played out on hundreds of square miles from Mesa to Florence.

"Anytime you invest in land it’s speculative," he says. "We’ve all been blessed as the market has been stronger than we ever anticipated coming out of the early ’90s.

"But when you bought it years ago, you didn’t know if you were going to have to hold it a year, two years, 10 years or 20 years because you just never know what’s going to happen to the land."

Playing the land market in the south East Valley has paid off for the speculators who moved in early. Although public records do not reveal exactly how much money the land dealers are making, court records and other documents show that tens of millions of dollars are changing hands in single transactions as the speculators sell off hundreds of acres they locked up a decade ago.

Records also show the speculators are using some of that money to curry favor with the politicians who must approve their plans.

Development interests are the largest class of donors to political campaigns for city and town councils and county supervisors in the area, donating nearly a half-million dollars since 2000.

The speculators also have taken advantage of state laws that allow them to classify their undeveloped properties as farms, saving them millions in property taxes, according to the state Board of Equalization.

Lund, for instance, used an agricultural assessment to pay $7,844 in property taxes on some of his land at Pecos and Val Vista. That land is worth about $7.8 million, county records show.

Had it been assessed as commercial property, consistent with his development plans, his property tax bill would have been more than 15 times as much — about $126,000.

With large amounts of money to be made and a favorable political and business climate, the speculators have moved with little restraint. But growth has come so quickly that the south East Valley is choking on itself.

Every work day, traffic on Hunt Highway and other roads in the Queen Creek area crawls to a virtual standstill as residents in the subdivisions that have sprung up in Pinal County struggle toward their jobs in cities to the west and then home again.

Though vast expanses remain vacant fields, there is scarcely an open parcel between Mesa and Florence that has not been master planned for some mix of houses, shopping centers, malls and offices.

As the miles of empty fields are covered with rooftops, elected officials acknowledge they have struggled to cope with the problems the land traders have brought.

"I never went out and said, ‘I want more people,’ " says Sandie Smith, the Pinal County supervisor who represents the district north of Florence. "The people started coming to us. We have no way to put a moratorium on it."


The building boom being played out in the southern stretches of the East Valley was inevitable, says Elliott Pollack, a longtime Valley economist who has studied development in the Pinal County area.

The ring of urban building had crept steadily through Mesa, Chandler and much of Gilbert. By the mid-1990s, large blocks of land were growing scarce and expensive in Maricopa County. That forced developers looking to build affordable housing farther east, toward Queen Creek and Pinal County where land was still relatively cheap.

While the growth was certain, its pace has astounded even the most optimistic speculators.

A confluence of factors beginning in about 1995 triggered the latest buying frenzy.

Land was cheap then. Arizona was emerging from the real estate depression that hit in the late 1980s. The federal Resolution Trust Corp., set up to liquidate savings and loans that went bust financing shaky land deals in the prior boom, was dumping Arizona properties on the market at cutrate prices.

Then, in December 1994, the Santan Freeway became a certainty. The Santan was part of the regional transportation plan adopted by voters in 1985, along with a 0.5 percent sales tax. But in the decade that followed, money ran short and it appeared doubtful the freeway would be built.

Then-Gov. Fife Symington retooled the freeway plan in December 1994, maintaining the Santan as a future corridor but without allocating any money for it. Over the next several years, new financing options and better than expected tax revenue resurrected plans to build the Santan, and accelerate its completion.

The guarantee of a freeway set off a buying spree throughout the south East Valley. As the speculators were forced farther east, they were squeezed into a narrow corridor of available land.

Just across Meridian Road, the line that divides Maricopa and Pinal counties, the massive holdings of the Arizona State Land Department have blocked development to the northeast. Only a few relatively small parcels of state trust land have been sold to developers in the last 10 years.

To the southwest, the Gila River Indian Community stopped urban encroachment.

That leaves a narrow strip, only a few miles wide in some areas, available to buyers who flooded into the south East Valley looking for a place to sink their money.


Among the first to bring big plans and big bankrolls to the area were George Johnson and Conley Wolfswinkel, who teamed up in 1995 to build Johnson Ranch in Pinal County about six miles southeast of Queen Creek.

County officials balked at first because there were no roads, utilities or schools in the remote patch of farmland that Johnson and Wolfswinkel proposed to turn into a master planned community. So Johnson, who took the lead role in the development, formed his own utility companies, donated land for a school and paved a 10-mile stretch of Hunt Highway.

By bringing utilities and paved roads into Pinal County, Johnson stretched the edge of the Valley’s growth bubble, Pollack says.

Today, Johnson Ranch has about 20,000 people and is the hub for a series of surrounding subdivisions, including the Wolfswinkel-owned Bella Vista Farms.

In the first half of 2005, the 3,578 residential building permits issued in the Johnson Ranch area nearly equals the total issued in Chandler, Gilbert, Mesa and Queen Creek combined, according to a study by Pollack.

He projects the population of Pinal County will quadruple to about 1 million people within 15 years.

Johnson "did the things necessary to make it possible for the growth to occur," Pollack says. "He dealt with the infrastructure issues. He put in reasonable housing. He put in amenities. He was in the right place at the right time.

"If that’s a visionary, then he’s a visionary."

Johnson has since sold his ownership interest in Johnson Ranch, but still owns several large land blocks in Pinal County through two of his investment companies, General Hunt Properties and Rancho Sendero LLC.

While Johnson has faded as a force shaping south East Valley development, Wolfswinkel has emerged as one of the area’s most aggressive and influential land speculators.

But after Wolfswinkel was convicted of federal bank fraud in 1993, he has acted as a consultant to companies titled to his children, companies in which he has no ownership interest.

The Wolfswinkels have one of the most extensive land portfolios in the East Valley. Wolfswinkelrelated companies own thousands of acres throughout Maricopa and Pinal counties, most of it in key transportation routes.

Wolfswinkel has also paired up with many of the other big players in the East Valley to craft joint ventures on land deals.

In fact, Petersen’s investments are so intertwined with the Wolfswinkels’ that he works out of their Tempe office.

Another frequent collaborator is Lund.


When he came to the Valley in 1996, Lund, 74, brought a lifetime of real estate experience and a fortune from the estate of his late wife, a daughter of Walt Disney.

As the co-owner of an economics research company in the 1960s, Lund was responsible for conducting economic and planning studies for some of the nation’s most recognized developments. Among the projects he was involved in were Disney World and the Epcot Center in Florida, the Magic Mountain theme park in California and the Vail Ski Resort in Colorado.

Lund also owned a home building company in the Valley for 15 years before it folded in 1987 as the state was drifting into a real estate depression.

Lund was semiretired, with homes in Wyoming and San Diego, when Wolfswinkel approached him in 1997 about investing in 375 acres in the path of the Santan at Cooper Road in Chandler.

By then it was known the freeway would be built — but not when. Despite that uncertainty, the potential to make money in the East Valley was clear, Lund says.

Working through his primary investment vehicle, Canyon Oaks Estates Limited Partnership, Lund says he brought the cash to close the Cooper Road deal in a joint venture with the Wolfswinkels.

Over the next five years, Lund locked up some of the most strategically placed land holdings in the East Valley.

"People thought we were nuts," Lund says of his early investments in the area.

But, he says, he had confidence. Retiring baby boomers would be flocking to the Sun Belt. Home prices in Arizona were still low compared with places like California.

"This to me was an obvious place to go," Lund says. "It was a very business-friendly state. California was losing that reputation very rapidly. So I just felt very comfortable that this had great long-term potential."

The portfolio Lund has built since 1997 includes several hundred acres at Meridian and Riggs roads, and a similar-size parcel at Rittenhouse and Ellsworth roads. Major shopping centers are planned at both sites.

Lund recently sold the mall site at Rittenhouse to a partnership involving Wolfswinkel and the Vestar company, one of the Valley’s largest shopping center developers. Lund also has paired with another mall builder, Westcor, in the planned shopping center on Meridian.

But it is the Spectrum being built at Val Vista and Pecos that will be Lund’s premier development.

Lund acquired the 950 acres that straddle the Santan Freeway corridor for Spectrum in 1999. While some of the land has been sold to builders, Lund retains key sites, such as the 130-acre auto mall and land for an upscale shopping center across Val Vista.

As with the Cooper Road property, Wolfswinkel brought Lund into the Spectrum investment to finance the deal, Lund says.

Canyon Oaks and related partnerships bought out Wolfswinkel’s interests in its joint ventures in 2003, according to Lund.


While classic speculators like Wolfswinkel and Lund have scattered holdings, a new class of investors moved into the south East Valley in the last five years and instantly became its largest land barons.

Harrison Merrill, who heads an investment group called Vanguard Properties

Inc. in Atlanta, began buying land on the outskirts of Florence about 2001, according to county records.

He became the biggest private land owner in the south East Valley, having assembled about 7,900 acres through three of his companies: Roadrunner Resorts LLC, Florence Copper Inc. and CMR/ Casa Grande LLC.

Like many other large land owners in the south East Valley, Merrill did not return repeated phone calls seeking comment.

Merrill’s land was annexed by Florence in January 2004. A few months later, his master plan for residential, industrial and commercial development was approved. Merrill envisions about 28,000 homes on his land.

Earlier this year, Del Webb Corp., a division of Pulte Homes, bought about 3,200 acres from Merrill and Johnson, owner of the adjacent property, for its planned Anthem at Merrill Ranch. That development will add about 9,100 homes to the area.

Another newcomer to the area is Bill Levine, a secretive land investor who heads Pacific Proving LLC, which bought the southern third of the General Motors Desert Proving Ground earlier this year.

Before the sale, the publicly traded GM had been the largest private landowner in the south East Valley. The automotive test track, which the company began acquiring in 1952, originally covered about eight square miles south of Elliott Road and east of Ellsworth Road.

Pacific Proving bought 1,800 acres south of Ray Road, and is leasing it back to the car company, says Bob Holso, operations manager at the proving ground.

Though GM announced plans to move the hot-weather testing facility to Mexico in 2000, that move was scrapped last year, Holso says. Now the company plans to stay, he says.

Levine would not agree to an interview.

"Bill doesn’t talk to reporters," says his lawyer, Paul Gilbert of Scottsdale. "He is very low profile."

Gilbert says Levine has no immediate plans for the land.

Aside from individuals playing the south East Valley’s land market, the profits being made there are attracting large investment groups that have made major land purchases.

The Circle Cross Ranch subdivision in Pinal County, master planned for more than 5,300 homes, lists more than 35 individuals, corporations and family trusts as its owners in records on file with the Arizona Corporation Commission.

Most have out-of-state addresses.

Among the Arizona investors is Jerry Moyes, who also owns a large strip of land at Ocotillo and Greenfield roads through a different investment company.

Moyes is chairman and chief executive officer of Phoenix-based Swift Transportation Co., which he founded in 1966 with a single truck and built into one of the largest hauling fleets in the nation.

Moyes also is co-owner of the Phoenix Coyotes hockey franchise and is a limited partner in both the Phoenix Suns and Arizona Diamondbacks, according to the Coyotes’ Web site.

Moyes said through a spokesman that he is a passive investor in the Circle Cross development, and has been selling off chunks of his land at Ocotillo for one-acre homesites.

In January, he sold about half of the property he owned on Ocotillo to Fulton Homes, a homebuilding company owned by Ira Fulton.

Another large investment consortium with significant land holdings in the area is Aspen Farms LLC, the titled owners of nearly two square miles in Pinal County at Arizona Farms and Cooper roads.

The company lists 85 owners, most from outside Arizona and many of them separate investment companies themselves.

The Wolfswinkels master planned the Aspen Farms property in conjunction with adjacent land they own. Plans call for more than 10,000 homes there.


Not all of the large land owners in the East Valley have grand plans to cash in on their holdings. The DeMuro family may be the area’s ultimate long-term land speculators.

The family owns two sizeable chunks of land in the area. The one most prized by speculators is about 160 acres on the northern edge of the Santan Freeway at Sossaman Road. The second is a similar-size property at Meridian and Williams Field roads.

Ten years ago, the DeMuros would have been considered small players in the south East Valley’s land market. But with many of the larger tracts in Maricopa County now covered with asphalt, concrete and stucco, their land is among the prime undeveloped properties in the area.

Arthur DeMuro, who owns the land with his brother, Eugene, and sister-in-law Kathy, says they have no plans to sell or develop the properties. The land was acquired by their father, Sam, who owned an aerospace manufacturing company in Phoenix in the 1960s.

"Arizona real estate was his version of the mattress," says Arthur DeMuro, a developer who specializes in restoring historic properties in Portland, Ore. "As he made profits in his manufacturing venture, he would put those profits in Arizona real estate, pay cash and just set it aside."

Sam DeMuro bought the Meridian land in 1982 for $3,000 an acre, his son says. The land north of the freeway was acquired a short time later, after a buyer defaulted on a deal that was financed by Sam DeMuro.

Arthur DeMuro says the family has been approached by brokers who want to market the properties, particularly the one along the freeway. But they have not given much thought to selling.

"A curse of owning property long term is you just get comfortable with owning it," DeMuro says. "Real estate investment is like a drug. You own it and it appreciates and you can’t help but think if we own it a little longer it will appreciate a little more. God never comes down and says ‘this is the time to sell.’ "


Aside from Merrill and Levine, most owners of the largest blocks of land in the south East Valley are the families that have farmed the area for generations. Almost all of them have formed investment companies to manage their real estate holdings.

Some are content managing the sell-off of their family farms. Most have all but abandoned raising crops and are building their fortunes on pure real estate speculation.

Howard Morrison was one of those who saw the boom coming. Morrison’s family had farmed about 3,000 acres at Elliott and Higley roads since World War II.

But like other longtime farmers turned land brokers, Morrison knew his family’s lifestyle was quickly drawing to an end.

By the mid-1990s it was clear to the Morrisons that they could either be poor farmers or rich land sellers. They split the difference, forming their own land investment companies that allowed them to cash in on the boom while controlling how their family farm is transformed.

"You can’t really make a living farming here," Morrison says. "We needed to be the ones to make the decisions rather than just have the growth happen to us."

The Morrisons have largely confined themselves to managing the sell-off of their family’s holdings as development encroaches.

Other farmers have turned more aggressive as land dealers, buying and selling properties throughout Maricopa and Pinal counties. Among the best positioned are the Lesueurs, a family enterprise headed by David and Nancy Lesueur.

The prime property for the Lesueurs is a half-mile-wide strip east of Val Vista that will soon be crossed by the Santan Freeway. Extending nearly two miles south of Ray Road, the Lesueurs own the land in partnership with another ex-farmer who has become one of the area’s most active real estate investors, T. Dennis Barney.

A regional mall is planned by Westcor on Lesueur land near the freeway. The Lesueurs and Barney are partners with Westcor in the development.

The Lesueurs also control almost three square miles of undeveloped land in Pinal County on Arizona Farms Road east of Cooper Road, according to property records. The family declined requests for an interview.


Though the land business is booming in the south East Valley, those playing the market fear that it could fizzle out, in large part because of their own success.

The subdivisions have sprouted up so fast, particularly in the Johnson Ranch area, that the streets in the once rural region are regularly gridlocked.

"To me the big wild card out there is the transportation solutions," says John Graham, the Power Ranch developer. "I guess I’m optimistic because I don’t think people will tolerate the way it’s going right now. If we don’t do a good job dealing with the infrastructure issues . . . at some point it would cause a deterioration in the quality of life and that’s the thing that would stop it."

Earlier this year, Queen Creek officials joined with major land owners in the area to lobby for an alignment of a new freeway south of Germann Road that would link up with the Santan.

Queen Creek Mayor Wendy Feldman-Kerr says she pushed for that alignment because the population boom in the area created an immediate need.

The hope was dashed in July, when an alignment two miles to the north was selected by the Maricopa Association of Governments, which helps fix freeway paths. Local governments do charge development fees to help pay for street improvements, but those do not come close to covering the costs. Legal loopholes have blocked the imposition of higher fees, officials say.

Queen Creek charges $166 for each new home built in the town for street improvements. By law, such charges must be based on the amount of traffic a new development will generate, says John Kross, assistant town manager.

But the problem is that about 75 percent of the town’s traffic is people passing through from the Johnson Ranch area, he says.

Pinal County requires a $1,753 fee on new houses to pay for roads as a zoning condition. Until recently, state law barred counties from charging what are known as mandatory impact fees on builders, according to Smith, the county supervisor.

Pinal County is studying whether to impose the mandatory charges to pay for roads, she says.

Developers in the Johnson Ranch area recently agreed to pay the Pinal County assessment upfront, rather than waiting until they obtain building permits as their zoning requires. The money will be used to widen Ironwood Drive to five lanes from Hunt Highway to U.S. 60, also known as the Superstition Freeway.

It is not an act of benevolence, but a realization that unless the gridlock in the area is fixed the building boom will end, says developer Kevin Petersen.

"Everybody who has invested millions of dollars out there understands that without a transportation backbone they are going to be dead in the water shortly," Petersen says. "The bottom line is without that corridor being built in the next 18 months, they would have been sitting on a huge investments with no way to get in or out."

Alden Rosbrook, who has lived in the Pinal County portion of Queen Creek since 1986, is one who thinks county officials have been too accommodating to the developers, allowing them to build subdivisions before roads were in place to handle the traffic.

"You would think somebody pulling their hair out over there at Pinal County would say, ‘Maybe we should take a timeout for a couple of years until the roads catch up,’ " says Rosbrook, president of a group working to preserve the San Tan Mountains.

But that isn’t going to happen.

"Everybody’s got to make a buck," he says.

NOTE: The Tribune used public records to identify the owners of the large tracts in a 450-square-mile area bounded by U.S. 60 on the north, Gilbert Road on the west, state Highway 79 on the east and Florence on the south.

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