$1 billion north Scottsdale lease sets state land deal record

A $1 billion lease for land, the most expensive in Arizona Land Department history, was auctioned Thursday to a developer who plans to build high-end offices on the property on Loop 101 in north Scottsdale.

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The 99-year lease on the 125-acre site, situated on the east side of the elbow made by Loop 101’s Pima Freeway, just north of Bell Road, went for $65.8 million, a figure that will be used to calculate the annual rent.

Land Commissioner Mark Winkleman said the state expects to generate $1 billion in rent over the life of the lease.

Jeffrey Levine, principal owner of Scottsdale Vistella, put in the sole bid.

“There are a number of things about the property that make it ideal for commercial development,” he said. The firm previously has built assisted living facilities in the Valley, he said.

The site is zoned for light industrial uses, and Levine said he plans to build a high-end business park with large office buildings and some retail there, but it’s too valuable to be used for warehouse space.

The site’s attractive factors include its proximity to major road networks, the Scottsdale Airport and the growing population in the area, Levine said. He said he wants to get started as quickly as possible. “The clock is ticking,” he said. The property may not all be developed at once. “It’s a big piece and we’ll approach it as the need arises,” Levine said.

Rick Kidder, president of the Scottsdale Area Chamber of Commerce, said demand for largescale office space in Scottsdale is “undiminished.” “The demand for Class A office space is not only consistent, it’s growing,” he said. He said Levine’s proposal makes sense for the site.

“To put Class A office and a little bit of retail sounds like a really good plan,” Kidder said. “The warehouse market, given the land value, doesn’t seem to work.” Revenue from the lease will be used statewide for teachers’ salaries and to reduce classroom sizes, Winkleman said, as funds for the trust largely benefit Arizona education.

“If we are successful this morning, this will be the largest lease in the history of the land department,” he said earlier in the day.

The parcel received no bids when it first went to auction last month. Winkleman attributed the lack of bids to proposed flyover ramps that could connect Pima Road and Loop 101, and in the process cut off vehicular access to the northern edge of the property. He also said it’s a large piece for developers to bite off at once. The state received an adequate price, he said.

“The price was aggressive. I’m confident we got as high a price as we were going to get,” he said. Eight companies registered to bid in the auction, including First Industrial Development Services, which made the initial application to the state that the land be auctioned. While the land department’s policy is to sell off residential parcels at auction, only leases are auctioned for commercial land.