Auction delay won’t affect construction

The cancellation of an Arizona Land Department auction scheduled for this month on a parcel vital to the proposed Palisene development doesn’t affect Westcor’s construction plans, a company official said Thursday.

Westcor has spent years putting together the Palisene project, a 2,200-acre master-planned community centered on a 72-acre commercial development to be built on state-owned land northwest of the Scottsdale Road-Loop 101 intersection in Phoenix. That commercial core is expected to include more than 1 million square feet of retail space.

“It really doesn’t mean anything other than the auction is going to be a little later than we expected,” said Scott Nelson, Westcor’s vice president for development.

Company officials have said they expect Palisene to open in 2009 or 2010.

The state land department recently canceled an Oct. 29 auction on a 99-year commercial lease on the 112-acre property after a competing developer, the Thomas J. Klutznick Co., lodged a protest. The auction likely will be held in early 2008, said state Land Commissioner Mark Winkelman.

Klutznick claims language that details any potential developer’s obligations to install $65 million of infrastructure on the site — including drainage, roads, water and sewer — is too vague, Winkelman said.

“They were concerned that there were some aspects that were not as clear as they could be,” he said.

Another objection involves Westcor’s option to match the highest bid at auction, and claim the lease. Klutznick contends the state’s agreement with Westcor is older than 10 years, and property interests that extend beyond 10 years must be auctioned off, Winkelman said.

Klutznick has a similar agreement with the land department that allows the developer to match the highest bid on property in Desert Ridge, within which sits Klutznick’s CityNorth development. CityNorth is a multibillion-dollar project at the northeast corner of 56th Street and Loop 101 in Phoenix that broke ground in mid-November.

“We genuinely want to bid at the auction,” said Klutznick spokeswoman Marla Ellis of the proposed Palisene parcel. “The core of the protest letter is that we needed more information to do that.”

DMB Associates, developers of the 120-acre, $1.5 billion One Scottsdale project just across Scottsdale Road from the site on the auction block, have expressed interest in bidding as well.

State officials have appraised the vacant land at $32 million. The first year’s rent on the lease will run $300,000, with gradually increasing payments and a percentage of the revenue from commercial transactions from development on the site going to the state, as well. The state expects to receive $500 million in revenue over the life of the lease.