Here’s how Crown Realty got $121M worth of prime land for $54M

Above: Crown Realty & Development closed on 96.5 acres and acquired the “Master Developer” rights in North Phoenix’s Desert Ridge master-planned community. The property and rights have been the subject of active litigation and bankruptcy for a decade. Crown now plans to develop the land as a new urban core in Phoenix. Real Estate | 6 Mar |

One simple, obvious question kicked off the process that unlocked thousands of acres of land in North Phoenix and cleared the way for what could be years of economic development in the City of Phoenix.

“We were standing on top of the big parking structure up (at High Street) and looking out over all of the vacant land up there,” said Robert Flaxman, CEO of Crown Realty & Development of his visit to the property in 2016. “I said to everybody, ‘What’s going on there?’ And there were all of these blank stares and no one seemed to know.”

Robert Flaxman

Rick Carpinelli

Rick Carpinelli, who runs the Crown Realty & Development operations in Phoenix, uncovered a string of legal activity that stretched back almost a decade. Crown and its advisors waded into the legal weeds that had entangled this property and after three years of work, came out on the other side as owners of a 96.5-acre parcel of land adjacent to the High Street mixed-use development at Desert Ridge. Crown also was granted “master developer” rights for not only that 96.5-acre site, but also 5,700 acres of land that runs along the Loop 101, stretching from 64th Street in the east to Black Mountain in the West. That’s approximately five square miles in the City of Phoenix’s highest-growth corridor.

Crown’s winning bid for the land was $54 million, while the Bankruptcy Court had previously valued the land as high as $121 million.

“The value is in the opportunity for the City of Phoenix and really, greater Arizona,” Flaxman said. “It’s going to be the economic driver for the state in many respects, and certainly for the City of Phoenix.”

When getting to what was going on with the property next to High Street, Crown discovered that Bruce Gray and Gray Development had borrowed $7 million from Burford Capital, a global litigation lender, to finance a lawsuit against Chicago-based Thomas J. Klutznick Co. That lawsuit resulted in Gray getting a $116 million judgment and resulted in him receiving the 96.5 acres of land as well as the “master developer” rights. By the end of 2015, Gray hadn’t repaid the loan from Burford Capital, and foreclosure proceedings were started in 2016, about the same time Flaxman was touring High Street in hopes of buying that property.

“We couldn’t make a deal for High Street, but we were able to make a deal with Burford to buy their note,” Flaxman said. “We bought two additional notes from a local lender because that loan was secured by additional collateral that was contiguous and Mr. Gray filed bankruptcy in connection with those notes in 2016.”

Crown confirmed its plan of reorganization with the bankruptcy court, over the objection of Gray. Crown was then successful in getting all of the unsecured creditors to sign off on the plan, which was confirmed by the court and became effective on May 7, 2018. The bankruptcy court ruled the Desert Ridge property tied to the community’s master developer rights be sold, and in January, the 96.5-acre parcel of land went up for auction, and Crown was the winning bidder at $54 million.

Flaxman credits the Polsinelli legal team of Todd Burgess, John Clemency and Lindsi Weber, as well as Shawn Tobin of Tobin & Connealy, PLC, for their work in securing the positive outcome. As “master developer,” Crown will have the option to work with the other developers and lead the planning for future development in the area.

Mayo Clinic has recently announced a $650 million investment to expand its campus nearby, Arizona State University has broken ground on its adjacent healthcare campus. American Express is also under construction on a new 300,000 square foot building.

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