By Mike Sunnucks ] Phoenix Business Journal
The Arizona Tax Research Association is questioning some real estate development deals crafted by Arizona State University, the University of Arizona and the state board that oversees them.
ATRA, a fiscally conservative watchdog group, is concerned about the recent $928 million sale of the Marina Heights development in Tempe and a lease-back deal involving State Farm Insurance.
State Farm was one of the owners that recently sold the 2 million square foot development to Transwestern Investment Group and JDM Partners LLC.
The Tempe Town Lake site where Marina Heights was built is owned by the Arizona Board of Regents, a state body that oversees ASU, UA and Northern Arizona University.
State Farm is leasing back office space at Marina Heights as part of the deal. Business Real Estate Weekly of Arizona pegged the sale price at a record $928 million.
That price concerns Sean McCarthy, senior research analyst for ATRA, because developments on land owned by public entities such as ABOR and the universities gets taxed differently than privately held property.
“The state of Arizona is exempt from property taxes, meaning the $928 million property with 2.2 million square feet of office space and the land underneath it are exempt as long as ABOR holds the deed to the property,” McCarthy said.
The Marina Heights land is next to, but not part of, a legislatively created development zone of land held by Arizona State University.
That ASU zone could accommodate 8 million square feet of development just east of the school’s main campus. The development district was one of the sites pitched Amazon.com (Nasdaq: AMZN) in its search for a $5 billion, 50,000-employee second headquarters.
ABOR spokeswoman Julie Newberg said the universities are within their legal rights to buy, sell and lease real estate. The schools need to diversify their revenue streams, as each has faced budget cuts from the Arizona Legislature in recent years.
