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MARICOPA, AZ–Harvard Investments Inc. and Meritage Homes of Arizona Inc. paid $27 million to acquire 650 acres of residential development land in the Lakes at Rancho El Dorado. The Scottsdale, AZ-based companies bought the property at auction from Wachovia Bank and Wells Fargo Bank, which had taken it back from a previous Meritage partnership.

The land is a mix of partially developed land and finished lots at the northeast corner of Smith Enke and Porter roads in Pinal County. The acreage is approved for construction of 1,985 single-family homes. It originally was bought for $39 million by Scottsdale-based Maricopa Lakes LLC, a partnership of Meritage and Scottsdale-based Hacienda Builders Inc. formed in November 2004. The purchase included an additional 384 lots, where homes have been built and subsequently sold.

Late last year, Hacienda revealed it was considering being acquired by another Scottsdale company, Montage Holdings LLC, in the wake of the housing meltdown. Earlier this year, the lenders agreed to put the property into a trustee sale rather than allow it to go into default. The unpaid debt together with costs totaled $36.75 million.

According to Meritage CFO Larry Seay, the steep decline in Greater Phoenix home values made the property uneconomic at its original cost, but the new price will make it possible to build and sell homes at a profit. “At the much lower basis, we should be able to build houses competitively and provide a very good value for new home buyers,” he tells GlobeSt.com.

Meritage, which has three other communities under construction in the Lakes at El Dorado, acquired 435 finished lots as its share of the new purchase. The homebuilder generally sells residences priced from the low $100,000s to the $200,000s. Harvard is taking 1,550 lots, 200 of them finished. The company intends to hold the sites for investment.

Harvard Investments, the US investment and development arm of the Hill Cos., Canada’s oldest land developer, recently partnered with a private equity group to acquire additional residential land in the Phoenix area. In June, it announced a partnership with the Cardon Group of Mesa, AZ to develop a 4,900-acre mixed-use, master-planned community on the west side of Lake Pleasant, 30 miles north of Phoenix. It also has projects under way in Texas and Colorado.

Meritage Homes of Arizona is a division of Scottsdale-based Meritage Homes Corp. The parent company reported a Q1 loss of $45.3 million, or about $1.72 per share, with home closings down 26% and sale orders off 21% compared with a year earlier. Despite its reverses, the company says it is still looking to buy finished lots for additional single-family communities in the Valley. In late April, Meritage filed for a secondary offering of four million shares of stock to boost its working capital and fund other general corporate needs. The offering, which was priced at $20.50 per share, was expected to generate $82 million.

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