1650 E. River Road
Tucson Builder Sierra Pacific Looking for Buyer to Purchase $20M In Land Holdings
As reported in the Arizona Daily Star, local homebuilder Sierra Pacific is looking to unload $20M worth of their land holdings. Sierra Pacific is currently going through Chapter 11 bankruptcy protection (the bankruptcy was filed on June 27th, 2008). Sierra Pacific is trying to decide whether it would be best to unload all their land holdings here in Tucson. The holdings are in the following communities: Sonoita Ranch, Mountain Manor View, Vista Montana Estates, Countryside Manor, Andrada Ranch, Desert Point Estates, and Valencia Alvernon Commerce Center. Court records indicate that Sierra Pacific has enlisted Chapman Lindsey Commercial Real Estate Services brokers James Marian and Dan Feig.
As already covered in prior posts, if you’re looking to make a purchase from a small local builder, make sure you have your earnest monies escrowed through a third party escrow company. It is not known what options buyers with homes currently under construction with Sierra Pacific will have in regards to their homes and earnest money. I think there will be more small builders to fall in the Tucson area over the next 18 months, and a lot of these smaller builders could go under if the market here in Tucson Arizona does not make any gains. The real estate market in Tucson has been especially hard on builders. Most builders build on the outskirts of town since that’s where large tracts of buildable land are. Couple a very hard real estate downturn with a spike in gasoline prices, and it makes a hard sell to get people to move out of town to buy a home. In Sierra Pacific’s case, their homes never really seemed (at least from what I saw) as if they were worth the money. During the super hot real estate market, Sierra Pacific also upset the real estate broker community by lowering their real estate commissions for sales brought to them. Even during the red-hot days of 2005, I heard many stories from past employees of Sierra Pacific who said it was run haphazardly. They always seemed to have issues during the construction process. It is no surprise that Sierra Pacific is re-organizing. My guess is that they will sell their land holdings and close up until a more opportune time to begin building again. This is assuming those land holdings will allow them to be able to pay off their creditors.
Currently the home building business in the country is in trouble. It was just reported this morning that Home Builder Sentiment Index is at an all-time low of 16. This index reflects the opinion of homebuilder executives across the country. The higher the number, the better the homebuilder business. The scoring is from 1-100, with 100 being the best market in the history of real estate. Anything under 50 means the business is in decline. A 16 is horrendous, and it signals that the industry is in serious trouble. Now, all the large national builders should be able to “keep the doors open.” I don’t think many will go out of business. However, there is talk in the industry about possible mergers. Over the past 5 -10 years, Tucson has become a large market for national builders. In the past, Tucson had very few large national builders. Now, almost every national builder has a presence.
Anyway, in this market, anything is possible. If you are looking to make a purchase, it’s certainly not a bad time to go see the local builders and see what they offer. You may be surprised by how interested they are in your business.