Friday, Nov. 7, 2003 | 11:13 a.m.
The Bureau of Land Management said it will have to do a re-evaluation of the 1,940 acres that no one bid on in Thursday's Las Vegas Valley land auction. Officials said they will have to look at when -- not if -- the land should be put up for sale again.
In what could be construed as a mass demonstration against the appraised value of the land or the restrictions the city of Henderson places on developers, bidders began leaving the BLM auction as the largest -- and most expensive -- parcel, which was in southwest Henderson, came up for sale.
The land, 1,940 acres south of the Henderson Executive Airport, was appraised at $250 million and had been the subject of speculation in the development community as to whether or not any one would bid on it. Many developers have said the price and the infrastructure costs -- an estimated $214.4 million above the appraised price -- didn't pencil out into a workable deal.
Among many of the restrictions placed on the land was low-density housing, or building fewer houses per acre, a high concentration of green space, and building a certain number of affordably priced homes, said Richard Lee, vice president/director of public relations for First American Title Co. and a local real estate expert.
"Every builder in the world would love to make affordable housing, they are all concerned about the high costs of housing, but all it would do is drive up the cost of housing for others," he said. "It would be very difficult to make that pencil. The economies of scale would make that very difficult."
It was clear before the auction started that there would be limited bidding on the parcel. Only one party placed the required 20 percent deposit in the form of a $50 million certified registered check with the BLM before the auction began. BLM spokesman Phil Guerrero said he did not know who registered to bid on the parcel and said the check was returned after the auction.
BLM officials said they were disappointed that nobody among the standing-room-only crowd of at least 800 people bid on the parcel.
"Our goal is not to make as much money as we can, but to let the public set the market value," Mark Morse, BLM field manager, said.
But it was clear many thought someone's number -- either the BLM's or the city's costly requirements -- were too high.
Many developers had prepared written statements to explain why they decided not to bid on the land.
A company -- formed by American Nevada Company, Pulte Homes, KB Home of Nevada, Lewis Land Co. of Nevada, American West Homes and Olympia Group -- that was to originally bid on the land said in the end that a purchase "would not create the opportunity to develop an economically viable project."
John Kilduff, president of American Nevada and manager of the consortium, said the project would have been challenged by the $250 million appraised value and the cost of infrastructure and other requirements by the city of Henderson.
American Nevada is owned by the Greenspun family, owner of the Las Vegas Sun.
"We were concerned that the vast majority of people living here would not be able to afford the estimated average home price required to fund the land, development costs and other requirements," he said.
Kilduff said if the BLM had released a larger parcel at a price that was more "sensitive" to development costs, it might have been possible to develop a quality project.
He said over the past couple of years the BLM has limited the amount of land that is released for sale, resulting in an increased demand for land, leading to higher land prices and more expensive housing.
In a joint venture in the May 2001 BLM land auction, American Nevada and Del Webb bought 1,905 acres for $47 million to develop what is now the master-planned community of Aliante.
Focus Property Group, which made a national name for itself when it bid $113.5 million for 485 acres at the BLM's June 5 auction and $159.1 million for 992.5 acres at the November 2002 BLM auction, also chose not to bid on the 1,940-acre parcel.
Focus Property Group Chief Executive John Ritter, who did not attend Thursday's auction, said the company worked for a year on due diligence and pre-engineering on the site.
Ritter said he thought the appraised value was reasonable, but that infrastructure requirements and development constraints "contributed substantially to our decision not to participate in the bidding."
To have land auctioned, a company or person must first ask the county or a local municipality to agree to have the BLM put the land up for auction. The BLM then does environmental testing before any land is put up for auction. The process takes about a year. Henderson officials said no one approached them to put up the parcel and they nominated the land themselves.
While some said Henderson had too many restrictions on the land, officials within the city said BLM's appraisal price was too high.
Henderson City Councilwoman Amanda Cyphers said she's glad the sale didn't happen.
Cyphers said she's worried the high price of the land would have meant too many expensive homes.
Hopefully, the lack of buyers will show the BLM that it was asking too much, Cyphers said.
"It's sending a message to the BLM that they've got to come down on their price," she said.
Cyphers said the development standards the city has asked for should not be weakened to make the development more affordable for developers.
"I'm not going to sacrifice my city," Cyphers said.
The BLM said it stands by its $250 million appraisal.
"We thought the appraisal was on the money. The figure is a huge figure, and that's a lot of money," Morse said. "In talking with the review appraiser we thought it was a fair market value."
A review appraiser is a second appraiser who looks over the original appraiser's work.
Guerrero said the 1,940 acres will be sold again, but to the chagrin of developers, it will most likely be even more expensive than the current $128,866 an acre. The appraised value is good for one year.
"There is no doubt it will go up for auction again -- 'when' is the big question," he said. "That was the original intent and that is still our intention."
Since the BLM auctions began in 1999, the average price of land per acre sold at auction has continued to increase. In November 1999, the average price of land was $90,271 an acre. In June 2003 the average price of land sold at auction was $233,739 an acre.
At Thursday's auction about 734 acres were sold for an average price of $173,245 an acre for a total of $127.1 million. While less than the June auction, Thursday's composite price was almost 26 percent above appraised fair market value, the BLM said.
Those numbers are subject to change if people fail to come up with the money. Six hours after Thursday's auction, six people already had defaulted on their bids, according to BLM officials.
Land not sold at Thursday's auction, not including the 1,940-acre parcel, was to be sold via Internet auction next week. The BLM decided against that plan and may hold the land until the next live auction.
While the per-acre price for the 1,940-acre parcel is less than the average price of land sold at Thursday's auction, Kilduff said it isn't a fair comparison.
"Every parcel is unique. You have to look at its location, infrastructure costs," he said. "It's a combination of what the BLM appraised it at and what the city is requiring."
An auction is planned for next spring and the 1,940 acres may be reoffered at that time, Morse said. Currently the spring auction has about 400 acres slated to be sold.
"That we received no bid is something we'll have to look at," Guerrero said. "We will work with our partners from the GSA (General Services Administration), and we will have a meeting to discuss the auction."
Henderson Mayor Jim Gibson said he was not surprised the largest piece of property wasn't sold.
"The appraisal was very high, I expected this might happen," Gibson said. "But I think it'll eventually sell and eventually be developed."
Gibson said the unsuccessful sale wasn't altogether bad for the city.
Gibson said it would have been bad for the city if developers had decided to "risk it all" and buy the property when they weren't sure it would be successful.
"There would be the potential for failed projects. We don't need the grief of dealing with someone who is always threatening to just shut it down," Gibson said.
Almost all the parcels auctioned Thursday were sold for more than the appraised value.
Most of the 51 parcels sold were small 2.5-acre and 5-acre parcels that elicited spirited bidding. At one point during the auction, when it became apparent that most of the 2.5 acre parcels, many appraised between $170,000 to $370,000, were selling for much more, bidding often began at $500,000.
While the 1,940 acres didn't sell, two large parcels did.
Pulte Homes bought 480 acres of land adjacent to its Anthem community for $66.5 million, or 138,541 per acre. There were no other bidders for the land, which lies near Henderson but is outside Henderson's jurisdiction.
Chris Haines, president of Del Webb, Nevada area, a division of Pulte Homes, said the company plans to build a fitness-oriented community under its age-restricted Del Webb brand and a family-oriented community under its Pulte brand.
Haines said he was a little surprised that nobody bid against Pulte.
"It's an incredibly beautiful piece of property and this is the hottest (real estate) market," he said. "It certainly is a lot of money for a piece of property and we didn't know what to expect as far as other bidders."
When Del Webb officials raised their blue placard No. 131 and opened the bidding at $66.5 million, the din in the auditorium quieted down as the auctioneer listened for another bid.
"My heart was racing like crazy," Haines said.
Kimball Hill Homes bought 115 acres of land within Henderson city limits for $28.4 million, almost 65 percent above the appraised value of $17.3 million.
Stan Gutshall, area vice president for land, said the company plans to build a community of detached and attached homes on about 500 lots.
"We have (one community) planned and with these two projects we have enough to maintain our presence in Henderson," he said.
The money raised from Thursday's auction will fund the purchase and protection of environmentally sensitive land in Nevada.
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