BLM land auctioned for $557 million

Jennifer Shubinski

Thursday, June 3, 2004 | 11:27 a.m.

More than 1,900 acres of land that attracted no bids at last year's federal auction because of what some said were unreasonable restrictions by the city of Henderson sold at auction Wednesday for more than half a billion dollars -- double the appraised value -- after at least one of those restrictions was lifted.

Among those restrictions developers balked at was inclusionary zoning, also known as work force housing, that would have required builders to offer a percentage of homes within the community developed on the land at affordable prices. Henderson officials eliminated that restriction after the land failed to sell last year.

John Ritter, chief executive of Focus Property Group, which bought the Henderson parcel for $557 million, or $287,113 an acre, Wednesday along with a consortium of seven home builders, said he bid this time around, in part, because the work force housing requirement had been lifted.

Comparatively, at the May 2001 Bureau of Land Management land auction, American Nevada Company and home builder Del Webb bought 1,905 acres for $47 million to develop what is now the planned community of Aliante.

The Henderson land was appraised at $250 million at Wednesday's and the November 2003 auction. At the last auction, it was estimated that on top of the sales price, infrastructure costs on the property would exceed $200 million. Neither Ritter nor the city of Henderson would speculate as to what today's costs might be, but Ritter said he expected it to be lower than previously thought.

"We worked diligently before the last auction and there were a number of issues -- one it was simply bad timing for our company, we had other projects that we were finalizing and there were lots of restrictions on the property," he said.

The home builders that joined with Ritter this time around to buy the land were KB Home, Toll Brothers, Woodside, Pardee Homes, Beazer Homes, Kimball Hill Homes, and Meritage (Perma Bilt).

The property ultimately will be divided among those builders, who will each construct new home subdivisions in the community, which has yet to be named. Focus estimates that the builders will open their first model homes in the new community at the end of 2006.

The land will be financed through a group of large national banks, Ritter said.

Pulte Homes was bidding against Ritter for more than half an hour, at times bidding the price up in $100,000 increments, eliciting boos from the audience that crowded around the two groups.

Ritter said he came close to his maximum bid, which he said was based on today's housing prices. The median price of a Las Vegas Valley resale home was $220,000 and $233,360 for a new home in April, according to Home Builders Research Inc.

He said the future community will most likely have a mix of home prices, densities and multi-story housing products.

Asked why Ritter didn't attempt to buy the land, appraised at $250 million, at the November auction when it appeared that no one else would bid at the time, Ritter (who didn't even attend the last auction) said: "That's what we're asking ourselves right now."

Henderson officials had mixed feelings about the auction.

They were glad the land sold but said it's a Catch-22.

"The resulting impact of high land prices is higher housing costs," said Bob Wilson, real property specialist with Henderson's city attorney's office property management division.

Wilson said work force housing is a matter of perception, and said builders only saw it in a negative light.

"The way we saw work force housing being produced, it would not be as impactful as builders thought it might be," he said.

The $557 million price tag for the 1,940 acres sold at auction Wednesday isn't the first time Ritter has stunned the development community with the price he's willing to pay for land.

Focus Property Group made a national name for itself when it bid $113.5 million for 485 acres ($234,020 an acre) at the BLM's June 2003 auction and $159.1 million for 992.5 acres ($160,302 an acre) at the November 2002 BLM auction.

Those properties are currently under development to create the 3,000-acre Mountain's Edge and the 1,200-acre Providence (formerly Cliff's Edge) master-planned communities.

At Wednesday's auction, 71 parcels in all totaling 2,532 acres of land sold for $707.2 million, or almost $279,300 an acre.

Many of the parcels, most of which sold in 1.25-acre, 2.5-acre, and 5-acre increments, sold for double their appraised value.

The most expensive land parcel was a 5-acre piece at the southwest corner of Lake Mead Boulevard and Rock Springs Drive, adjacent to U.S. 95. That land sold for $5.4 million, or more than $1 million an acre.

The cheapest parcel was 3.75 acres northeast of Russell Road and west of Stephanie Street, split by U.S. 95. That land sold for $240,000, or $64,000 an acre.

Land prices can very greatly depending on the zoning, location and improvements (sewer, water, roads) to the land.

The high prices discouraged numerous bidders, including Lynn McAlister, a recent Southern California transplant who was hoping to buy 2.5 acres to build four houses -- one for herself and three to sell.

The parcel she'd picked out was appraised at $300,000 and she was prepared to pay $600,000. The land sold for $1.2 million.

"To me it's unrealistic," she said of the prices. "If interest rates increase, a lot of people will be sitting with land."

Michael Mixer, senior vice president at brokerage Colliers International, Las Vegas office land division, said the final bid price of the land sold at the auction did not surprise him.

"I see those numbers in the normal buying and selling of the open market," he said. "It's the big large parcels that make those numbers that's surprising. They are not just something that can be developed and be done with. That's a project that will be here for quiet some time."

Another highly contentious bidding war erupted Wednesday between Olympia Land Corp. (Olympia Group) and developer Jim Rhodes for the second largest parcel offered -- 354.7 acres of land south of Southern Highlands. The Olympia Group is headed by Southern Highlands developer Garry Goett.

Olympia finally won the bidding and will pay $50.5 million, or $142,370 an acre, for the land, which was appraised at $22 million.

"We did Southern Highlands and we're not going to let anyone come into our area," Goett said. "We are best suited to develop this property."

After numerous defaults at the last auction, the BLM required for the first time that bidders provide a $10,000 refundable deposit. The deposit is lost if a winning bidder defaults.

Parcel purchasers were required to pay 20 percent of the successful bid amount by the end of business Wednesday.

Proceeds of Wednesday's auction will go toward the creation of parks, trails, natural areas, capital improvements, conservation initiatives, the purchase of environmentally sensitive lands and Lake Tahoe restoration projects. In addition, 10 percent of funds raised go to the Southern Nevada Water Authority and 5 percent to the state general education fund.