Tuesday, Nov. 15, 2005 | 9:01 a.m.
Developers and industry experts say Bureau of Land Management auctions have been a mixed blessing: The auctions have provided much needed land, but some say the process itself has had an adverse effect on land prices.
"I think some prices have been inflated because of three very competitive companies overall and everyone else wanted to play like the big boys," said Richard Lee, vice president at First American Title Co. and a local land expert.
Since 1999, when the BLM began auctioning public lands, American Nevada Company, Focus Property Group, Olympia Group and, to some extent, Pulte Homes have been slugging it out over the largest parcels of land for future master-planned communities.
American Nevada is owned by the Greenspun family, which owns the Las Vegas Sun.
Those companies will most likely face off again in Wednesday's federal land auction. The BLM will auction 3,176 acres in 87 parcels, ranging in size from 2.5 acres to more than 2,000. Among the offerings are parcels that are 2,073 acres and 601 acres, to be sold together, in North Las Vegas, just east of Aliante. The opening bid is set at $522.4 million.
Development companies didn't always face a competitive bidding process for developable land tracts in the Las Vegas Valley.
For years the BLM negotiated to swap sensitive lands controlled by developers for large land tracts more suitable for development throughout Southern Nevada.
The process came under fire after an audit by the Interior Department's inspector general found that the federal government was losing millions of dollars through the exchange process. The 1996 audit found that in four land exchanges alone, two of which involved the Olympia Group, taxpayers were shortchanged at least $12.2 million from 1993 to 1995.
Garry Goett, Olympia Group president and chief executive, declined comment for this story.
As a result of that investigation, the Southern Nevada Land Management Act was passed by Congress in 1998. It did away with land swaps and established the auction process. The act created the so-called disposal boundary that established which lands can be auctioned.
John Ritter, whose Focus Property Group has bought more than 5,000 acres at BLM auctions for more than $1.3 billion, said the process is now much more honest and open.
"The only fair way to determine the actual value of a property is to sell it on the open market to the highest bidder," he said.
John Kilduff, president of American Nevada, said the auctions have been a mixed blessing.
"The sun is shining on the process now, which wasn't the case during the land-swap days," he said. "Over the years the lack of supply (of land) and increased demand resulted in the inability to provide affordable or attainable housing for a large portion of our population."
American Nevada was the first company to buy a large swath of land at a BLM auction. The company bought 1,905 acres in North Las Vegas for $47.2 million in May 2001. That land has become the master-planned community Aliante.
"People thought we were crazy," Kilduff said of the purchase.
But hindsight is 20-20 and the $24,776 an acre American Nevada spent on the land appears to be a steal compared with land prices today, which can be more than $800,000 an acre on the open market.
Kilduff blamed the auction process for helping push land prices to astronomical levels.
"You can see that as a result of the auction process, land has become very expensive and not readily available," he said. "It's supply and demand. By constraining the supply of available land, it's become much more expensive."
For land to be put up for auction, local municipalities must nominate lands to be auctioned off. Many in the development community have been critical of the process and have said that not enough land is being released fast enough to satisfy the valley's appetite, driving up prices at the auction and in private-party sales.
At the first auction in November 1999, 105 acres were sold for $9.5 million, or an average price per acre of $90,476. At the most recent land auction in February, 2,282 acres were sold for $599.9 million, or $262,883 an acre. That's a 190 percent increase in price in less than seven years.
Overall, the BLM has pulled in more than $1.9 billion for more than 10,000 acres. About 46,000 acres remain within the BLM disposal boundary to be auctioned, although an estimated 5,000 acres will likely be set aside because of environmental concerns.
"It has been amazing to watch the growth of the sales -- the growth of the program itself, the popularity of the sales, of the bidding and the benefits that have been (made available)," said Jo Simpson, BLM Nevada spokeswoman.
John Restrepo, principal of Las Vegas-based Restrepo Consulting Group, said it is not necessarily the auction process that has driven up land prices.
"What happens is they (developers) keep increasing the price as high as they can go because of the perceived shortage of land, and that drives what people bid," he said. "It's hard to find 2,000 acres out there, and so when it's auctioned, a lot of people go after it.
"The auction in and of itself is not a problem, it's what people are willing to bid."
He did say having more frequent auctions, instead of twice a year, or more land auctioned off could help the pressure on pricing.
Lee said the prices paid at the auctions are simply a reflection of the market.
"The auctions are a pretty realistic barometer of the market," he said. "If the market is slowing down, developers do not spend as much money."
As to what will happen at Wednesday's auction is anybody's guess, Lee said. But if the market is any indication, prices will likely remain flat as compared to past auctions.
"Hindsight is a wonderful thing," Lee said. "If we could only bottle it and sell it before these BLM auctions."
Jennifer Shubinski can be reached at 259-8832 or at [email protected].
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