BLM Land Auction Stuns Observers
by David Berman
In a two-way bidding war that stunned those in attendance at today’s (June 2) Federal Bureau of Land Management (BLM) auction of government-owned land in the Las Vegas Valley, Focus Property Group of Las Vegas
http://www.focuspropertygroup.com emerged the victor over Pulte Homes by paying $557 million to acquire one of the choicest pieces of undeveloped land in the area.
The 1,940-acre parcel, located immediately west of Del Webb/Pulte’s Anthem master-planned community in Henderson and carrying a minimum bid of $250 million, failed to attract any bids when it was first offered for sale at the previous BLM auction in November, 2003. But a combination of factors, including the startling jump in southern Nevada home prices over recent months, along with the willingness of the City of Henderson to relax or remove some of the stringent development requirements previously asked of property buyers, apparently made acquisition of the parcel more desirable for developers who had previously shied away from bidding.
Almost all of the 71 parcels offered for sale at this auction, some as small as two or three acres, sold for several times their appraised value, leading many of those in the standing-room-only crowd gathered at the Sam’s Town Live performance hall, site of the auction, to speculate on what the nearly 2,000-acre parcel, the final parcel up for bid, would command for a selling price. When all was said and done, the combined 2,532 acres up for sale, appraised at a combined total of nearly $310 million, sold for more than $707 million.
Though several bidders participated in the early stage of competing for the huge parcel, all but Focus Group and Pulte soon dropped out. As the bidding escalated, mostly by $100,000 amounts, the two bidders quickly leapfrogged each other while the bids moved over the $400 million mark and then passed the $500 million mark. While the drama developed and the atmosphere became electric, the crowd all stood and were almost transfixed as they stared at the two sides they raised their bids almost without hesitation. In addition, a full complement of newspaper reporters and TV cameras were at work recording the action.
At several points during the latter stage of the bidding, the auctioneer gave one side or the other a “time out” to allow for quick cell-phone consultations between bidder and advisers located off-premises. As the drama neared its conclusion, Focus Group CEO John Ritter seemed to gain crowd support, based on their murmurings, as he would raise his bid by large amounts, a half-million or more, while the Pulte bidder was more tentative with $100,000 and even $50,000 increases.
Finally, after many tense minutes, the Pulte people said they were through and Focus Group emerged the winner.
This writer participated in an impromptu press conference held by a smiling John Ritter on an auditorium exit ramp after the auction concluded. Ritter revealed that his winning bid was on behalf of a consortium of builder-partners whose names are well-known to those familiar with the homebuilding community: KB Home; Toll Brothers; Woodside Homes; Pardee Homes; Meritage Homes; Beazer Homes; and Kimball Hill Homes. Ritter said the property will ultimately be divided among these builders, who will each construct new subdivisions in the community, with the first model-home openings expected to occur in late 2006.
When Ritter was asked how high he and his group were prepared to go in the bidding, he said, “We were just about there, and couldn’t have gone much higher.”
Ritter was also asked if he found the process nerve-wracking. “My sweaty palms and nervousness came before the bidding started,” he replied, “but I’ve done this before, and once the bidding starts I just find it rather exciting.” He added, however, that he did not expect the final selling price would get as high as it did.
I asked Ritter if, in view of the fact that the adjacent age-restricted communities of Sun City Anthem and Sun City Solera were due for build-out within the next three years or so, any of the development in the newly acquired parcel would include neighborhoods strictly for seniors, and his emphatic answer was no. “That’s not what our builders do,” he said, “and we have no plans to build anything on this land for that market segment.”
Ritter was asked why the land he found so desirable at $557 million was not desirable at $250 million seven months ago. “That’s what I’m asking myself,” he replied, though he did note that the factors of soaring home prices and City of Henderson's relaxed developer requirements helped make it attractive at this time. And when asked if there is any risk of pricing buyers out of the market because of the high purchase cost that must be recouped, Ritter said he remains confident that the economics of the project will allow the construction of housing product that will be affordable to a wide spectrum of buyers.
As for his opinion about the future of residential development in the Las Vegas Valley, Ritter echoed a view being voiced increasingly in local circles: “Our land supply is not inexhaustible, even with these BLM auctions. You can definitely expect to see more vertical development, both in the form of high-rise and mid-rise housing.”