There weren’t a lot of takers Tuesday for federally owned lands on the auction block.
Thirteen of 29 parcels the Bureau of Land Management put up for sale found buyers. The land purchases totaled 357.6 acres of the 597.6 acres available, while the bureau raised $19.2 million of the $29.7 million it set as the parcels’ total minimum price.
Take out the biggest parcel, a 247.6-acre tract at Hollywood Boulevard and Cheyenne Avenue, and “a very small portion of what was available sold,” said Larry Canarelli, founder of American West Development.
Most of what sold went at its starting price, which the bureau sets at fair market value.
The biggest premium by far was on a 25-acre parcel near the Henderson Executive Airport and the Inspirada master plan. The 25-acre property, zoned for 24 to 48 multifamily units per acre, had a starting price of $2.5 million. Companies including multifamily developer Nevada West Partners and home builder Lewis Operating Corp. were among the bidders, but American West came away with the parcel for $4.16 million.
Canarelli said he was willing to pay up to $5 million for the site given its location and density.
The parcel could also mean a new market segment for American West, which currently doesn’t build multifamily communities. The company isn’t interested in straying from its single-family business model now, but it could be ready to develop the parcel in three to five years, Canarelli said.
The largest parcel sold for its opening price of $1.85 million. Only one company — Sao Tome LLC — bid on it. An entity search through the Nevada Secretary of State’s office turned up no information on the business or its principals. A records search through the Clark County assessor didn’t find any other local company holdings.
The acreage came on the auction block for $2.59 million in January 2014, but went unsold because of development constraints: It has a gravel pit that must stay, its mineral rights belong to a third party and it’s in the Nellis Air Force Base’s live-ordnance loading area.
Eleven other parcels ranging from 1.25 acres to 17.5 acres sold to companies that are auction regulars. Buyers included home builders and developers Olympia Land, KB Home, and DR Horton. The Roohani family, which owns development companies and has been amassing a land portfolio partly through the auctions, also bought several parcels.
The auctions happen after interested potential buyers ask cities to nominate parcels for bidding. So why did so many prospective buyers sit out Tuesday’s sale?
For starters, some buyers wait until after a parcel is officially accepted for auction to do due diligence. Once they look at a site more closely, they might discover problems with drainage, hydrology or other issues.
In other cases, the purchase of a neighboring parcel that would make a deal work falls through, so the developer no longer wants the tract he nominated for auction, Canarelli said.
Pricing may also be an issue. The fact that most of the parcels sold for their opening price may show little wiggle room when buying, said Brian Gordon, a principal in local research firm Applied Analysis.
Land appreciation has slowed, and flatter new-home prices plus the cost of development have hurt builder profit margins and left them with “less flexibility to push the bounds on land-acquisition costs,” Gordon said.
Some of it may also have been a quality issue.
“There aren’t very many good sites that can be nominated right now. The best sites have already been nominated,” Canarelli said.
None of that means the market’s underlying fundamentals are suffering, Gordon and Canarelli agreed.
“Looking at the overall fundamentals of the economy and the direction of the real estate market, there are more positives than negatives to point to,” Gordon said.
American West has purchased just over $105 million in land across Clark County since January 2014, and roughly a third of that — $35.2 million — has come through bureau auctions. The company has been the largest buyer in the four auctions of the last 15 months.
Canarelli said he has nominated additional parcels for sale in the next auction this fall, and he expects steep competition for the plots. With local new-home sales up 25 percent to 30 percent in 2015, the “grab for land will get more pronounced,” he said.
“The next auction will be interesting.”
Proceeds from the bureau’s land auction go to Nevada’s education fund, the Southern Nevada Water Authority, public parks and the purchase of environmentally sensitive land.
Previous auctions have funded the $25 million renovation of Lorenzi Park, as well as the visitors’ center at Red Rock Canyon, outdoor features at the Las Vegas Springs Preserve and amenities at Lake Mead.
Contact Jennifer Robison at email@example.com. Find @J_Robison1 on Twitter.