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Focus on growth
With an innovative business model, developer looks to expand regionally
 
By Jennifer Shubinksi / Staff Writer

From left, Focus Property Group Chief Executive John Ritter, Chief Operating Officer Tom DeVore and Focus Commercial Group President Andy Flaherty are seen on the balcony of their new office in northwest Las Vegas.
Photo by Sam Morris

Focus Property Group is redefining the rules of development in Las Vegas not only in the way it does business, but also in how it plans to develop its future communities.

John Ritter, chief executive of Focus Property Group, will be the first to admit it: He's a bit of an oxymoron.

In industry publications he's been described as a "tree hugger." Ritter describes himself as a liberal Republican who loves the outdoors and happens to be the developer of some of the Las Vegas Valley's largest master-planned communities under construction.

"I'm kind of a hippie developer," Ritter said. "We develop as sensitively as we can."

When Ritter and partner Andrew Flaherty, president of Focus Commercial Group, came to Las Vegas in 1987, after moving from Phoenix and its busted real estate market, they didn't expect to stay in Las Vegas long.

Their small office with a handful of employees has since grown to a company of more than 100 people. It has been involved in transactions totaling more than $4 billion and holds a property portfolio with a value of about $1 billion.

Some of the company's current projects include:

• Mountain's Edge -- 3,000 acres southwest of Rainbow Boulevard and Blue Diamond Road.

• Providence (formerly Cliff's Edge) -- 1,200 acres near Interstate 215 and Hualapai Road.

• Henderson project (yet to be named) -- 1,940 acres south of the Henderson Executive Airport and west of Anthem.

• Kyle Canyon Gateway -- 1,712 acres roughly south and east of Kyle Canyon Road off U.S. Highway 95.

"Now I consider Las Vegas my home," Ritter said. "I'll always have a place here."

Ritter and his staff are helping shape the future of the Las Vegas Valley, and quite possibly the way people live in it, all while looking to the past as a guide.

But in order to do that, Ritter and his staff had to rethink the way business should, or rather can, be done in the Las Vegas Valley as land continues to become as much as scarce of a commodity as the valley's water.

"Land is getting so expensive and because BLM (Bureau of Land Management) is selling it in relatively large parcels, it pushes the price upward to $400 (million) to $500 million," said Tom DeVore, the company's recently appointed chief operating officer and former general counsel. "Neither we nor any one of the big national (homebuilding) companies wanted to make that investment in a single market. We were looking for a way to share the costs and share the risks."

The answer was a company formed by some of the nation's largest homebuilding companies and Focus Property Group that would bid for land jointly at government land auctions. It was certainly the first time in the Las Vegas Valley, if not the nation, that numerous homebuilders and a developer teamed up to purchase such large tracts of land.

The result was that two different consortiums have successfully bid at the past two BLM auctions, purchasing 1,940 acres in Henderson for $557 million and more recently bidding $510 million for 1,710 acres in northwest Las Vegas.

"Everybody had a common goal and no one partner or faction had anything over the other ones," DeVore said. "The other reason it works well is it's cutting out the middleman. Master developers buy the land, improve it and mark it up to builders. Hopefully it benefits everyone."

Jim Widner, president of KB Home's Nevada division, said the homebuilder owns land in Focus' four Las Vegas master-planned communities now under construction.

"On latter pieces they've done some things, such as putting together consortiums, because the land parcels are too big for any one developer to take on," Widner said. "By putting a group of end users together, the developer pays the best price for the land. He's (Ritter) done a good job."

A management fee is paid to Focus Property Group for the day-to-day planning and management of the project, from preauction to completion of the master-plan improvements, he said.

Focus Property Group also is an owner in the projects. At the Henderson plan, called South Edge until a permanent name is chosen, Focus Property owns all 200 acres of commercial land along with some residential parcels that will be sold off to builders that weren't involved in the original consortium.

The 1,940-acre Henderson deal marked the first time Focus Property Group went to Wall Street for financing. It is rare for a real estate company to go to Wall Street for financing; typically only large publicly traded companies will obtain financing from Wall Street. And unlike those large companies that get their company rated by the rating agencies, Focus sought successfully to get the transaction itself rated.

"It definitely was the first time anyone in Nevada had done a transaction like that, a pure real estate deal," Devore said. "Of course it had been done for Strip hotels, but it's a first as it relates directly to a land transaction."

Focus Property was able to obtain $535 million in acquisition and development financing for the 1,940-acre project in Henderson from a collection of institutions led by JP Morgan Bank One. Kyle Canyon was financed the same way, Ritter said.

"JP Morgan kind of created a new structure for the industry. I imagine we'll see more of these deals," Ritter said.

In Focus' two latest projects, it is trying to rethink the way communities have been developed in the Las Vegas Valley.

Kyle Canyon, in northwest Las Vegas, will be the company's most environmentally friendly project to date, Ritter said.

At its Henderson master-planned community, Focus Property Group is working on developing a community that is a throwback to simpler times.

"It's a return to old-fashioned neighborhood design, a traditional neighborhood design," Ritter said. "We're utilizing great planning principals of the past, many of them from Europe, and combining that with new construction techniques and technologies."

The Henderson community will be dense, but it is being designed with lots of open space so that it is a pedestrian-friendly community, he said. Plans are for smaller neighborhoods surrounding community gathering places.

"As the yards get smaller and houses get smaller, which is a key issue of affordability, you have to provide more community space," Ritter said.

How the two communities might influence future development in Las Vegas will be open for debate for some time.

"It may be two or three or four years before anything is built in Henderson and a couple years after that for the Las Vegas project (Kyle Canyon) -- for the amount of time it takes to go through planning and design, and get all the infrastructure to the site," said Robert Fielden, partner at RAFI Planning, Architecture, Urban Design. "It's going to be a while before we know what impact they have."

Fielden said despite the sprawl of the valley and the heavy role cars play in people's lives, it is possible to create a small-town community environment. The question will be whether the homebuilders and future developers follow through with the plan.

"I only hope that the builders build houses as nice as the infrastructure, in contrast to Summerlin and Green Valley," he said. "Both were well designed and well planned, and then developers bought the property and increased the zoning to increase property rates."

Fielden said Focus Property Group has to think outside the box on its latest two projects not just to attract people to them, but because land costs have gone so high since the days of the valley's "traditional" master plans of Green Valley and Summerlin.

"He's (Ritter) going to have to do things differently, and in doing things differently, he has to identify a way to get greater density living but additional amenities so they actually have a better quality of life than in Green Valley or Summerlin," Fielden said. "We won't know that until it gets built and we get some of those units open for the public to review and judge. From my conversations with him, his heart is in the right place."

While Focus Property Group has its hands full in the Las Vegas Valley, it also is hoping to expand into a regional development company.

Land costs and land availability are a big reason the company is looking to expand elsewhere, DeVore said.

"What is available is extremely expensive. We're looking outside the valley for the large contiguous pieces builders are looking for," he said. "Pahrump is a place where the builders want to go. They want to start building houses there."

Focus Property is currently working on a 2,000-acre community in Pahrump and another 450-acre community in Victorville, Calif. The company also owns an 80-acre commercial site in Denver, across from a new mall.

"We've looked at Arizona, the Denver area and haven't found anything, but we're still in the process of looking," DeVore said. "We're looking in a number of areas in southern California. We want to expand regionally; that's one of our goals."

Jennifer Shubinski covers real estate and development for In Business Las Vegas and is sister publication, the Las Vegas Sun. She can be reached at (702) 259-8832 or by e-mail at js@lasvegassun.com.

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