When he was growing up in Northern Nevada, Harvey Whittemore envisioned himself as a doctor or lawyer. Little did he know he would lead the way as a developer to build a city from scratch with a proposed 159,000 homes.
That's what Whittemore faces as the developer of Coyote Springs, which straddles the line between Clark and Lincoln counties. In 1998 he and a partner purchased 43,000 acres from Aerojet-General Corp. for $15 million.
A graduate of UNR who attended law school at Arizona State, Whittemore clerked for the New Hampshire Supreme Court before he returned to Nevada in 1978 to work for law firm Lionel Sawyer & Collins. He gained experience in administrative law working with natural resources, planning, zoning and gaming.
Whittemore is a former powerful lobbyist at the Nevada Legislature who dealt with controversy from time to time. And he's still in the middle of some controversy. Environmentalists are challenging a land exchange involving Coyote Springs and a conservative group is suing the federal government to seek documents that might link Sen. Harry Reid, D-Nev., to approvals for Coyote Springs.
Question: How did you get involved in the development business?
Answer: I loved the planning, zoning and entitlement piece of it. I had always made investments with respect to land, and I thought this was a natural outgrowth of some of my interest.
How did Coyote Springs come about?
In the early 1990s, I was involved in a project in Sparks called Red Hawk Wingfield Springs. My partner was David Loub, the chairman of Countywide Mortgage. David (who died in 2005) asked me to come in and become a partner in the resort at Red Hawk. As part of that, I was presented with the opportunity to look at this piece. He and I decided to pursue the acquisition of Coyote Springs.
Why this piece?
You take a look at it — the most amazing thing about the desert Southwest is there is limited public land and limited water and the confluence of this piece of land having such significant water resources. Being a fresh and new canvas excited me as a possibility for development. It was really the size, 43,000 acres, the largest privately held piece of land within 60 minutes of Las Vegas, and knowing that Las Vegas never really had this type of opportunity for a bedroom community,.I thought it made sense to look at. In 1998 we purchased the property and started the development process and in 2002 we got the development agreements approved and since then we have been developing the land.
Why did the Aerojet-General Corp., which planned to build facilities related to the MX missile, sell you the land?
Aerojet decided that parcel no longer fit into their development and management plans. They originally acquired the land through an exchange with the federal government in 1988.
There is a lawsuit by two public land advocacy groups challenging a land deal they say helped you. What about that?
That's the big misunderstanding with respect to Coyote Springs. Coyote Springs is a parcel of 43,000 acres, of which approximately 30,000 are owned in fee and the remainder is lease. At the time in 1988, it was 200 years. When we acquired it in 1998, it was a 190-year lease. That property was reconfigured to move some of the leased land from the center of the property to the eastern boundary. There was never a land exchange involved in Coyote Springs at all, other than the original land exchange that took place in 1988. People, for purposes associated with trying to stop the development or cause problems, characterize this as some sort of land exchange. I have never had a land exchange with the federal government with respect to Coyote Springs.
What about the controversy?
What we did, and this is very important — they came to us and said the eastern boundary is more important from a biological diversity perspective and to protect the desert tortoise. What they did was approach us and ask if we could move the leased land from the center of the property to the east. The BLM and U.S. Fish and Wildlife Service said, "We would like your cooperation."
How did it affect the development?
We were in the middle of planning the development so under either scenario we would be able to develop the property. This probably cut down some of our usable land. If we pushed the point and tried to keep the land as it was originally configured, we probably would have made a little bit more money. We felt it was the right thing to do because we were approached in a spirit of cooperation from the federal agencies.
What about the people pushing this issue?
I think they are totally misguided or they are, I think, inappropriately telling the story that what they are proposing is beneficial to the endangered species, when in fact it's the exact opposite. ¦ If the federal agencies said going back would be a better configuration, we would go back to that configuration. People don't appreciate the fact that we have 30,000 acres of developable land and 160,000 units approved in two counties.
What is happening now at Coyote Springs?
The development is ongoing. If you go out there, you will see the water facilities being built, the sewer facilities being built. We have a development agreement with Clark County and Lincoln County. We have a general improvement district responsible for delivering water to our first customers. That is all going to happen. Detention basins are being built on land to the west of Highway 93. We are protecting the species, as we were required to do. We have won environmental awards in the EPA region. We are very proud of everything that we are doing and excited about it. It is a very neat thing to build a new city.
What are the plans?
The plan calls for 160,000 units on 43,000 acres. We have approval for 16 golf courses in two counties. We will never build all 16 golf courses. I don't think we will ever build 160,000 units. That's for my children and grandchildren and others to decide.
What is the timeline for all this?
The exciting news is we have been at this for nine years and we are less than 12 months away from having homes. The golf course is ready for play. If you take a look at the course today, it is going to be one of the top ones in the region, and, I believe, with the PGA as one of our development partners and Jack Nicklaus and Pete Dye, we are going to have a phenomenal place.
When will they start building model homes?
In March. The first cement is being poured for curbs. ¦ The community center is being built. The gymnasium walls are up.
What is the phasing?
The first phase on our plans is approximately 10,000 homes. That is over the next probably five to eight years. The first phase is quite large when you are talking about something like this. It is not a typical development like you have in the Las Vegas valley where you have a couple of hundred acres or 2,000. The first phase in Clark County is 6,881 acres. You take a look at the 43,000 acres; it is almost twice as large as Summerlin.
When will people be moving to Coyote Springs?
People will be moving there in the last quarter of 2008 and the first half of 2009.
How did the deal come about with Pardee Homes?
Pardee has been selected as the master developer for all the single-family and multifamily homes. They have an option to purchase land every year. What they have done is take down the first almost 2,000 acres and started the process of developing the planning and different model types. Our deal with them is what's known as a buyer's option. They come in every month and make payments pursuant to an option (agreement). Pardee is an unbelievable partner to work with. They have been extraordinarily strong and responsive, have a great environmental record and understand what you have to do in these types of environments.
How did you select them?
It was basically the result of negotiations. They were willing to come in at the level I wanted in terms of price per acre, and, more importantly, make a commitment that they were going to develop the way we wanted.
Could they pull out at some future stage under the deal?
They could but it's highly unlikely. They have so much invested in the property right now. We think we made the right choice.
What is Pardee Homes paying her acre? There was a transaction listed on assessor records last year in which they paid $25.5 million for 3,605 acres ($7,074 per acre).
That is private. I can't disclose that.
How much have they invested so far?
They are putting in the infrastructure. I have to pay for my portion I retain and use. Let me put it this way, anybody who looks at this projects knows they have in excess of $100 million invested.
What is your income other than the sale of the land?
Under our agreement with Pardee, we have retained 100 percent of the commercial, the golf course and resort hotel. Everything other than the single-family and multi-family, our company has retained.
What about problems with water?
We have over 4,140 acre-feet, which under the utilization is enough for the first 10,000 homes. Then, other privately held resources we have were 40,000 acre-feet of certificated water from some of my ranches throughout Lincoln County. These are certificated rights from the aquifer that we believe pursuant to Nevada law will be available for use in the Coyote Springs area.
How do you envision Coyote Springs?
It truly is going to be a town away, a world apart. It is going to be a little community that serves as both a bedroom community and a standalone community. It is going to have its own hometown village and churches, schools and infrastructure. With the proximity to Las Vegas, we see this as an alternative to Pahrump, Mesquite and other communities people presently use to access employment or entertainment.
How much will homes cost?
Everybody knows land is a finite commodity in the Las Vegas area, and we think that Pardee is going to have a huge price advantage compared to its competitors, and that's going to be reflected in price. I think you are talking 10 to 20 percent below Las Vegas market.
But the Las Vegas market price keeps coming down.
That is one thing you are going to have to look at and say long term what is going to happen with respect to prices in Las Vegas. People who have to sell their products because they built their homes already, it wouldn't surprise me if prices would be in the $105 to $115 per square foot range. I think if you are a good shopper today, you can buy that. There is no way to replace those homes under present market conditions for that price. What does that mean on a macro basis, it means that I believe sellers today are having to sell below cost.
Who is going to live in Coyote Springs? Is it just going to be retirees?
I don't think there is any sense that it is going to be just second homes or retirees. You are going to see segmenting in the market similar to Las Vegas and a higher emphasis on young families and second-home buyers in terms of their willingness to be in a brand-new community with no crime or traffic and great resort amenities. I think you will see a very active adult component quickly.
What will be the breakdown?
Originally in the early 2000 period, you were probably going to see 70 percent the resort, second home and active adult and 30 percent primary home. Now, the reality is that you will see this more like 50-50.
It is a heck of a time to start a community in the middle of a housing slowdown. How has that affected you?
It has not affected me. We don't have any homes for sale. We will in September 2008.
Don't you worry about the slowdown continuing through next year?
That is other people's judgment, not mine. I think there is going to be a market for homes in Coyote Springs in September 2008. I think there are lots of people struggling in this market. I don't mean to be cavalier about it, and I am not suggesting that your concern is wrong. I am telling you that I love our position.
Weren't you supposed to open the community already?
As it turns out, my inability to get certain things done and understanding what the county wanted with the general improvement district — those sorts of things — created the typical delays associated with projects of this magnitude. As it turns out, others or I have done me a great favor because, instead of opening in the teeth of the market in September 2007, we are opening in September 2008. If you would have asked me if I would have been happy selling houses in September 2007, it would have been wonderful to see sticks in the air and all those sorts of things, but would it have been good for the development, the answer is no.
Will you have a casino?
We haven't decided exactly what the land plan is going to look like. I have two partners in the development (today) — Tom and Albert Seeno, who are partners in the Peppermill hotel-casino. I think ultimately this community will have a casino, but I don't think it's anything we are going to build right away.
How much commercial will there be?
There is more than 4,000 acres approved.
Is there anything that is not going to be there?
There are going to be businesses that the community doesn't want to have. I don't think we have a need for some businesses that aren't consistent with that community's value system.
What specifically?
I don't want to go into it. The community will define the character. I can do that as a developer. I can assure you I am not going to sell to anybody I don't like.
Will Coyote Springs provide much-needed industrial land to service Las Vegas?
That is a real possibility there will be people that can service the Las Vegas community from Coyote Springs. We also know we will serve the employment center of Apex. We know the people who are working at the power plants along 93 will live in Coyote Springs. We see a great relationship with people who work at Nellis Air Force Base and people who work in the northern part of the community.
Have you done anything like this before?
I don't think there are many people that have developed 43,000 acres so the pool of people that have done this before is relatively small. It is 10 times larger than the development we did in Sparks. We successfully developed more than 4,400 units with two golf courses and a whole resort component. My partners like to say the difference is just about adding zeros (laughing).
That must be a challenge.
That is a fair word. If you can come up with a word that is beyond a challenge, that's what I want you to use. We are building everything from scratch. That is good news and bad news. Everything is brand-new. It is a challenge to plan that, finance that, build that and get approval for that.
What about environmentalists complaining about sprawl?
I guess I respect their opinion for saying we ought to look for these things, but I think they have to be realistic about this. This is a 43,000-acre piece of land that is owned by private parties. Some 87 percent of Nevada is owned by the federal government, and you are going to need private land development. We think we are going to do it in a responsible way. We think people who don't understand what we are doing tend to look at this as this forerunner of this huge rash of urban sprawl. Nothing could be further from the truth. There is no land. Where is the sprawl going to take place. There is Coyote Springs. There is Mesquite. There is Pahrump. There is the Rhodes project in Arizona. There is not going to be this multiplicity of Coyote Springs, and they use this to create this shock and awe about what's taking place. It is just not accurate. They are using scare tactics to try and create a fever about this. What they need to do is work with us in developing the best land plan. Quite frankly, they have had the opportunity since 1998 to do so. It is a little late in 2007 to say I am concerned.
How are you going to convince people to move out to a new community? There is no sense of community.
I think when people go out there, they will see it immediately. This isn't one little stop sign. They said the same thing about our development in Sparks. No one is going to go out there. You are never going to build the roads. You are never going to build the golf courses. You are never going to build a village. You are never going to put in all of the infrastructure. You just do it and people respect people who do what they say they are going to do. We deliver on our promises. That is a track record that speaks well of my partners and my business associates.
But how are you going to get people to live out there?
I think people are trying to avoid traffic. I think they don't want to have crime in their neighborhoods. They want to have the American dream, which allows them to buy a home on a little piece of property. The notion that people are somehow dying to live in vertical condominium structures and apartments is oversold. I think they have to do that in Las Vegas because that is the only way they can do it. I believe there is going to be a market out there and that there are going to be plenty of workers who take on that notion of being a pioneer in this type of community.
What about the freeway system?
The good news is that we have a wonderful freeway system for us. I'd hate to be the people that have anything other than what we have. We have I-15 to Highway 93. There are no stop signs. There is no traffic. You get onto the freeway and you make a left-hand turn on 93 and you are home. It is 25 minutes from the freeway. It is 11 miles from the 215. If you are going to the northwest and live in the southwest, you are going to be an hour and you are going to be in horrible traffic. Here you are driving and moving on and listening to music and looking at beautiful vistas.
You really believe in this project despite naysayers?
I am betting 100 percent of what I have on this. These are the same people who said our gaming pioneers were crazy. There are three stages of development. You're crazy. You're a visionary, and you were lucky. I am somewhere between crazy and visionary. I want to be lucky (laughing).
Will Coyote Springs be incorporated?
I am not planning on it. I don't have any idea what's going to happen 30 years from now. We are happy to be in Clark County. We have great relationships with the Clark County staff. We think this is a natural way to go. We will have an interlocal agreement. The fire service will be seamless. The school district is going to be Clark County. The police service is going to be the same. You are going to have the same level of services.
Will anything ever top this in your life?
Nevada is unique in affording people the opportunity to achieve their wildest dreams. The only thing I could tell you is that if anybody had told me in 1970, graduating from Sparks High School that I would be involved in doing something like this, I would have said you're crazy. I am going to go to medical school or law school. I had no idea this was going to happen. You can't plan for it. I am a real big believer that things happen for a reason.
Are you looking to another challenge already?
We haven't sold our first house (laughing). We have a lot of challenges ahead. What I would like to do is focus on things we can make a difference in. One of the things we can do is develop a university community, research facility and technology center at Coyote Springs that will be the envy of the world.
Do you have any advice for someone else wanting to build a new community?
Like Rodney Dangerfield said: "Don't do it." I would tell you to surround yourself with really good people. Do it in an environment that encourages entrepreneurship and rewards responsibility. I wouldn't do it in a lot of pieces. If I was going to do it, I would definitely pick Nevada again. Nevadans are the type of people that say if you do what you say you are going to do and deliver on your promises, we are going to let you try to succeed.
Brian Wargo covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at (702) 259-4011 or by e-mail at buck@lasvegassun.com.