Fred Chin tells Liz French how this home builder’s gamble turned out to be its best move ever.

When Jim Rhodes bought a 1,300-acre tract of land in Las Vegas in 1995 with the intent of building a master-planned community, others in the home building industry thought he was crazy. They furrowed their brows once again when he bought a 600-acre plot east of the Strip with the same vision. Today, they wish they had his foresight.

Jim Rhodes started his career as a carpenter and framer. In 1991, he started Rhodes Homes, building production homes with custom features in 50- to 100-home subdivisions throughout Las Vegas. “He did something no one else did at the time,” said Frederick Chin, CEO of Rhodes Homes. “Jim made first-time home buyers feel like they were getting more than just a box, and that helped the marketability of his business.”

As already booming Las Vegas continued to grow, Rhodes Homes developed more and more subdivisions until the opportunity arose to acquire its first sizeable tract of land with the potential for over 9,000 homes. Today, Rhodes Ranch, a master planned community made up of 4,000 homes, boasts amenities such as a public play signature golf course, a 35,000-square-foot recreation center exclusively for homeowners, and guarded entrances.

Fred Chin

“Over the years, Jim’s business morphed from a production home builder into a homebuilder and master planned community developer. That was a significant and difficult transition, but a highly profitable one,” Chin said.

In 1997, Rhodes Homes acquired its second major tract of land in Las Vegas for another master planned community. Tuscany has the same amenities as Rhodes Ranch, but it is slightly smaller with the capacity for 2,000 homes.

Today, Rhodes homes offers a variety of floor plans. In Pacific Mist, the newest community inside Rhodes Ranch, one- or two-story floor plans range from 1,720 to 2,255 square feet, three to four bedrooms, and are priced for the first-time homeowner. In comparison, three-story Fiori townhomes in Tuscany range from 2,307 to 2,268 square feet, feature two bedrooms and three and a half baths, and are targeted toward second-time home buyers seeking a resort locale.

Vertical integration
In the beginning, Rhodes Homes focused solely on the construction of homes and subcontracted all of the other functions involved in land development. But as business grew, Rhodes realized that he needed to better control production timing and project scheduling and launched his first subsidiary company, Bravo Framing. He later formed Spirit Underground, an underground utility company; Gung Ho, a concrete company; Geronimo, a plumbing company; Pinnacle, a land grading company; and Arapahoe, a cleaning company. In addition, Rhodes’ wife, Glynda, launched ID Interior Design, a one-stop interior and exterior design company.

Since 2002, thanks to its vertically integrated structure, Rhodes Homes is the only homebuilder in either of its master planned communities. It performs about 60% of the work on each home, leaving the dry wall, paint, roofing, cabinet installation, and other tasks to subcontractors. “We consider ourselves Las Vegas’ largest private land developer and home builder. That is an important differentiator in our area because other than Pulte/Del Webb, most home builders don’t develop master planned communities, and most land developers don’t develop homes,” said Chin.

Founder Rhodes remains active in all aspects of the company, and his framing background and keen eye for architectural design has played a key role in the company’s profitability. Chin explained that many times, architects eager to try a new design will overlook practicality and cost effectiveness, but “Jim’s knowledge of framing allows us to identify inefficiencies in design that will lead to waste,” he said. Many times, he added, customers don’t find certain architectural design elements functional, much less a value-add. “The translation of architectural design into the field can cause a lot of inefficiencies, so having someone as skilled as Jim to identify and thwart these problems has been key for us.”

Price point
Although Las Vegas continues to be a hot spot for the homebuilding industry, Rhodes Homes needed additional capital to continue growing at a competitive rate, so Chin approached investment bankers on Wall Street for a little extra funding. In 2005, Credit Suisse raised $500 million for the company to further develop its Las Vegas locations and to expand into Arizona. “Many of our Las Vegas land holdings provide security for the debt, but we went to the rating agencies and Wall Street to tell our story. Doing so has strengthened our balance sheet and provided us with the capital needed for land acquisitions,” Chin said.

The extra funding also has been a catalyst in the company’s efforts to develop Pravada, a master planned community just outside Kingman, Arizona, which is strategically located between Phoenix and Las Vegas. At present, the 5,700-acre parcel is being rezoned and the company is securing the necessary approvals to build nearly 30,000 homes over the next decade.

Chin explained that although Nevada has plenty of undeveloped land, 87% of the state is owned by the federal government, so acquiring tracts large enough to develop master planned communities is difficult. Penetrating the Arizona market will allow Rhodes Homes to build larger communities and offer similar amenities for less. Pravada homes will start at $150,000, much more affordable than the median-priced new home in Las Vegas—$325,000.

“We have found significant demand at that price level. Our intention is not to build exclusive private golf course communities. We want our homes to be affordable for everyone, while offering residents a country club environment,” said Chin. “Branching out aids our geographic diversification strategy and solidifies our position to benefit from the population growth in the West, which has been prolific for decades.”