Del Webb Corporation

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Del Webb Corporation

6001 North 24th Street
Phoenix, Arizona 85016
U.S.A.
(602) 808-8000

Public Company
Incorporated: 1960 as the Del E. Webb Corporation
Employees: 1,800
Sales: $803.12 million
Stock Exchanges: New York Pacific
SICs: 6552 Subdividers and Developers, Not Elsewhere
Classified; 1521 Residential Building Construction

Once known for its hotels and casinos, Del Webb Corporation is one of the largest residential developers in the United States as a result of its success in planned retirement communities.

The life story of its founder, Delbert E. Webb, reads like a screenplay: fame and fortune pursue the simple boy. According to his official biography, he liked to boast of knowing every president since Franklin Delano Roosevelt on a first-name basis. Starting early in his career, he met such baseball greats as Ty Cobb, later Mickey Mantle, Joe DiMaggio, and Yogi Berra. As a golfer, he walked a course with Bing Crosby, Bob Hope, Barry and Robert Goldwater, as well as Howard Hughes. Later, after Webb’s death, legendary crooner Frank Sinatra would buy a share in the company.

Several times in his life, Delbert E. Webb found his fate unpredictably refracted through circumstance. His scholarly career was cut short in high school when in 1915 financial setbacks afflicted his father, the president of a California gravel company. After completing his freshman year, Del Webb fell back on two boyhood occupations: baseball, which he had been playing semiprofessionally since age thirteen, and carpentry. For the next 12 years he moved about California, working as a carpenter exclusively for companies with baseball teams, on which he could also earn extra money. A severe bout with typhoid fever (he lost 105 pounds, from 204) truncated his major league ambitions; in fact, he could not work at all for a year.

Phoenix, in spite of its depressed economy, attracted Webb, like many others in search of a healthful climate. Eager to return to the ball field, Webb violated a league residency requirement, which he had missed by one day. Unable to play and unwilling to do anything halfway, he ended his baseball career forever in 1928 and began concentrating on construction full-time. He soon was moonlighting as a contractor. His first major jobs came from the Bayless family of grocers, who originally hired him, according to one source, after a wayward superintendent skipped town during a project. Webb’s competence and person-ability, as well as such windfalls as rebuilding the local Sears store after a fire, kept his small business active through the stock market crash of 1929.

Although strongly identified with his work on grocery stores, Webb during this time eagerly sought public sector jobs, such as schools, dormitories, and the 1938 addition to the Arizona capítol building. George W. P. Hunt, Arizona’s first governor, commissioned Webb to build his distinctive pyramid-shaped tomb. Webb also completed several landmark buildings for Phoenix businesses and an unprofitable dance hall joint venture. With some audacity, a tiny branch office was opened in Los Angeles in 1937 to accommodate a high school project there; the geographic influence of his company gradually grew.

Del Webb’s reputation gained stature from such challenging and prestigious projects, and through his own personal influence he had established himself as one of Arizona’s largest contractors by World War II. However, he still hadn’t attained the capital required for the bonding requirements of large federal projects. The White Miller Construction Company, a road-building firm, entered into a joint venture with Webb, helping him meet bonding requirements and also supplying certain types of expertise. The arrangement soon showered the Del E. Webb Construction Company with dozens of government jobs, including three major military bases; civil projects such as gas stations kept coming. President Roosevelt’s controversial internment of Japanese Americans created a challenging order for quick construction of a huge relocation camp the size of an entire city. Webb completed the project at breakneck speed.

The new scale of operations required Webb to make several changes. In 1941, the company moved out of its severely cramped quarters into a spacious new building. The company also built itself at every building site portable office buildings, standardized in order to smooth administration. Del Webb organized personnel and procedures in a similar fashion. His travel and shoulder-rubbing demanded increasing amounts of his time, so in 1943 he appointed L. C. Jacobson, a trusted employee, to look after the home front, making him a 25 percent partner.

Concern over the cyclical nature of construction spurred the company to diversify in the postwar economy. It bought Master Products, a leather goods and filing equipment company, and invested in photography and petroleum. Webb bought a share in the New York Yankees in 1945. He gave away greatly coveted Yankees game tickets to potential clients as premiums, which allowed him to bask in a constellation of influence. After 20 years, however, the ball club was sold to CBS for $14 million. Later diversions into sports included sponsoring an Indy race car in the early 1960s.

Webb’s defense work brought him into contact with one of the most unique Americans of the century, the secretive tycoon Howard Hughes. The Del Webb Company was hired to build an addition to the Hughes Aircraft Company plant in 1950. The scarcity of materials during the Korean War proved another hurdle successfully cleared, which boosted the company’s reputation. Webb built several plants for Hughes.

The company constructed apartments and hospitals, including the mammoth St. Joseph’s in Phoenix, built at the beginning of the 1950s, a decade of explosive growth for Phoenix. It also entered into a new area of operations—planned communities— beginning with the 700-unit Pueblo Gardens on the outskirts of Tucson. San Manuel, a company town built for Magma Copper Company, followed. It required Del Webb to build streets, stores, parks, and infrastructure as well—all in the middle of the desert.

The company’s out-of-state work also thrived during the postwar period, as manufacturers expanded out of their old facilities (Kraft Foods) or ordered new facilities to reduce cross-country freight costs (Pabco Floor Covering; Self-Locking Carton Company). Del Webb’s matchmaking skills helped produce a joint venture that foreshadowed the “industrial ecology” movement by decades. The Self-Locking Carton Company harmonized operations with the Diamond Match Company in the Integrated Forest Products Manufacturing Plant in Red Bluff, California, resulting in a pinnacle of efficiency. Besides egg cartons (made of newsprint recycled at the plant) and matches, paper plates and lumber were also produced at the factory, itself partly made of wood.

Numerous hotels were also built and cofinanced by Del Webb during this period, including Webb’s own Highway House motel chain. The firm’s expansion required increasing amounts of capital, and on December 8, 1960, the company was incorporated as the Del E. Webb Corporation in an offering worth $12 million. This year also marked the dawn of a brilliant new phase in Del Webb’s history: the opening of the first Sun City and the beginning of its full-force involvement in residential and commercial property development.

Ben Schleifer, a Russian émigré, is credited with developing the first community designed for senior citizens, Youngtown, northwest of Phoenix. A number of executives shuttled the concept through the Del Webb Corporation, where it grew quite different from Schleifer’s community. Sun City would offer a relatively affluent generation of retirees “activity, economy, and individuality,” according to Tom Breen, one of the project’s first sponsors. Built around the remains of a 20th-century ghost town, Marinette, Arizona, the project featured a recreation center, golf course, swimming pool, and shopping center—all finished before the first houses were sold. New Year’s Day 1960 was the day of the impressive grand opening; turnout was ten times the expected 10,000, and 237 houses (worth over $2.5 million) were sold in the first weekend. Sales steadily surpassed expectations, and the community grew. Eventually a hospital was built, providing another important selling point. Other Sun Cities soon sprouted up across the Sun Belt: first a small, 150-unit community in Kern City, California, then one south of Tampa, Florida, in 1962. However, these clones did not meet the success of the original, in part due to lower visibility (the Tampa location was somewhat isolated from the main thoroughfares). A fourth Sun City between San Diego and Los Angeles actually outperformed its model but suffered setbacks due to a strike.

The success of the complicated project, a work of many hands, enhanced Del Webb’s personal reputation even more, garnering him a Time magazine cover and a place as spokesman for his vision of active retirement living. In spite of this type of popular identification, the company continued to pursue government contracts such as missile silos. The company began to venture into the international arena, losing money on Central American infrastructure projects. The Del Webb Corporation located its new headquarters in a glittering 17-story building, the first erected in what was to become a new financial center for Phoenix.

In the 1960s, hotel and casino development also became a highly visible part of Del Webb’s blend of projects. The company had built one of the early Las Vegas hotels, the Flamingo, in 1946.

One of its owners, mobster Bugsy Siegel, was murdered in Beverly Hills just weeks after its grand opening. According to Webb, he didn’t know his client’s notoriety when he began the project. But he noted Siegel paid for the work quickly, in cash. The Flamingo was designed to astonish visitors when it was built, but its 100 rooms seemed quaint after Del Webb built the 1,000-room Sahara two decades later. Observers noted the casino business gained a measure of respectability from Del Webb’s presence. The company headquartered its Hotel Group in the Thunderbird Hotel after acquiring it in 1964.

Gaming and leisure, enhanced by convention activity, dominated Del Webb’s balance sheet and seemed an expanding industry. The company developed casinos and resorts outside of Las Vegas, including the Sahara Tahoe, the Mountain Shadows and TownHouse in Arizona, and the Fresno TowneHouse. Nevertheless, the group’s most prestigious properties, such as the Mint in Las Vegas and the Primadonna Club in Reno, were located in Nevada.

By 1978 Del Webb was known as the largest gaming company in the world. Its success in this arena made it an attractive takeover target for Frank Sinatra, his attorney Milton Rudin, and newspaper publisher Harry Greenspun. However, the Hotel Group met its Waterloo in New Jersey with the purchase of the President Hotel site on the Atlantic City boardwalk and the purchase of a share in the Claridge Hotel. The President Hotel was nearly full when Del Webb took over with plans of building a new casino in its place, and plans for relocating the residents caused some initial public relations problems. Billing itself as “a corporation with a conscience,” the company helped elderly residents find alternative housing and provided some financial assistance. Although the building was emptied six months later with the company’s image intact, financing difficulties scuttled the plan and the building was sold.

Del Webb kept the Claridge Hotel after dipping deeply into its considerable credit (including the first revolving credit for a developer) for its restoration. However, the effort was besieged by increasing interest rates and construction costs. A bloated (compared to Nevada’s) and seemingly hostile bureaucracy stalled the casino’s licensure in a costly investigation of dozens of executives. The Claridge was sold in October 1983 as part of a company-wide belt-tightening that laid off thousands at Sun City and sold many other properties.

To organize this restructuring, Robert K. Swanson was elected president and chief operating officer in 1981, after the retirement of Bob Johnson, a company veteran who had served as president for three years and served as CEO after Del Webb himself left the post in 1973 (remaining as board chairman). Johnson had succeeded Webb as chairman of the board as well as president when the health-conscious Webb—his desk sported a “No Smoking” sign—died on July 4, 1974, due to complications related to cancer treatment. Johnson also headed the Del E. Webb Foundation, a charitable organization founded in 1961.

Swanson sold several recreational properties in order to cut the company’s massive debt. Philip J. Dion joined Del Webb in 1982 as senior vice-president for finance, a critical position. Eventually, he and Swanson came to believe that the company’s best chance for survival lay in dissolving the casino and hotel group, which, until the New Jersey venture, had been profitable. Fortunately, the success of most of these properties helped them sell, as did a recovering economy. Del Webb also took advantage of a unique tax loophole allowing it to buy millions of dollars worth of tax losses from Alaska Native Corporations, benefiting the company by $27.5 million between 1985 and 1987.

However, in 1987, crisis struck again after the stock market crashed in late October. Robert Swanson retired and Phil Dion took over almost immediately as chief executive officer. Again, a plan to reduce debt by liquidating assets was enacted, and the company began concentrating exclusively on its retirement communities, since the hotels and casinos would require too much capital to maintain. The property management division of the company was also liquidated.

The Del Webb Corporation emerged from these difficulties as a more focused company, and its Sun City developments performed well. The original met its goals of 25,000 dwelling units and 50,000 residents in 1978, reaching a cost of nearly $1 billion. Sun City Las Vegas proved even more profitable than the wildly successful original. By 1995 over 50,000 residences had been built in seven developments in five states. A new development with a more affordable product line—the Sun City MacDonald Ranch—was planned for the Las Vegas area. However, a weak economy dampened the success of its southern California project, Sun City Palm Desert.

In the 1990s the company expanded upon its core business, venturing into less exotic areas than its previous diversification efforts. Coventry Homes, acquired in 1991, competed in the conventional residential construction market, and Terravita, located in North Scottsdale, offered a planned community setting to people of all ages. Both performed well. In fiscal 1995 Coventry boasted 921 closings, an annual increase of 57 percent. More than half of the available Terravita homes (723) were sold within a year and a half of the development’s opening in November 1993. A similar, but much larger, planned community known as the Villages at Desert Hills was planned for Phoenix.

Del Webb seemed well prepared for the 21st century. In 1995 annual net orders rose almost 400 units to 4,534; revenues leaped almost $300 million to $803 million. At the same time, the average sale price for its new homes grew 18 percent. A $45 million common stock offering in August 1995 helped reduce the company’s debt. The fastest-growing segment of the U.S. population in the 1990s—adults aged 55 and over—was predicted to peak in 2010 as the baby boom generation reached retirement age. As Phoenix and Las Vegas, the company’s home territories, continued in their above-average rates of growth, Del Webb entered a new frontier with Sun City Hilton Head, located near the South Carolina coast.