Here’s how water is holding up Arizona’s largest-ever planned community

Howard Hughes Corporation needs to secure billions of gallons for its Teravalis project

(Photo Illustration by Steven Dilakian for The Real Deal with Getty)
(Photo Illustration by Steven Dilakian for The Real Deal with Getty)

Teravalis, the Howard Hughes Corporation project proposed for 37,000 acres in the desert west of Phoenix, has a water problem.

Really, most developments in the Southwest do, as the New York Times reports. Climate change and a more than 20-year drought in the region that spans Arizona, Colorado, Utah, New Mexico and California, have turned water supply into a great source of grief for real estate developers.

In Arizona, temperatures are rising and water supplies are dwindling, and yet, its residential real estate market is on the up. A mansion in the state’s richest town sold for a record $21 million in April, only to be followed by listings hoping to out-do it. The market appears to be unphased by the reality of the state’s resource challenges.

Howard Hughes seemed to adopt that same optimism last year, when it bought the Teravalis site from Jerry Colangelo’s JDM Partners and Mike Ingram’s El Dorado Holdings for $600 million. Colangelo and Ingram stayed on as joint venture partners for one part of the development, a 3,000-acre community called Trillium.

“We are creating a city of the future,” Colangelo said in a press release at the time, broadcasting confidence in the project.

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Those 3,000 acres have been approved by the Arizona Department of Water Resources to build 7,000 homes, according to the outlet. The fate of the remaining 34,000 acres and how Howard Hughes will prove the land has a 100-year water supply –– as required by state law –– are unknown.

The developer’s plans include 100,000 homes for an estimated 300,000 residents and 55 million square feet of commercial space with an estimated 450,000 workers, according to the newspaper. Buckeye, the city that is home to the Teravalis site, currently uses about 3.5 billion gallons of water a year for 115,000 residents. Estimates for Teravalis’ water usage are about triple that.

State officials began a study earlier this month to determine if the groundwater supply has enough to sustain the development.

The former governor of Arizona responsible for the state’s 100-year supply law, Bruce Babbitt, did not express the same optimism as the project’s developers.

“My conclusion, based on a lot of analysis, is the project is not viable on the scale they are talking about,” he told the outlet.

— Kate Hinsche