Rising land values, increased construction costs and a population boom have pushed median Las Vegas Valley home prices past $314,000, resulting in a flood of newly proposed condominium projects. Developers are offering a variety of super-luxury high-rise residences ranging anywhere from 700 square feet to 5,000 square feet in size, with prices from $350,000 up to $4.5 million and more.
Local and out-of-town builders are betting big bucks on the market’s sustained popularity over the next decade, targeting everyone from second-homeowners and empty nesters to baby boomers and urban professionals. It has prompted companies like Beasley & DeVarreau Sotheby’s International Realty to open a new vertical development group in Las Vegas to service the demand. “Our new division was created to exclusively cater to the growing vertical development market with programs and services to better aid this special type of clientele,” said James Beasley, president of Beasley & DeVarreau Sotheby’s International Realty.
Condo Hotels on the Horizon
But not all residences are the same. Condominiums and condominium hotels, although similar sounding, are worlds apart. The condo-hotel concept enables owners to rent out their residence when it’s in not in use, enabling them to earn revenue from their investment. The units are normally marketed by the building’s operator in exchange for a portion of the income. Most condominiums, by contrast, have strict guidelines for subleasing units. But each development has its own user criteria that can vary dramatically from place to place.
“We’re tracking approximately 35,200 condominiums and 8,300 condo-hotel units in the Las Vegas Valley,” said John Restrepo, principal of Restrepo Consulting Group LLC, a Las Vegas-based economic research firm. “But these are two completely different products. A condo-hotel unit is closer to a timeshare property, operating more like a vacation hotel room rather than as a genuine residence in a condominium tower. For resort casinos, a condo-hotel is essentially away to expand your room inventory for free.”
Turnberry Associates, which is credited with launching Las Vegas’ high-rise boom with its Turnberry Place project at Paradise Road and Riviera Boulevard, has partnered with MGM Mirage Inc. to build a $1.2 billion, 3,500-unit condo-hotel complex, located at the northeast end of MGM Grand’s 116-acre property. Buyers who choose to participate in the hotel program pay 10 percent to MGM to market the unit, with a subsequent 50-50 revenue split if the room gets booked. MGM’s portion goes toward providing hotel services such as housekeeping.
“When we started, there wasn’t a whole lot of optimism locally that people would want to live on the Strip,” said Dan Riordan, director of sales for The Residences at MGM Grand. “Our marketing has traditionally been to out-of-state, second-homebuyers. We’re not thinking it will replace the traditional homes that people are buying.”
Other condo hotels under construction include: the Palms Casino’s 50-story, 599-unit Palms Place at the southeast corner of Flamingo Road and Arville Street; Donald Trump’s 64-story, 1,282-unit condo-hotel at the New Frontier Hotel Casino at Fashion Show Drive and Las Vegas Boulevard; the Hard Rock’s 1,113 condo and condo-hotel units at the northwest corner of Harmon Avenue and Paradise Road; the Cosmopolitan’s 1,700 condo-hotel units at Las Vegas Boulevard and Harmon Avenue; and Station Casino’s 600 units in two towers at the southeast corner of Charleston Boulevard and the I-215 Beltway.
How Many Projects Will Survive?
“There are a lot of projects being proposed that could mean a flood of new construction work,” said Richard Rizzo, president of Perini Building Co., who is currently building the new Trump Tower and Cosmopolitan, as well as the 385-unit One Queensridge condo complex at Rampart Boulevard and Alta Drive. “However, we carefully select projects based on a development team with a proven track record that has financial backing.”
While 103 condominium projects are being proposed, very few are actually coming out of the ground. Only three high-rise condominium projects totaling 884 units have been completed in Las Vegas during the last 30 years. Local real estate developer Irwin Molasky finished the $125 million, 84-unit Park Towers at Hughes Center in early 2001, and Turnberry Associates completed the first phase of its $700 million, 800-unit Turnberry Place development around the same time.
“It’s not an infinite market, and demand for this market type is going to cap-out,” said Brian Gordon, principal of Applied Analysis, a Las Vegas-based economic research firm. “Realistically, we expect to see only half of these proposed projects developed over the next five to seven years.”
One project that is leading the race toward completion is the 21-story Metropolis tower at Debbie Reynolds Drive and Desert Inn Road. Built by Houston developer Randall Davis, it has been substantially completed and all 71 units have been sold. Final occupancy is scheduled for November. Residential Constructors LLC, a unit of McCarthy Building Cos., is the general contractor, and WPH Architects is the architect.
Newport Lofts is only the second condominium project rising downtown, behind the $61 million, 120-unit SoHo Lofts project by developer Sam Cherry at Las Vegas Boulevard South and Hoover Avenue. The 23-story, 168-unit Newport Lofts, which is being jointly developed with Cherry, is scheduled to finish in 2006. Breslin Builders is the general contractor, and WPH Architects is the architect.
“Many first-time developers are looking to build this product,” said Michael Mirolla, principal of Sandhurst Development, LLC, and a former executive with Silverstein Properties, Inc., the developer of the World Trade Center site. “A lot of people are out there to get the quick hit. Buyers really have to do their homework and be comfortable with the developers and their product.”
Sandhurst is developing a $180 million, 413-unit condominium tower, situated on 3.2 acres on the north side of Iron Horse Court, between Grand Central Parkway and the Union Pacific railroad tracks in downtown Las Vegas. The 35-story, 900,000-square-foot high-rise, designed by JMA Architecture Studios, is scheduled for occupancy in late 2007.
Barclays North is building the $105 million, 21-story Streamline Tower, situated on one acre at 150 North Las Vegas Boulevard in downtown Las Vegas. Martin-Harris Construction is the general contractor, and PGAL is the architect. The project calls for 251 units, from 822 square feet to 1,905 square feet in size, plus 24,000 square feet of commercial space. Streamline Tower is scheduled to open in early 2007.
Australian developers Victor Altomare and Joseph Di Mauro are planning to build the 21-story, 132-unit Liberty Tower at 1801 Las Vegas Blvd. South, near the Stratosphere, plus the $500 million, 80-story Ivana condo tower at the northeast corner of Sahara Avenue and Las Vegas Boulevard South. The 946-unit Ivana was first announced in August 2004 as the Summit. It was renamed and relaunched to reflect Ivana Trump’s affiliation. Turner Construction is the general contractor for Liberty Tower and The Ivana, and JMA Architecture Studios is the architect for both projects.
New condominium towers underway near the Strip include the $325 million, 350-unit Sky Las Vegas near the southwest corner of Las Vegas Boulevard and Sahara Avenue. The 45-story building is being built by Aaron Yashouafar, CEO of Milbank Real Estate Services Inc., a Los Angeles-based real estate company specializing in high-rise asset management, and David Pourbaba, a noted Southern California real estate developer. M.J. Dean Construction is the general contractor, and Klai Juba Architects is the architect.
Andrew Sasson and Laurence Hallier are building the 616-unit Panorama at Harmon Avenue and Industrial Road. The project consists of two 33-story glass towers with residences from 700 square feet to 4,500 square feet in size, priced from $300,000 up to $3.5 million. The $93 million first tower is scheduled to finish in February 2006. M.J. Dean Construction is the general contractor, and Klai Juba Architects is the architect.
Del American has started work on the first phase of Vegas Grand, a 670,382-square-foot condominium complex at Swenson Street and Flamingo Road. The $86 million project calls for two four-story buildings, totaling 426 units. Summit Builders is the general contractor, and JMA Architecture Studios is the architect. A 12-story, 129-unit second phase is anticipated to break ground later this year.
Those projects now underway all have institutional backing, with Bank of America financing Turnberry and Corus Bank of Chicago underwriting Panorama and SoHo Lofts. “Reservations can fall out; it’s the hard contract that’s tough,” said Clark Seegmiller, co-developer of Newport Lofts. “The capital that we have to put into the project is substantial. In our case, we own the land. And the first thing banks want to know is if you own the land.”
Some Early Winners and Losers
Poor finances recently killed the proposed $600 million, 825-unit Aqua Blue condo project at Koval Lane and Flamingo Road. The developer, Diversified Real Estate Concepts, blamed rising construction costs as the primary reason for the cancellation. The high-rise was reportedly over 50 percent sold. Refund checks had to be returned to buyers via Nevada Title. Meanwhile, Diversified broke ground on the 18-story, 255-unit The Platinum condo-hotel at Flamingo Road and Koval Lane in April. Residential Constructors is the general contractor, and Morris and Brown Architects are the architects.
“We have seasoned developers and newcomers alike jumping into the Vegas market. Some of them will simply under-price the costs of doing business and they’ll be caught in a tough squeeze play,” said Rob Emerick, a Las Vegas high-rise analyst. “With all the projects going up, it’s a numbers game. Some will make it, some won’t.”
Experienced developers familiar with high-rise products who are armed with strong finances and a brand name have a distinct advantage over competitors. Turnberry, for example, is building two 45-story towers combining for 632 units at Paradise Road and Karen Avenue. The first tower is completely sold-out and underway, with scheduled occupancy by late 2007.
Related Las Vegas is building the $325 million, 514-unit Icon Las Vegas at Las Vegas Boulevard and Convention Center Drive. The project calls for two 48-story towers with residences from 950 square feet to 1,833 square feet in size. The first tower sold out within 48 hours, and the second is 60 percent reserved. Hypo Bank of New York is providing the construction loan, and M.J. Dean Construction is the general contractor. The project is being designed by Arquitectonica, the firm responsible for the Westin New York Hotel in Times Square and the U.S. Embassy in Lima, Peru. Related Las Vegas is a joint partnership between Jorge Perez of The Related Group of Florida and Stephen Ross of The Related Companies. Their portfolio consists of $12 billion in real estate assets, including the $2.2 billion Time Warner Center in Manhattan and the 72-acre CityPlace in West Palm Beach, Fla.
Related is also partnering with CENTRA Properties in developing eight 400-foot-tall towers housing 3,000 condominium units near the northwest corner of Harmon Avenue and Paradise Road, just west of the Hard Rock hotel-casino. The unnamed $2 billion undertaking is expected to break ground around mid-2006, and take about 14 months to complete.
“People haven’t had to work this market because the demand has been so strong,” said Marty Burger, president of Related Las Vegas. “But as the market matures, it’s not going to be the latest gimmick that gets the unit sold.” Well-planned projects with a strong location and nearby amenities will thrive in sales and resales over the long haul.
MGM Mirage, for instance, is building its $6 billion Project CityCenter on 66 acres fronting the Strip, between the Bellagio and MonteCarlo hotel casinos. The 8 million-square-foot mixed-use development calls for four residential towers totaling 2,500 units, with 550,000 square feet of retail shops and restaurants. Project CityCenter is scheduled to finish by 2009. New York-based Ehrenkrantz Eckstut & Kuhn Architects, the firm responsible for Lower Manhattan’s Battery City Park, is the master-plan designer, and Gensler of San Francisco is the architect-of-record. Perini Building Co. is the general contractor for the first phase of work.
The Curve is another well-situated, mixed-use project near the I-215 Beltway at the southwest corner of Durango Drive and Sunset Road. The development consists of two 18-story condo towers combining for 376 units, with 61,200 square feet of office space, and 115,885 square feet of retail and restaurants for a live-work-play environment. The Curve is being developed by The Curve LLC, with M.J. Dean as general contractor and Klai Juba Architects as architect. The first phase is scheduled to finish in early 2007.
Reno Also Seeing High-Rise Boom
Reno is also seeing a mini-condominium boom with the 13-story, 92-unit Palladio under construction in the city’s redevelopment district at the former site of the Granada Theater. The 10-story, 50-unit Chambolle is planned next to theRiverside Artist Loftsdowntown, and a new two-tower project is proposed for the one-time site of the River Inn and Bundox restaurant. The Comstock Hotel at 200 West Second Street has been gutted and is being transformed into the 120-unit Residences at Riverwalk Towers, and the Sundowner hotel-casino at 450 North Arlington Avenue is being converted into the 187-unit Belvedere Towers. Similar conversion projects are being proposed for the Golden Phoenix Hotel and the long-vacant Kings Inn, making for an active downtown revitalization.
“It’s a wonderful evolution,” said Ken Adams, a consultant and former president of the Downtown Improvement Association. “Now, when you are looking for vitality and life and meaning, it’s downtown.”