LAS VEGAS CONDO CONVERSION RATE AMONG HIGHEST IN U.S

By Hubble Smith

Las Vegas Review-Journal

RISMEDIA, April 28 – (KRT) – Las Vegas has become one of the major condo conversion markets in the country with an 8 percent share of the $6.5 billion in conversion volume among 10 major metropolitan areas, a report from Marcus & Millichap Research Services shows.

The combination of low mortgage rates, significant single-family home appreciation and the rise in demand for condo units led to a sharp increase in conversion activity.

More than $9.2 billion worth of large apartment properties slated for conversions changed hands in select markets last year, up from $2.1 billion the previous year, the report said.

Some 17,000 apartment units in Las Vegas are projected to be converted to condos, said Dennis Smith, president of Home Builders Research. About 7,500 are being actively marketed as condos and 10,000 are proposed to be converted.

They're priced from $120,000 to $250,000 for a unit with a garage, an affordable alternative to the $304,734 median new home price, factoring out condo conversions, Smith said.

Last year, 249 major condo conversion transactions closed in select markets across the nation, up from 80 in 2003, Marcus & Millichap reported. All apartment and condo conversion figures are based on sales of properties priced at $5 million or more.

Activity continues to heat up, with an estimated 70 large conversion properties in these markets trading during the first quarter this year, more than double the number from a year ago.

Nearly two-thirds of the transactions were concentrated in Southern California and Florida. Miami and San Diego had the lion's share of dollar volume, with 24 percent and 22 percent, respectively.

"This is a new trend for Las Vegas," said Christopher LoBello, regional manager for Marcus & Millichap in Las Vegas. "What's driving it is low interest rates and demographics of the people that are buying these condos. They don't want to deal with the maintenance of a home. A lot of retirees are stepping up and buying these because they're more cost-effective than a home."

Las Vegas is getting more national exposure as demand for condos continues to accelerate, LoBello said.

The median price per unit for major conversion properties is $130,000 this year, up slightly from $129,000 in 2004. Prices are expected to rise substantially in the second quarter based on prices for properties under contract.

LoBello said condo converters have snapped up large apartment complexes in Las Vegas that were either already mapped as condos or meet condo specifications.

"Now they're bought up, so we're seeing people buying apartments willing to rent them until they get the necessary requirements for conversion," he said.

One of the difficult tasks for investors looking to hold is verifying income of a rental property, said Donna Coquilla, a broker with Lee & Associates in Las Vegas.

"When you hold a building, as opposed to converting, you want to look at net operating income and make sure it jibes with the price, make sure the income is high enough that you don't end up with a low cap rate," she said. "Generally speaking, if you get a substantial apartment building that's been well maintained, you should be able to come out okay."

Investors should examine lease arrangements and check them against the seller's receipt books to make sure there are no hidden concessions such as several months of free rent.

"If you have 400 leases, you've got to go through every one of them. That's part of your due diligence," Coquilla said.

Copyright © 2005, Las Vegas Review-Journal

Distributed by Knight Ridder/Tribune Business News.

Las Vegas Condos - Make Sure Your High Rise is Low Risk!

Las Vegas is rapidly being "Manhattanized" and the quality Las Vegas high rise developments are appreciating at astronomical rates, but not all projects are well funded and ma

/24-7PressRelease.com/ - March 26, 2005 - There are currently over 100 Las Vegas high rise projects approved by the Clark County Commission and more on the way as developers from all over the world are vying for a spot along the hot Las Vegas Strip. Fueling the Las Vegas condo market are retiring baby boomers who are purchasing second and even third homes in warm climates with low or no taxes, as well as an emerging generation of young urban professionals who prefer the low maintenance high rise as a counterpart to their harried business lives. Fears of overbuilding have been put to rest by millions in market studies showing that only the tip of the burgeoning condo market has yet been realized.

But despite brisk sales, Krystle Sands, a 568 unit luxury high rise condominium project to be built in a premium location on the site of the former Algiers Hotel, has closed its doors and is no longer selling units. The land is adjacent to a parcel zoned for a new hotel and casino already owned by Turnberry Associates, and it is rumored that Turnberry will be purchasing the project and that it is already in escrow. Several previous projects, most notably the Versailles and the Magestic (which has recently reopened), suffered the same fate. And Las Vegas real estate experts predict more to come.

Conversely, investors in the sizzling Cosmopolitan Resort and Casino have already experienced spectacular gains as over 1200 units were sold in little more than a month. And buyers in this luxury project have more windfalls to look forward to as the second tower has yet to be released and the general public is just beginning to realize how incredible the proposed $4 billion dollar MGM City Center directly to the south is going to be.

The difference? Developer Bruce Eichner of the Cosmopolitan had final financing in place before the first units were even put on the market. Eichner had already proven himself previously in both the Miami and New York markets. Investors who placed reservations with Krystle Sands will eventually get refunds on deposits that were held in escrow, but they have lost months of valuable time and possibly over a hundred thousand dollars in appreciation that investors in Cosmopolitan garnered during the same period.

According to Victor Altomare, developer of the Summit, "Unless a residential condo is at $600-$800 per foot, I question the project's viability. Construction costs the same next to the Bellagio or on an old downtown redevelopment site. Although land is expensive, it's content is minor compared to construction costs. A hotel condo needs to be forward priced at $800-$1,200 per foot, or it's just not viable. Land and construction costs are skyrocketing, which inevitably means fabulous capital gains for buyer upon delivery. In the short to medium term (2-5 years) capital gains in Vegas are assured. The risk for buyers is the knowledge, experience and judgment of the developer in forward pricing accurately. The trick for buyers and their estate agents will be to buy in a project where the developer has charged enough in the first place!"

How can would-be investors cash in on the profits? Pick an experienced real estate agent who knows the market and has researched the developers! "We're happy to say that we did not have a single customer in the Krystle Sands development," said local Las Vegas Realtor Judy Campbell of the Tonnesen Team at Prudential Americana. "We had researched the project and were just unsure of the developer's ability to deliver, so we tried to give our clients better alternatives. We were lucky to be able to reserve over 100 units for our customers in the Cosmopolitan so far, and we have more waiting for the 'angle' units to be released, as well as the second tower."

Lofty goals for way east Fremont

Builder hopes tin homes will draw the hip

By J.M. KALIL
REVIEW-JOURNAL

Houston architect and developer Larry S. Davis' nickname "The Tin Man" stems from his signature design: loft townhouses sheathed in brightly colored corrugated steel.

Over the past decade, his progressive architecture has been credited with turning dilapidated swaths of Houston, Dallas and Atlanta into housing hot spots for young urbanites craving live/work spaces with 17-foot ceilings, wood floors and few internal walls.

Now, The Tin Man is headed here.

Davis, 52, said this week that he would build 101 of his patented live/work spaces in downtown Las Vegas.

Crews plan to break ground next month on 30 lofts already approved by the Las Vegas City Council, with completion set for year's end. The Las Vegas Planning Commission will consider initial approval of the 71 other units Thursday night.

But unlike the numerous other loft and condo projects flooding into the city's core as part of a burgeoning redevelopment trend, Davis' lofts won't be just a few blocks from Fremont Street's casino corridor.

Instead, he's going a dozen blocks east down Fremont's hill, past a string of dingy weekly motels into a crime-ridden neighborhood that for decades has been a no man's land for investors.

"When people see these loft spaces, it will spark a change down there," Davis said Tuesday from the Houston base of his company, Urban Lofts Townhomes. "It's going to take nanoseconds to turn this neighborhood around."

City officials say an award-winning, reputable builder pouring millions of dollars into downtown's most dilapidated district is a signal that City Hall's redevelopment push is working.

"This would have been unthinkable a couple of years ago," Mayor Oscar Goodman said. "You hope to have a rehabilitating effect, and this indicates it's happening."

Whatever initial reservations potential buyers may have about prostitution and drug crime in the neighborhood, Davis and city officials are confident that he will have little trouble selling out his metal-skinned lofts because they are priced to move.

A three-story, 2,000-square-foot house with two bedrooms, two bathrooms, skylights, a two-car garage and a small yard will cost about $259,000, or about half the price that condos half that size are being reserved at less than a mile to the east.

"We deal in transitional neighborhoods, so we can get the land cost down," Davis said. "I prefer to give people a real value for their money."

Clark County assessor's records show that Davis acquired the 3.76-acre site for the 71 planned lofts on Fremont near Bruce Street for $800,000, a fraction of what vacant land is selling for in other parts of the city.

"It's an intriguing concept, because what they're doing is combining a lower-cost land site with a lower construction cost, so they can sell these below-market," said Scott Adams, the city's redevelopment chief.

Adams said Monday that he believes Urban Lofts' projects are an indication of things to come.

"East Fremont could represent one of the best frontiers for housing development in the future because the land is still reasonably priced," he said. "It takes some pioneers to get in there and change things."

So far, Davis, who is something of a critics' darling of the urban planning set, has proven himself capable of changing things.

During the last 10 years, he has continually drawn young urban professionals to rundown neighborhoods in Texas and Georgia with the uniqueness of his modernist house style, for which he was awarded a patent years ago.

Inside, the bottom floor is a treated concrete that can be stained cola or black, or left a natural gray, lending a chic industrial feel. The second floor is hardwood, and the third is carpeted. Davis' previous houses have had 17-foot ceilings, but the ones in Las Vegas will be 2 feet higher.

Urban Lofts' corrugated steel exteriors will be perfect for Las Vegas, Davis said.

"Stucco can crack. It discolors. Brick totally retains heat. That's why they make the best pizza ovens out of it. But metal reflects," he said. "As soon as the sun goes down, it's cool to the touch."

In style and technique, Davis' townhouses are painted more like cars than traditional homes. The intense blues, reds and other hues of the exteriors are baked onto sheet metal coated with a corrosion-resistant zinc-aluminum alloy, requiring little maintenance.

"The colors definitely turn heads," said Davis, who has also put up lofts in Houston with colored stripes on the exteriors. "We're not hitting Las Vegas with our stripes yet. We've got to ease them in. I think the council members would've had heart attacks if I'd shown them stripes."

Instead, the council's reaction to Urban Lofts' proposal has been overwhelmingly positive.

"I told him I wanted to pick the colors," Mayor Pro-Tem Gary Reese said.

No one is savoring Davis' projects and the spread of redevelopment they represent more than Reese, the councilman whose ward will house Davis' buildings.

Formerly lifeless tracts of downtown represented by other council members are in the midst of rebirth.

In the Arts District to the south, galleries have opened and the first of several planned condo towers is rising. To the north near the casino corridor, crews are putting the finishing touches on the first phase of a massive furniture mart, and the City Council is considering increasingly ambitious plans for the 61-acre Union Park development.

Meanwhile, the dilapidated eastern downtown district represented by Reese remains characterized by a string of rundown weekly motels and the occasional weed-strewn vacant lot.

So it's not surprising that Reese is nothing short of ecstatic as he discusses the hip, urban lofts coming to two of those vacant lots.

"I've been begging for something like this for a long time," said Reese, who sent city staffers to Houston to discuss the project with Davis and his associates. "It's the most fantastic thing, and I told them I would do whatever I can do to help them out. It's huge for my ward."

Part of the resistance to investment along that stretch of Fremont has been the public nuisance and misdemeanor crime problems there, which prove an almost constant headache to businesses.

About 8:15 a.m. Tuesday near the Lucky Motel across the street from the 30-unit Urban Lofts site, a brunette in a dirty mauve sweater, denim shorts and flip-flops asked male passersby if they "need to be helped out." She would not disclose to a reporter what this entailed but said it would cost $60 and assured "you'll like it."

Just around the corner, in front of the storefront Jesus Is The Answer church, two men sat on a bus bench sipping from cans concealed in brown paper bags and taunting streetwalkers. One eventually rose and went to urinate behind the nearby Family Food Market.

The most common felony in the area are attacks, Las Vegas police statistics show.

Over the last six months, officers have responded to 437 reports of an assault with a deadly weapon in the approximately 25-block area running from 10th to Bruce streets between Odgen and Lewis avenues.

"We're generally getting a lot of disturbance calls there," said officer Jose Montoya, a spokesman for the police department.

Yet business proprietors in the area, such as auto repair shop owner Doug DeMasi and Mabel Murray of Trudi Furs, say police are taking great strides in improving the neighborhood, the result of a push for a crackdown from City Hall.

"It will be safe down there," Mayor Goodman said. "Metro is bending over backwards to make sure of that."