gaming:

Report: 25% of LV commercial real estate troubled

Friday, April 3, 2009 | 3:08 p.m.

See the Real Capital Analytics report

Sun business and economy coverage

Commercial properties valued at a whopping $7.885 billion are in trouble in Las Vegas as casinos struggle under the weight of the recession and office buildings and shopping malls lose or are unable to find tenants, a research firm says.

Real Capital Analytics Inc. of New York said that in terms of troubled commercial properties and loans against them, Las Vegas ranks second in the nation behind the much larger New York market, with $8.525 billion of loans and property in trouble, and is ahead of the far larger Los Angeles market at $5.02 billion.

Real Capital senior market analyst Jessica Ruderman said the problem has accelerated in Las Vegas since February 2008, when loans on troubled local properties totaled $4.8 billion, or 17 percent of the market. She estimated the new figure of $7.885 billion represents about 25 percent of the market.

The company identifies properties that are in trouble by looking at foreclosures, tenant departures and the weakening finances of their owners, among other factors, she said. For instance, the Las Vegas numbers include the Tropicana hotel-casino, which is in bankruptcy; the Riviera hotel-casino, which has warned it may need to seek bankruptcy; and two shopping malls owned by struggling real estate giant General Growth Properties Inc. Those malls are the Fashion Show and the Shoppes at the Palazzo, both on the Las Vegas Strip.

The problem in Las Vegas, and other markets, is that developers and other borrowers who run into trouble because of the economy are having difficulty refinancing their debt; while lenders increasingly are having to make concessions so they don't have to foreclose on the properties, Ruderman said.

So far, she said, government assistance to banks hasn't freed up a lot of credit, "But we're hopeful that will help.''

Jeremy Aguero, a principal at Applied Analysis in Las Vegas, noted that in Las Vegas there are signs of life in residential real estate. On Thursday, Las Vegas was among the cities highlighted by BusinessWeek in a story called "Housing: Signs of Life.''

"The foreclosure-torn city saw a 108 percent increase in home sales in February as buyers scooped up homes at 2002 prices,'' BusinessWeek said of Las Vegas.

Aguero's firm has identified commercial real estate as the top economic challenge in Las Vegas this year and no turnaround in that sector is foreseen through 2010 as new product -- started when the economy was strong -- continues to come into an already oversupplied market.

There will soon be five years worth of inventory to absorb in the local office market, which is already struggling with a vacancy rate of 17 percent, Aguero said.

Aguero said it's hoped that government assistance to lenders will help free up credit, but that in many cases in the commercial market the only alternative is bankruptcy because so many properties are under water, meaning they are worth less than what is owed on them. It's also hoped that government stimulus packages will create jobs, which would improve consumer spending and hopefully help struggling retailers and their landlords.

Overall, he said, a local economic rebound "is still too early to call.''

Discussion: 11 comments so far…

By rejco100

4/3/09 at 4:36 p.m.

Suggest removal

DUH!
By stevem

4/3/09 at 4:53 p.m.

Suggest removal

"vegas is recession proof".

funny how i don't see the p.r. types saying that anymore.

even with low hotel rates, people are saying "we'll pass" on what vegas has to offer...

$8.00 coronas and $500 bottles of grey goose.
By sanddunes

4/3/09 at 5 p.m.

Suggest removal

And the other shoe drops.

Now what was that about falling tax revenue, school funding shortage, light rail, budget crisis?
By Boomer111

4/3/09 at 5:24 p.m.

Suggest removal

The reason for this mess that It's all neiman1's fault. He forgot to wear his aluminum hat last year when he returned from K-Pax
By geenab65

4/3/09 at 7:46 p.m.

Suggest removal

Boomer111
Thank you for that much needed laugh!! You are right on the money!!
By redsoxwin

4/3/09 at 9:24 p.m.

Suggest removal

Drive down Lake Mead Pkwy in Henderson, and you'll see how bad things really are. The new Target Shopping Center looks busy, until you see the empty parking lots in front of the stores, some of which have already closed. Drive down to see the fancy strip center at Athens Street-not one store occupied, and the adjacent church unfinished. Maybe Jesus can help? There's a "future" Smiths Super Market sign across the street-it's already falling down from the wind and old age. It's in front of an "exclusive" housing development with only 15 homes-12 of which are "bank owned". Don't even bother to head to Lake Las Vegas up the road. The City wisely invested 33 Mil of taxpayer money to develop that disaster. God, I know it's a big request, but can you let us start from square one, and run these connected developers and their good buddy City enablers out of town-like a bad hangover? Oops, too late? Maybe next time...
By Sabibaby

4/4/09 at 10:26 a.m.

Suggest removal

the commecial realeste crash will make the housing crash look like a picnic.
By stevem

4/4/09 at 11:29 a.m.

Suggest removal

redsox and sabi are correct.

i work in advertising and i'm in and out of these strip malls all day long and from the road they look like they are humming along, but actually walk them and it's empty store front after empty store front.

some never had anything in them and then some you can tell at one time there was a business there. there's a huge tidal wave of mom and pop retail businesses closing about to hit this town.

with people spending less, taxes, licensing fees, and huge anchor stores like circuit city going out of business, they just can't make any money. really sad.

these businesses are going to close and there won't be any new businesses to take their place.

there's about a 2 or 3 month delay from when things happen to when the effect is felt and reported in the media, and things are horrible in this town and getting worse.
By skerlahdee

4/4/09 at 5:53 p.m.

Suggest removal

Part of the problem is that planning commissions, county commissions, and city councils don't say no to developers. Even in good times, new commercial real estate applications seldom represent real community need. They are simply designed to cannibalize older spaces.
By alienbaby

4/5/09 at 12:44 p.m.

Suggest removal

geez when i read the head line i thought we were talking weather...maybe these experts need doppler radar to get it right because common sense is long gone.
By ksen

6/4/09 at 1:15 p.m.

Suggest removal

I think we are 2 to 3 years from the bottom. However when things get bad it opens the doors to opportunity and a redistribution of wealth.

We are looking to purchase bank owned commercial real estate in Las Vegas. We have significant funds available for an immediate all cash purhcase. If you are a broker we will allow you to represent us in the transaction. Please send all opportunities to me at:

Kris Petersen
Denley Investement
Hollywood, CA 90028
realestatekp@hotmail.com