Las Vegas Sun

February 12, 2012

Currently: 56° | Complete forecast | Log in

Analyst: LV keeps spot at top of list of distressed properties

By Buck Wargo

Fri, Aug 21, 2009 (3 a.m.)

Sun Topics

Sun Coverage

The number of commercial properties facing foreclosure tapered off over the summer, but that hasn’t prevented Las Vegas from holding onto its No. 1 ranking for distressed buildings and development.

In its August report that tracks the market through the end of June, New York-based Real Capital Analytics said Las Vegas had 168 troubled assets valued at $9.2 billion. That is down from $9.4 billion in its July report and $9.7 billion in its June report.

The slowdown comes after distressed properties rose 52 percent during the spring.

“It has been consistent, but I still think it gets worse before it gets better,” said Jessica Ruderman, a senior analyst at Real Capital Analytics.

The Chapter 11 bankruptcy filing by Station Casinos in July will be a new factor to consider, Ruderman said. That will push the number of distressed properties past $15 billion with $6.5 billion attributed to Station, she said.

Excluding Station, however, the value of distressed properties has stabilized, Ruderman said.

The reason for the stabilization in Las Vegas is the attitude of lenders, Ruderman said. Many don’t want to take over the properties in foreclosure and would rather work out a deal. They are even reluctant to file default notices, she said.

Of the distressed properties, about $1 billion or less than 10 percent have been resolved, Ruderman said. Resolving them means they have been sold, refinanced or a new tenant has been found, she said.

John Restrepo, principal of Restrepo Consulting, said he has heard reports about lenders trying to work with developers and property owners because they know there are no buyers for those properties.

“If they take the properties, they have to manage and maintain them and get them leased up or finished if they are under construction,” Restrepo said. “They are finding it’s better to work with an established good developer.”

Restrepo said that may not last. As the job market worsens, vacancy rates are likely to increase and banks will face more pressure from federal regulators to dispose of underperforming assets. He said the market won’t know until 2010 how big the commercial foreclosure wave is.

“All bets are off if the economy worsens,” he said.

Las Vegas’ No. 1 ranking from Real Capital Analytics is based on the percentage of commercial property in distress rather than raw numbers. Detroit was No. 2.

In its August report, the firm breaks down the $9.2 billion in distressed properties to $6.5 billion in commercial properties that are “troubled,” $692 million are having loans restructured or extended and $2 billion in properties foreclosed by lenders.

Development properties fared the worst with $4.6 billion in distress. That was followed by $1.8 billion in retail properties and $1.5 billion in hotels. Retail distressed properties have grown by about $100 million to 6.7 million square feet, up from 5.8 million in the last report.

Other distressed properties include 37 apartment complexes at $907 million; $51 million in industrial and $72 million in miscellaneous commercial.

Sales activity has remained tepid in the commercial market in Las Vegas with $17.4 billion in sales reported as of Aug. 1 through the past 12 months. It was $17.7 billion through July 1, the firm reported.

About $17.2 billion of the sales were 13 hotel properties with an average price per square foot of $256,854, the firm reported.

Eight retail properties sold for $82 million in the past year at an average price of $121 per square foot. Industrial and office sales amounted to $55 million. The five office sales averaged $213 per square foot, while the six industrial sales averaged $106 per square foot. Six apartment buildings sold for $48 million, the firm reported.

Nationally, the volume of troubled commercial properties grew by 123 percent in the first half of 2009 as $67 billion became troubled. At the end of June, the value of 6,063 commercial properties in default, foreclosure or bankruptcy was nearly $115 billion, Ruderman said.

First American Core Logic reported that in 2009, more than $165 billion in commercial mortgages will mature and need to be refinanced or sold. The firm said Las Vegas had $41 million in retail commercial mortgages maturing in June, the fourth highest in the nation.

Discussion: 4 comments so far…

Comments are moderated by Las Vegas Sun editors. Our goal is not to limit the discussion, but rather to elevate it. Comments should be relevant and contain no abusive language. Comments that are off-topic, vulgar, profane or include personal attacks will be removed. Full comments policy. Additionally, we now display comments from trusted commenters by default. Those wishing to become a trusted commenter need to verify their identity or sign in with Facebook Connect to tie their Facebook account to their Las Vegas Sun account. For more on this change, read our story about how it works and why we did it.

Only trusted comments are displayed on this page. Untrusted comments have expired from this story.

No trusted comments have been posted.

Post a comment

Commenting requires registration.

Comments are moderated by Las Vegas Sun editors. Our goal is not to limit the discussion, but rather to elevate it. Comments should be relevant and contain no abusive language. Comments that are off-topic, vulgar, profane or include personal attacks will be removed. Full comments policy.

If you would like to submit your comment as a letter to the editor, you may submit it here.

Most Popular

  • Viewed
  • Discussed
  • E-mailed
  • Facebook