Saturday, Jan. 24, 2009 | 2 a.m.
With the condo-hotel market hard hit and many prospective owners unable to close on their units, Donald Trump has decided to lease units at the Trump Tower for up to one year as furnished apartments.
Realtors are hailing it as a trend that may catch on with other developers such as MGM Mirage with its condo-hotel Vdara, whose sales are stagnant.
Since it opened last year, Trump has closed on nearly 400 of the 1,282 units despite having contracts for nearly all of them, Realtors say. The problem has been the credit crunch, and investors’ inability to obtain financing to close. Many purchasers signed contracts when the condo market was hot and financing was readily available.
Renting units as apartments “is a very smart move, and it is not an unexpected move,” said Steve Bottfeld, executive vice president of Marketing Solutions. “The problem is simple. Even a guy like Trump has to borrow money to build buildings to pay the loan back. He has to find a way to take care of that carry, and the best way to do that is to make those units apartments.”
Bottfeld said not only will other condo-hotels consider a similar move, so could residential condos having problems closing units. He says he wouldn’t be surprised if Trump’s cost of carrying each unit is $2,000 a month.
So generating revenue from rentals is “a good move on his part that will be emulated,” Bottfeld says.
Trump is listing all of his units for lease, including studios, one bedrooms, two bedrooms and penthouses.
The lowest price is $1,600 a month for a one-year lease on a studio. One bedrooms are as low as $2,600 and a three-bedroom penthouse is $6,500 a month for a one-year lease. Those units are $7,500 a month for a three-month lease and $7,200 a month for a six-month lease.
High-rise Realtor Bruce Hiatt said it’s a brilliant strategy for Trump to generate more operating revenue and help establish the hotel. With the troubled economy, competition has been tough, including with Steve Wynn’s Encore.
Some staff members were let go and that reduced services, Realtors say. Bringing in more people as tenants will enhance services and increase the number of jobs, they say.
“I think they are on the right track to reduce inventory that is not being closed because people are walking away from their units,” Hiatt said. “I think it is going to be the trend for the next couple of years.”
Hiatt said he wouldn’t be surprised if CityCenter does the same thing at Vdara and other condo-hotel complexes follow suit. The units could ultimately be sold when the economy improves.
The hotel units will be attractive to companies that bring in accountants and others to do temporary work and need a place for three months or longer, Hiatt said. Even wealthy people who travel might not want to buy in Las Vegas, but have a furnished place they can live in short term.
A version of this story appears in this week’s In Business Las Vegas, a sister publication of the Sun.