Real Estate:

Units aren’t closing so Trump says: Rent ’em out

Birth of a trend is seen in decision to lease furnished apartments for up to a year

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.

Discussion: 10 comments so far…

By chazbean

1/24/09 at 8:07 a.m.

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Isn't it amazing everything Trump does is a triumph. He is nothing more than a show man who uses his name to get other people to borrow him money. How many times does his Atlantic City Casinos go bankrupt before he has to pay or go bankrupt. Maybe his Co could be eligible for Government assistance!
By rentinginternational

1/24/09 at 9:42 a.m.

Comment removed by staff.
By RPJ

1/24/09 at 9:43 a.m.

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Jealous much, chazbean?
By LT2LV

1/24/09 at 11:05 a.m.

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Are there still people that can afford $1600 rent on a studio?
By harske

1/24/09 at 11:21 a.m.

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So much for "build it and they will come" mentality. Of course... that's been obvious for a while now.

I just wonder how many of these units they're going to be renting for $3k to $6k a month. I mean, where do those people work? The interest from wealthy, out-of-towners who want to rent instead of own isn't unlimited. That market can be only so big. Be interesting to see how it shakes out when the ignorant glut of units starts to flood the market in the next few years.

I continue to be amazed by the number of developers who didn't scale back at all until it was way too late. Now it's on to the survival of the fittest. Or the least greedy.
By LasVegas2009

1/24/09 at 12:24 p.m.

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A studio for $1600? Well now we get to set back and see just how far those rents are gonna fall. I guessing to about $900 a month for the studio. Just wait until city center opens they will have even more to compete with. Maybe they should have had a casino to go with it.
By davidwayneosedach

1/24/09 at 2:23 p.m.

Suggest removal

Somebody has to pay the HOA. And it's not going to be Trump! I doubt if there will be multitudes rushing to rent at those prices though.
By johnevegas

1/24/09 at 2:50 p.m.

Suggest removal

chazbean "Isn't it amazing everything Trump does is a triumph."

No. He uses the Law of Attraction. That's how rich people become rich. You should try it.

I have a friend who was born with the skill. He's worth over $2 Billion. Never saw himself as anything other than successful, even when he was a lowly truck driver. Maybe Donald was born with it too.

Good for them both. Great examples of what is possible.

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