Consultant says Las Vegas headed in right direction

By Buck Wargo

Fri, May 15, 2009 (midnight)

Dan Van Epp remains active in Las Vegas real estate circles.

The former executive with the Howard Hughes Corp., the Rouse Co. and Newland Communities has been running a national real estate development consulting firm with his son, Michael.

The company consults for Van Epp’s former employer, Newland Communities, project manager of Union Park in downtown Las Vegas.

Van Epp says he has no regrets leaving Newland and forming his own company a year ago. He says he was helping Newland downsize to match the economy, and it seemed like a good time to leave.

He says he continues to work with Newland to help Union Park move forward and remains bullish on it. The groundbreaking of the $450 million performing arts center next month will further boost the project.

Van Epp says he is also working on helping Newland recapitalize so it’s prepared once the economy heals.

As for the healing of Las Vegas, Van Epp says Southern Nevada was the first place in the country to go through the downturn in the residential housing market and is likely the first market that will see an upturn because of the increased affordability.

“We had the steepest decline in prices, and we now have single-family homes priced at half of what they were in 2003 and 2004,” Van Epp says. “At that price, you make the single-family home a lot more attractive to a lot more people.”

Las Vegas is also taking the right steps in what needs to be done to correct its economy, Van Epp says. The lowering of room prices by the resorts is the key to getting people to come back in greater numbers, he says.

“They are going to flock back to Las Vegas, and when that happens, our own unemployment rate will get much better and that is part of the equation to buying homes,” Van Epp says.

The commercial market, however, has a long way to go both locally and nationally, Van Epp says.

The office vacancy rate continues to rise and with the high jobless rate, the office market could be in bad shape for a number of years, he says. The retail market has been overbuilt in Las Vegas and across the country, and it will take time to correct that with a construction hiatus, he says.

Commercial real estate will be hurt by the continued credit crunch that’s going to push down values even further, Van Epp says. More experts are raising concerns about commercial foreclosures, and he says he understands why.

“That is the $10 trillion question,” Van Epp says about commercial foreclosures. “On the surface, it appears it could be worse than the housing issue. Nobody really knows. If the government can act fast enough or if enough is done to solve the liquidity of U.S. banks, we can head off a disaster in the commercial market. I think there will be enough focus on the banking system that we will probably avert it.”

With General Growth Properties in the midst of bankruptcy proceedings, Van Epp says the remaining undeveloped parcels of Summerlin will be sold. Having a different owner will be good in the long term, he says.

Finding a buyer, however, won’t be easy. There is no appetite for raw land, and the prices people are willing to pay may not satisfy creditors, he says.

Two years ago, residential land in high-quality locations went for $1 million per acre, but now you are lucky to find a buyer for $100,000 per acre, he says.

That is quite a comedown for Las Vegas.

The city spent years trying to persuade Wall Street that it was a viable city and a place to invest and have confidence in, Van Epp says. The city was successful, but now those same people are gun-shy given the recession, he says.

“It is way too early to predict the demise of Las Vegas,” Van Epp says. “We have a very bright future.”

There is a silver lining to Wall Street and other investors not looking as favorably at Las Vegas, Van Epp says. That holds down the value of real estate, which is great for people looking for a home, he says.

“You need capital for strong growth, but we don’t have to worry about growth at this moment,” Van Epp says. “Once we fully utilize the growth we have, then we can start talking about growth again.”

Windermere report

Robyn Yates, broker/owner of Windermere Prestige Properties, says there is growing evidence that some homeowners who are upside down on their mortgages are purchasing homes and letting their original home be foreclosed.

This “buy and bail” trend is a result of home values declining, she says, and not because those people are unable to make their monthly payments. They don’t want to pass up buying a home at record lows, she says.

But the foreclosures have consequences even if someone gets a lower-priced home in return, Yates says. The foreclosure affects credit and hurts a person getting a car loan, student loan or credit card. It will also take a minimum of four years before the person can purchase another home.

In other news:

• Prudential | IPG announced it has formed its Commercial REO Division, a platform established to assist banks and lenders in managing the growing number of commercial defaults in Southern Nevada. The Las Vegas-based operation is designed to work with financial institutions chief credit officers and special asset managers, says Hayim Mizrachi, a senior commercial adviser.

• Colliers International has named Patrick Murray as a managing partner and senior vice president responsible for its portfolio of 14.5 million square feet of retail, office and industrial/flex properties in Nevada and California. Gretchen Lee, senior portfolio manager, will continue as the contact and facilitator of Nevada properties. Murray worked at San Francisco investment firm McMorgan & Co. as a senior vice president.

• Tom Breitling, former owner of Travelscape and Golden Nugget and current executive with Wynn Resorts, has paid $3.7 million for a 9,947-square-foot home on Orient Express Court.

Brian Wargo covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at wargo@lasvegassun.com.