Las Vegas condo hotels remain a tough sell — just ask Trump

By Buck Wargo

Friday, Nov. 20, 2009 | 3 a.m.

Sales in the local high-rise market rose 7 percentage points in the third quarter, but closings at the Trump International have been essentially nonexistent, according to the latest report by a Las Vegas research firm.

SalesTraq reported that 23 percent of the 1,282 units at Trump, a condo hotel, have closed through the third quarter, the same percentage as in the second quarter.

The condo-hotel market especially has been hurt by buyers’ inability to close because of the lack of financing and because the concept is struggling across the valley. Condo-hotel owners share revenue generated by hotel room rentals with the operator, but drops in visitor volume and room rates have cut into that.

Steve Bottfeld, executive vice president of Marketing Solutions, says the failure of units closing at Trump centers on its location next to the Fashion Show mall. Nearby Echelon Place halted its casino development, and other projects were delayed, thus detracting from it, he says.

Trump, however, can get a shot in the arm from the opening of CityCenter, which should bring in more visitors and make the Trump easier to sell, Bottfeld says.

“CityCenter is going to have a greater impact than the Mirage did in 1989 and Bellagio did in 1998,” he says.

In Las Vegas 45 percent of all high-rise units have been sold through Sept. 30. That’s up from 38 percent at the end of June.

Palms Place, another condo hotel, saw closings rise from 58 percent to 62 percent at the end of the third quarter.

At the third tower at Panorama, closings jumped from 38 percent in the second quarter to 64 percent in the third. Juhl rose from 6 percent to 10 percent, and One Las Vegas went from 15 percent to 17 percent. Newport Lofts in downtown Las Vegas rose from 67 percent to 70 percent and Allure rose 1 percentage point to 53 percent.

Turnberry Towers remained at 52 percent; Streamline Towers stalled at 10 percent; Sky Las Vegas stayed at 80 percent and Queensridge remained at 62 percent.

Economy report released

The Southern Nevada Index of Leading Economic Indicators dropped in October, suggesting the region’s recession will go on through at least February, according to the report released by UNLV’s Center for Business and Economic Research.

The October index measures economic conditions in August. The index fell 3.73 percent from October 2008, and all 10 sectors used in the analysis declined. Segments measured include gaming, visitor counts, convention attendance, retail sales, and commercial and residential construction.

Keith Schwer, director of the center, said the Clark County Business Activity Index fell 11 percent during the past year and 1.5 percent from July.

The Tourism Index is forming a bottom, holding fairly steady between May and August, he said. The Construction Index, however, was weak, down 34 percent over the past year, he said.

Apartment market report

Applied Analysis reports that demand for professionally managed apartments is still weak and rents fell during the third quarter to reach their lowest level since 2006’s first quarter.

The average occupancy rate rose to 91.1 percent in the third quarter, up from 90.5 percent in the second quarter, but that’s below the 93.7 percent rate in 2008’s third quarter, the firm reports.

Average rents fell for four consecutive quarters with the price averaging $840 per unit per month. That is down from $857 in the second quarter, a 2 percent decline. Rents have fallen 5.6 percent since the third quarter of 2008.

The apartment market’s future isn’t looking good because of the weak job picture, the firm says. It won’t recover until home prices stabilize and foreclosures begin to fall.

Jake Joyce, Applied Analysis project manager, says most future apartment-sale transactions will likely result from lender sales.

The southwest valley had the highest rents in the third quarter at $994 per month, while the northeast had the lowest rents at $708. Rents in the southwest valley fell 2 percent and fell 8 percent in the south valley in the past year.

The southwest area had the highest occupancy at 92.4 percent, and the northwest had the lowest occupancy at 89 percent.

Apartment market specialist Michael Belnick says the number of notices of default for apartment complexes is climbing, setting the stage for more foreclosures. Even the bigger properties are starting to fall, he adds.

Among fourplexes through the third quarter, the 284 sales were 89 percent higher than 2008. Despite that increase, the sales volume declined 10 percent, reflecting the drop in prices and large number of foreclosures. The price per unit was $39,100, a 52 percent decline from 2008.

In the five to 99-unit market, 31 buildings sold, three more than in 2008. The average price per unit fell 25 percent to $57,500. Nine buildings with 100 units sold, four less than in 2008. The average price per unit was $34,700, a decline of 57 percent.

In other news

• The Douglas Wilson Cos. report the sale of the distressed Spanish View Towers condominiums on behalf of the U.S. trustee as part of bankruptcy proceedings. The buyer was OneCap Holding Corp., which was the original financier, said Tigg Mitchell, director of brokerage services at Douglas Wilson. Mitchell says OneCap, which held the trust deeds on the property valued at $36 million, will hold the project until the market improves. Construction stopped in July 2006. It has a partially constructed underground garage. The project went into bankruptcy in 2007 when developer Tower Homes was served an involuntary petition by several of the mechanic’ liens creditors. The project near the Las Vegas Beltway and Buffalo Drive has entitlements for 390 units and 29,000 square feet of retail.

Brian Wargo covers real estate and law for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at [email protected].