Lack of financing and qualified help are likely to derail high-rise buildings. Several projects in Las Vegas are dead and others are threatened by the difficulty of securing construction funding and contracting qualified general contractors to build high-rise apartments at feasible prices, industry officials say. These two fundamental reasons are due to the failure of projects such as Ivana Las Vegas, Icon, Aqua Blue, and Crystal Sands. “If a developer cancels a project, it’s not good for consumer confidence, but developers are not pulling out of Las Vegas because they can’t sell units,” said Steve Fifield, president of Chicago-based Fifield Corp
Fifield is developing a 41-story allure tower on Sahara Avenue west of the strip, with a $120 million construction loan from Union Labor Life Insurance Co., and a $70 million stake or mezzanine financing from CB Strategic Partners. Mezzanine financing is the difference between what banks will borrow for construction and the total cost of the project. M.J. Dean of Las Vegas is working on specifics, and Bovis Lend Lease is a general contractor. With luxury condo projects announced in abundance in other markets, including Miami and San Diego, as well as Las Vegas, financial institutions are tightening lending requirements and approaching them carefully. 온라인경마
“Especially in areas like Vegas, above all, they are very concerned about the developer’s experience and performance,” said Aaron Yashoafar, president of Millbank Real Estate Services in Los Angeles and the developer of the $325 million Sky Las Vegas on the North Strip near the Circus Circus. “And they also require a very high percentage of pre-sales. By pre-sales, lenders don’t care about bookings. They care about actual contracts and non-refundable deposits in escrow.”
Andrew Woodley, vice president of commercial real estate at New York-based HSBC Bank, said he was looking for a “unique project with a strong and dedicated development team” for $250 million in construction funding for One Queensridge Place, an 18-story luxury condo tower being developed by Executive Home Builders near Rampart Boulevard and Alta Drive.
“The initial challenge was to educate lenders about demand for high-rise projects not located on the strip,” said David Stepanchok of George Smith Partners, which rescued financing with HSBC on behalf of Executive Home Builders. “Once the banks assessed the strength of the local market, they reacted enthusiastically and broadly.”
HSBC, which has nearly 400 locations primarily in New York and Florida, has joined several other financial institutions, including PB Capital and Bank Leumi in New York, to offer loans. “It’s very difficult when loans reach this level,” said Yashoafar, whose Sky Las Vegas project is being financed by a $260 million loan from Hypo International. “They like to break up loans.”
David Norris, an independent mortgage broker in Los Angeles who arranged the financing of Sky Las Vegas, said it was much like how banks viewed Las Vegas toward Florida. “People are worried that the majority of Las Vegas has become a speculative market,” he said. “Lenders are being cautious about that. There is a (caution) in some sales contracts that you can’t sell for the first two years.”
Banks want to see more than 60% “hard sale” and want the developer to line up with signed contracts. “Yashoafar” has done a good job of converting a high percentage of the deposit into a hard contract, which requires 25% of the purchase price to be put in escrow, Norris said, and has held M.J. Dean as a general contractor. Project manager Matt Joens said the 45-story Sky Las Vegas construction reached 19 floors, with floors added about every four days. About 85% of the 409 units sell.
“There is no magic. What we do is not brain surgery. It’s numbers. They just add up,” Norris said. “Other lenders I spoke to also knew that some of those (high-rise apartments) weren’t going to be built. Vegas is a small town in many ways, and there are actually only three builders. There are not enough contractors to do these things and people knew that.”
An estimated $3.625 billion project has been announced and is under construction. Fifield said high-rise condominium developers in Las Vegas are moving inventory at a record pace, which is driving up demand for limited contractors and construction resources. This is eventually pushing up construction prices and putting pressure on developers.
“Developer fallout is a sign of a very strong and very aggressive market,” he said. “We did our homework and paid good value to the land, which was instrumental in Allure’s success. There are developers in Las Vegas who have paid two to three times the amount of land they sold for years, which, along with rising construction costs, has driven up the cost of development, making their projects unworkable.” Land prices don’t guarantee success, either.
In January 2004, the related company paid $15 million for 4.5 acres of Convention Center Drive, part of the Silver City property purchased by San Francisco real estate investor Luke Brugnara. Officials announced a $350 million Twin Towers Icon project for the site and said zoning and financing were already underway.