ACCESS LASVEGAS AUGUST | SEPTEMBER 2007
YOUR ACCESS TO THE LAS VEGAS MULTI-FAMILY HOUSING MARKET
Allure Las Vegas Way Ahead In Sizzling North Strip Development With the flurry of recent announcements regarding property acquisitions and real estate transactions, the north end of the Strip has quickly become the focus of hot redevelopment activity. Anchoring the northwest corner of Sahara Avenue and Las Vegas Boulevard, construction on Allure Las Vegas continues to heat up as the 41 story high-rise tower of makes its final push towards completion through the next few months. Allure Las Vegas features 428 units and 15 distinct open floor plans with studio, one, two and three bedroom residences which
range in size from 671 to 4,400 square feet, in addition to tower suites and extraordinary two-story penthouses.
residents. Allure Las Vegas is also the only high-rise residential development in Las Vegas offering feng shui design.
Allure's large outdoor pool deck with cabanas is overlooked by a well-appointed fitness center with locker rooms, and a media center, conference room, catering kitchen and business center equipped with high speed internet computers, wi-fi in all of the public spaces, resident storage, 24-hour security and valet parking. In addition, due to its close proximity to fiber optic lines, Allure will have a large bandwidth connection available to all units for video and data. A private wine cellar will offer climate-controlled storage for
With remaining residences remarkably priced from the mid-$500,000s, Allure Las Vegas is more than 92% sold out of its luxury units. Each of its remaining residences offers premium views of Las Vegas and the surrounding mountains, superb amenities and exceptional finishes. Visit Allure Las Vegas on the web at: www.AllureLasVegas.com, for additional information.
ACCESSLASVEGAS August | September 2007
SPECIAL REPORT: Affordable Housing Gap Widens; Apartment Industry Benefits Source: Mortgage Bankers Association of America
It's getting harder to build and manage truly affordable rental housing. Lenders are struggling to figure out what deals to approve as market conditions grow more challenging. The housing boom that swept the country over the last few years has been great news for many people. Existing homeowners saw their property values skyrocket. Millions took advantage of low interest rates and creative financing deals either to enter homeownership for the first time, refinance their homes, or upgrade to bigger houses or better neighborhoods. Where land was at a premium, builders went skyward, and condos saw unprecedented popularity. The apartment industry saw some benefit from the boom as well; as property and for-sale housing doubled in value in many markets, rents went up, too. Condo converters took some existing apartment stock off the rental market, thus diminishing supply and helping rental rates to rise. Suddenly, class A rental units were leasing at monthly rates equal to or more than comparable mortgage payments, and B and C class rents crept upward as those apartments became more attractive options for people shut out of the luxury rental or for-sale markets. While things have cooled on the homeownership side in many areas and whispers of overbuilding are starting to be heard in that crazy condo market, apartments keep on renting. Getting a mortgage isn't quite as simple as it was two or three years ago, and more families find themselves looking for apartments to rent instead of property to buy. Shut out in all of this, however, have been families, especially large ones, that the Department of Housing and Urban Development (HUD) says have "worst-case housing needs." Defined as households that either pay 50 percent or more of their monthly income on housing or who live in substandard housing, their numbers are increasing exponentially. HUD says that in 2005, the latest year for which numbers are available, 5.99 million U.S. households fell into the worst-case housing needs category-up 16 percent from two years before. Just about everyone, from HUD to nonprofit housing providers, says there isn't nearly enough truly affordable rental housing to begin to cover the need. The obvious answer-build or convert more low-income rental housing-isn't as simple as it might seem. For one thing, land prices are far too high in
and around most cities for developers to begin to cover the costs of building new apartments and charging federally defined affordable rents for them. And, developers say, federal guidelines that govern subsidy programs are too complicated and restrictive for most to even think about using them. And then there's the issue of supply vs. demand, and a free market. Simply put, most people would prefer to spend as little on rent as they realistically can. In practice, that means some renters who technically could afford market-rate or work-force-rate rental housing instead hunker down in apartments originally meant for the worst-case rental needs market, taking those units out of the pool.
“Housing is getting more expensive, there’s not as much available at affordable rents and there’s a decline in the amount that’s being built new...” Peter Coccaro of Fannie Mae
But experts say there are creative ways for lenders and developers to work together to provide more affordable rental housing for the lowest end of the spectrum. The answers, they say, are creativity and due diligence. Facing a Shortage According to HUD, in 2005, there were 77 available affordable units for every 100 very low-income renter households (defined as those earning no more than 50 percent of area median income). In contrast, there were 81 units available for every 100 very low-income households in 2003. But that's not the worst of it. Extremely low-income renter households, defined as those earning not more than 30 percent of area median income, only had 40 units available for every 100 households in 2005. "Three things are going on," says Peter Coccaro, director of product management at Fannie Mae. "Housing is getting more expensive, there's not as much available at affordable rents and there's a decline in the amount that's being built new," he says. And with land costs skyrocketing and subsidies declining, he says, even nonprofit groups that have
ACCESSLASVEGAS August | September 2007
traditionally found creative ways to build affordable rental properties are throwing up their hands in frustration. "In parts of the country where jobs are being created, there's a need for more housing," says Kim Griffith, vice president of multifamily affordable housing at Freddie Mac. "Where there's a need for more housing, there's definitely a need for more affordable housing. But where jobs are not being created or are being lost, there's (also) a need for some replacement housing. And that housing becomes obsolete and run down, and is ultimately lost." He points out, however, that in areas with job growth, housing costs go up and construction costs go up, making it more difficult to build or reconfigure housing that's affordable to lower-income households. And while the federal Low-Income Housing Tax Credit (LIHTC) program provides subsidies to owners of truly affordable housing, many developers shy away from it because of its layers of complication. To use them, tax credit property owners must restrict rent so that either 20 percent of the units are available to households whose income is at or below 50 percent of area median (AMI), or 40 percent of the units are affordable and occupied by households at or below 60 percent of AMI. To qualify for the LIHTC program, owners must also commit the properties to these restrictions for at least 30 years. The bottom line, experts say, is that multifamily owners and their lenders must be extremely well-versed in tax credit restrictions and regulations to make their projects work-after all, they still have to cover land, construction and maintenance costs over the life of the property, tax credit rent or not. "Initially, anyone in this business has a hard time," says Matt Wanderer, principal with Alterra Capital Group, Miami. Alterra specializes in purchasing distressed properties, renovating them and operating them as affordable rental housing. "There's a lot of paperwork where you're constantly showing your track record," says Wanderer. "All of our properties have some subsidies." That said, Alterra generally prefers to have 10 percent to 20 percent of a property subsidized, and turn to private financing to work out the rest of the deal.
"We've tried to do fully subsidized deals, and there's too much red tape and too many complications," says Wanderer. "There's a lot of government oversight on expenses and the way you manage and run the property. It gets in the way of a business plan and makes it tough to be successful." Others say Alterra's preference isn't unusual. "If you are accustomed to dealing only with conventional multifamily financing, the different aspects of an affordable deal are very complicated and difficult to sort through," says Griffith.
SPECIALREPORT That can spell headaches for lenders that work with housing developers to supplement tax credits with other financing options to boost the number of affordable units in a building or on a property. "It's not necessarily that it's complicated, but it is layered," says Fannie Mae's Coccaro. "You can't just go out and get one conventional loan. You have to find additional financing. And that's where it's drying up. Federal subsidies are drying up; the funds just aren't available, and it's getting harder and harder to find them." Lending 101 The market for financing affordable rental housing is huge, as more developers embrace mixed-use developments in and around large metro areas to incorporate subsidized affordable housing units into projects that are otherwise market-rate, and sometimes very high-end. By blending in a certain percentage of affordable units into a building with market-rate apartments and, sometimes, retail or offices, developers can qualify for tax credits and breaks that they otherwise wouldn't have. By doing so they also help fill the affordable-housing gap, which also builds corporate goodwill for the project and those involved with it. But often it can mean more homework for lenders.
"We have to think about land use differently," says Joan Carty, chief executive officer of the Housing Development Fund (HDF). "We have to think about where the economics will make the most sense. Lenders have to be very aware of trends and operating expenses, property taxes, insurance costs, energy costs. Those are all huge drivers on the operating side. And it's good to project those out correctly." Carty says she and other lenders have had to educate themselves on the ins and outs of including affordable units in larger projects, particularly in neighborhoods that wouldn't have been considered for affordable housing several years ago. "It's back on the radar screen full-force," she says. "It's become a more middle-class issue. It's harder for kids coming out of college to get a foothold on their own, and the cost of land has impacted the cost of housing itself." But just tossing a few lower- rent apartments into a larger building won't fully address the problem, she says. And it also likely won't be enough for developers to qualify for tax credits and other state-allocated subsidies that could boost the potential for long-term successful financing on a deal. "It would be great to be able to build a 100 percent affordable-housing project in the middle of New York City or Los Angeles or wherever," says Coccaro. "You can pick any urban area. But the reality is that you can't get it to work. There is not enough income when it comes to buying the land and building the building. So we're seeing more deals where it's 20 percent of the units for 60 percent AMI renters, or some other percentage. I think that's going to be the trend. There's no other way to do it." That said, Coccaro advises both developers and lenders to take a hard look at neighborhoods before committing to a percentage of units for subsidized renters. And, he says, take a good, hard look at the local government and any restrictions or perceptions about this kind of housing. "It's harder to build. It's harder to lease. It's harder to permit," Coccaro says. "And for all the mixed-use stuff you see when you come into an urban area, there's a lot of NIMBY (not-in-my-backyard) stuff."
ACCESSLASVEGAS August | September 2007
Coccaro points to a new rental property being built in tony Bethesda, Maryland, one of the country's wealthiest ZIP codes, just a few miles outside of Washington, D.C., that was originally slated to have a percentage of affordable housing. A previous phase of the development had similar plans that flopped, thanks to local outcry. "That deal took 10 years to build, and they never did do apartments because of all the outcry," he says. "The new part was slated to have a certain percentage be affordable, and now it's just going to be four stories of market-rate rentals." Even states with their own incentives for builders that include affordable units can be tricky, Coccaro says. "People just don't want that sort of affordable housing," says Sarah Garland, national director of multifamily affordable housing at Fannie Mae. "They have a vision of old HUD concrete. That's not where we are today, but people still visualize that. The projects we participate with, you can't tell the difference between the affordable units and the market-rate units. In fact, that's against the law-you have to mix them in; you can't congregate them." Being aware of all these types of regulations and others can make or break the long-term success of a subsidized deal. When considering whether to finance a deal that's partially based on tax credits or other government programs, lenders would do well to completely familiarize themselves with both the regulations and the potential property owner's familiarity with them.
going to qualify. And you do the same thing with any affordable deal, you want to be sure that there's a demand within that group of tenants. Look at the market rents on comparable properties. Look at it both as a developer and as a lender, and look to see that there's a rent advantage to living in this restricted income property as compared to a market-rate property in the same area."
the same reporting requirements as traditionally subsidized housing, Wanderer finds this kind of housing easier to finance and manage properly.
Non-Subsidized Housing
Even here, though, builders and owners struggle to find ways to cut costs and keep maintenance on the lower side so rents don't have to go up. And Coccaro says that challenge may stymie some of the appeal of today's affordable and work-force housing in the long run.
Tax credit properties aren't the only ones hoping to reinvigorate the affordablehousing market. Developers across the country are investing in so-called workforce housing. That is the term being used for rental housing that's technically market value but is rented for lower amounts so that blue-collar and service workers can afford to live near where they work.
SPECIALREPORT "If affordable housing is at or below 60 percent of AMI, workforce housing, depending on location, can be anywhere from 80 [percent] to 120 percent of AMI," says Griffith. "Work-force housing was a phrase that, at one time, was substituted for affordable housing. It's evolved a notch or two in terms of income (level)."
"Compliance (in terms of) affordability is an ongoing thing," says Coccaro. "The risk of not being in compliance-of losing your tax credit-is a big risk. If a property owner doesn't know how to manage that component of it, you could be at risk."
The advantage to that, he says, is that it helps soften a neighborhood's potential resistance to the apartments. Work-force housing is often associated with teachers, police officers, firefighters and other community servants, and doesn't generally get the same negative reaction as pure subsidized low-income housing, especially in more upper-income areas.
Knowledge of the local market is also important, says Freddie Mac's Griffith. "If a property has restrictions associated with it, like if it's for (those) age 55 and above, you need to be sure that the market to be served has a sufficient market within that group of people to fill up your building and keep filling it up," he says.
Much of what Alterra rehabs falls into the work-force housing category. "The properties we buy almost always need significant investment to make them safe again," says Wanderer. "In order to do that without raising rents, we have to buy correctly. They're usually about 50 percent occupied, and we're buying them out of foreclosure or from a bank."
"You do all kinds of studies looking at potential tenants and whether they're
Because such properties aren't subject to
"The markets are liquid both in debt and equity markets," he says. "We're able to find money pretty easily. The hard part is getting deals-people are used to a crazy bull market where prices are going up by 15 percent a year."
"Developers are cutting costs by building smarter," he says. "They're buying stuff in bulk. They're subcontracting everything instead of having a lot of crews. They're doing all those kinds of things. But part of the thing that suffers becomes the expense of doing affordable housing-the community center is smaller; the pool is smaller, or there isn't a pool. Right now, you'd be hard-pressed to tell the difference between an affordable complex on one side of the street and a market-rate on the other. In the future, you may see more of a distinction. That's definitely not the goal," he adds. Experts say there are creative ways for lenders and developers to work together to provide more affordable rental housing for the lowest end of the spectrum. Coccaro advises both developers and lenders to take a hard look at neighborhoods before committing to a percentage of units for subsidized renters. Defining the Need The Department of Housing and Urban Development (HUD) defines "worst-case needs" households as those who either pay 50 percent or more of their monthly income for rent, or who live in substandard housing. In 2005, 5.99 million U.S. households had worst-case housing needs. Of those 5.99 million households: * 1.29 million were elderly, and 2.23 million had children at home;
ACCESSLASVEGAS August | September 2007
* 3.10 million were non-Hispanic white, 1.34 million were non-Hispanic black and 1.17 million were Hispanic; * 520,000 lived in severely inadequate housing units; * 208,000 were located in the Northeast, 143,000 were in the Midwest, 338,000 were in the South and 129,000 were in the West; and 2.91 million lived in central cities.
Economy.com Predicts Another 12.9% Drop in Las Vegas Home Prices By 2009 Source: Moody’s Economy.com
In the latest news from the slumping U.S. housing market, a report released this week says that median house prices are likely to decline more than 10% over the next few years in 20 metro areas, including Las Vegas, Tucson, Arizona, and Washington, D.C. The report, by Moody's Economy.com Inc., a research firm in West Chester, PA, also says that the slump won't end quickly. Indeed, according to the report, prices may keep falling until 2008 or even 2009 in some areas. In all, prices are falling or likely to decline soon in about 100 metro areas, the firm says. The study comes on the heels of a survey from the U.S. Census Bureau showing that 35% of American homeowners with mortgages last year spent 30% or more of their household income on housing costs, including loan payments, real-estate taxes, insurance and utilities. In 2003, a similar survey found that 30% of such homeowners were spending that much on housing. The new survey illustrates the strain on household budgets that has already helped slow house-price increases in some areas and push them modestly lower in others. The proliferation of headlines about a weakening housing market is encouraging some potential buyers to hold off until prices look like they're near a bottom. Nillani McClain, a 35-year-old
human-resources manager who lives in an apartment in Brooklyn, N.Y., has been looking at condominiums and townhouses in New Jersey with her husband, David. But given the recent slowdown news, the McClain’s are leaning toward waiting until next spring -- and then looking in Manhattan, a market they had originally thought they couldn't afford. "We are taking into consideration the option of finding something in the city and not having to move out to Jersey if prices drop considerably," Ms. McClain says. Buyers and sellers can use forecasts from Economy.com and others for guidance as they try to figure out how to play this tricky market. But because the reports don't agree on which markets will be the weakest or how severe the slump will be, they could also be left scratching their heads. While various studies generally agree that some of the biggest risks of declines are in California and Florida, there are striking differences, reflecting different forecasting methods. For instance, a recent "risk index" study published by PMI Mortgage Insurance Co. ranks the Boston metro area as the seventh riskiest in the nation in terms of the likelihood of price declines over the next two years. But Economy.com says that home prices in Boston likely bottomed out in this year's third quarter after a modest 2.2% decline. No study, of course, can tell exactly how bad the market will get or when it will hit bottom. Even if accurate, a prediction for a metro area won't hold true for all neighborhoods or all types of housing. The good news, according to Economy.com's chief economist, Mark Zandi, is that the current downturn so far looks more like a correction than a crash on a national scale, slowing economic growth but not tipping the economy into a recession. The bad news is that falling prices could be very painful for some people who have bought homes near peak levels over the past year or so in such areas as California, Arizona, Nevada, Florida, Washington, D.C., and the coastal Northeast. Housing markets in most of these areas began turning down about a year ago after prices more than doubled in many cities during a frantic five-year buying spree. It still isn't clear how hard the landing will be. Last week, the National
Association of Realtors reported that the median sales price of a previously occupied home slipped 1.7% in August from a year earlier. That was the first decline from a year earlier in more than a decade. Other signals are mixed. The Mortgage Bankers Association reported that its seasonally adjusted index of applications for home-purchase loans surged 7.6% in the week ended Sept. 29. But that index is volatile from week to week, and it is still down about 15% from a year ago. In a more positive sign for housing, mortgage interest rates have declined over the past two months. Inventories of unsold homes continue to rise in much of the country, though they have leveled off or fallen slightly in some cities. Economy.com based its price forecasts on a broad range of factors including demographic trends, job markets, mortgage rates, lending standards, construction costs and limits on land development. Among major metro areas vulnerable to steep price declines, Economy.com points to Nassau and Suffolk counties in suburban New York. For the rest of the New York City area, the firm sees a milder downturn, with the median price bottoming out in late 2008 just 3.5% below its peak in this year's second quarter. An exodus of speculators, who have dumped homes on the market, are hurting the Las Vegas housing market, and construction payrolls have been shrinking as developers cancel condo projects. But Economy.com says job growth in leisure and retail businesses will help offset the housing downturn in Las Vegas. Miami's high house prices have sent some residents scurrying northward to slightly less expensive areas, and the city is highly dependent on investment from Latin America, which "could easily dry up or even go into reverse," the report warns. For sellers, the real-estate news adds to their headaches. Laurie Siegel, a 62-yearold retired nurse in West Orange, N.J., is trying to sell a three-bedroom house so that she can buy a condo. The house was listed six weeks ago at $449,900, and Ms. Siegel hasn't had any serious offers.
ACCESSLASVEGAS August | September 2007
Las Vegas 2Q 2007 Apartment Update: Preliminary Results Show Weakness Source: AXIOMetrics Inc.
AXIOMetrics Inc. released its 2Q 2007 Apartment Market Early Edition results for the Las Vegas market and the consensus was not much positive news to reflect on. This report summarizes the Early Edition 2Q 2007 results for Las Vegas. Outlook
"If I don't get enough for the house, how am I going to buy the condo?" Ms. Siegel asks. So far, she has refused to lower the price of the house.
Big drops on all fronts since peaking in 2005. Rent growth is on a negative pace for the year. The occupancy rate has decreased in six of the past eight quarters. Job growth is at its lowest point since June 2003. Total permitting is down 41.9% from a year ago; MF permitting is down –35.7%. The market has to deal with all of the supply from 2005 and 2006 coming online while job growth is shrinking. Apartment Market * Effective rental rate growth for the quarter: +0.9%. Annual pace from 4Q06 to 2Q07: -0.9%. * Effective rental rate growth for the year: +1.3%, down from +5.5% from last year and +10.5% from 2Q05. * Occupancy rate: 94.1%, down by –1.4% from 2Q 2006 but up +0.5% from 1Q07. * Concessions: -3.3% (-$31 per month) of asking rents; down slightly from last quarter (-3.5%). Demand and Supply * Annual job growth at March 2007: +29,600 jobs or +3.3%, down from +7.1% last year this month. * MF permitting trailing twelve months ending March 2007: 6,152 * Change from a year ago: -3,418 or –35.7% * MF Demand/Supply Ratio at March 2007: 3.1 jobs per MF permit, down from 22.5 in 2006.
ACCESSLASVEGAS August | September 2007
OCCUPANCYCORNER
Las Vegas Metro Occupancy July 2006 through June 2007 100% 98% 96%
95.51%
95.03%
94.10%
94%
93.84%
93.42%
92.90%
92.82%
92.58%
92.85%
92.56%
92.44%
92.17%
92%
Source: CB Richard Ellis (100,818 Apartment Units Surveyed in June)
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ACCESSLASVEGAS August | September 2007
MARKETACCESS
Las Vegas Snap Shot KEY INDICATORS
Source: Red Capital
1Q 2007 RESULTS
YEAR OVER YEAR CHANGE
2008 OUTLOOK
Vacancy Trend
5.1%
up 1.2%
SMALL INCREASE
Effective Rents
$799
up 4.4%
SMALL DECREASE
Cap Rate
5.5%
up 0.2%
STABLE / DECREASING
932,400
up 31,500
SMALL DECREASE
Employment
Access Investment Offerings COMMUNITY (UNITS) Emerald Suites (717)
ASKING PRICE $ 90,000,000
PER UNIT PRICE BROKER / CONTACT INFORMATION $ 125,523 The Bentley Group / 702.855.0440
Wynn Palms (554)
$ 57,750,000
$ 104,242
Colliers International / 702.735.5700
Parks @ Maryland Redevelopment (343)
$ 38,500,000
$ 112,245
Colliers International / 702.735.5700
Deer Creek Apartments (328)
$ 28,500,000
$ 86,890
The Bentley Group / 702.855.0440
Rancho Vista (168)
$ 23,500,000
$ 139,881
Colliers International / 702.735.5700
Elmwood Villas (156)
$ 11,500,000
$ 73,718
The DT Group / 818.286.1209
Lido Arms (38)
$ 2,950,000
$ 77,631
Hendricks & Partners / 702.866.6333
Access Recent Transactions COMMUNITY (UNITS)
CLOSING PRICE
PER UNIT PRICE
CLOSING DATE
BUYER
Bacarra (180)
$ 27,700,000
$ 153,889
July 11, 2007
RW Selby & Company
Loma Vista (393)
$ 42,000,000
$ 106,870
June 29, 2007
National Commercial
Avery Park (320)
$ 27,600,000
$ 86,250
May 31, 2007
The Prime Group
Spanish Oaks (216)
$ 18,650,000
$ 86,343
May 31, 2007
Artisan Real Estate
Sunrise Meadows (896)
$ 103,000,000
$ 114,955
May 29, 2007
Bean Investment
Rancho Del Sol (80)
$ 6,400,000
$ 80,000
May 23, 2007
Khoan and Khem Than
Mesa Club (368)
$ 43,800,000
$ 119,672
May 15, 2007
Colony Realty Partners
For additional information and / or broker information on Access Investment Offerings and / or Access Recent Transactions contact Michael Fazio at 702.755.7477.
ACCESSLASVEGAS August | September 2007
By 2040 Four Million People to Call Las Vegas Home
Las Vegas Luxury Condo Demand Softens
Source: In Business Las Vegas
Source: Las Vegas Business Press
What do outsiders think of Las Vegas and its growth and what future challenges does the community face?
Demand for Vegas' pricey high-rise, high life is starting to fizzle out. Buyers for the valleys luxury condos were scarce in the first quarter as new projects flattened out, reports Applied Analysis, a Las Vegas based economic advisory firm.
Robert Lang, founding director of the Metropolitan Institute at Virginia Tech, said he expects Las Vegas to have 4 million people by 2040, including an area that includes Mohave County in Northern Arizona. The Las Vegas metropolitan area will come to be known as the bi-state region, he said. That's significant, given no one ever expected Las Vegas to develop into the region it has become, said Lang, who has closely monitored the growth of Southern Nevada. That's evident by the interstate highway system built in the 1950s that lacks direct links between Las Vegas and Phoenix, he said. An Urban Land Institute planner in the 1960s predicted all regions in the country that would have 1 million or more people by 2000. The only mistake he made - Las Vegas, Lang said. The planner predicted Oklahoma City and Albuquerque would be larger than Las Vegas by 2000. Las Vegas is not without its challenges and problems, Lang said.
There was a potential inventory of 97,776 units during the first three months of the year, yet 11,814 were canceled and another 2,491 suspended. The project “Rest In Peace� list includes such casualties as the 3,000 unit W Las Vegas, at the northwest corner of Harmon Avenue and Koval Lane, officially pronounced dead on May 11th, 2007. Other fallen dreams include Vegas 888 (50 story/ 888 units), Club Renaissance (60 story/888 units) and Sandhurst Towers (35 story/398 units). "While it would have been an unreasonable expectation to believe that all of the projects in the development pipeline would enter the market as planned, it would be equally questionable to conclude that resort and residential condominiums are a passing fad," commented Brian Gordon, principal of Applied Analysis. "The luxury condominium market continues to evolve and respond to the latest market conditions." The bulk of the market is still speculative, with 56,302 units accounting for 57.6 percent of the valley's total inventory. Only 13,409 units, or 13.7 percent, were under construction in the first quarter, including the 1,282 unit Trump Las Vegas, 2,700 unit City Center, 3,000 unit Cosmopolitan, 632 unit Turnberry Towers and the 1,000 unit One Las Vegas.
HOTHEADLINES
Roughly 55.5 percent of those under construction in the first quarter, totaling 7,444 units worth, were located on the Strip, not including another 1,014 units on the South Strip. Also, 47.2 percent of all units under construction have some form of rental program. Meanwhile, 4,214 units of the valleys total inventory were pre- existing in the first quarter, including the 800 unit Turnberry Place, 405 unit Sky Las Vegas and 84 unit Park Towers at Hughes Center, along with another 9,546 units, or 9.8 percent, still being planned or pre-sold.
It lacks the water supply that Phoenix has, and another obstacle is the control of federal lands by the Bureau of Land Management. In addition, the growing cost of Las Vegas is making Boise and Salt Lake City more attractive alternatives, he said. Las Vegas has entered a phase that when you are expensive, you have to find things for people to do that pays well or you are expensive and poorly paid. There is nothing worse than that. That is like most of the Northeast except for the bad winters.
The vast majority of units in the pipeline have been sold and their total is exponentially higher than the present market inventory," maintained Gordon. "Land owners and developers are dealing with conservative reactions by the investment community and potential buyers, in response to recent reports that a supply-demand imbalance is inevitable." At the end of the first quarter, an estimated 754 units, or 17.8 percent, were listed for resale, with an average asking price of $803,900, or $622 per square foot. Yet first-quarter resale prices averaged $764,000 per unit, or $537 per square foot about 5 percent below the median asking price.
ACCESSLASVEGAS August | September 2007
Investor Alert: Coyote Springs, The Next Hot Spot
development in the new town.
Construction is under way on the clubhouse at Coyote Springs, a 32,000square-foot facility that will be the heart of the master-planned community springing up 60 miles northeast of Las Vegas.
Protected federal lands surround Coyote Springs, 20 miles in any direction. It is divided by the Pahranagat Wash wetlands and is planned to include some 12,000 acres of nature preserve, extensive trail systems, parks, open spaces and multi-species habitat. Upon build out, which is estimated to be in 40 to 50 years, Coyote Springs is projected to have about 160,000 to 200,000 residents. Construction is already under way on a 10-acre park that will incorporate the natural wash corridor at the site and feature youth baseball fields.
"We have spent many months designing the clubhouse at Coyote Springs, knowing that it is going to be the center of this community," said Klif Andrews, Southern Nevada Division president, Pardee Homes. "And, we also have learned from the thousands who have provided input to our Web site -villagesofcoyotesprings.com -- that facilities that allow the community to come together are strongly desired. We wanted to provide a place where residents of all generations can come together to socialize, play and connect." The clubhouse will feature an indoor basketball court, fitness center, community rooms for special gatherings and meetings, a cafĂŠ and a business center and will also be home to the Coyote Springs Home Finding Center. Outside, a water park with a 25 meter lap/competition pool, lagoon pool, water slide and fanciful play structure will complement the clubhouse. The building will feature a Western Settlement architectural style with a partial metal seam roof, and stone and brick accents. It is located at Lake House Drive and Coyote Springs Parkway. Future development adjacent to the clubhouse will bring a 17 acre lake and 3,000 seat amphitheater. Pardee Homes is the master residential developer of the 43,000 acre town of Coyote Springs, the largest privately held parcel of property approved for development in Southern Nevada. Located about an hour's drive north of Las Vegas at the junction of U.S. Highway 93 and State Route 168, Coyote Springs straddles two counties. Nearly 30 percent of Coyote Springs is in Clark County, while 70 percent is in Lincoln County. Some 20,000 acres have been set aside for residential
Development of the first 3,000 acres is planned to include about 10,000 homes in five villages, with the first home sales scheduled for spring 2008.
The Coyote Springs master plan also envisions a series of golf courses, a major golf training facility, vacation golf villas, custom lots and multi-family, commercial and retail developments. Pardee is also working with the Clark County School District in planning the first school in Coyote Springs -- a K-8 elementary/middle school -- to serve pioneer first-phase families. For additional information on Coyote Springs, visit: VillagesOfCoyoteSprings.com.
Picerne Builds $200 Million Worth of Apartments Source: Las Vegas Business Press
Picerne Development Corporation is heading the charge for new apartment construction. The company will build $200 million worth of new apartment projects in Southern Nevada in 2007. The Phoenix-based firm last month opened "The Preserve" and "The Presidio" -- two complexes with a total of 1,035 units. The Preserve is a 37-building, 455-unit development at Deer Springs Way and Losee Road in Las Vegas. The Presidio, meanwhile, is a 47-building, 580-unit complex at East Rome Boulevard and
Valley Drive in North Las Vegas. The two new properties give Picerne 14 communities totaling over 4,000 units in the Las Vegas Valley.
COURTESY MASSMEDIA
Yet the company plans to finish two more projects by year's end for another 966 units. The developments include "The Paladium," a 390-unit complex at Russell Road and U.S. 95, and the 576-unit "The Pavilions at Providence" at 10151 Dorrell Lane. Picerne's developments are generally situated on 10-15 acres, with three-story residential buildings. The firm builds a combination of high, mid and low-range rental products. The company, which has 112 employees locally, manages, builds and leases its own properties. The future local rental market appears strong due to the high cost of living and 4,000 new residents a month moving to the area. Local median family household incomes were $43,831 last year, reports Applied Analysis, a Las Vegas economic research firm. A record 23,042 single-family homes were available last month or 20.4 percent more than in 2006. And about 55 percent of those homes are vacant resulting in an estimated 6,000 to 7,000 units worth of rentals. The multifamily rental market had a 7.83 percent valley-wide vacancy rate in June, reports CB Richard Ellis, with average rents of $919 a month or 96 cents per square-foot. Three-bedroom apartments had the highest rents at $1,110.91 a month, though Class C products boasted the lowest vacancy rate at 6.57 percent. Rents, meanwhile, continue to increase as the market tightens.
ACCESSLASVEGAS August | September 2007
24 Seconds and Counting... Within 24 seconds after a prospect leaves an apartment community you own/ manage, make sure each member of your leasing team sends either a personalized handwritten thank-you note, a text message or e-mail to every future resident, inviting them to become a new resident!
PROPERTYTIP
By implementing the 24-second rule, your leasing teams will recognize the importance of communicating immediately after their prospect’s visit. This will allow your leasing team to remember the personal information their prospect shared with them while it’s still fresh in their mind. Plus, it’s much easier to send one personalized communication piece at a time than to be faced with the challenge of playing catch up with sending multiple communication pieces all at once! Take the 24 second rule one step further...within 24 hours, have your leasing teams contact each future resident by telephone and have them continue to stay in touch until this
Text Message Your Way to Higher Occupancy Mobile marketing has come to the apartment rental industry. For Rent Media Solutions, a leading apartment resource for searching apartments for rent, and a division of Dominion Enterprises, has introduced text messaging for its clients in Las Vegas, San Francisco and Richmond, Virginia. The product will be expanded nationally later this year. Here’s how it works: Property managers include a unique keyword in their print advertisements listed in For Rent Magazine®. The curious apartment seeker sends a text message with the property’s unique keyword to the short code 47368 (4RENT). Within seconds the apartment seeker receives a text message with information about the
prospect makes a decision to lease at your latest community newsletter or calendar community or somewhere else. of resident events to each prospect that is still undecided. This shows prospects you In addition to keeping in touch by are very interested in having them live at telephone or electronically, instruct your your community. Implement your leasing teams to mail a copy of their property tip today!
property. Property managers also can use the service to send customizable messages promoting specials to potential renters, as well as important messages and alerts to their current residents. “Text messaging makes For Rent Media Solutions’ clients more accessible to their audience,” says Terry Slattery, vice
FUTUREFOCUS
president and general manager of For Rent Media Solutions. “It also has the potential to strengthen the relationship between property managers and potential or current residents...” According to M:Metrics, an authority on mobile marketing, 68 percent of U.S. mobile subscribers age 18-24 regularly send and receive text messages. “Mobile marketing provides another avenue for driving leads to our advertisers,” says Brock MacLean, vice president of national sales and development for For Rent Media Solutions. “This product will allow our clients to expand their existing market. Displaying the property management companies’ unique and exclusive keywords will catch traffic generated by apartment seekers driving by the properties as well as traffic generated after leasing hours.” The future is now...focus on it!
ACCESSLASVEGAS August | September 2007
Insight to Ideas, Goals of Access Las Vegas Access Las Vegas, developed by Advanced Management Group, is a bi-monthly informational newsletter created with asset managers and owners in mind. Access Las Vegas ensures accurate market information, industry articles and multi-family housing trends that are delivered with flawless precision. Our goal, when developing this newsletter, was to deliver the strongest content possible while helping asset managers and owners think differently than in the past. The multi-family housing industry changes quickly and we do not want you to fall behind, your financial success depends on staying ahead of changes. So Access Las Vegas, and leave the rest to us... Advanced Management Group Nevada, LLC is a real estate management company providing advanced property management, financial and accounting, and asset management services for multi-family properties in the southwestern United States. Specializing in each of these facets, Advanced Management Group strives towards excellence, with a foundation built on a close personal interest to our owners and owners’ assets. Advanced Management Group can be contacted at 702.699.9261. For information, article consideration and featured columns Access Las Vegas can be contacted at 702.755.7477. The editor of this newsletter is Michael Fazio.
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