ACCESS LASVEGAS FEBRUARY 2008 | MARCH 2008
YOUR ACCESS TO THE LAS VEGAS MULTI-FAMILY HOUSING MARKET
The Premier Address In Las Vegas: One Queensridge Place With the Las Vegas Strip to the East and the breathtaking Red Rock Mountains to the West, One Queensridge Place is ideally situated in the picturesque landscape of the Las Vegas Valley. One Queensridge Place is perfect for basking in relaxation, whether reveling below the desert blue sky or unwinding to the backdrop of an orange sunset behind the mountains. One Queensridge Place, the twin 18-story residential towers, is an exquisite, over-the-top Baby Boomer's paradise. "Queensridge is Summerlin's answer to Wisteria Lane,â€? says Shari Sanderson, of Ezra International Realty. "Everyone who lives there is a lawyer, doctor or financial chief.â€? These big spenders' biggest complaint? They were moved in before completion. "But once the dust settles," Sanderson says, "they'll be kissing the ground that the developer walks on." The $400 million project debuted this fall at Rampart Boulevard and Alta Drive, the first finished luxury vertical residences in the suburbs.
The 20-acre Art Nouveau buildings are situated atop the 27-hole Badlands Golf Course within the 3,000-acre Queensridge master-planned community. Conveniently located across from both Boca Park and the Suncoast Hotel Casino, added cache includes shops, restaurants and theaters, all within walking distance. One Queensridge Place offers 219 units in a whopping 40 floor plans, priced up to $20 million for a double-decker penthouse (The project is reportedly 85 percent sold out). Although a little more costly than other high-rise offerings, the project is posh enough to attract buyers like pro champ car driver Alex Tagliani, who snagged a 2,638-square-foot custom home on the sixth floor. There are private wine cellars, a 25-meter indoor lap pool, fitness center, 25-seat movie theater and a 24 hour concierge service to meet every midnight whim. And there are even three rental casitas available for when the in-laws come to visit.
ACCESSLASVEGAS February 2008 | March 2008
Unlucky ‘07: Vegas Year In Review 7 Local Impacts Which Affected Your Multi-Family Community In 2007 Source: Las Vegas Review Journal
The Las Vegas Valley posted mixed fortunes in 2007, with uneven results in key quadrants of the economy.
restaurants, convenience stores and other service businesses. Rising energy costs didn't help, as higher prices for power and gasoline ate away at small
Southern Nevada's housing sector stumbled most noticeably, drawing national attention for its high rate of mortgage defaults and home foreclosures. Residential real estate's poor performance cascaded through the economy: Thousands of jobs lost in the home-building and finance industries helped push local and state unemployment rates past the national average for the first time since 2002. Job creation also skidded, dropping several percentage points from 2006 levels.
“Southern Nevada’s housing sector stumbled most noticeably, drawing national attention for its high rate of mortgage defaults and home foreclosures.”
Those faltering indicators generated a $285 million revenue hole through November in the two-year state budget. While gaming executives pointed to the treasury shortfall as evidence of the need for a broad corporate-income or gross-receipts tax, special interest groups targeted the resort sector for fresh funds. The Nevada State Education Association mounted a petition to raise teachers' salaries through a higher gaming tax, while local lawyer Kermitt Waters launched a drive to triple the levies against the industry. Gaming remains a popular bull's-eye for additional revenue because it is still the state's best-performing economic driver. Though most industries and economic indicators softened in 2007, resort development stayed strong as operators unveiled fresh plans and continued building massive projects. The Strip's prospects drew $5 billion in CityCenter funding from the investment arm of the Persian Gulf state of Dubai, and lured global resort operator Kerzner International Holdings Ltd. to the market in a deal with MGM Mirage. The industry also enjoyed a record gaming win in October. Private-equity firms upped their interest in gaming, with the November buyout of Station Casinos following the 2006 announcement of a deal to take Harrah's private. The Harrah's agreement is scheduled to close in early 2008. As profitable as local gaming operations are, the resort sector in a far-flung emerging market outperformed the Strip in 2007. Gaming revenue from flourishing Macau, which is within a five-hour flight of 3 billion prospective visitors, surpassed gaming win on the Strip for the first time and drove financial results for major operators, including Wynn Resorts Ltd. and Las Vegas Sands Corporation. Smaller local companies had their own set of challenges in 2007, with voter-approved initiatives raising the minimum wage and banning smoking in
- LAS VEGAS REVIEW JOURNAL 12.30.2007
companies' bottom lines and squeezed the consumers who spend on local goods and services. And several proposed coal-fired power plants in Nevada came under fire as U.S. Senator Harry Reid teamed with environmentalists to advocate replacing the electric projects with alternative fuel sources. Here is a closer look at the biggest local business stories of 2007. 1) THE BUBBLE HAS BURST After years of being undervalued, the Las Vegas housing market found its tipping point in 2007 as home sales plunged by 40 percent and median home prices tumbled about 10 percent. The sluggish housing market remained the top economic story throughout much of the year, capturing headlines for the subprime mortgage meltdown, which has led to soaring foreclosure rates. Nevada, once the nation's leader in home appreciation, is now first in foreclosures with about 40 pre-foreclosure filings for every 1,000 households, California-based Foreclosures.com reported. The market started slowing in 2006 and went into full retreat in 2007. Some would say the proverbial housing bubble has burst. Now the question is how far will prices fall and how long will it take to burn through an inventory of some 24,000 homes for sale on the Multiple Listing Service. About half of them are vacant, either investor-owned or in foreclosure. "Inventory is a leading indicator of where the market is going," said Larry Murphy, president of Las Vegas-based SalesTraq. With the exception of foreclosures, inventory is
declining for new home permits, existing homes and the number of new home subdivisions, he said. SalesTraq reported 343 permits in November, the lowest monthly total in about 20 years. Permits are down 36.7 percent for the year. Through November, new home closings are down 44.6 percent to 18,021 and existing home sales have slid 39.8 percent to 22,504, SalesTraq reports. November's median new-home price fell 20 percent from a year ago to $271,228; existing home median prices are down 10.5 percent to $257,000. These are near 2004 levels, Murphy said. Weakness in home building also hurt construction employment. Builders such as KB Home and Pulte Homes have had significant layoffs. Some industry sources put the number as high as 10,000 to 12,000 lost jobs. The housing market will continue to adjust and "rebalance" in 2008, University of Nevada, Las Vegas, economist Keith Schwer said. Global Insight and NationalCity estimated that Las Vegas housing has moved from about 30 percent overvaluation in third quarter 2006 to near 20 percent a year later, Schwer said.
The firms' overvaluation estimates suggest that Las Vegas will be back in balance once prices return to levels of 2004, when median prices ranged from $196,000 to $248,000. 2) ECONOMY SOFTENS
from 4 percent in October 2006 to 5.2 percent a year later. Population growth slowed to 3.7 percent, down from 5.3 percent in 2006. And tax revenue from gaming and sales, which shattered records in 2005 and 2006, came in substantially lower than expected and left a $440 million hole in the Nevada budget by early December. Behind the declines were a faltering housing market and a lack of new capacity in the resort industry, said Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas. Nevada topped the nation in home foreclosures for the latter half of 2007, and pain in the housing sector meant less spending by consumers. And with no major additions of hotel rooms, Las Vegas maxed out on its ability to boost visitor volume. Though 2007 wasn't a great year for key economic indicators, it wasn't painful for the most part, either. So what of the long-held notion among many in the business community that Las Vegas is recession-proof ? That has changed, Schwer said. "We're making progress," he said. "Now, we're just recession-resistant." The downgrade to recession resistance is progress, Schwer said, because it's a sign of the local economy's maturation and increasing sophistication. The economy is much larger now than it was a decade ago, and it more closely resembles the established economies of major states such as California, Schwer said. "We often say, 'Things are really different in Las Vegas than they are everywhere else,' " Schwer said. "Well, this was a year in which we really weren't that different." 3) LENDER PROBLEMS Problems? How about quick buck artisits, who took advantage of unsuspecting real estate investors.
About 130 real estate investors were relying on Southwest Exchange of Henderson to hold $95 million when the firm closed 11 months ago. The real estate investors have yet to see any of their money trickle back from a The city had major dips in several key court-directed receivership, but the indicators that once provided the pride of investors got some good news in local business and government leaders. November when a stock brokerage agreed to settle lawsuits for damages by Unemployment surged past the national paying $23 million. average of 4.7 percent, jumping locally Las Vegas residents who believe 5 percent job growth and 4 percent unemployment are local birthrights, 2007 provided a rude awakening.
Southwest Exchange was a qualified intermediary or accommodator. Real estate investors often rely on intermediaries like Southwest Exchange to hold the proceeds from property sales. When intermediaries hold the sale proceeds, investors can delay paying income taxes on their gains and roll over the money into another property. In late January, , Southwest Exchange closed, leaving only a few dollars in cash. Clients of the financial firm learned their money was gone. Southwest Exchange chairman Donald McGhan and other family members were named as defendants in 15 lawsuits in Clark County district court, plus a separate class action lawsuit in federal court. Lawyers soon determined that Peter John DeMarigny, a former stock broker for UBS Financial Services, had handled financial transactions for Southwest Exchange. With the help of DeMarigny and others, McGhan and other defendants used investor money to support a lavish lifestyle and McGhan's Medicor Ltd., a penny stock company that made breast implants, lawsuits say. While Southwest Exchange has few assets, deep-pocketed defendants such as UBS may enable the company's former clients to recover at least some of their money. Attorneys for investors also hope to recover assets from other third-party defendants. Real estate professionals say the moral is: Don't trust independent intermediary firms, such as Southwest Exchange, with proceeds from property sales. Have sales proceeds sent to a large title company, which can also serve as an intermediary. If a title company employee steals an investor's money, the investor may be able to recover assets to satisfy a potential judgment against the title company. 4) CHANGING STRIP The pending soft opening of the $1.8 billion Palazzo serves three purposes. It gives Las Vegas Sands Corporation its second Strip resort; it is the only new casino to be unveiled on the Strip in 2007; and it starts what is expected to be Las Vegas' newest resort building boom. If all the announced, proposed and
ACCESSLASVEGAS February 2008 | March 2008
speculated upon hotel-casino projects are built, between 18,000 and 42,000 rooms could be added to the Southern Nevada's inventory by 2012. The room count now stands at more than 135,000. Despite the U.S. economy seemingly in a downturn and local economic indicators showing a declining trend, the Strip continued to evolve in 2007. Construction proceeded on several big Strip projects while two old Strip relics were imploded. Meanwhile, the long speculated northern Strip push began to take shape as the Sahara changed hands and MGM Mirage increased its presence in the market. "Everybody is starting to look around and see what value is out there," said John Knott, executive vice president of the Global Gaming Group for CB Richard Ellis, soon after the Sahara was sold in March to a Los Angeles entrepreneur.
Also during the summer, New York based Elad Group which is owned by an Israeli bought the 35 acres on which the New Frontier stood and planned to build a $5 billion replica of the New York's Plaza Hotel on the site. The New Frontier was closed in July and imploded during the fall, joining the Stardust in Nevada history books. In March, Boyd Gaming imploded the closed Stardust to make way for Echelon, the company's $4.8 billion hotel-casino development. Construction began on the project in June; an opening is expected in 2010. Also on the Strip, Wynn Resorts proceeded with construction of Encore, the company's $2.1 billion sister resort to Wynn Las Vegas. It is expected to open in 2009. In 2008, only a couple of new projects are expected to open: the first tower of Donald Trump's non-gaming Trump International Hotel and Tower behind the Plaza site and Station Casino's $650 million Aliante Station in North Las Vegas. 5) MACAU BOOMS
Las Vegas real estate consultant John Restrepo added: "There is no question the natural push is now to the north." MGM Mirage heard that message. The company bought two land parcels on the Strip's northern end in June, including a 26-acre parcel across from the Sahara. The company then announced a joint-venture agreement with Kerzner Holdings International, developers of the Atlantis Paradise Island in the Bahamas, to build a hotel-casino on the north Strip. MGM Mirage also said it plans to redevelop, rather than sell or demolish, Circus Circus. Meanwhile, MGM Mirage's $7.8 billion CityCenter development continued to take shape while the company welcomed a new investor. In August, MGM Mirage said Dubai World, the investment arm of the Persian Gulf state of Dubai, was buying half of CityCenter for $2.7 billion. Dubai World also invested in the Kerzner project.
so successful in the region." Three new major resorts opened in Macau during 2007 - the $585 million Crown Macau, which is operated by Australian-based Melco PBL; the $2.4 billion Venetian Macau, which is owned by Las Vegas Sands Corporation; and the $1.2 billion MGM Grand Macau, a joint venture between MGM Mirage and Hong Kong businesswoman Pansy Ho. Along the Cotai Strip region of Macau, 20,000 hotel rooms housed in more than dozen hotel-casinos are in various phases of construction. The bulk of the new development is expected to open in 2009. Las Vegas Sands is spending almost $12 billion to build resorts on the Cotai Strip. The Venetian Macau changed the Chinese market, adding 3,000 hotel rooms and housing a 546,000-square foot casino. The hotel-casino, which anchors the Cotai Strip, also has 1 million square feet of retail space, 1.2 million square feet of convention space and a 15,000 seat arena. The 600-room MGM Grand opened December 18 and was MGM Mirage's initial entry into the market. The Wynn Macau opened in 2006 and hotel tower expansion is being planned.
Macau solidified its place as the world's fastest-growing gambling market during 2007, fueled partly by Las Vegas-based casino operators that either expanded their holdings in the Chinese enclave or entered the region for the first time. By the end of 2007, Macau had 8,900 hotel rooms, more than twice as many as the region had in 2006. Gaming revenues produced by Macau casinos topped $6.7 billion in 2006, and gaming analysts predicted the figure would exceed $9.7 billion by the end of 2007. Macau's gaming revenues surpassed the annual total produced by casinos on the Strip. Macau had 22 million visitors in 2006 and the figure was expected to grow to 25 million in 2007. "What's interesting is that the Las Vegas model of tourism development, which uses casino gaming as a fundamental driver of economic growth, is at play here in Asia," said Jonathan Galaviz, a partner in Las Vegas-based Globalysis, a research and consulting firm that advises companies in several travel related industries on the Asian market. "This is why Las Vegas companies are
The booming casino industry is taxing Macau's infrastructure. "Getting people to Macau is not a problem," MGM Mirage International CEO Bob Moon said. "It's getting them around once they are here that is the issue." 6) WAGE INITIATIVES Local businesses in 2007 felt the power of the ballot box, as the effects of two ballot
referenda spread through the area's economy. Voters in November 2006 passed a law that constitutionally resets Nevada's minimum wage to $1 higher than the national average, plus annual increases to account for inflation. The public also approved a law that banned smoking inside establishments that serve food and inside convenience stores and grocery stores. The upshot of both: Nevada businesses that don't pony up for health insurance now pay employees a minimum of $6.33 per hour, with an increase to at least $8.25 an hour once federal jumps in the rate cap out in July 2009. And local taverns and bars have scrambled to ditch food service or rebuild their operations to separate smokers from nonsmokers.
The Silver State suffered widespread malaise in 2007, starting with a substantial slowdown in the housing market and continuing with a dearth of the resort openings that propel the economy. Those forces likely dwarf any ballot-box fallout, Anderson said.
product. That's well below the 8.5 percent of GDP during the S&L Crisis and recession of the early 1990s, he said.
7) RECESSION FEARS
"There is clearly an overreaction." That doesn't mean there aren't concerns, however, he says.
In a city dependent on tourism and a housing industry clinging to hope for a quick recovery, Las Vegas Realtors, developers and investors remain anxious about whether the U.S. is headed for a recession.
Although some cite a study that shows that if borrowing against a house stopped completely, it wouldn't greatly impact retail sales, others continue to remain concerned about consumer spending.
Numbers from the state's Department of Employment, Training and Rehabilitation show that unemployment insurance claims in Nevada's food-service economy are up 50 percent from a year ago.
The agency did estimate, though, that 57,000 workers, out of a statewide labor force of about 1.3 million, took home between $5.15 and $6.15 an hour in November 2006, and the new law would affect those low earners the most. Veronica Meter, vice president of government affairs for the Las Vegas Chamber of Commerce, said both laws have burdened businesses. The wage initiative created a two-tiered pay scale based on whether a business pays for employees' health insurance, and the smoking ban has generated confusion on who must comply and how local agencies will enforce the rule, Meter said. Meter said the chamber didn't have details on whether the ballot questions have led to significant job loss locally. Bill Anderson, chief economist for the Department of Employment, Training and Rehabilitation, cautioned against attributing economic tribulations to either law.
Job growth has slowed and there are questions of where the jobs will come from because 40 percent of those created over the last five years were related to the real estate market. Nadji also says retail sales have slowed in part because consumers have lost discretionary income from their housing equity.
Observers say companies have felt the new rules.
Pinpointing job loss among minimum wage earners is tougher, because the department doesn't collect unemployment data by pay rates.
"This is not unlike other bumps in the road that we have had except that it is much bigger psychologically," Nadji says.
Those fears only grow when Federal Reserve Chairman Ben Bernanke recently warned of threats to the economy -- that economic growth will likely slow noticeably in the coming months because of oil prices adding to inflation. Despite his warning, he quickly added that the economy would rebound by the middle of 2008. Throughout an Urban Land Institute conference in Las Vegas that brought some of the leading investors and developers in the country, the consensus was that although the U.S. economy is slowing and growth rates of investments have to be adjusted because of it, there won't be a recession. The biggest concern is the fallout from the subprime lending woes and its effect on the credit markets and the housing industry with a rising number of foreclosures. To put it into context, Hessam Nadji, managing director of research services at Marcus & Millichap, says the financial impact of an expected 2 million foreclosures is expected to be about 3 percent of gross domestic
Ron Sturzenegger, the global head of real estate and lodging with Banc of America Securities, says recessions happen a lot of different ways. Some recessions are financial or a corporate crisis while others are a consumer crisis. When it comes to financial institutions, many are writing off bad loans for billions of dollars and saying they're fine. They are so well capitalized compared to how they were in the 1980s and 1990s, that they can afford to take substantial write downs and say they are strong financially, Sturzenegger says. Corporations are doing well with their earnings, he says. That brings us to the consumer. "The biggest question is what happens to the consumer when their houses don't have the ATM effect," Sturzenegger says. "What if they actually have to put money into the house to support the loan or their adjustable rate mortgages are ratcheting up and their payments go from $400 a month to $850 or $900. And then they struggle to make their payment. The issue right now is not a financial or corporate problem but what will the consumer ultimately do. If we do lead ourselves to a recession, it starts at that end of the market."
ACCESSLASVEGAS February 2008 | March 2008
Las Vegas Downturn Boosts Multi-Family Rentals
Source: Las Vegas Business Press
Reeling residential and sub-prime mortgage markets have increased the number of renters in the Las Vegas Valley. Potential home buyers required to come up with substantial down payments amid tightening credit are increasingly turning to high-end multi-family rentals, reports the Bentley Group, a local real estate advisory firm.
when adjusted for inflation," said John Restrepo, principal of Restrepo Consulting Group, a Las Vegas-based economic research firm. "The apartment market will be the valley's long-term source for work-force housing. The demand for rental housing will likely rise once the current wave of new Strip resorts open."
"Nearly 40,000 hotel rooms are coming on line over the next four years, creating more than 285,000 new jobs," Bentley Group President Christopher Bentley said. "Demand for multi-family product will increase to meet the housing needs of new employees."
There are 5,581 units on lease-up, 2,521 units under construction and 7,992 units planned for development, Bentley said. Although third-quarter vacancies rose slightly, due to the large number of homes for sale, rents still increased 2.6 percent. And rents are expected to rise 3.5 percent and 5.7 percent in 2008 and 2009, respectively, Bentley adds. These dynamics have created hot demand for multi-family investments, with 100-plus unit complexes commanding average sale prices of $122,300 per unit or $125 per square foot.
Yet, the 23,494 homes listed for sale last month have created a "shadow" rental market. Roughly 25 percent or more of those units are being used as rentals until the housing market rebounds. Multi-family builders, as a result, will only deliver 1,500 new units this year, or about 1,000 fewer than in 2006, reports Marcus & Millichap, a real estate brokerage. Vacancies are expected to remain low as rents grow by 3 percent. "Tighter residential lending standards and uncertainty in the housing market will encourage renters to delay home purchases, supporting demand," said John Vorsheck, Marcus & Millichap's regional manager. "Strong fundamentals and healthy prospects for long-term growth are supporting prices for local apartment leases." Some of those fundamentals include job growth with 13,300 new positions created in the Las Vegas Valley at the end of September, reports Hendricks & Partners, a national commercial real estate company. New-home closings and permits each fell by about 54 percent in September compared with a year ago, Hendricks & Partners said, while multi-family permits more than doubled to 3,810 units -- its highest quarterly mark in nine years. "Absorption entered positive territory for the first time since mid-2006, closing the third quarter of 2007 with 345 net move-ins," said Carl Sims, an apartment specialist with Hendricks & Partners. "Las Vegas' suburbs are growing in terms of both population and new commercial development." Stagnant incomes have also aided the rental market. The median household income for Southern Nevada newcomers is $43,831, according to the 2007 Las Vegas Perspective. Home sale list prices, meanwhile, averaged $306,000 in November, reports the Greater Las Vegas Association of Realtors, making the dream of home ownership elusive. In addition, the area's cost of living ranks among the highest in the Southwest with a 109.4 composite score, placing Las Vegas ahead of Denver; Albuquerque, N.M.; and St. George, Utah; in affordability, the Council for Community and Economic Research reports. "Although the residential market softened dramatically in 2007, household incomes and wages haven't risen since 1990
A Boston-based investor, for example, recently bought the 18-year-old, 256-unit Martinique Bay Apartments at 3000 High View Drive in Henderson for $31.85 million, or $124,414 per unit. The 12.92-acre, 278,840 square-foot complex is mapped for condominiums. The sale price equals $114 per square foot. Grubb & Ellis' Joseph Kupiec, Diane Miramontes and Darcy Miramontes represent the seller. "While many continue to paint a 'doom and gloom' picture of the Las Vegas real estate market, fundamentals within the industry remain healthy," Bentley said. "The multi-family market in particular has remained healthy and is expected to continue to offer sound investment opportunities."
Housing Slump Leads To More Renters, Opportunities Source: Multi-Housing News
The ongoing housing slump has created a number of renters. Potential buyers in many cases are renting because they either can't get a mortgage under the current restrictions or because they're waiting to see if home prices drop lower. The situation is making the rental market more lucrative -- but not necessarily for landlords, who are seeing competition from unsold properties on the market that are being rented out. In the fourth quarter of 2007, home vacancies increased in 29 markets -- including Las Vegas, Palm Beach, Memphis, Orange County and Orlando, according to New York real estate research firm Reis Incorporated. Dallas-based housing analyst Ron Witten estimates that, in excess of 350,000 vacant rental properties, 760,000 vacant condos and homes are for sale across the country. Thousands of single-family homes also are hitting the market, but renters prefer apartments and condos easy upkeep to more time-intensive houses, the Wall Street Journal said. The influx of properties has affected rents across the country.
Las Vegas Metro Occupancy December 2006 through November 2007 95% 94% 93%
Source: CB Richard Ellis (95,977 Apartment Units Surveyed in November)
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ACCESSLASVEGAS February 2008 | March 2008
Las Vegas Snap Shot KEY INDICATORS
Source: Red Capital Group
3Q 2007 RESULTS
YEAR OVER YEAR CHANGE
STABLE / DECREASING
Access Investment Offerings COMMUNITY (UNITS) The Reserve at Arrow Canyon (426)
ASKING PRICE $ 76,650,000
PER UNIT PRICE BROKER / CONTACT INFORMATION $ 179,930 The Bentley Group / 702.855.0440
Emerald Suites Las Vegas Boulevard (396)
The Bentley Group / 702.855.0440
Portofino Villas (280)
The Bentley Group / 702.855.0440
Palm Village (156)
Hendricks & Partners / 702.866.6333
Emerald Suites Cameron (96)
The Bentley Group / 702.855.0440
Lake Mead Apartments (64)
Great West Equities, Inc. / 702.493.3451
NAI Horizon / 702.938.6561
Access Recent Transactions COMMUNITY (UNITS) Martinique Bay (256)
PER UNIT PRICE
December 18, 2007
Monterey Villas (80)
December 17, 2007
Walt A. Walters
Crossing at Green Valley (384)
December 14, 2007
Summer Winds (352)
November 30, 2007
Wen Shan Chang
San Croix (352)
October 31, 2007
JVP Investment, Inc.
Siegel Suites Cambridge (230)
October 18, 2007
The Siegel Group
Siegel Suites Twain (198)
October 10, 2007
The Siegel Group
For additional information and / or broker information on Access Investment Offerings and / or Access Recent Transactions contact Michael Fazio at 702.755.7477.
Multi-Family Specialist Files Chapter 11 Source: GlobeSt.com
Atherton-Newport Investments, which controls approximately 5,000 units of multifamily property in Las Vegas, Phoenix, Seattle and South Florida, filed a voluntary Chapter 11 bankruptcy petition this week after problems meeting its debt service. The Irvine-based company issued a statement saying that the filing "was necessitated by the actions of one of ANI’s creditors," who include about 200 note-holders that invested about $40 million in ANI.
combination of its own capital, high-net-worth individuals and institutional investors, and that it had invested $425 million in 2006 after $190 million of investment in 2005. Khatana told GlobeSt.com that ANI's business plan aims at generating value through capital improvements that in turn support rent increases, and that the company's typical hold period is about four years. According to the company's web site, Atherton-Newport had acquired 41 multi-family properties and sold 26 of the 41 properties as of July 31 last year, resulting in 50% gross and 37.2% net annualized returns to investors. The company was founded by Khatana and Roger E. Fiola, who are listed as co-managing members of the firm on the bankruptcy filing.
Recent Rate Cuts Add Up to Good News for Multi-Family Owners Source: Multi-Housing News
Atherton-Newport referred questions regarding the Chapter 11 filling to its attorney, Joseph A. Eisenberg of Jeffer, Mangels, Butler & Marmaro in Century City, who tells GlobeSt.com that after ANI "became illiquid and unable to service its debt," some of the note-holders began collection efforts that prompted the bankruptcy filing. As Eisenberg explains, Atherton-Newport initiated the filing "to ensure that all of the note-holders were treated equally and fairly" and so that "nobody would leap to the front of the line by litigating aggressively" to collect on the debt. ANI, which was founded in 2001, is a holding company that funded its operations by borrowing money on an unsecured basis from the approximately 200 note-holders. Each of the properties that it controls is owned by a separate single-purpose entity, none of which are debtors in the bankruptcy, Eisenberg points out. The ANI Chapter 11 petition, filed with the Santa Ana Division of the US Bankruptcy Court's Central District of California, lists assets in the range of $10 million to $50 million and liabilities within the same range. According to the filing, the claims of the 20 largest unsecured note-holders amount to approximately $15 million. ANI expects to continue to operate normally throughout the Chapter 11 process, the company said in its statement regarding the bankruptcy filing. It said the Chapter 11 process will enable it to "develop a comprehensive restructuring of all of its legal and financial affairs." The bankruptcy filing comes approximately a year after Atherton-Newport co-founder Ashish K. Khatana, in an interview with GlobeSt.com, said that the firm planned to invest in and develop $600 million of property during 2007, with plans to take its operations global in 2008. Khatana told GlobeSt.com that the company was funded through a
The Federal Reserve, reacting earlier to an international stock sell-off and fears about a possible recession in the U.S., slashed three-quarters of a point (0.75 basis points) off the federal funds rate, which is the interest banks charge each other for short-term loans. The move came surprisingly just ahead of a regularly scheduled meeting of the central bank. The Fed’s policy-making group, known as the Federal Open Market Committee, lowered its target for the federal funds rate, which regulates overnight loans between banks, to 3.5 percent, from 4.25 percent. In its statement, the Fed said, “The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households.” Fed watchers believe that policymakers will knock an additional point or more off the rate before they’re finished. That would take the funds rate from 5.25 percent, where it was last September, to as low as 2.25 percent. Whether the rate cut would help the economy avoid a recession or not remains to be seen, but for now, the cut is expected to be good news for multifamily renters and owners. “We believe the recent rate cuts will make the Freddie Mac and Fannie Mae rates more attractive in the market,” Timothy L White, president of PNC ARCS, a multifamily lender, tells MHN. “We will see a downward trend in the rates of adjustable rate loan products,” White predicts. “As a result we will see an increase in the demand for the loans and when the interest rates go down, there will be fewer foreclosures and fewer multifamily projects vacant on the market,” he concludes.
ACCESSLASVEGAS February 2008 | March 2008
Casino Openings Abound In 2008 Source: The Dallas Morning News
Including the recent opening of Palazzo on the Strip, Las Vegas has a busierthan-usual year in store. Expected casino openings in 2008 include Cosmopolitan, Cannery East and Aliante Station, as well as the Trump Tower and Palms Place condos. There's also a full slate of scheduled expansions and redevelopment. That's a significant list, but it's still just the beginning. Forming what's being called Las Vegas' fourth wave of growth will be the 2009 openings of M Resort, Encore, Fontainebleau and the massive CityCenter, followed in 2010 and beyond by Echelon Place, Crown Las Vegas and the new MGM-Dubai World mega resort planned for the west side of the north Strip. Together, about 50,000 rooms are scheduled to be built on the Strip over the next five years, and these are just the major projects that have been announced. The full Las Vegas "Report Card," including building timetables through 2012, can be viewed at LasVegasAdvisor.com. Here are some Las Vegas highlights and tidbits for early 2008: * Trailer Station: If you blinked, you missed it. The shortest-lived casino in Las Vegas history opened for five hours recently in a move necessary to keep a gambling license current. Station Casinos opened a trailer holding 16 working slots in the center of the expansive vacant lot that used to be the Castaways (formerly the Showboat). The action extends the license for two years, during which time Station will decide whether or not to build on the site. * Mamma Mia!: Due to popular demand, the most successful Broadway show to date on the Las Vegas Strip will be extended through January 4, 2009. * Back on Top: The latest survey from the U.S. Census Bureau indicates that Nevada is once again the fastest-growing state in the union, a position from which it was briefly toppled last year by Arizona after a 19-year run in the No. 1 spot.
Analyst: Homebuilders Nearing End Of Price Cuts Source: In Business Las Vegas
What's in store for the Las Vegas housing market in 2008? Dennis Smith, president of Home Builders Research, says 2008 can't be any worse than 2007 and a "flat and steady year" should position the market for improvement in 2009 and 2010 with the creation of jobs because of the Strip resorts. Smith says he expects new home prices to show year-over-year decreases of 10 percent to 15 percent during the first quarter. By midyear, it will be 8 percent to 11 percent and by the end of the year, price reductions should be about 5 percent over the last months of 2007. That means, he says, there isn't much more of a bottom when it comes to the new home market. "Homebuilders are very near the end of their price cuts in Las Vegas," Smith says. An appraiser, he says, recalled going to subdivisions and seeing concessions as high as 33 percent with the typical concession offered by builders at 20 percent. Many subdivisions have lowered prices by as much as $80,000.
the year, he says, adding there will be 15,000 to 16,000 permits, which is similar to 2007. In the resale market, the number of sales should improve this year, but not by much, he says. It will depend on the credit crunch. The number of resales won't exceed 24,000, he says. As for prices, the median price should drop to $240,000 by mid-2008, down from $253,900 in the latest available number in November.
Luxury Condos Still Hot Sellers Source: Las Vegas Business Press
Okay, maybe the housing market has seen better days. But luxury condos are still hot sellers commanding big buck sale prices, reports Restrepo Consulting Group, a Las Vegas-based economic research firm. "The luxury condo market saw a 48 percent increase in units sold in the third quarter," said John Restrepo, principal of Restrepo Consulting Group. "Although median sale prices slipped by 17 percent, primarily due to smaller unit sizes, the price per square foot increased by nearly 5 percent."
There have been 89 luxury condos sold year-to-date with a median price of $860,000, or $502 per square foot, Restrepo reports. Condos this year averaged 1,712 square feet in size and Richmond American Homes is one spent roughly 92 days on the market. builder that raised prices at some of its Single-family homes, by contrast, saw a communities, and those who continue to 38.2 percent sales drop this year despite a wait for more price declines are 4.9 percent price decrease. Condos gambling, he says. similarly dropped prices by an average of 16.9 percent as opposed to 2006. But last Smith expects new home sales to improve year's units were 20.8 percent larger, by the middle of the first quarter, but averaging 1,161 square feet in size. Sale that won't last long. By June, he says, they prices, as a result, are 4.9 percent higher should soften to their late 2007 levels and in 2007 when compared on a square remain that way for the rest of the year. footage basis. That will be a second bottom to the market, and the duration of it depends There were 5,143 luxury condo units on the availability of mortgages, he says. completed in the third quarter, including Smith predicts 20,000 new home sales in the $195 million, 428-unit Allure Las 2008, which will be close to 2007's Vegas on Sahara Avenue, just west of numbers. Las Vegas Boulevard. Turnberry Towers had 56 resales in the third Builders will be slow out of the gate quarter -- the most of all properties -when it comes to getting permits, but by with a median sale price of $532 per the beginning of the second quarter, square foot and 35 days on the market. activity will pick up and pulled permits will average 1,300 a month the rest of
Customer Service 101: Reach Out & Welcome Your Residents Phase 3 of a 5 Phase Series for Leasing Consultants and Managers
Phase Three: The Telephone The purpose of this telephone call is to touch base before you contact a resident for a renewal. Phase 3 is a time to clean up any reasons why he / she might not be willing to renew. Check all completed work orders for any recurring problems and discuss the general satisfaction with the apartment. This personal touch of the phone call validates your seriousness about service.
concern in communication is the key element to good resident relations!
Is everything okay in your apartment? Do you have any requests for service?
Telephone Follow-Up: Review residents’ files, know their names and any problems or complaints they have had. Familiarize yourself with pertinent information concerning your residents. Personal
Marketing Questions: Are you using our amenities? How do you like...? Discuss the manager’s surveys and ask residents to participate. Thank them in advance.
Resident Referral: By the way, we have a beautiful apartment just around the corner, do you know of someone who would enjoy living in our community?
RealPage Enhances Resident Screening
ability to better evaluate risks associated from applicants with a recent home loan default.
RealPage, Inc., a leading provider of point of lease systems for the multi-family industry, announced the availability of broader settings within its LeasingDesk™ Screening system effectively improving the screening of applicants with past foreclosures. The new controls give owner / operators the
The new controls deliver enhanced flexibility for multi-family resident screening if a prospect has a prior mortgage default. The software enables owner / operators to filter this specific credit information, acknowledging a foreclosure, but giving the option to remove it from the prospect’s overall credit score. Owner / operators gain a greater capacity to recognize quality residents by adjusting the settings to require additional conditions for residency with a foreclosure or automatically deny an application if the risk is too great.
Performance™, can review and track the rent payment behaviors of resident’s with and without foreclosures but comparable credit ratings. RealPage will analyze the payment behaviors through the first quarter of 2008 and incorporate the findings into LeasingDesk™ Screening to further enhance the scoring process.
As the impact from the sub-prime fallout on the multi-family industry is still unknown, being able to dig deeper into the payment history of an applicant is of high priority. To further protect owner / operators during the screening process, RealPage’s rental payment database, Renter’s
“With our access to extensive rental payment histories, we can determine and statistically validate whether applicants with previous foreclosures represent a less, equal or greater risk compared to others with similar credit scores,” said Carner. The system boasts the most comprehensive index in the multi-family industry and alerts owners to past monthly rental payment behavior and any outstanding apartment debts. This detailed information provides owners with a comprehensive rental recommendation to ensure they are renting only to quality applicants. The future is now, focus on it...
ACCESSLASVEGAS February 2008 | March 2008
Advanced Management Group Offering FREE Property Analysis Advanced Management Group Nevada, LLC, a real estate management company providing advanced property management, financial and accounting, and asset management services for multi-family properties, is offering a FREE Property Analysis to property owners in Las Vegas. The FREE Property Analysis includes the following: * Occupancy Comparison (within 3 mile radius) * Rate Comparison (within 3 mile radius) * 3 Phone Shops To find out more information on how to obtain your FREE Property Analysis, e-mail Advanced Management Group at firstname.lastname@example.org or contact Bret Holmes at 702.699.9261. Access Las Vegas ensures accurate market information, industry articles and multi-family housing trends that are delivered with flawless precision. The multi-family housing industry changes quickly and we do not want owners or asset managers to fall behind. Financial success depends on staying ahead of changes. 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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FEBRUARY 2008 | MARCH 2008 YOUR ACCESS TO THE LAS VEGAS MULTI-FAMILY HOUSING MARKET The 20-acre Art Nouveau buildings are situated atop the...