The High Rise Boom in Las Vegas: Who's Booming and Who's Busting?

 

High rises in Las Vegas are certainly a craze around town. When I ask people if they'd like to purchase one, most people say, "Yeah, it would be nice to have one, but I'm just not sure." Likewise, if you asked some of the builders of these high rises if they'd like to build one, I'm sure I'd hear a lot of "Yeah, it would be nice to build one, but I'm just not sure."

Money is usually the reason. Sure, who wouldn't want to own one? But with price tags escalating along with the proposed number of floors on the developments, the real question is- are the purchasers and builders really going to be able to afford them? We already have an increase in the number of foreclosures in the area because many people bought on "creative" financing that's becoming a black hole financially for a lot of people.

According to a July 2005 article in the Las Vegas Business Press, there are 103 condo projects totaling 50,500 units proposed, but only nine are in the construction phase.

One of the major reasons this is happening is because of the number of non-refundable reservation deposits. Most of the reservations on towers are non-refundable at this point. Having worked for a local builder, I know well that you can only count on about half of the potential buyers following through, even if they have placed a deposit on a unit.

If you were going to loan money to someone for a real estate purchase, would you loan money to someone just because they've placed a deposit on something? I would hope not. Noted in the same article from Michael Mirolla, who is building the Sandhurst in downtown Las Vegas- "Institutional lenders are going to finance 75 percent of the project, but the remaining amount must come from the developer."

Builders cannot consider a refundable deposit available money to finance their construction. With few investors comfortable putting a non-refundable deposit down on a unit, it's no wonder these 103 projects are slow in coming to fruition. John Moran, principal of Moran Financial Services, was also quoted in the article, stating that "Pre-sales deposits typically go into an escrow account and generally aren't used as developer equity."

Only a few projects in town have the location and financing in place to make it happen:

• Metropolis
• SoHo Lofts
• Sky Las Vegas
• Panorama Towers
• Platinum
• Turnberry Towers

The main reason is this: a solid track record making banks comfortable in lending the funds needed to make it happen

Those who haven't been so lucky are:

For additional articles about the high rise market in Las Vegas, please visit the News & Articles About High Rises Page. Have a comment? Send an email.

 

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