Condo Developers Find Tough Time in Vegas

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Posted on Sun, Apr. 23, 2006
Condo developers find tough time in Vegas MATTHEW HAGGMAN Knight Ridder Newspapers Two years ago Miami developer Jorge Perez said the Las Vegas market was ripe for the high-rise condominiums he has built so successfully in Florida. But Sin City has not been kind to South Florida's "Condo King." In January Perez canceled a twin-tower condo called ICON Las Vegas. Now he's weighing selling the 25 acres on which he, along with actor George Clooney, planned to build a massive - and much-hyped - 11-tower condo project, Las Ramblas. The $3 billion project was to rise near the Las Vegas Strip, and full-page newspaper ads heralded the arrival of Perez, Clooney and team as the second coming of the Rat Pack. But now Perez says demand is lower than expected and construction costs much higher - in fact, he says, Las Vegas' condo market has dropped off more sharply than any of his other markets. His experience reflects that of some other South Florida developers who gambled on Las Vegas: Going West has turned out to be not quite as easy as it looked. As Las Vegas grew, these developers figured it was poised to become a second-home destination. But now, some wonder if the Las Vegas market is not yet ready for projects centered on condos rather than on the tried-and-true formula of hotels and casinos. A decision will be made in the next two weeks about Las Ramblas' fate, Perez said. Options include going forward, bringing in another investor, or selling - which may still bring a profit, he said. But it would leave the builder without a project in a city he proclaimed the next South Florida. "Did we misjudge the levels of demand and costs in Las Vegas?" said Perez. "The answer is yes." Two years ago Perez and several other South Florida developers - including Miami Beach's WSG Development, Miami-based Fortune International and Royal Palm Communities in Boca Rato - decided Las Vegas might be the next hot condo market. At the time, only Aventura-based Turnberry Associates had successfully built condos in Las Vegas. Like South Florida, Las Vegas was growing. Just as South Florida drew buyers from the northeast, Las Vegas drew the massive Southern California market. And neither Nevada nor Florida has an income tax. Sprawling development and chronic traffic was whetting the appetite for urban living - i.e., condos near The Strip. And, the hope was Las Vegas would do as well with Asian buyers as South Florida had with Latinos. Now some South Florida developers are less sure. Fortune International CEO Edgardo Defortuna considered a Las Vegas project but backed out."The reality is that there are such wonderful, gorgeous hotels at very reasonable prices," said Defortuna. "Why would you stay in a condo when you can stay in a hotel in the middle of the action and not pay that much price?"