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WHAT ABOUT APARTMENTS IN THE VALLEY?
By ELI SEGALL, Las Vegas Sun, Posted May 25, 2014
With its sprawling subdivisions of cookie-cutter stucco homes, Las Vegas may not seem like a big apartment market.
But the valley has a large number of renters, and this once battered business is rebounding.
Developers are getting loans again and pushing ahead with stalled projects. Investors, squeezed out of pricier cities, are snatching up apartment complexes, and renters are moving back in.
The market is far from fully healed, but rents are rising and vacancies shrinking to the dismay of renters and the joy of landlords. The burst of activity also is steering work to carpenters, painters and other contractors who build or refurbish complexes.
When Las Vegas’ economy collapsed, the apartment market fell with it, as renters lost their jobs and financiers abandoned the sector. But investors are showing more interest here, in part because the housing crash wreaked havoc on people’s finances and made it impossible for them to buy homes.
Investors also are coming back because of a surge of projects on the Strip, including hotel renovations and construction of new retail sites and a 20,000-seat arena. The resort corridor is the valley’s main source of jobs.
“We’ve got employment growth now,” said developer Benjy Garfinkle, of WGH Partners. “People have to find some place to live.”
With the rental market’s upswing, bankers are more confident that developers will fill buildings with tenants and pay back loans. Some developers have owned sites for years but only now are starting construction, as they couldn’t get financing until recently, said Eric Cohen, co-founder of the Calida Group, a local development firm.
Daniel Grimm, owner of DG Development Corp., bought 20 acres of land on Dean Martin Drive south of Cactus Avenue in August 2011 and secured county approval to build apartments in February 2013. But he didn’t get project financing until December. A $33 million loan from Wells Fargo allowed him and his partner, Fore Property Co., to break ground on the 360-unit complex this year.
“I did not anticipate it taking me three years,” he said.
Grimm expects the project to be completed next May.
Most properties in the works are in the south valley. Some will be stocked with high-end amenities and charge rents far above the local average. Many had been mothballed during the recession.
Among the projects recently opened or in the pipeline:
The Calida Group opened a 255-unit complex in January in Southern Highlands. Homebuilder D.R. Horton had planned to develop the land and spent $30 million on site work there but never built any homes and sold the property in 2008 to money manager Angelo, Gordon & Co. The firm sold the site to Cohen’s group in early 2013.
The Calida Group also plans to develop a 466-unit complex at Tropicana Avenue and the 215 Beltway, a 360-unit project at the District at Green Valley Ranch and a 124-unit complex in Downtown Summerlin, formerly the Shops at Summerlin.
Pinnacle Family of Cos. is turning the 110-unit Vantage Lofts in Henderson, originally designed as a condominium complex, into apartments. Slade Development spent about $70 million on the project before it stopped work in 2008. Pinnacle bought Vantage last summer for just
$10 million and resumed construction. Rent for some units could be as high as $4,000 a month.
WGH Partners is working with the Krausz Cos. to complete the former ManhattanWest project, now called the Gramercy, on Russell Road at the Beltway. Krausz bought the partially-built, 20-acre mixed-use project for $20 million last June from developer Alex Edelstein, who spent $170 million before he lost his funding and stopped construction. Edelstein planned to sell the condos for $200,000 to $1 million each. They now are slated to be pricey rentals.
WGH also is turning a busted condo project on Cactus Avenue at Bermuda Road into rentals. The original developers defaulted on a $19 million loan and lost the partially-built, four-story complex to foreclosure in 2010. Lenders sold it to Garfinkle’s group in 2012 for just $2 million. The new owners resumed construction last November and plan to finish in August.
As developers bring new units to market, investors also are buying existing complexes. Some sell for a pittance, others for big bucks.
Properties that sold this year include the 172-unit Tropicana Village near UNLV for $7.9 million ($45,600 per unit); the 180-unit Destinations at Sandhill, near Desert Inn Road and Boulder Highway, for $10 million ($55,600 per unit); the 332-unit Wellington, on Sahara Avenue at Grand Canyon Drive, for $43.2 million ($130,000 per unit); and the 164-unit Elysian Parc, on American Pacific Drive near Stephanie Street, for $26 million ($158,500 per unit).
The jump in sales can be attributed, in part, to the fact that many landlords’ mortgages now are coming due. Some owners who paid too much for the buildings a decade ago are selling at a loss to get out of the deals.
Despite the surge in investment, the apartment market still has room for improvement. The average vacancy rate for large complexes dipped below 8 percent recently for the first time in six years.
“That’s a milestone, in my opinion,” CBRE Group broker Spencer Ballif said. “It has just been a long time.”