Wall Street’s financial woes have played havoc with all sectors of the Las Vegas development community, from housing to office and retail.

Even with the congressional bailout, the future remains dicey for some projects.

Not only have there been delays in Strip projects, but development across the valley could be pushed back because of limited access to capital, said Brian Gordon, a principal with Applied Analysis. Even with the bailout, it will take time before financial institutions will be able to lend again.

“There are a number of planned office, retail and industrial projects throughout the valley that are not only competing with existing product on the market today but also with financial markets for limited capital,” Gordon said. “That will likely cause a shift of timing or cancel plans altogether.

“With above-average vacancy and soft demand, there is a multitude of factors against many of these projects moving forward already.”

The financial crisis already has had a deep impact in the valley because banks haven’t renewed lines of credit and there is growing difficulty getting loans for new projects, said John Restrepo, an economist and principal of Restrepo Consulting Group.

Even with the bailout it will take time for money to flow through the system, he said, and the existing economic slowdown will be protracted.

“Even with the infusion of capital, it will depend on the type of project,” Restrepo said. “It may be more difficult to get office financing because of a higher vacancy rate, but easier for retail and industrial. It will be determined on a project-by-project basis.”

Tim Sullivan, president of Sullivan Group Real Estate Advisors, said the housing market stands to benefit from a bailout.

“I don’t think anyone knows what is the right solution, but my point is that the one positive element is that it at least offers some stability or perception of stability,” Sullivan said. “That instills some blanket of confidence in the marketplace.”

Many homebuilders have had their lines of credit called back from the banks even when they are in full compliance with their loans, Sullivan said. Without that access to capital, they have to cut back operations and halt projects.

The financial crisis has hurt sales of new homes, which were down sharply in the second half of September, said Tom McCormick, president of Las Vegas-based Astoria Homes. “I think all of this is scaring people from purchasing a home, and when we don’t sell homes, that constricts our cash flow.”

Alex Edelstein, chief executive of Gemstone Development, the developer of the Manhattan West condominium mixed-use project, said he’s also worried about the lingering credit crunch and the ability of buyers to get mortgages.

“Lending has pretty much dried up the last 90 days, and so developers have to bring more equity to the table to try and get a building built,” Edelstein said.

If the bailout is successful in taking huge amounts off banks’ balance sheets, lenders will be in a position to raise money from investors, he said. They won’t be afraid the banks will be wiped out.

“I am a hard-core free-market guy,” Edelstein said. “I don’t like government intervention, but it is the right thing if it is executed well. If they do nothing, we will go into a prolonged depression that essentially will be caused by cascading economic contraction as companies that can’t borrow money are forced to lay off and shrink.”

Associated General Contractors of America, the nation’s largest commercial construction association, backed a bailout to help restore liquidity, stability and confidence in the financial markets and restore credit to finance construction projects.

Steve Holloway, executive vice president of the group’s Las Vegas chapter, said he’s seen a large number of projects that have permits but are not moving forward because of the lack of financing, especially smaller projects off the Strip.

Even though he thinks the bailout will make construction loans more readily available, Holloway said that’s not the only problem to overcome with any rebound. “Housing usually leads us in a recession and something needs to be done with housing to take us out of this recession,” he said.

Kirk Boylston, regional director of EJM Development, said his company hasn’t had trouble getting financing for its Arroyo mixed-used project in the southwest valley. But many other companies are finding it difficult to obtain construction loans.

“Lenders don’t have money to lend, and they are not inclined to lend for speculative developments,” Boylston said.

Not only does the lack of capital affect developers directly, but if prospective tenants lose their lines of credit, they don’t have the money to expand or move into a new building, he said. That is especially true for companies that did business with Silver State Bank, Boylston said.

“It is one big clog in the pipeline right now,” Boylston said. “It is hurting everybody, and it is going to have to be worked through, and it is going to be painful. There is no quick fix.”

Kyle Nagy, director of CommCap Advisors, a Las Vegas mortgage banking firm, said it continues to become tougher and tougher for developers. Two years ago lenders required developers to put up 15 percent of the project, but today that is up to 25 percent to 30 percent, and developers don’t have enough equity.

Many regional and local lenders are not considering loans for clients unless they have a deposit relationship of 10 percent to 15 percent of the project, Nagy said.

Lenders also want developers to have 50 percent to 60 percent of a project preleased compared with as little as 0 percent to 20 percent in the past, Nagy said.

“This is a credit crunch and not a fundamental real estate problem,” Nagy said. “Real estate is still doing well. Vacancies may be up and rents are soft, but it is not like we have a lot of vacancies up and down the street.”

Credits: Las Vegas Sun

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With the city’s housing market stumbling in 2008, you might expect local home builders to back off on extras such as ecofriendly construction methods and materials.

Annette Bubak certainly expected a little less interest in a green-building program she oversees.

Bubak is president of Nevada Energy Star Partners, a coalition of home builders, mortgage companies, utilities and construction suppliers dedicated to deploying the U.S. Environmental Protection Agency’s Energy Star program inside local new homes.

Bubak expected 12 local companies to sign up as partners in 2008. Instead, the program netted more than 30 partners by the time its 2008 campaign ended in September.

“Going into the year, we were a little concerned that builders wouldn’t have it in their budget (to contribute funds to the group’s media campaign),” Bubak said. “But we found instead that energy conservation is more important to consumers than it’s ever been, and builders are even more committed to finding progressive ways to increase the energy efficiency of new homes.”

Among Nevada Energy Star Partners’ key accomplishments this year: The group got the Las Vegas High-Rise Condominium Association on board in one of just three pilot programs nationwide to create the first Energy Star criteria for condo towers.

By spring, local builders specializing in mid- and high-rise condo communities will have federal EPA guidelines on insulation, duct work, appliances, lighting fixtures and windows federally certified as energy-saving measures.

The Energy Star designation will help condo developers market more effectively to buyers, Bubak said. The Boca Raton development at Las Vegas Boulevard South and Serene Avenue will serve as the pilot’s guinea pig.

Credit the sustained interest in sustainable design to two factors: Rising energy costs and consumers’ awareness of the carbon footprints their lifestyles leave, said Steve Bottfeld, executive vice president of local real estate research firm Marketing Solutions.

Home buyers want to save money on power bills, and they want to make a smaller impact on the environment. Builders have heeded those demands with Energy Star.

“If a builder adds a core value of energy conservation and climate savvy to their brand, it’s a big help to their future,” Bottfeld said.

“They’re investing in their future. People constantly underestimate builders’ appreciation for what’s going on in consumers’ heads. Builders aren’t stupid. They understand where consumers are going.”

Today, 67 percent of all new homes built in Las Vegas meet Energy Star standards. That’s far and away the top rate in the nation; No. 2 Phoenix lags way behind, in the 35 percent range.

And if Bubak has her way, Nevada Energy Star Partners will make even greater strides in 2009.

The group will partner in the next six months with the EPA on a new initiative called Home Performance with Energy Star.

That program will help owners of existing homes rate their houses for energy efficiency, and it will offer a menu of possibilities for boosting energy conservation in older homes.

In April, Nevada Energy Star Partners won the EPA’s Sustained Excellence honor — the sixth consecutive year the state program received the award. It’s a string of accolades no other Energy Star chapter in the nation has accomplished.

RESALE HOMES — The number of resale homes on the market in Las Vegas jumped by 359 units to 22,317 homes in the week between Sept. 22 and Sept. 29, a report from business consulting firm Applied Analysis shows. That’s the largest weekly gain in resale inventory since the last week of May 2007. The number of listed, vacant properties rose 399 units in the week.

PROPERTY SALES — CB Richard Ellis broker Jeremy Green represented Kirkorian Enterprises in the $1.9 million, 65-month lease of 25,308 square feet of industrial space to Atronic Americas. The property is at 955 Grier Drive. Randy Broadhead, also with CB Richard Ellis, represented Bormann Development Group in the $1.56 million, 66-month lease of 13,155 square feet of office space to The Powell Litigation Group. The space is inside the Nevada Benefits Building at 9525 Hillwood Drive.

Credits: Review Journal

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At IceBar Orlando, patrons don’t need to order drinks on the rocks.

“You have a vodka in the rocks,” said co-owner Patz Turner.

Make a reservation, pay $35, don an insulated cape and gloves and you can have a vodka drink in a 27-degree room. There, the couches, chairs, walls, glasses, bar and even the fireplace are made of ice. Lights alternately bathe the room in subtle colors, and the drinks are served by waitresses dressed in stylish all-white snow suits and Russian-style fur hats.

Ice bars are popular in Northern Europe, where entire buildings are sometimes carved from ice. But Florida?

“Orlando has all kinds of adventures,” Turner said. “This is an adventure into the Arctic.”

Ohio artist Aaron Costic did the sculpting, based on Turner’s vision.

“It’s the Crystal Palace as I imagined,” said Turner, who co-owns the bar with Wylie Plummer, which is being touted as one of the first permanent facilities of its kind in North America. “It’s a fantasy, created in my mind, of things frozen in time.”

Turner said they’re careful that those frozen in time don’t include the patrons or the staff. Visits are limited to 45 minutes and a variety of warmer drinks are available. The bar staff has a 30-minute in, 15-minute out rotation.

Chuck Taylor, construction project manager, said efforts were made to limit electric consumption by using bioclimatic filters, which refresh and recycle the cold air.

Turner, who calls herself an environmentalist, said the bar has LED lighting, which uses less electricity than normal, incandescent bulbs.

“We want to make the smallest footprint we can,” she said.

Her husband, Fred Turner, said the projected average monthly electric bill is $3,500.

The bar aims to draw conventioneers and vacationing parents looking for a more adult adventure after a steady diet of theme parks, Turner said.

Credits: SFGate

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Sue Garrett, in Las Vegas for a birthday party earlier this month, went to what she considers extraordinary lengths to hold down the cost of her trip.

“We decided to sit through one of those blasted time-share presentations to get a free hotel room,” said Garrett, who lives in Los Angeles. She turned down the time-share but earned herself and her husband a stay on the Las Vegas Strip for her trouble.

Similar stories are heard all over Las Vegas these days, where resorts are discounting and even giving away room nights just to attract enough people to keep their roulette wheels and slot machines spinning.

Vegas barrelled through previous U.S. economic recessions with no problem, but the current slowdown — marked by home foreclosures, high gasoline prices and now the Wall Street meltdown — has had a much bigger impact on the gambling mecca than economists expected.

And while free rooms and room discounts have kept hotels relatively full — occupancy is down just one per cent in the year to July — gambling revenue is down 6.5 per cent.

“People still have Las Vegas as their destination of choice, but their budget is less,” said Jan Jones, senior vice-president at Harrah’s Entertainment, operator of nearly one-third of the Strip, from Bally’s to Caesars Palace.

Harrah’s and MGM, which operates 10 properties on the Strip including Bellagio and Circus Circus, have each cut about 1,500 Las Vegas jobs over the past year.

“There is no question that people are spending less money now,” said Jim Murren, president and chief operating officer at MGM.

MGM plans to continue aggressive promotions, such as a $300 return travel voucher for a two-night stay at the MGM Grand. “Our business model is based on a desire to maximize occupancy and traffic at the properties,” Murren said.

The majority of Harrah’s hotel rooms in Las Vegas, Jones said, are “comped” — given for free — to higher-spending members of the company’s bonus points system.

Two factors make the current downturn harder for Las Vegas than previous ones, according to analysts.

One is high gasoline prices, which will hit the pockets of the more than half of Las Vegas visitors who drive in by car or bus. No one knows how $4-a-gallon gasoline will affect their spending decisions, said Margaret Holloway, senior credit officer at Moody’s Investors Service.

The other is the growth of places where gamblers can get a cheaper fix close to home, like riverboats in the U.S. Midwest and new casinos on Indian reservations.

The U.S. credit crisis has begun to dampen construction, a big economic driver since the 1990s.

Cranes have stalled at Boyd Gaming Corp.’s $4.8-billion partially built Echelon project as the company awaits financing agreements for two joint venture deals.

And the projection for new luxury hotel rooms to be built by 2010 is down by half from a year ago as the weak economy and credit constraints lead companies to reconsider their plans.

MGM’s CityCenter, due to open in late 2009 at a cost of $9.1 billion, along with Echelon, Wynn Resorts Ltd’s Encore, Fontainebleau Las Vegas and a new hotel tower at Caesars, will probably be the last projects built on the Strip for a decade, MGM’s Murren said.

But the 23,000 hotel rooms still in the pipeline loom over an industry that can hardly fill the ones it already has.

Since last October, shares of Las Vegas Sands, owner of the Venetian and the Palazzo, have fallen about 75 per cent, while shares of MGM Mirage have lost about two-thirds of their value. Harrah’s, the world’s biggest gambling company, is owned by Apollo Advisors and TPG Capital.

As the Las Vegas casinos offer discounts to keep their hotels full, the ripples of these policies are felt all over town and even in the plushest of venues.

“We feel what they feel — when you lower the rate you attract a different clientele,” said Nikki Pishotti, marketing manager at the exclusive Canyon Ranch Spa Club, which gets most of its business from people staying at the adjacent Venetian and Palazzo resorts owned by Las Vegas Sands.

Similarly, shopping malls like the Miracle Mile at Planet Hollywood Hotel Las Vegas are forced to follow the casinos’ lead by cutting prices. They are thronged, but 50-per-cent-off signs are common.

“Everybody is a little worried,” said Marcia Martinez, who sells moisturizer at a booth in Miracle Mile. “There are a lot of people, but sometimes the restaurants are almost empty.”

But like inveterate gamblers, Las Vegas boosters will never stop betting on the city.

The Las Vegas Convention and Visitors Authority, trying to make the best of the downturn, is running an ad campaign under the slogan “Crazy Times Call for Crazy Fun” and is looking to bring in more visitors from overseas.

The growth of Macau, where the Chinese government has been encouraging the construction of Las Vegas-style gambling resorts, will create new gambling customers for Nevada, said Rossi Ralenkotter, president and chief executive of the authority.

Nevertheless, the authority recently delayed renovation plans for the Las Vegas Convention Center — pushing final completion of the $890-million project to 2011.

“I’m betting that Las Vegas will continue to grow over time,” said Keith Schwer, director of business and economic research at the University of Nevada, Las Vegas.

“It’s a little bit different than a boat in St. Louis or whatever. Here, it’s a destination and the competition is strong. The losers get bought out or blown up.”

Matthew Glazier, co-owner of Strip House, a high-end steak house above Planet Hollywood’s casino, said that business since it opened a year ago has been around what he expected.

“People know when they come to Vegas they are going to spend a little more than they can afford,” he said.

Credits: Canada.com

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