BluefoxToday blog : March 2008

The Las Vegas hotel school is already on the leading edge of hospitality education in the world and evidently it desires to stay there. Dean Stuart Mann and his team have drafted an ambitious plan for its future that includes several major developments.

It's currently busy at work to make the INNovation Village a reality. When all is said and done, it'll be a "campus within a campus" at UNLV, a one-of-a-kind concept that combines academic and business interests to give future students a strong stepping stone from which to launch themselves into the real world of the hospitality and tourism industry. It'll also put a significant emphasis on commercially viable research and several high-profile companies, among them Microsoft, Hewlett-Packard, MICROS, InfoGenesis, Bose and Sony, have already shown interest in getting involved in that.

The college took a bold step in 2006 and expanded abroad by opening a campus in Singapore to tap the rapidly-growing Asian leisure market. The site presently offers a bachelor's degree program in hospitality management and a smaller graduate program. It compliments well the strong presence of Las Vegas-based resorts in Macau, like MGM Mirage, Wynn Resorts and Las Vegas Sands.

That isn't enough, though, since Dean Mann has a brand new project on his desk. This time the focus is on the Middle East and more specifically the United Arab Emirates, a seven-member federation. As it so happens, MGM Mirage already has ties to the area. It is planning to develop a $3 billion resort there with Abu Dhabi as the local partner and has sold half interest in Las Vegas CityCenter condominium, hotel and casino complex to Dubai, another one of the seven emirates.

Recognizing the U.A.E.'s increasing draw as a tourist destination, UNLV Hotel College is thinking about starting a campus there, too, and model it in many ways with the Singapore one. It would be located in Ras al Khaimah. The good thing is that the program, if it comes to fruition, would be financed by the emirate while UNLV would keep total control of the curriculum and admissions and hiring decisions.   

As the world tourism expands and capable management talent is in increasing demand, UNLV Hotel College is actively preparing to meet that demand.

The residential real estate markets in many areas of the country are plodding along in high weeds. When that is combined with a home loan industry that is grappling with serious balance sheet tremors, the situation is ripe for healthy head scratching for a homeowner who needs to refinance his explosive mortgage. As if that isn't enough to take a deep breath, there is another new, potentially crippling twist to the scenario.

The refinance process can turn murky, even impossible, if a second mortgage is involved. It usually is subordinate to the 1^st loan, so in case of a default the 1^st loan is paid off first and what's left goes to satisfy the second. Clearly the second mortgage holder takes a bath if the sales proceeds aren't enough.

So, let's say a homeowner wants to refinance only his 1^st, which could be an option ARM about to reset higher, to a lower rate, receives plenty of appraisal to blanket both mortgages and is promptly approved. That's step one. Now, the second is typically with a different lender and it also needs to okay the deal. This is step two. If it doesn't sign off on it, however, the refi is dead, regardless of how sound the fundamentals are. Strange, isn't it?

Why would a lender, National City Corp. is one of them, resort to this? For one, it may fear home values will continue declining which could expose it to a loss. That's understandable because its collateral is in danger. But if the appraisal comes in 10-20% above the two loan balances, then it doesn't make much sense. Yet, refinances have been vetoed under these circumstances. Perhaps the idea is to force the homeowner to refi both mortgages that would then wipe out the potentially risky second loan from its books. And give it added liquidity if its balance sheet is bleeding badly.

For a homeowner, the best route would be to refinance both loans in one shot, so long as the value is there.

The whole idea certainly goes against all the grand talk we hear from Washington and the finance industry that they are helping people stay in their homes.

The still little talked-about reverse mortgage option is fast becoming a household word. It only makes up less than 1% of the huge overall home loan market that right now stands at around $10 trillion, so it's no wonder. In the coming years it'll take a larger bite out of that total, though, if a recent trend is any indication. According to HUD, the Department of Housing and Urban Development, federally-sponsored reverse product lending grew 41% in the fiscal year ending in September, 2007. The increase is indisputably substantial.

The traditional reverse mortgage is available to homeowners 62 years and older who can tap on the built-up equity of their homes and receive funds either in a lump sum, monthly payments, a line of credit or a combination of them. Government-backed programs have long ruled this niche segment, but now a number of mortgage lenders and large financial institutions are entering the market and are inventing more product variety.

Some of them are already offering loans on second homes and even vacation rentals, the minimum age was dropped by one to 60 and jumbo reverse mortgages are creeping into the picture, too, going as high as $10 million. The direction is clearly moving away from meeting the applicant's basic needs, the original reason to getting one, to helping him also satisfy an investment plan, a childhood dream or a spouse's must-have impulse. Or whatever. Generally to put more depth to one's retirement life.

Also, Fannie Mae used to be the principal buyer of these loans, but now big investment operations like Lehman Bros. and Bank of America are doing so, too, and sometime soon will start packaging them and selling them on. Ginnie Mae, a federal agency, is providing a guaranty to mortgage lenders that gives them better pricing on the secondary market and that allows them to make additional money available for new loans. That is its primary role. Ginnie Mae now has plans to create a government bond issue supported by reverse mortgages and when that initiative sees daylight, borrower costs will decrease and the reverse product becomes even more accessible.

This niche market is nicely maturing and drawing the interest of large institutions, two key developments that together will bring a string of new choices to the benefit of the older consumer.

All Southern Nevada residents, and others too, mark your calendars on April 11 and put also down the time of 6:30 a.m. That's when the sixth annual Drive Fore Literacy with Oscar golf outing at Silverstone Golf Club will tee off. The club is located at 8600 Cupp Drive in northwest part of the valley, within the Silverstone Ranch residential community.

The event is a fundraiser for the Newspapers in Education, or NIE, program that seeks to improve literacy at a pre-adulthood level. The whole idea of NIE goes all the way back to 1795 when a Portland, Maine, newspaper got the ball rolling. The initiative gained a foothold here in the 1970s with the Las Vegas Review-Journal and Las Vegas Sun teaming up to distribute newspapers to local schools. The school year 2003-04 was especially rewarding when over 1.5 million copies were handed out to schools and currently about 1,600 teachers in the valley include NIE in some shape in their curriculum.

The tournament is sponsored by Kainos Partners, the local franchisee of Dunkin' Donuts, and it'll remain in that role for the next three years. The event will conclude with a lunch where Oscar Goodman, Las Vegas Mayor, will probably get up and say a few words to the delight of the birdie-blessed golfers. By being a solid advocate of this great program he got his name on the tournament's title. Happy golfing!

For more info visit www.lasvegasnie.com.

Home buyers and refinance hopefuls are currently struggling with a mortgage market that has retooled its guidelines several degrees harder. They aren't alone, however. The same thing is now happening to the commercial finance sector, too. Even major developers are finding it difficult to secure financing for their projects and if they find it, it comes at a cost that may be too high to make sense.

A few weeks ago it was reported that the Cosmopolitan had worked out a tentative deal with Global Hyatt Corp. and Marathon Asset Management who would recapitalize the troubled condominium and hotel project on the Strip, next to the under-construction CityCenter. The details were supposed to be worked out by Thursday, but the deadline was missed and now Deutsche Bank, the main lender, has informed the principals that foreclosure papers are being filed on its $760 million loan.

Obviously the lead bank is unhappy about the pace of the negotiations, so it decided to put some pressure on the parties to reach an agreement pronto by threatening foreclosure. In the meantime, construction on the site stays on schedule as Perini Building Corp. is being paid by Deutsche Bank as stipulated in their prior arrangement.

The other development said to be on thin ice is the Plaza Las Vegas, a hotel and condominium complex to be built on the former New Frontier site. The plan includes seven towers that would house 4,100 hotel rooms and 2,600 condos and they would surround a large casino. The marquee tower is to be a replica of the famous New York Plaza, a landmark hotel over there.

A newspaper report states that the developer is going to hold off on it until the mortgage and overall credit markets improve, although the president of the Elad Group, a joint venture partner in the project, disputes that. Financing has been a question mark from the day the project was announced because no details were disclosed then and now that the capital market situation has further deteriorated they may simply have a terrible time convincing anyone about their plan's viability. The smart money is on the decision to wait out the slump and come out swinging when the haze of uncertainty clears.

A high-powered economic panel has been meeting under the direction of the U.S. Treasury Secretary to seek solutions to the current mess in the mortgage and overall credit markets. The task is difficult, of course, because of the complexity the financial segment has grown into over the last several years. But something has to be done, tried at least, to get the industry back on the right path.

One of the favored recommendations of the working group is the careful overhaul of the mortgage broker sector that would require at least a national licensing system, if not more. Uniform mandatory licensing would definitely help put more teeth into the monitoring function of these lenders.

It appears, though, that whenever ideas are brought up to address the challenging credit situation, the mortgage brokers are often the first ones to be called on the carpet. Yes, there are some bad apples in the profession, but as a whole they were merely marketing subprime and other loan products that were invented by the large wholesale banks. That's their function, marketing. Be a conduit between the borrower and the wholesale lender. Legislating vast reform on them will miss the point.

The federal government has a host of departments and agencies that are tasked to oversee the home loan industry and the working group has reportedly also touched on their role in the present crisis. They ought to bring it to the top of the agenda, however. The existing laws in the books aren't perfect, but had probably averted much of the mess we are in the middle of now if those regulations had been properly enforced. Letting the industry police itself doesn't work. Besides beefing up the enforcement, the number of departments in charge of oversight should be drastically reduced and consolidated into two or three of them. Preferably only one. How can about ten or so different entities effectively monitor the same thing? They can't.

The complexity of today's financial markets is a delicate issue. Innovation is great and necessary to advance modern economies. Yet, the lesson now is that too much innovation can also come back and bite the innovators, the large lenders. The mortgage-backed securities sold on the secondary market that largely fueled the rise and fall of the subprime home loan were shaped so complex that even the investors buying them couldn't always understand what they were purchasing. And they are said to be pretty sophisticated. Therefore, this area ought to be looked at as well.

As the federal government is getting more involved, then hopefully it'll focus on the more relevant issues.

First the rapidly-growing hotel, gaming and resort company built the Venetian at the corner of Las Vegas Boulevard, better known as the Strip, and Sands Avenue, to compliment the huge convention facility Sands Expo Center. It promptly became a major hit among convention goers and up-scale visitors to town. Since the demand was there, they soon went ahead and built the luxurious Palazzo next door, opening it in January, and connected it directly to the Venetian.

There is more in the pipeline, though. A piece of prime land sits right in front of the Palazzo and the owner of that wanted to put a shopping center on it and repeatedly declined to sell his prized holding, so Las Vegas Sands negotiated an airspace agreement with him that allows the construction of a 400-unit condominium tower above the street-level shops. That's a first for Las Vegas. Airspace deals and other tight building arrangements are common in New York and other large metropolitan areas, but not here. Although the real estate and mortgage markets in Southern Nevada are presently hurting, Las Vegas Sands aims to offer the deluxe condominiums for up to $2,000 a square foot, which is about the same as the MGM Mirage's CityCenter units go for.

The company plans to truly maximize the available land it has in this important corner. Preliminary discussions are under way to develop a third resort on top of the Sands Expo Center, or erect it in its place and move the convention center to another location across the street. They own 18 acres behind the Wynn Las Vegas employee parking garage, which location certainly present its own logistical problems. How to conveniently ferry over and back time-challenged event visitors, that's the question? If the condo market rebounds in the coming years as expected, the advancing master plan draft could also include more of that component.

Anyway, this shoehorn approach is likely going to encourage other resort developers here to squeeze more buildings into smaller lots for maximum benefit. The days of inexpensive Strip land and wide-open spaces among buildings seem to be coming to an end. Vegas is on its way to joining the big leagues in that respect. 

Southern Nevada residential real estate market is actively seeking a solid foundation to stand on. Some of its more meaningful components are either moving up a little or heading down a bit, instead of going steadily in either direction. The positive thing is that the shifts now are minor which usually indicates the correction here is nearing the end of its cycle.

Local housing experts are loudly cheering the 11.7% increase in sales of single-family homes in February, as was reported by GLVAR, the Greater Las Vegas Association of Realtors. The total came to 1,098 sales. A considerable 41.5% of the transactions were short sales, where the property is bought for below its mortgage balance, or lender-owned houses banks unloaded at discounted prices. Regardless, the main point is that the buyer appears again to be showing some confidence in the market and is willing to act on the opportunities out there.

On the minus side the report states that the MLS inventory of houses for sale edged up 1.7% from January, rising to 22,497. This is the second consecutive month when it moves slightly higher, not a major concern in itself but something to keep an eye on down the road. The other minus factor was the median home price that eased down 1.4% from January and is about 20% lower than a year ago, a trend that has been going on for quite some time.

Las Vegas is drawing a lot of attention nowadays thanks to the soft real estate market conditions. Investors, those on the move, second home buyers and the plain curious from around the country and even abroad are making inquiries and that obviously means that the market is becoming attractive once more. There is no better cure for a flu-ravaged market than a healthy demand dynamic.

Like so many other housing markets across the country Las Vegas, too, is feeling the adverse effects of tightening mortgage guidelines, slumping home values and skittish buyers. It's a major task to sell a property under these testing circumstances.

Real estate agents, FSBOs, lenders, whoever is selling, have burned the midnight oil in a quest to discover marketing tools that work. Wide screen TVs have been offered as enticements, vacation packages, cars etc., they've all been put into action. House auctions became popular a while back, although the results with them have been mixed.

One of the latest innovations in Las Vegas is the Foreclosure Express, simply an airport shuttle bus with appropriate signage that seats 24 passengers. To read the entire article, please click on the link in this paragraph. 

CityCenter has for some time made nice-sized headlines with the scope of the mammoth project and its upward-revised $8 billion price tag. This cost figure will buy the gaming giant one of the most unique resort experiences in the world of leisure and entertainment. The small city within Las Vegas will feature a large casino, standard condominiums, condo hotels, a wide variety of retail and dining space, thousands of hotel rooms of course and a convention facility. With that package it deserves to be called a city-within-a-city.

CityCenter wants to do more, however. Any major city worldwide can display a fair dose of art, any kind of art, to give it a wider base to stand on. To bless it with sophistication, to endow it with legitimacy.

Following that script MGM Mirage will spend $40 million to acquire contemporary art for the development on the Strip and obviously desires to bring Las Vegas to some degree out from the shadows and onto the world stage as a noteworthy urban center. The artists who are commissioned to provide the works are among the elite in the business and surely give the effort a strong start.

One of them is Maya Lin, creator of the Vietnam Veterans Memorial in Washington, D.C., who will shape a huge silver cast of the Colorado River to be hung over the resort's lobby area. Richard Long's two large mud wall drawings, for details on that kindly Google the topic, will enhance public space at the Veer Towers, a condominium component. And Frank Stella will supply his "Damascus Gate Variation I" for the Vdara Condo Hotel as its reception area's backdrop.

This is just a small sample of what to look for when the place opens late in 2009.