The frustrating mortgage lending environment and soft residential real estate market in Las Vegas is testing the resolve of many condo developers. Several projects in the past few years have been cancelled or put on hold. Some that are presently under construction are struggling to attract buyers offering their usual amenities, so they have done the next best thing and lowered prices, sometimes substantially. But even that hasn't always been enough, though.
Newport Lofts is a downtown condo project being built by West Seegmiller that had recently advertised an auction of 60 of its units, priced from $229,000 on up. Evidently sales had been lagging, so an auction became a viable option. Soon after the announcement one of the lenders, Pyramis Global Advisors which is the institutional asset management arm of Fidelity Investments, decided to intervene and assumed control of the 23-story development. That effectively cancelled the planned auction.
By July Newport Lofts had in its books 32 sales with an average price of $536,315, according to Home Builders Research, which is far removed from the much lower auction offering and that must have raised serious concerns with the lenders. In addition, since July only one unit has been contracted for and that will put any project on notice to seek different answers.
The banks involved and West Seegmiller have scheduled a meeting in the near future to hash out possible solutions to the issue. But it's going to be tough to find the right recipe. Unless the developer bears a name and an organization like Turnberry Associates or Trump, the successful marketing of a condo project in this market becomes a true task.