During the Dec. 16 finale of last season's TV show The Apprentice, Donald J. Trump unveiled a model of his first Las Vegas condominium tower. Trump began taking $10,000 deposits that night and within a month had reservations for 80% of the 1,282 units, at prices around $1,000 per square foot. In January he announced plans for a second tower. "Everybody wants to be in our building," The Donald told BusinessWeek.
Trump's boasting aside, Las Vegas has become one of the hottest condo markets on the planet. Developers are filing for permits on 30 high-rises and are considering building 50 more. The condos, most of them along the city's famed Strip, start at $350,000 for one-bedroom units and run into the millions -- sky-high prices in a city where the average condo sells for $203,000. The volume of projects amazes even boosters of a city that prides itself on excess. "I went to a groundbreaking the other day," says Las Vegas Mayor Oscar Goodman. "Half the units were spoken for. People don't even know what their views will be. I never saw anything like it."
Trump isn't the only big name in the game. MGM Mirage (MGG) has sold $600 million worth of condos adjacent to its MGM Grand Las Vegas hotel and casino. Stars are joining the party, too. Actor Leonardo DiCaprio recently spent $1.5 million for two adjacent two-bedroom units at Panorama Towers, a two-building complex under construction west of MGM's Bellagio Las Vegas hotel and casino.
Buyers need to be wary. Not all of the proposed projects will get built. It's important to ask about the track records of the developers and check references at their other projects. You can secure a unit with a $20,000 refundable deposit. Developers will ask for 10% of the purchase price when you sign a firm contract, 10% more at groundbreaking, and 10% when the roof goes up -- all nonrefundable.
As always, location is crucial. An empty lot next door may sprout a view-blocking new tower. There's also a risk that the construction frenzy will create a glut that depresses prices.
RENT IT OUT
The Vegas condo boom began six years ago when Turnberry Associates, a Miami-area developer, began selling the first of its towers. Turnberry brought features from its South Florida properties, such as a wood-paneled clubhouse, limousine service, and elevators that open to the front doors of each unit. At the time, many developers thought gamblers used to getting free rooms wouldn't buy condos, but Turnberry proved them wrong. "High rollers can feel harassed at casinos," says Turnberry principal Jeffrey Soffer. Early buyers have been winners. A two-bedroom, 1,500-square-foot unit in Turnberry's first building cost $290,000 in 1999. An identical one in their latest tower sold recently for $745,000.
Many of the proposed buildings are "hotel condominiums." These are individually owned units that owners can opt to rent out like hotel rooms when they're not in town. At the Majestic Las Vegas, a 59-story tower planned on land just south of the Riviera Hotel & Casino, a 480-square-foot studio costs $400,000. The condos come fully furnished, with Viking appliances and flat-screen TVs. Maintenance fees start at $450 a month. The property will be managed by Conrad Hotels, the luxury division of Hilton Hotels (HLT). Condo owners get 60% of any room revenue.
Since many condos are bought by investors, buyers who don't want a constant flow of tenants next door should look for projects that restrict rentals. Buyers of hotel condos, on the other hand, should make sure the property is managed by an established hotelier and adjacent to a popular casino that can generate a steady flow of customers. Remember, real estate booms always end. And Las Vegas has a long history of separating suckers from their money.
By Christopher Palmeri