It looks like Ivana Trump may have failed in her valiant attempt to outdo The Donald. Last summer she announced plans to build the tallest condominium tower in Las Vegas, which was expected to soar 20 stories higher than her ex-husband's latest Vegas development. Now the yet-to-be-built property is up for sale–its ultimate fate unknown.
Ivana Las Vegas isn't the only Sin City condo to take a hit recently. At least three planned projects have been canceled in the last year, including The Related Group's highly publicized 514-unit Icon and Aqua Blue, a condo-hotel attached to NBA star Michael Jordan. But this string of condo crashes shouldn't come as a surprise, given the sheer volume of proposed projects coupled with rapidly increasing construction and land costs. "I don't think anyone who was sober had the expectation that all those projects would come online," says Jeremy Aguero, principal analyst for Applied Analysis, a Las Vegas-based economic research firm.
Nearly 100 projects (close to 53,000 units) are planned for the Vegas area, according to Applied Analysis. The firm expects only 30 percent of those units to be online or under construction by 2010, with the rest to be either delayed further or scrapped all together.
But these statistics aren't scaring off developers, as many remain bullish on the Las Vegas market. "It's a market that is maturing, not a market that is in trouble," says Rick Cavenaugh, president of Chicago-based Fifield Cos., which broke ground on Allure Las Vegas, two 41-story condo towers representing half a billion dollars in sales. "Fewer deals are getting done, which helps the fundamentals even more."
So why are some projects making the cut while others are folding? It all comes down to experience, says Cavenaugh. "The five or six people who are truly building high-rise condominiums that are of a conventional type of nature are surviving and doing very well," he says. Of those who rode the marketplace hype into substandard deals, he says, "whether they were ego-driven or cheap-land driven, a lot of them have fallen by the wayside in the last year to year and a half."
Cavenaugh used his high-rise know-how to design an efficient, cost-effective building. Just as critical to the project's success, Cavenaugh priced his units in line with rising construction prices. A pricing mistake ultimately led to Icon's demise, say industry experts. (The Related Group was unavailable to comment).
A project's success hinges on the right location, developer, and product, agrees Steve Molasky, chairman and CEO of Molasky Pacific, a Las Vegas-based developer. And if these fundamentals aren't in place, not even a splash of star power can save a project. "You need more than a famous face, and I think everybody has realized that," Molasky says. "[Donald] Trump's project has sold out, and he's looking at doing another one–but he is a developer. But if you just put Ivana Trump's name on it [a building], it's not going to make me buy there."
–Rachel Z. Azoff
Unfair Treatment
A fair housing report claims discrimination.
The stories of people leaving New Orleans and other Gulf Coast cities after Hurricane Katrina drew sympathy from many people around the country, including the apartment industry. But a recent report from the National Fair Housing Alliance (NFHA) claims apartment owners may not be treating evacuees equally.
Shortly after the hurricane, NFHA had both black and white testers call apartment complexes in 17 cities across five states to ask for an apartment. In 43 of 65 instances (66 percent), the report says, white callers were favored over black callers. (Though not always reliable, it is often possible to detect a person's race by his or her name and manner of speaking, says Shanna Smith, president and CEO of NFHA.)
The discrimination took a variety of forms at the same apartment complexes. "It ranged from outright lies by telling the African-American that nothing was available and telling the white [person] that two or three apartments were available to telling the African-American the security deposit was $250 and then telling the white [person] that it was $200," Smith says.
After the over-the-phone testing, NHFA actually sent testers out to five apartment communities. It says black testers encountered racism at three of the five sites. Based on both phone and in-person experiences, NHFA filed five complaints with HUD for discrimination faced at properties in Texas, Florida, and Alabama.
In response to the situation, the National Multi Housing Council posted HUD guidance on the NMHC Web site reminding members of their fair housing obligations. Though Jeanne Delgado, vice president of property management for NMHC, doesn't deny that there probably is some discrimination against Katrina evacuees, she says it's important to remember how the industry stepped up after the hurricane. "Our emphasis from day one has been one of reaching out and helping," she says.
–Les Shaver
Online Update
Want more industry news? Sign up for Multifamily Executive Business Update, our online newsletter, which will now go out twice monthly, thanks to online editor David Moran ([email protected]). The first e-mail of the month will feature stories from Multifamily Executive; the second e-mail of the month will highlight the latest apartment news. To subscribe, visit hanleywood.sparklist.com/subscribe/memberlogin.tml.
Slammed Door
The loophole that football players from college powerhouses Iowa and Virginia Tech exploited to live for free–or close to it–in Section 8 housing has finally slammed shut. In late 2005, President Bush signed a bill that requires students to include parental income or any financial aid that exceeds tuition when they apply for Section 8 housing certification.
–Les Shaver
Uncharted Waters
Run out of land to develop? Take your product out to sea with a ship-based condominium project. One of the latest proposed luxury liners: the Orphalese, which plans to offer 200 condo units priced between $1.8 million to $10 million. The ship is expected to set sail in 2008.
–Rachel Z. Azoff
Save the Date
Mark your calendars for the 2006 Multifamily Executive Conference, which will be held Oct. 4-6, 2006, at the Venetian in Las Vegas.
Bargain Living
Indianapolis offers the most affordable housing of any of the nation's big cities, according to the NAHB/Wells Fargo Housing Opportunity Index for the third quarter of 2005. The index includes both single-family and multifamily for-sale property in major metros with populations over 500,000.
–Rachel Z. Azoff
Westward Move
After spreading its roots in the Southeast, Washington, D.C., Texas, and Colorado, Wood Partners of Marietta, Ga., has announced that it's entering the competitive Southern California market. The firm, which topped Multifamily Executive's 2005 list of builders, hired Frank Middleton to become a director of development and establish the firm's Southern California operations.
–Les Shaver
Legal Help
Looking for advice regarding your next affordable housing project? A new book from the American Bar Association covers everything from financing a new affordable development to preserving an existing property. To order The Legal Guide to Affordable Housing Development ($94.95), visit www.ababooks.org or call the ABA service center at 800-285-2221.
–Alison Rice
Hot Hues
These colors will wow in 2006.
Don't get caught designing an apartment community with a color palette that screams 2005. Instead, check out Sherwin-Williams' 2006 color forecast. This year, nature-inspired hues–think indigo, arresting auburn, and jargon jade–lead the list of five color trend categories that can serve as a springboard for countless décor schemes and themes.
"The natural living collection is at the forefront of everything," says Becky Spak, senior designer for Color Marketing and Design at Sherwin-Williams, a Cleveland-based paint manufacturer. There's less of a transition between the indoors and the out, as rooms showcase the bold colors and weathered texture of nature.
The other trendy color categories for this year include the internationally inspired Great Escapes collection with river rouge, kendal green, curry, and smoky topaz; the trendy Fifth Avenue group featuring lush pinks and purples; the calming Relaxed Retreat offering dancing green, lucent yellow, and peach fuzz; and the comforting brown collection with Turkish coffee, mocha, and lightweight beige. (For a complete listing of colors, visit www.sherwin-williams.com.)
Another big trend for '06: More blue. "The blue family has been neglected the past few years," says Spak. "While the yellow-green has been tremen-dously strong and continues to grow, we are seeing a little bit more of the bluish green. Look for the blue family to gain prominence."
–Rachel Z. Azoff
Land of Opportunity
The Hispanic population expands into new regions.
It just might be time to broaden your Hispanic marketing outreach efforts. While still concentrated in key gateway cities and border states, the Hispanic population is moving into new regions. Since 1990, Hispanic communities have increased by more than 50 percent in eight states, according to a new report from Prudential Real Estate Investors. These states are expected to see continued growth between 2005 and 2010.
–Rachel Z. Azoff
Executive Feedback
How do you think the recent public-to-private deals will affect the industry?
A: "I don't expect the AMLI and Gables sales to materially affect the apartment REIT industry, as ongoing consolidation was already taking place–albeit slowly. I think these transactions were facilitated by historically low interest and cap rates and the opportunity to sell some of the properties to converters. I don't expect to see a lot more." –Ron Terwilliger, CEO, Trammell Crow Residential
A: "The broad implications are that multifamily real estate will continue to grow as an attractive real estate investment class over the next five to seven years. The trend will likely continue if the public and private capital markets' perception of value and long-term performance prospects remain this different." –Eric Bolton, CEO, Mid-America Apartment Communities
A: "History suggests that public-to-private transactions or private-to-public deals are always dictated by valuation differentials. [Now,] private markets are valuing assets anywhere from 15 percent to 30 percent greater in the private world than in the public markets. The trend 10 years ago was just the opposite. I suspect in the years ahead that the gap between private and public will close again and probably flip to the other side." –Tom Toomey, president and CEO, United Dominion Realty Trust
Project of the Month: Alice Court
Laguna Beach, Calif. Architect JZMK Partners and developer The Related Cos. performed an extraordinary feat: Plot an affordable housing complex right smack in the heart of Laguna Beach, one of Southern California's most exclusive (and hyped) beach communities.
The designer's objective was to create an affordable yet attractive housing development within the ritzy beach community. The end result? A Crafts-man-inspired, 27-unit apartment community called Alice Court.
Not unexpectedly, though, rallying community support for the development proved tough. "We faced a lot of opposition from the immediate community due to the fact that the concept of the project was an affordable housing project with studios," says Eric Zuziak, a principal at JZMK. "The community did not want low-income residents living close to homes that were worth, on average at or above $750,000."
(The project's targeted renters are individuals with annual incomes between $16,140 and $21,520–normally those who work in the city, but can't afford to live in it. Studio units are about 400 square feet.)
To drum up support for the project, the developer and the architecture firm solicited community input on the project's design. Locals were concerned about losing their ocean view, so JZMK designed Alice Court as a single-level building on a half-acre infill site that once housed a blighted two-story medical facility.
Gaining approval from the city of Laguna Beach also proved arduous, but the companies came up with a deal. "We included parking spaces in the subterranean garage that would be owned by the city and rented to the local businesses in the area," Zuziak notes. In the end, the project answered the city's need for affordable housing while also providing more downtown parking.
The Related Cos. built the project and manages it, but the land and the apartment itself are owned by the City of Laguna Beach. The total development cost of the project was $5.2 million, or $192,488 per unit. The apartment complex opened in February 2004 and is 100 percent rented.
–Abby Garcia Telleria