- Property: Villas at Desert Pointe
- Owner: Atherton-Newport Investments
- Location: Las Vegas, Nevada
- Project Cost: Roughly $5.5 million as of August 2006
- Scope of Project: Renovation of Interior and Exterior, including pool repairs, new appliances, updated leasing center, landscaping, and structure work
Gambling brings a lot of people to Las Vegas, but Atherton-Newport, an Irvine, Calif.-based real estate firm, came to town last August sure that it couldn't lose with its purchase and remodeling of the Villas at Desert Pointe.
The firm had done its homework and saw past the property's rundown condition. The 346-unit apartment complex had a 60 percent vacancy rate when Atherton-Newport purchased it for $18.5 million. "You could fish in the pool," says Sid Thulin, the company's vice president of construction. Built in 1973, it's located in an older part of the city, on 8 1/2 acres in the midst of other aging apartment buildings.
"We wanted to enter the Las Vegas market, and the Villas fit our program of rehabbing and repositioning underperforming apartments," says Ward Dutton, senior vice president of acquisitions at Atherton-Newport. "A number of the surrounding properties were [also] being renovated."
The Villas' location one block from the Las Vegas Convention Center and a monorail station was attractive. And the four three-story buildings have interior courtyards, unlike all the two-story garden-style buildings nearby.
Everything from the leaky roof to the landscaping has been redone in the $5.5 million effort. The stucco exterior was repainted; fencing, elevators, exterior lighting, and the pool have been repaired ("Now children can actually swim there," Thulin says); and HVAC units were replaced.
The renovation of the 149 studios and 42 one-bedroom and 155 two-bedroom apartments began with vacant units; now Atherton-Newport is moving current residents into renovated apartments to get at the rest of the units. The company has upgraded appliances; installed new counters, faucets, and sinks; retextured and repainted walls; and replaced the flooring. "You can only patch a wall so many times before it looks like a quilt, and we had to make the floor look like something other than moon craters," says Thulin.
The clubhouse, which the prior owners primarily used as a leasing office, also received attention. In the reception area, Atherton-Newport replaced the furniture with more contemporary pieces, added a fireplace, and improved the lighting. Some of the space went into a new fitness center.
While the rest of the building is fairly traditional, the company took a nontraditional approach to landscaping, replacing grass with drought-resistant plantings suited to the arid climate. As a result, not only will the Villas conserve water, it will receive a tax credit.
A Plan for the Unseen
But what seemed like a straightforward set of renovations proved more complicated than Atherton-Newport had envisioned. "There were hidden conditions," says Dutton. "The process ended up being more expensive than we anticipated because we just didn't know what we had until we tore apart the walls."
The major problem, says Thulin, "was that a cast iron vertical pipe, which rarely needs replacing, was cracked." At one point, the Villas had been a hotel, he explains, and the chemicals used to clean the drainage pipes had weakened them over the years. Additionally, both the roof and HVAC system were in worse shape than expected. Dutton says Atherton-Newport had an extra allowance for such contingencies.
Distance and Las Vegas conditions also interfered with renovation plans. "There was so much construction competition with all of the Vegas hotels that it was a challenge to find a contractor we could rely on," says Dutton.
Going Out of the Way
Strong management was important for the Villas project because it was conducted while residents inhabited the buildings. "We tried to stage construction in a manner that was least intrusive," says Thulin. Crews placed construction materials as far out of residents' way as possible, he says, and "if we had to change over the gas lines, we'd hand out coupons to Pizza Hut."
"We worked on three of four buildings at once because we had so many empties, but we tried to keep an equal mix of [studio, one-bedroom, and two-bedroom] units open," Thulin adds. "We also paid attention to location because we had to get occupancy up, so the better locations, like by the pool, were the first ones tackled."
All this work has paid off. "We've obtained a dramatic improvement in the [quality of] tenant residents, and the reputation of the property has improved," notes Dutton. When purchased, the Villas studios rented for an average of $490. Now they command $595. One-bedroom units have risen to $695 from $550. Two-bedroom apartments increased $225, to $860. The property has improved from Class D+ to Class B-.
"A lot of tenants were way behind on rent," says Thulin. Now he estimates that the Villas are 60 percent occupied. "But that's basically 100 percent gain–we've had about 40 percent turnover," he says. "And [the new tenants] pay their rent."
–Mary Jane Irwin is a freelance writer in Evanston, Ill.
- When purchasing properties, do an extensive investigation into the building because hidden conditions add to the cost and length of a project.
- If residents are living on site during construction, find ways to offset inconveniences. Atherton-Newport handed out coupons for free meals.
- It's important to have an on-site manager. If your firm is based out of state, find a local company that can take over project management responsibilities for you.