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Condo Hotel Builders Rise to Challenge

Buyers more knowledgeable before
contacting sales office

By Hubble Smith

Las Vegas Review-Journal
December 2, 2006

Nothing effectively generates a buzz about the launch of a condo-hotel project like a powerful Web site and an experienced, knowledgeable sales and marketing team, a panel of experts said at a two-day IMN Condo Hotel Symposium at The Mirage.

The panelists talked about what needs to be done before the big launch, what needs to be in the sales literature, alternative marketing methods and phase-by-phase sales process.

Condo buyers are savvier today and will conduct months of research before they contact a sales office, Brent Gleeson, president of NewCondosOnline, a San Diego-based marketing firm, said this week’s event.

“They know the answer to their question before they ask it. There’s accessibility for investors to do their due diligence,” he said. “Eighty percent of people use the Internet for research on real estate. It’s so much more effective than print (advertising). People can gather information more quickly than looking at a newspaper and they have much freer range of information.”

Offering bulk purchases at a special rate can also help create that buzz and take a project to the next level, Gleeson said. It’s definitely becoming a popular model to help move product, he said, when 30 percent of the inventory is already sold.

Michael Landau, vice president of marketing and public relations for the Edge Group, which is developing the $1 billion W Las Vegas, said the company sold units in phased releases, with buyers selecting units over a four- to five-day period.

“You discover more about what people want and you always keep that vibe that if you don’t buy today, the price could increase tomorrow,” Landau said.

Even with the folding of projects such as Aqua Blue, Las Ramblas and Hard Rock, Las Vegas is a hotbed among leading condo-hotel markets, said Joel Greene, president of Condo Hotel Center in North Miami. He came to Las Vegas for a meeting of preferred brokers who will be selling the first 500 units at Vdara, the 1,543-unit condo-hotel at Project CityCenter. The deposit to reserve units will increase from 20 percent to 30 percent in January.

Among the projects he likes in Las Vegas are Cosmopolitan, Residences at MGM Grand, W Las Vegas and Trump International. Conrad Majestic, a project planned at the former site of La Concha motel on the Strip, ran into problems but could come back with the backing of the Waldorf-Astoria, Greene said.

One project he doesn’t favor is the $112 million, 255-unit Platinum that opened in October on Flamingo Road, about two blocks east of the Strip.

“It’s a dog of a property in terms of appearance,” he said. “I saw the property when I was in Vegas. What an eyesore. No glitz or glamour, it’s small and not a great location.”

Two blocks off the Strip is like being two blocks off the ocean in Florida, Greene said. He has two properties in Fort Lauderdale and the oceanfront property gets 99 out of 100 calls.

The International Management Network conference was attended by about 700 real estate developers, analysts and financial lenders, many of them from Florida and New York, said Paul Murad, chief executive officer of Metroplex, which plans to develop Gateway Las Vegas on Charleston Boulevard with a condo-hotel component.

He chaired a panel of executives from Edge, MGM Mirage, Trump International and local law firm Snell & Wilmer discussing an overview of the local condo-hotel market.

“There’s a lot of interest in Las Vegas,” Murad said. “The panel was the most attended among the seven regions. I’ve got (business) cards from lenders and analysts from major banks, Wachovia and Deutsche. They stressed that they’re still interested in lending in Las Vegas. They just have to make sure the projects meet their underwriting criteria.”

Another panel at the conference focused on the “dirty words” that can’t be used in sales and marketing in compliance with the Securities Exchange Commission.

“Legally, we’re not allowed to mention the ‘R’ word (return) on investment. Never ever do we discuss numbers,” David Schwartz of The Management Consortium said.

“Our buyers are sophisticated, college-educated people with lots of disposable income and they like to vacation. We’re selling them a vacation experience.”

Greene of North Miami said any buyers who are disappointed with anticipated cash flow from rental of their units may have been misled during the purchase process.

“The SEC specifies that you cannot sell the investment aspect of the hotel, only the real estate and the lifestyle,” Greene said. “That includes services, amenities, the location, pride of ownership at Trump or MGM. You can’t get into occupancy rates or return on investment. It’s basically meant to be sold as a condo. You want an 8 percent return, buy a shopping center with Wal-Mart as your anchor.”

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