Banks have tightened their purse strings on construction financing for high-rise condo projects in Las Vegas, especially after several high-profile projects were canceled.

Calmerica loan officer Bob Charles said he has worked eight months trying to find construction financing for a luxury condo project in Las Vegas.

But he said the project may be “caught in the same mud” as Club Renaissance, a 60-story downtown tower that was announced in January 2005 but has yet to break ground.

“Of the 80-plus lenders that would have thrown their money at this project last year with the frivolousness that Paris Hilton shows when she throws money at her next party, only two lenders are left that will even take a call on a condo project in Vegas,” Charles said. “Well, Paris Hilton came out last month to say that she’s not partying anymore and lenders have mostly done the same.”

Neil Kadisha, who brought equity financing to the $325 million Sky Las Vegas condo tower next to Circus Circus on the Strip, called high-rise condominium projects “one of the riskiest developments.”

“It’s very different than a housing project. When you start the first or second floor, you’ve got to finish. That makes it a risk. You cannot start a project when it’s sold out. You start selling then start moving.”

Two players highly exposed to the Las Vegas condo market are Corus Bank of Chicago and Hypo Real Estate Corp., a New York-based subsidiary of Hypo Real Estate Bank International.

Corus has 90 percent of its $9 billion loan portfolio allocated to condo projects, including $770 million in Las Vegas. Among its projects are Juhl ($106 million), Panorama Towers ($236 million), Streamline ($123 million) and One Las Vegas ($140 million).

Hypo is committed to Las Vegas for about $850 million, including $537 million in construction financing for Trump International condo-hotel and $66 million in land acquisition for Cosmopolitan. Beyond condos, the bank loaned $370 million for construction of the World Market Center.

Hypo financed $216.3 million for construction of Sky Las Vegas in September 2005. The 45-story, 405-unit project is scheduled for completion in December. It will have 547,000 square feet of net space for sale, along with 43,500 square feet of retail, including fine-dining restaurants open to the public.

“Hypo Real Estate Bank International sees opportunities in the Las Vegas market, however we watch the market development carefully,” Hypo Deputy Chief Executive Officer Evan Denner said. “We are not concerned about our investments. Based on presales and other factors, (like) the stage of construction process, we are very comfortable.”

Economic numbers are strong right now and that’s what keeps banks interested in getting money out the door, said Paul Engler, senior vice president for Chase commercial real estate banking in Phoenix. Chase loaned about $130 million to Las Vegas-based Palm Beach Resort Condominiums to develop the Boca Raton mid-rise luxury condo project.

But demand for housing has cooled, so builders are looking to unload their inventory and are not as aggressive as they had been in building new units, Engler said.

“It’s been interesting times all over the country,” he said. “We’ve been picky about condo projects we’ve invested with. What we’re all watching is affordability of housing, which bleeds all the way down to land prices.”

Jeff Teetsel, vice president and regional manager for Fremont in Phoenix, said it takes experienced construction executives to make sure loans are better underwritten and to help borrowers complete their projects on time and within budget.

“Vegas, like most places, has well-conceived deals with good sponsors that will do very well,” Teetsel said. “What is somewhat unique to Vegas is the number of deals brought forward by completely inexperienced developers and often on unremarkable sites, and we’re talking about $100 million-plus proposed developments.”

Charles of Calmerica said condo projects hit the skids in Las Vegas for various reasons. Some were proposed by people who weren’t “true developers,” he said. That is, they lacked capital and experience. Other projects, he added, used a horrid lender or grossly underestimated construction costs.

Banks are taking a closer look at the developer’s experience, reputation and net worth, he said.

“While George Clooney or Michael Jordan jumping into a project creates some hype, it doesn’t convert into a finished project,” Charles said. “You can’t just have net worth and make a project happen.”

Information from: Las Vegas Review-Journal, http://www.lvrj.com

This entry was posted on Tuesday, October 10th, 2006 at 12:03 am and is filed under Condo, Real Estate. Tags: bank Bob Charles Corus Bank of Chicago Evan Denner Fremont George Clooney Hypo Deputy Hypo Real Estate Bank International Hypo Real Estate Corp. Jeff Teetsel Las Vegas Las Vegas Review Michael Jordan Neil Kadisha New York Panorama Towers Paris Hilton Paul Engler Phoenix real estate banking retail Sky Las Vegas condo tower World Market Center . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.