Sunday, November 14, 2004
Copyright © Las Vegas Review-Journal

Condo building presents special risks, experts say

Work is continuing on the Manhattan condo project on Las Vegas Boulevard South. The project's first five buildings are expected to be finished next year. Photo by Gary Thompson.

High-rise condominiums are all the rage in Las Vegas lately, but for most working-class citizens, the hefty price on these luxury units creates a huge obstacle.

Housing affordability has become a big issue in Las Vegas as median new home prices approach $300,000. That makes it tough for locals to pay $400,000 and up for a small studio or one-bedroom unit.

Alex Edelstein has a solution. The former technology manager from California founded Gemstone Development and is building the Manhattan condominiums on Las Vegas Boulevard South at Serene Avenue.

"This is going to allow that kind of lifestyle for someone who can only afford $200,000 to $400,000 and they're going to get things Turnberry (Place) didn't offer like two acres of central park," Edelstein said.

When the project was announced earlier this year, prices started at $149,900 for the smallest one-bedroom floor plan, going up to $350,000 for expansive 1,400-square-foot lofts and three-bedroom residences.

It's comparable to Park Avenue, the midrise condo complex built by Amland Development just north of Manhattan at Agate Avenue.

The first five buildings are expected to be finished and ready for occupancy by the end of next year. Upon build-out in late 2006, Manhattan will consist of 44 four-story buildings with 700 residential units.

Edelstein said he's had a diverse range of 11,000 registrants for the condos.

"We've got young professionals, executives at Strip hotels. They're living in a house because it's the only choice they've had," he said. "I'm a condo kind of guy. I like views. If I'd come here five years ago, I wouldn't have had much to choose from."

While most of the condo projects are still in the planning stages, Manhattan has broken ground on construction with financing from Tharaldson Financial.

Edelstein borrowed $105 million this year for the first five buildings and the 9,000-square-foot clubhouse with a fitness center, theater, business center and kitchen and lounge facilities for hosting parties. He'll borrow another $50 million next year for four other buildings.

"Condo financing is tricky and getting insurance is tricky," Edelstein said. "One of the problems is construction costs went up this year and lowered profit margins."

Developers like to say they've "sold" a certain number of units in order to get construction financing from the banks.

Edelstein said buyers reserve their units at Manhattan with a 2.5 percent refundable payment and then convert to contract with another 2.5 percent payment, which becomes "hard money," or money that won't be refunded.

Building condos is different than building single-family residences because it tends to be an "all-or-nothing proposition," Edelstein said.

"If you have 100 houses, you build and sell them one at a time. If sales get soft, you can stop. With a condo tower, that's the other extreme. You've got to build the whole tower at once," he said.

"It's riskier from the bankers' perspective. Also, there's the persistent threat of litigation. If there's a defect with one house, you fix that one house. With a condo tower, it's all the homeowners. The set of insurers that are ready and able to insure a condo project is a small pool and they charge a lot of money. Except for land, I'm spending more on insurance premiums than any other cost."