Developer still scarred from Las Vegas’ boom, bust
When the real estate market was booming last decade, Florida developer Christopher DelGuidice set out, like so many others, to build a condo tower in Las Vegas.
May 6, 2017 - 4:32 pm
LAKE MARY, Fla. — When the real estate market was booming last decade, Florida developer Christopher DelGuidice set out, like so many others, to build a condo tower in Las Vegas. But he didn’t want just any old high-rise.
His project, Vegas 888, was supposed to have concierge service, butlers, poolside villas, steam rooms, glass stairs and a nightclub called The Whale Club.
And like so many other proposed towers from that era, his never came out of the ground, leaving a dirt lot that sold last year for a fraction of what he paid a dozen years earlier.
The founder of Del American Real Estate Group in Orlando, the 60-year-old DelGuidice was born in New York, lived in Puerto Rico from 9 to 18 because of his father’s construction career and graduated from Georgia Tech.
He ventured into Las Vegas’ real estate market in the early 2000s with Vegas Grand, a residential project at Flamingo Road and Swenson Street east of the Strip. He planned to construct five buildings, but in the end, he built one, was hit with a class-action lawsuit after he raised the sales prices and lost the property to foreclosure.
Vegas 888 would have been a 50-story tower at Flamingo and Valley View Boulevard, next to the Palms. DelGuidice — who acquired the 8.6-acre site for $50 million in 2004, property records show — opened a sales center but never built the tower and lost the land to foreclosure.
Both properties were seized by New York financial giant Lehman Brothers, which backed his projects and whose 2008 collapse helped trigger the U.S. financial crisis.
DelGuidice, who is still developing projects, but not in Las Vegas, sat down with the Las Vegas Review-Journal last month in Lake Mary, Florida, 20 miles north of Orlando.
What got you interested in developing real estate in Las Vegas?
I had frequently visited Las Vegas; my dad loved to gamble. We used to go there two, three times a year. Around 2001, I read an article about the city of Las Vegas — I didn’t know the boundaries at the time — which was in desperate need for apartments and was willing to contribute land and help developers with all kinds of concessions. I called my broker and told him to find out what they’ve got. Later, I told him to find something near the Strip. He came back with one site, which had been looked over because it had lots of hair on it — it was in the flight path, it had washes running through, it was zoned single-family.
Was that Vegas Grand?
Yeah. I initially went there to do apartments. I had the contract (for the site) on my desk. For some reason, I hesitated to sign it, and a day or two later, Sept. 11 happened. A few days later, I called my casino host at the Bellagio, and he said it’s a ghost town. A little bit of time passed, and things started to come back, so we put a contract on the property and got it rezoned and approved. As time kept going on, construction costs kept going up, but rents weren’t going up. The guy we hired to do a market study said, “Chris, why don’t you look to do condos?”
How were sales initially?
We did one sales event, and we took 54 reservations. I was somewhat in shock. We did another event; we got two ballrooms, chocolate fountains, models in body paint. We had elaborate parties. This is the time when everything was positive. It was 2004; sales were off the charts. We ended up taking over 800 reservations. Other projects started to get announced. They were coming out of the woodwork, one after the other after the other.
What did you think when you saw all the towers getting proposed and people talking about the ‘Manhattanization’ of Las Vegas?
I never liked the concept of the Manhattanization of Vegas. Manhattan has walkability; in Vegas, these hotels are monster-size, and it takes forever to walk from hotel to hotel. The walkability wasn’t there. But people wanted to build close to the hotels.
Why did you want to build a tower?
Most of the towers we saw had traditional architecture, and we felt that if we did something more modern, we would have an edge. We felt that the location we picked, you would have a view of the Strip. And we were trying to go above and beyond the typical condo project.
The project seemed like hyperopulence. Was that the idea you were going for?
Yes. We wanted to have as close as we could to a resort-hotel.
How many units did you pre-sell at 888?
Maybe 80, 90 units — about 20 percent of the building.
But you never closed any sales?
Right. What ended up happening was, there were two or three other major developers building projects in Las Vegas at the time, and all those deals were canceling. People started wondering: If nothing’s going to happen, why should I put a contract down? So our sales literally came to a halt when all those deals started canceling.
How easy was it to get Lehman financing for real estate projects at that time?
Lehman was smart, and if the market didn’t change, they would have made a ton of money. Lehman had simple rules they followed, but they were very quick and aggressive. The deal for 888 was done between myself and an individual at Lehman at the French restaurant at the top of the Palms, sitting at the bar. There was a group of us having dinner — people from Lehman and my team — then myself and the managing director, we went to the bar and talked. It was a logical deal to do. At the time, the market was booming; there was no end in sight for buyers. The price for the dirt was fair. The concept made sense.
What happened with Vegas Grand?
Our original construction costs were $86 million for all five buildings, but eventually, that rose to $290 million. We had a commitment from a bank, but one of its executives was in Las Vegas when a big rainstorm came through, and he saw construction equipment floating down the wash. When they pulled out — when you lose a bank commitment, other banks want to know why. One bank said the only way they could make it work is if I raised the prices. We originally were selling in the $200-per-square-foot range, but the market was now closer to $500. We went back to the customers and said we’ll give you some options: We’ll give your deposit back with interest, and 250 people decided to do that. Another option was, here are the new prices, but we’ll give you a 20 percent or 25 percent discount, and a number of people agreed to that. Then we had some people who cried foul and formed a class-action lawsuit.
What was the result of the lawsuit?
A retired federal judge came in as the mediator, and we negotiated a settlement. We paid the plaintiffs’ lawyers $500,000, and then there was going to be a percentage of sales that would go into a pot to be distributed.
How much did you eventually pay to the buyers as part of the settlement?
They got nothing. The property got foreclosed, and I got wiped out on the deal. Sales had basically come to a halt, and I told Lehman that we should sell the property. We actually had the property under contract to sell for, I believe, $75 million — Lehman would get all their money back, I would get all my money back, the class-action lawsuit people would get something. I got a call from my attorney the day before the buyers were supposed to put down a deposit, and he said they wanted a $5 million price cut. I called Lehman Brothers; they said no. They still felt bullish about it.
Would you ever build apartments or condos in Vegas again?
No. After you have a bad experience in a particular market with a particular product, your emotional side can’t get you back over the hurdle.
Contact Eli Segall at firstname.lastname@example.org or 702-383-0342. Follow @eli_segall on Twitter.