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Gaming Guru

Jennifer Robison
 

Increased sales at The Ogden signal bright future for downtown Las Vegas

27 July 2015

They only made it look easy.

When DK Las Vegas closed on its sale of 14 units in The Ogden between mid-June and mid-July, it might have seemed like, "Build it and they will come."

But it was actually, "Build it, invest millions in upgrades and spend all of your waking hours for six months to find financing programs for buyers, and they will come."

The $125 million condo tower at 150 Las Vegas Blvd. North opened as Streamline Tower at the worst time — in 2008, at the beginning of the recession. Only 10 percent of its 275 units sold in its first year. ST Residential, a division of Starwood Hotel Group, acquired it out of Chapter 11 in 2009 and converted it into a rental project. Most notably, it attracted Zappos CEO Tony Hsieh, who once leased dozens of units for himself and for entrepreneurs funded through his Downtown Project tech initiative.

ST Residential sold The Ogden in early 2014 to DK Las Vegas, a partnership between Dune Real Estate Partners of New York and California-based KRE Capital, as part of a $237 million, multiproject portfolio.

Upgrades followed. DK made more than $1.5 million in improvements, including interiors with hardwood floors and granite countertops, a 16th floor clubhouse for entertaining and a partially shaded rooftop sky deck with a pool, an outdoor kitchen and cocktail and dining areas.

"We wanted to upgrade the homes to meet what people expect today," said Uri Vaknin, a KRE Capital partner.

The condos went back on the market in November. DK sold about seven units a month at an average of $250,000 to $320,000 each. But the company would have to take its efforts to a whole new level to convert sales into closings.

Half of The Ogden's buyers are local survivors of the housing bust — and some have the damaged credit to show for it. The other half are out-of-towners who don't want to tie up chunks of cash in real estate. Either way, both would need help with financing, Vaknin said.

It wouldn't be simple: Stung by losses in the real estate bubble, the Federal Housing Authority and other U.S. agencies stopped backing mortgages on condos built before 2010. Private lenders were gunshy as well.

So DK executives approached big, national banks one by one to tell The Ogden's story. It took months of massaging, but they finally arranged 10 percent down programs through CitiBank and Federal Savings Bank — programs "unheard of" for high-rise condos, Vaknin said. They also worked with federal officials to offer low-down-payment programs through the U.S. Department of Veterans Affairs. They've received conditional approval for FHA-backed loans once they reach a certain low threshold for investment owners (the number of rentals will be capped at 25 percent, and Hsieh has just a couple of leases left). And they're arranging federal Fannie Mae financing.

It's been an "uphill challenge," Vaknin said, but the lending dam finally broke enough in mid-June for that flood of closings — 14 in four weeks, totaling more than $4 million.

Bruce Hiatt, a broker with Luxury Realty Group who sells homes in both Nevada and California, called the closings tally "a good sign." The lending initiative was "huge," and unusual among condo projects, he added.

"The perception of downtown is still a hurdle. It's a transitional area," said Hiatt, who's shown clients units inside The Ogden. "Kudos to them for a very smart lending strategy, because that's a key to success in a challenged location."

Through its recent sales, DK has been witness to an evolving real estate market: Locals who never thought downtown Las Vegas had much to offer are learning what it might be like to watch the Life is Beautiful music, food and art festival from their balconies, Vaknin said. Out-of-state architects, marketing execs and other professionals, increasingly from the Pacific Northwest, want to take advantage of the fact that "Las Vegas is truly one of the last cities in America that is still on sale," he said.

"Every other major market is either at or above pre-recession prices," Vaknin said. "Las Vegas is still off by about 20 percent. People are seeing values in Las Vegas that are below replacement cost."

DK Las Vegas is hoping the same magic will work at four other local properties it's turning around. The partnership has already sold 62 homes inside the freshly relaunched Spanish Palms condo project at Rainbow Boulevard and Hacienda Avenue. It's wrapped $2 million in upgrades at One Las Vegas, on Las Vegas Boulevard South near Windmill Lane, and will soon offer units for sale there for an average of $350,000 to $450,000. And it has both downtown's Juhl and the south valley's Loft 5 about 98 percent leased, with a long-term strategy to sell when it makes sense, Vaknin said.