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A Shift to the Skies

15 September 2006

by Jennifer Robinson

LAS VEGAS -- Start with an empty piece of land along Las Vegas' resort corridor.

Draw up plans for a series of high-rise condominium towers. Set prices in the millions. Market the condos to out-of-staters looking for second homes near the Strip.

That business plan is common in Las Vegas today, with more than a dozen high-rise condo towers completed or under construction on or near the Strip, in downtown Las Vegas and even in suburban Peccole Ranch.

And though the luxury-tower boom might seem a product of the past two years, a pioneering Florida developer was laying the foundation nearly a decade ago for Las Vegas' growing high-rise market.

This week, Turnberry Place, a 778-unit high-rise community at Paradise Road and Riviera Boulevard, obtained the certificate of occupancy for its fourth and final 40-story tower. The paperwork capped off what was -- along with Irwin Molasky's long sold-out, 84-unit Park Towers at Paradise and Flamingo Road -- the earliest local project in the current wave of high-rise development.

"Turnberry Place was the turning point, along with Park Towers," said Bruce Hiatt, broker-owner of Luxury Realty Group in Las Vegas. "They really were the beginning of the emerging market for high-rises in Las Vegas. They were the true test of whether high-rise could be successful here."

Florence Shapiro, a broker with Prudential Americana Group, Realtors, agreed.

"(Turnberry) basically put high-rise on the map in Las Vegas," Shapiro said. "Because of their success, new high-rises came into the market. Turnberry showed other developers they could do it."

Selling out a high-rise community wasn't always a sure bet in Las Vegas.

Turnberry Associates had done well in Florida, developing the city of Aventura and its tony Turnberry Isle Resort & Club. Before the company's foray into Las Vegas, it had built about $1.5 billion worth of projects in the Sunshine State. In Las Vegas, Turnberry officials saw a warm-weather winter-tourism dynamic similar to the one that made south Florida a haven for Midwesterners and Northeasterners looking to thaw out on vacation.

So in 1996, Turnberry hired a California consulting firm to perform a marketing analysis. The firm came back with a warning.

"They told us we were out of our minds," said Bruce Weiner, President of Turnberry Ltd. "They told us that people in Las Vegas don't want to live in vertical housing, and they told us people wouldn't want to be anywhere near the Strip."

The best Turnberry could hope for, the consultant said, would be to sell 30, maybe 40, units a year.

That forecast didn't feel right to Weiner and other Turnberry executives.

They saw the luxury megaresorts on the drawing boards -- Bellagio, The Venetian, Mandalay Bay -- and they had confidence in the city's bid to go high-end with fine dining and upscale shopping. On weekends, Weiner said, the Strip's hotel rooms were booked solid, leaving few options for affluent Californians who enjoyed frequent spur-of-the-moment trips to their backyard playground. The city had Wolfgang Puck outposts and would soon be home to its first Chanel boutique. Perhaps, Turnberry executives thought, it was time for a marquee name in high-rise development to enter the market as well.

Their instincts proved sound.

In Turnberry Place's first year of sales in 1999, brokers sold just under 200 units. Prices ranged from just under $400,000 to about $3 million, while the market's overall median new-home price was $142,000. Yet the community's first tower sold out in about 15 months -- half the time Turnberry executives had predicted.

With the exception of a few months following the terrorist attacks of Sept. 11, 2001, Turnberry Place steadily churned through 150 units to 200 units annually, until its last few homes sold earlier this year at prices ranging from $500,000 to $7 million. With its final certificate of occupancy this week, Turnberry is complete a full three years ahead of schedule, Weiner said.

"That (early delivery) is gratifying. From an overall standpoint of quality and profitability to Turnberry Associates, Turnberry Place has been very good," Weiner said. "It gave us a lot of confidence in the market and gave us the ability to commit to many other projects."

Turnberry Place's success has also been a sunny respite from a tempest of high-profile condo failures, including Ivana Las Vegas, Las Ramblas and Icon Las Vegas.

Weiner said the market is substantially different today than it was in the late 1990s, with higher construction costs and land prices making building tougher. Turnberry bought Turnberry Place's 15-acre site from ITT for a $20 million in 1997; today, the parcel could cost as much as $20 million per acre, Weiner said.

Those stark realities ran head-on into a glut of high-rise supply in 2004 and 2005, as developers -- some with no high-rise experience -- blanketed the market with about 100 condominium-tower proposals totaling more than 50,000 units.

"Developers tend to follow trends as soon as they hear someone is doing well (with a project)," Weiner said. "Unfortunately, the market will absorb only so much naturally on an annual basis. There just wasn't enough room in the market for as many towers as were proposed."

So what determined which projects have survived?

"Execution," Weiner said.

"The conversation stops at a certain point, and that's when you have to perform," he said. "You're only as good as your reputation. People who were inexperienced at building condos or experienced in the way (development) works elsewhere said, 'Let's go build condos in Las Vegas.' But you still have to go through a learning curve and learn local customs. Many of them said, 'I'll do what I want to do.' They were arrogant. Now, most of them are gone."

Hiatt said Turnberry's reputation followed the company from Florida to Las Vegas, and that renown helped the company fare well here. When he works with people interested in buying into a high-rise, he said, they ask for Turnberry by name.

"We still have to teach them who the other (developers) are," he said.

But Hiatt, who's brokered sales to clients living at Turnberry Place, said branding alone doesn't explain the community's brisk sales pace.

The amenities at Turnberry Place, such as its Stirling Club and its guard-gated entrance, are very upscale, Hiatt said. Plus, the towers have larger units than the projects coming online today. Homes at Turnberry Place range from 1,600 square feet to 11,000 square feet, while land prices have forced many newer developments to plan homes with less than 1,000 square feet of space.

"The trend today is toward smaller units and a higher number of units per floor," Hiatt said. "(Turnberry Place's) kind of true luxury is really hard to find today."

Shapiro, who's also sold homes within Turnberry Place, said the project's rapid sell-out resulted from Turnberry officials' willingness to take an early chance on the demand for second homes in Las Vegas.

"It was an idea whose time had come," she said.

And it's an idea that's going to stick around for a while, Weiner said.

Though it's closing the book on Turnberry Place, Turnberry Associates is far from finished with the Las Vegas market.

Across Paradise from Turnberry Place, north of the Las Vegas Hilton, construction is under way at Turnberry Towers, a 638-unit community with two 45-story towers and prices ranging from $550,000 to $1.3 million.

Turnberry is also developing The Residences at MGM Grand, a three-tower condo-hotel property with 1,727 units.

The company is a partner with Centra Properties in Town Square, a 1.5 million-square-foot retail center at Las Vegas Boulevard and Sunset Road, and it plans to build the 4,000-room, $1.5 billion Fontainebleau resort on the Strip just north of the Riviera.

Weiner said the local market could absorb as many as 1,200 high-rise condos annually over the next few years, as more people retire to Las Vegas or relocate here to do business.

"We believe Las Vegas will continue to grow," he said. "It may not be the pace we saw the last two to three years, but it will be an orderly growth. In the end, the well-conceived, well-located developments presented by reputable, experienced developers will win out."

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