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Howard Stutz
 

Palms Place condo buyers offered financing

29 May 2009

LAS VEGAS, Nevada –- In an effort to jump-start sales in the otherwise nonexistent high-rise condominium market, the Palms has begun offering seller-backed financing to some 150 potential purchasers in the 599-unit Palms Place development.

Palms President George Maloof said Thursday the offer targets buyers who have already made at least a 20 percent down payment on their units, but have been unable to get financing through traditional avenues.

Maloof said the West Flamingo Road project might be the only high-rise within the Strip corridor to offer this type of financing.

"The problem is nobody seems to be lending," Maloof said. "We're trying to create an opportunity for people who bought condos but can't find financing. We want to try and get them closed."

Letters to those buyers were expected to be mailed Thursday. Maloof said the interest rates would be between 4.25 percent and 7 percent, depending upon the size of the down payment. Purchasers will be offered 30 months of interest-only payments, which may buy time until the lending market recovers.

Maloof said the bank consortium, which funded the financing costs for Palms Place, is backing the seller financing. He said the Palms paid off roughly 90 percent of what was borrowed for the project, which gave the banks some comfort.

"We have relatively little debt," Maloof said. "The goal is to get these units closed."

Union Gaming Group principal Bill Lerner said Palms Place is in much better shape than the majority of the Strip-area high-rise market. He said if the Palms financing plan is successful, MGM Mirage may consider using something similar when the company tries to close sales on its condominiums at CityCenter.

"This is the best solution that could have materialized for George," Lerner said. "For condo-hotels, this idea makes sense."

If the potential buyers can't qualify or don't accept the seller financing, Maloof said the condominium units would be taken back and placed into the Palms hotel room inventory.

The Palms has 703 hotel rooms in two towers.

Maloof began building the 520-foot-tall Palms Place on the western end of his 32-acre site in 2005. The building opened last year before the national and local economy tanked.

Palms Place is connected to the Palms casino by a covered walkway. The tower doesn't have a casino, but is home to Simon Restaurant & Lounge, which was developed by chef Kerry Simon.

The tower has a mix of 600-square-foot studio units and 1,200-square-foot one-bedroom suites. There are also 21 penthouses on the top four floors, ranging in size from 2,000 square feet to 7,000 square feet.

Maloof said sales had closed on 370 of the Palms Place units. He said sales closed in recent weeks on two of the penthouses, one for $3.5 million to a player in the National Hockey League and another for $3.2 million.

According to the Web site Blackshopper.com, Palms Place hadn't closed a sale between Dec. 30 and March 3. Since then, only six sales had closed.

Maloof has another reason to try a enable closings: he can then add the condominiums into the Palms hotel room inventory for owners wishing to rent the units out when they are not using them.

Last year, Maloof said he expected approximately 80 percent of the studio and one-bedroom suite owners to agree to rent their units.

The individual owners will receive 50 percent of the room's rented price on the nights they are used.