Tuesday, April 24, 2007

In Las Vegas, Too Many Hotels Are Never Enough

In Las Vegas, Too Many Hotels Are Never Enough
By GARY RIVLIN

LAS VEGAS — Stephen A. Wynn, the hotel and gambling impresario, still remembers the first time he was asked if he and other developers had lost their minds building so many casino hotels here. It was the mid-1970s, when Las Vegas had about 35,000 rooms.
He was asked that same question in the 1980s, while building the 3,000-room Mirage, and again in the early 1990s. By that time Las Vegas was home to more hotel rooms — 106,000 — than any other city in the country.
And so now, with Las Vegas in the midst of another big building boom, Mr. Wynn only shrugs when people suggest that the nation’s premier gambling center, with 151,000 rooms and counting, simply cannot absorb any more new hotels.
Ever since the mobster Bugsy Siegel opened the first modern hotel casino here in 1946, the surest means for gaining attention has been to one-up the competition by building an even more monstrously immense pleasure palace.
But even Las Vegas has never witnessed anything quite like what is going on today.
“This is the most outrageous, over-the-top expansion” ever, Mr. Wynn said.
Americans — and an increasing number of foreigners — can’t seem to get enough of Las Vegas. The current construction craze is driven by a 95 percent weekend occupancy rate — and rates that approach 100 percent at the city’s newer properties. Last year, even the weekday rate fell just shy of 90 percent, partly because of the city’s success in positioning itself as an attractive convention destination.
Fueling the current boom as well are the enticing riches to be made catering to a new kind of guest: aging boomers entering the empty-nest phase of their free-spending lives.
And contrary to some predictions, the opening of American Indian casinos and other gambling outposts in more than 30 states has not hurt Las Vegas.
Far from it. The smaller, more prosaic gambling halls stretched across the country have actually helped the boom, casino executives say, serving as a kind of a feeder system for Las Vegas as people gain a taste for gambling and then aspire to a touch of the big time. The soaring popularity of poker has also helped drive growth as the game has drawn a younger crowd to the city.
“I suppose one day Las Vegas will reach its limit,” said Anthony Curtis, president of LasVegasAdvisor.com, a local travel site. “But that day is nowhere in sight.”
Consider the Venetian, which already ranks as the sixth-biggest hotel in the world and the fourth largest in Las Vegas, home to 15 of the 20 largest on the planet. This colossus will assume the top spot once it opens a 3,200-suite tower, now under construction, that will bring its room count to more than 7,000.
Another development, Echelon Place, will have more than 5,000 rooms when it is built on the site of the old Stardust, which its owners demolished last month. The MGM currently ranks as the largest hotel in Las Vegas — and the world — with 5,000 rooms.
At $4.4 billion, Echelon Place would rank as the most expensive development in Las Vegas history — if not for the $7 billion the MGM Mirage is spending on CityCenter. That price is far more than the previous record, set when Mr. Wynn and his financial backers spent $2.7 billion building the 2,700-room Wynn, which opened in 2005.
Even competitors marvel at the scope of the CityCenter project, which MGM calls the most expensive privately financed project in American history. This minicity bordering the Las Vegas Strip will feature six towering buildings that reach as high as 61 stories. Covering 67 acres, it will include a 4,000-room hotel, a sprawling convention center, a half million square feet of retail space and 2,700 condominium units.
The changing demographics have led the designers of the new Vegas to push a sleek and modern aesthetic, along with amenities like luxurious spas, in place of the gilt and gaudy properties that reigned in the 1980s and 1990s. But their owners’ ambitions are greater than ever.
“The building we’re seeing right now,” said Gary Loveman, chief executive of Harrah’s, which operates half a dozen casinos on the Las Vegas strip, “is by leaps and bounds bigger than anything we’ve ever seen.”
For a long time, Harrah’s had only one major casino in Las Vegas. “One of my predecessors was convinced in the late 1980s, early 1990s, that Las Vegas was overbuilt,” Mr. Loveman said. “That turned out to be a wrong call. Spectacularly wrong.”
Even more than hotel construction, a boom in condominium development has increased the number of construction cranes crowding the skies.
Developers, including Donald J. Trump and Florida-based Turnberry Associates, are collectively spending billions of dollars building condo towers on or near the Strip, adding thousands of units even as the local real estate market, like much of the country, has been mired in a downturn.
But MGM and other developers see themselves as competing for buyers far beyond the Las Vegas market. “We see these as third homes,” said Alan M. Feldman, a spokesman for MGM.
Data provided by the National Association of Realtors indicated that the median price of a condo in the Las Vegas metropolitan area fell by 3 percent in the second half of 2006.
In a perverse way, though, the city’s current boom helped developers here avoid the kind of frantic overbuilding that plagues condominium developers and condo owners in cities like Miami and Washington. John Restrepo of the Restrepo Consulting Group, a real estate firm based here, said that a “gold rush fever” had swept through the Las Vegas condo market, with more than 100 luxury condo projects, totaling 72,000 units, announced since 2005.
But escalating land prices and a steep rise in construction costs, Mr. Restrepo said, “caused most of these guys, who were never much more than a Web site and a dream, to fade away.” Today, there are just 22 luxury condo projects, representing 10,000 units, under construction, he said, “and a large portion of those units have been sold.”
The MGM Mirage is not the only casino company venturing into the condominium business. So, too, is the Venetian, which will add a 270-unit condominium tower to its property along the Strip.
“Las Vegas has morphed from a place that is simply a casino box with rooms to rent for 23 bucks a night,” said William P. Weidner, the president of Las Vegas Sands, the parent company of the Venetian. “It is now a place with mixed-used developments which take advantage of the new Las Vegas, a multiday-stay destination and a place where increasingly people want to live.”
The scale of Las Vegas’ hotel industry and the size of its properties put other cities to shame. Even the massive 2,000-room casino resort Mr. Wynn is building next to Wynn — it would rank as New York’s largest hotel — will not crack Las Vegas’s top 15.
Not to be outdone, Fontainebleau Resorts recently announced plans for a $2.8 billion, 3,900-room resort on the northern end of the Las Vegas Strip. And developer Ian Bruce Eichner has raised $3 billion to build a 3,000-unit condo-hotel, the Cosmopolitan Resort and Casino, on the Strip.
[And there is the likelihood of more large-scale projects on the horizon. Yesterday, Goldman Sachs paid $1.3 billion for the four Nevada casinos owned by Carl C. Icahn’s American Real Estate Partners, including the Stratosphere Las Vegas Hotel and Casino, but also a precious 17 acres of undeveloped land on the Strip.]
Even without the new hotel properties, the 151,000 guest rooms in the extended Las Vegas area, according to Smith Travel Research, a lodging industry data broker, are nearly twice the 80,000 rooms in New York City. Orlando ranks second to Las Vegas with 111,000 rooms.
And yet Las Vegas has more new hotel rooms under construction (11,000) than any other city in the country, as well as more rooms on the drawing boards (35,000).
Tourists spent a combined $15 billion last year at the Strip’s various casino resorts. Sixty percent of that revenue — $9 billion — was from noncasino sources ranging from hotel rooms to restaurants, some as costly as New York’s best, to high-end retailers that pay dearly for a spot inside the sprawling malls that are a staple of today’s Las Vegas casino.
These revenue sources are proving enticing even to an old-line player like Boyd Gaming, a middle-market casino company that had ceded the high-end market to the likes of MGM and the Venetian. But with the announcement of its plans for the $4.4 billion Echelon Place, Boyd made clear it was going upscale, too.
“We considered a variety of options,” said Robert L. Boughner, a longtime Boyd executive who is overseeing the Echelon project. “But ultimately we concluded that there were very compelling reasons to enter the premium tier.”
Concerns over future limits on water supplies might ultimately slow development here. Eventually, tourists might tire of fighting the daily traffic jams that snarl the Strip and nearby freeways, or grow frustrated negotiating McCarran International Airport, which seems in a perpetual state of crisis.
But those problems have not hampered Las Vegas’s success so far. The city had just under 39 million visitors in 2006, according to the Las Vegas Convention and Visitors Authority — an 86 percent increase over the 21 million visiting the city in 1990.
And in anticipation of handling even larger hordes of tourists, McCarran is in the first year of a five-year, $4 billion makeover. Meanwhile, officials are looking into adding a second airport at Ivanpah Valley, 30 miles from Las Vegas.
“People have been predicting dating back to 1955 that Las Vegas will reach a saturation point,” said David G. Schwartz, author of “Roll the Bones,” a history of gambling, and director of the Center for Gaming Research at the University of Nevada, Las Vegas. “But me, I wouldn’t bet against casino growth.”

Monday, April 23, 2007

LV housing slump worsens

Don't shoot the messenger,,,,steve

LV housing slump worsens

Prices plummet as existing-home inventory hurts new-home sales

By Brian Wargo / Staff Writer
Toll Brothers homes are shown under construction at the Retreat at McDonald Highlands in Henderson. The luxury homes start at just under $1 million and run to almost $2 million.
Photo by Steve Marcus
The price of new homes has tumbled nearly 10 percent this year, the inventory of existing homes has reached an all-time high and bank repossessions accounted for a greater percentage of existing home sales in Las Vegas, according to the March housing statistics.
The ongoing weakness in the housing industry was reflected in numbers released Tuesday by Larry Murphy of SalesTraq. The housing research firm reported the median price of new homes sold in March was $308,471, down nearly 10 percent from $341,990 in December.
The new-home market rebounded slightly in March with 1,771 sales, up 330 from February, but sales were down nearly 51 percent from March 2006.
Dennis Smith's HomeBuilders Research reported Tuesday that there were 5,204 new-home sales in the first quarter - the fewest since 2001.
"The first quarter of 2007 will go into the archives as one that most in the homebuilding industry would like to forget," Smith said.
Don Boettcher, an area vice president with Pulte Homes, said the price reductions are a reflection of the softening housing market. In a competitive market, it's part of a "continuing correction of supply and demand."
Since January, Smith said the price of new homes has dropped nearly $29,000 or 9 percent. He attributes part of the decrease to sales of condos on Las Vegas Boulevard South, with 37 at one project selling for less than $300,000.
On the existing home market, it recorded its highest sales this year at 3,175. But that was offset because the drop of nearly 28 percent from March 2006 was even greater than the percentage declines in January and February. In addition, 402 or 13 percent of those 3,175 sales were bank repossessions - the first time that figure has reached double-digits in Las Vegas in history, SalesTraq reported.
Bank repossessions accounted for 9 percent of the existing home closings in January and February. The growing number of repossessions isn't surprising given Nevada is No. 1 in the country in homes entering foreclosure.
The continued softening of the housing market comes as the homebuilding industry has expressed concern in recent weeks that any recovery would be pushed back by the tightening of loans. That was prompted by a large number of defaults in the subprime market.
The drop in new-home prices isn't surprising given the large number of existing homes on the market, said Monica Caruso, spokeswoman of the Nevada Home Builders Association. SalesTraq reported the 22,970 existing homes on the market in March was the highest in history and represents a 13-month supply.
"It is having a tremendous impact (on new home sales and prices) because there are a significant number of existing homes that are essentially brand new homes," Caruso said. "They have never been lived in. Homebuilders are competing against that housing. This has to do with supply. If new homes are sitting on the market and not selling, prices have to come down."
That competition is borne out because 44 percent of homes listed for sale on the Multiple Listing Service remain vacant, SalesTraq reported.
Not only does the large inventory compete against new home sales, but it also poses problems for homeowners who want to sell their house and purchase a new home, Caruso said. That's why so many builders last year had several months of inventory and offered incentives and reduced prices, she said.
Las Vegas housing analyst Steve Bottfeld, executive vice president of Marketing Solutions, said the resale prices will remain stagnant until the inventory is thinned. That could take into early 2009, he said.
The median price of existing homes stood at $280,000 in March, which is down 1.8 percent from March 2006.
Despite the lackluster sales and drop in prices, there is some hope within the housing industry for a rebound by the end of 2007. There were 1,550 permits issued in March, the highest since August. That mirrored the rest of the country where housing starts ticked up unexpectedly in March. Brian Wargo covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at (702) 259-4011 or by e-mail at wargo@lasvegassun.com.

Monday, April 02, 2007

New Century, Biggest Subprime Casualty, Goes Bankrupt

Just glad to be in Las Vegas.....Steve

By Bradley Keoun and Steven Church
April 2 (Bloomberg) -- New Century Financial Corp., overwhelmed by rising defaults from borrowers with poor credit records, became the largest subprime mortgage lender ever to fail as it filed for bankruptcy today.
New Century plans to sell most of its assets within 45 days, said the Chapter 11 filing in federal court in Wilmington, Delaware. About 3,200 people, more than half the workforce at the Irvine, California-based company, will be fired. New Century said it already agreed to sell its mortgage billing and collections unit to Carrington Capital Management LLC for $139 million.
The company rode the U.S. housing boom to become the largest independent mortgage lender to subprime borrowers, only to collapse as interest rates rose and home prices fell. New Century's market value soared to more than $3.5 billion in December 2004, and last year it made about $60 billion in loans. Like rival firms, the company lowered its lending standards to keep business flowing after demand slumped.
``They're clearly going to be the poster child for bad practices in the mortgage industry,'' said Matthew Howlett, an analyst at Fox-Pitt Kelton in New York. ``When all is said and done, the management team will be to blame.''
The court filing protects the company's assets from creditors. They include many of the Wall Street firms that financed its mortgage loans, such as Morgan Stanley, Goldman Sachs Group Inc. and Credit Suisse Group.
Shares Fall
The company's shares fell 14.5 cents, or 14 percent, to 91.5 cents at 3:59 p.m. New York time in over-the-counter trading. They've fallen 97 percent this year.
Late payments on U.S. subprime mortgages reached a four-year high in last year's final quarter, the Mortgage Bankers Association reported. At least 30 home lenders halted operations or sought buyers in the past 12 months, including four that went bankrupt since last November, according to Bloomberg data.
New Century ranked second only to London-based HSBC Holdings Plc last year in total U.S. subprime mortgages granted. HSBC said last week it's planning to slash subprime lending operations.
The California company said in a statement it obtained $150 million in financing from CIT Group Inc. and Royal Bank of Scotland Group Plc's Greenwich Capital unit. Lazard Ltd., New Century's investment banker, has been shopping the remaining businesses to potential buyers. The loan agreement requires the bankruptcy court to approve procedures for selling New Century's assets by April 10.
New Century also agreed to sell Greenwich a portfolio of loans and interests in mortgage-backed securities for $50 million.
Quick Sales
Quick asset sales may be the only means of ``maximizing returns for stakeholders,'' Holly Etlin, a managing director from AlixPartners LLP, New Century's financial adviser, said in an affidavit filed with the bankruptcy court.
In addition to the billing and collections unit, New Century's largest assets include its lending platform. That business consists of a network of 57,000 independent mortgage brokers who locate borrowers and the employee loan officers who handle applications and approvals.
The platform also includes computer software and equipment used to analyze applications, as well as 262 retail branches and 34 regional operations centers in 20 states.
``They have an enormous platform, so it wouldn't be a surprise me to see someone come in and take this over,'' Fox-Pitt Kelton's Howlett said. ``You could realize value down the road when market conditions improve.''
Help Wanted
The job cuts aim to ``better align the company's cost structure with the current operating environment and to properly size these businesses in preparation for possible sale,'' New Century said in the statement. The company employed about 7,200 people at the end of 2005.
For the lending platform to attract an offer, New Century will need to keep as many of the loan officers as possible, said Ron Greenspan, a financial adviser to the creditors of three other subprime mortgage lenders that filed for Chapter 11.
``The value is absolutely contingent on them being able to maintain the key employees,'' said Greenspan, senior managing director in FTI Consulting's Los Angeles office.
New Century said in court papers it created a bonus plan that may pay 1,300 employees in the lending unit $7.34 million to stick with the company, and asked permission to pay $15 million owed to workers for regular wages by April 6.
``It is essential that the human beings who are maintaining these businesses for sale have the resources to keep them operating,'' the company said in court papers.
Liquidation
Harvey Miller, a partner at the Weil, Gotshal & Manges law firm in New York, said New Century likely will be liquidated.
``Finance companies just do not do well in Chapter 11,'' he said, adding that at New Century, ``there isn't much to reorganize around.''
Ownit Mortgage Solutions Inc. of Agoura Hills, California; Mortgage Lenders Network USA Inc. of Middletown, Connecticut; ResMae Mortgage Corp. of Brea, California; and People's Choice Financial Corp. of Irvine are among rival companies that filed for bankruptcy.
The Wall Street firms that backed New Century probably will have limited losses, Miller said, because their loans were secured by the company's loans and other assets.
``The major institutional holders have said they're over- collateralized,'' he said. Stockholders and junior creditors may be wiped out, he said.
Criminal Probe
U.S. prosecutors opened a criminal probe of accounting errors and trading in securities at New Century, the company said March 2 in a filing with the U.S. Securities and Exchange Commission. Since then, more than a dozen states have told the company to halt operations, citing complaints from borrowers that their loans weren't being funded.
Subprime mortgages are made to people with blemished credit records or heavy debts. The loans typically charge 2 to 3 percentage points more than those to people with less-risky credit profiles, and often carry adjustable interest rates that can cause payments to jump in later years.
Securities firms and banks financed New Century and other mortgage lenders to create a steady flow of mortgages they could package into bonds. With delinquent home loans rising nationwide, those firms have cut back credit to mortgage lenders.
The Wall Street firms that provided about $17.4 billion in credit lines to New Century after March 2 demanded that the company post $150 million in cash as additional collateral. The company had to halt new loans after it failed to make the payment and couldn't persuade the Wall Street firms to keep the credit lines open.
A Survivor
New Century was founded in 1995 by a trio of former managers at Option One Mortgage -- now a unit of H&R Block Inc. -- including current Chief Executive Officer Brad Morrice. In the late 1990s the company survived an industry shakeout that led to the bankruptcies of bigger rivals including United Cos.
Since then its growth had surpassed that of all other subprime underwriters. In the past two years, New Century underwrote about $120 billion of loans, or more than half the total since its inception. Subprime loans accounted for 86 percent of all New Century loans last year, the company said in today's court filings.
Morrice, 50, praised the subprime mortgage industry in New Century's statement today and said he was proud of the company's legacy. Since inception, employees have made about 1.4 million loans totaling more than $225 billion, the statement said.
``These loans have helped millions of Americans, many who might not otherwise have been able to access credit or to realize the benefits of home ownership,'' Morrice said in the statement.
Lower Standards
New Century may have compounded its losses by lowering underwriting standards to keep business flowing in 2005 and 2006 as interest rates rose and home sales slumped.
``As a management team, they were just probably a little too focused on pleasing the market with growth, introducing more and more new products and hiring more people when in reality they should have been tightening,'' Howlett said.
``They were trying to correct themselves toward the end,'' he said, ``but it was just too late.''
The case is New Century TRS Holdings Inc., 07-10416, U.S. Bankruptcy Court, Wilmington, Delaware.