Luxurious Las Vegas community not isolated from real estate meltdown

Tony Las Vegas development struggles in downturn

LAS VEGAS — It was a symbol of Las Vegas largesse during the good times. Now it’s an emblem of recession blues.

With a manmade lake in the desert, an Italian-style village beyond the suburban sprawl and neighborhoods fit for diva Celine Dion, the Lake Las Vegas resort development flouted good sense and modesty in the tradition of all great Las Vegas dreams.

But it has fast turned sour for some.

Last year, the developer, Transcontinental Corp., lost the property in foreclosure after defaulting on $540 million in loans. The new owners of Lake Las Vegas filed for Chapter 11 bankruptcy last summer. One if its anchor hotels, a Ritz-Carlton owned by Village Hotel Investors LLC, also filed bankruptcy to stave off foreclosure and has been sold to new owners. One of three premier golf courses has been abandoned.

New home construction has slowed to a crawl, though the community is far from built out. Foreclosures have spread like a virus, and home values are falling.

Even the sparking, blue lake — the jewel of the luxury haven — nearly sprung a leak, forcing engineers to rush to make repairs before it drained.

Not surprisingly, residents are jumping ship. In May, nearly 10 percent of the homes on the market at Lake Las Vegas were either bank-owned or short sales, meaning they were priced so low a sale would not satisfy the owners’ debt to the bank, according Applied Analysis, a real estate research firm.

Nearly 80 percent of the homes listed were vacant.

“I thought it was a no-lose situation. It ruined me,” said Ed Santacruz, a former mortgage broker and fortune seeker who let his Lake Las Vegas hotel-condominium go into foreclosure. He had planned to rent out the property to tourists, but couldn’t get enough takers to cover the mortgage.

“That’s where I messed up, I believed enough in the product and in Las Vegas,” Santacruz said.

Lake Las Vegas’ woes largely are due to now familiar problems. The community was designed as both a resort and residential destination — leaving it heavily dependent on second-home buyers and tourism. Both faltered when the economy sputtered.

“There was a point and time when the higher end of the market had been less impacted. But as the recession has run longer and deeper than initially expected…” said Brian Gordon, a principal at Applied Analysis.

The community that strove for seclusion wasn’t as isolated as some thought.

The palm trees and putting greens of Lake Las Vegas emerge out of the near empty desert off a dusty suburban highway 17 miles from the Las Vegas Strip. The homes are clustered around a 2-mile-long lake that defies the scorching heat and environmentalists, alike.

A replica of Florence’s Ponte Vecchio, a popular venue for weddings, crosses the water on the south end, near a tasteful, small casino.

Two of the community’s three golf courses were designed by Jack Nicklaus. Promotional materials boast a seven-minute commute to the Las Vegas casinos on the horizon — by helicopter.

The idea of exclusive desert resort living originally was the brainchild of J. Carlton Adair, an actor and businessman. Adair acquired the land in 1966 in a swap with the federal government that also included the rights for 10,000-acre feet of water. Creating what he planned to call Lake Adair would require damming water destined for Lake Mead, the Colorado River reservoir that provides water to southern Nevada.

But Adair went bankrupt before his dream was realized and a subsequent group of investors also failed to raise the necessary money.

Transcontinental took up the mantle in 1990, a year before the dam was completed. The city of Henderson, a bedroom community next to Las Vegas, was attracted by the promise of a new solid tax base. It agreed to sell the community the water it would need to replenish the evaporation under the scorching sun. The community pays a water bill of about $2 million a year.

The decision was blasted by environmentalists, who now see a bit of karma in Lake Las Vegas’ recent troubles.

“This was the height of the gilded age of excess in the 1990s and 2000s. It was a community built on the idea that there were no limits to natural resources or to the number of millionaires willing to invest in a project,” said Launce Rake, a spokesman for the Progressive Leadership Alliance of Nevada, a liberal government watchdog group.

“I don’t know if Lake Las Vegas is sustainable in the long term. Does it turn into a ghost town?”

This dire notion is dismissed as hyperbole by many residents and the current owner of much of the land and amenities, Atalon Group.

“Like many large-scale second home and resort communities throughout the country, Lake Las Vegas has had to adjust to the decreased demand for property and pricing of investments,” Frederick Chin, president of Atalon-subsidiary LLV Holdco LLC, said in a statement.

“Atalon’s goal for Lake Las Vegas is to reset and reposition the community to flourish as market conditions improve, thereby achieving what is in the best interests of homeowners and stakeholders alike.”

After the development filed for bankruptcy in July 2008, corporate officials won approval to pay for urgent repairs to prevent the premature deterioration of two pipes underneath the lake. They argued the damaged pipes threatened to drain the lake like water from a bathtub.

There are plenty of residents with ample resources working to hold Atalon to its commitment. A savvy and heavily invested group, some are banding together to protect their homes and their amenities. One group is trying to arrange to buy the private SouthShore Golf Club now tied up in the bankruptcy.

Others are ready to move to less remote pastures.

To her own disbelief, resident and real estate agent Lynne Hoffman has had her Lake Las Vegas home on the market for three years with an eye toward moving to a community closer to more ordinary comforts — supermarkets, clothing stores, a bank.

She’s dropped the price to $488,000 — $40,000 less than she paid in 2001. She gets offers from potential buyers, she says, but they lowball her lowball price.

“It’s insane! I’m like, what do you want people? You want this house for a penny? I have to pay the bank,” she said.

There are plenty of properties that have fallen much further from the height of southern Nevada’s real estate bubble, one of the most inflated in the nation.

Real estate listings show a 4,000-square-foot mansion that sold in 2005 for $2.7 million was marked down to $1.2 million in May. A 1,700-square-foot condominium that sold for $1.2 million in 2004 is now listed for $389,000.

Celine Dion and her husband Rene Angelil bought a home on the lake’s south shore for $1.2 million in 2002, as the Canadian songstress began what became a five-year run at Caesars Palace on the Las Vegas Strip. Since then, Dion has moved on to other gigs and the home has only sunk in value to about $795,000, according to estimates on Zillow.com.

“Deals” like these are drawing a new breed of potential home buyers to the lake. One agent and resident, who asked not to be named to protect her business, described her new clients this way: “It was the Lexus or the Mercedes, we’re down to now pickup trucks.”

However, it’s not likely that this tony retreat will soon become a favorite for young families or middle-class homeowners. Although home values have dropped to affordable levels, homeowners association fees that go to pay for upkeep of common areas have not. Some residents pay three such fees, adding more than $500 to a monthly housing bill.

Santacruz, who now lives in Chicago, laughed a pained chuckle when told the current listing price for the condominium he let go to foreclosure. He paid $359,000 for the 630-square-foot unit in 2004. It’s listed for $76,900.

He thought for a minute and said, “At that price, someone could make some money.”

On the Net: Lake Las Vegas: www.lakelasvegas.com/