Living in the Dream
Once a weekend haunt of stags and conventioneers, Las Vegas has morphed into a second-home and retirement capital for baby boomers
From the Print Edition:
Vegas, Mar/Apr 2006
The Las Ramblas development currently exists as a claustrophobic sales office up an outdoor stairway on a nondescript stretch of Las Vegas's Convention Center Drive. Its black-and-white advertising campaign-featuring modern-day Rat Packers (including actor George Clooney, an investor in the project) with ties undone and drinks in hand-seems designed to evoke a simpler Las Vegas during a simpler time.
But the concept of Clooney's Las Ramblas is even more ambitious than Ocean's Eleven. Visualize an 11-building city-within-a-city just off the Strip, with more than 4,000 apartment units spread across 25 acres. A pedestrian thoroughfare includes a casino, fitness centers, a hotel, and a dozen restaurants and nightclubs, all of it designed by the hip south Florida firm Arquitectonica. To make it happen, construction costs will total as much as $43 billion.
Las Ramblas is just one of an estimated 80 to 110 Las Vegas condominium or condo/hotel projects in some state of development. Most have been announced, with great fanfare and often a celebrity presence, within the past year. Throughout the city in makeshift offices, sales executives armed with a dream and a floor plan are busy pitching potential buyers.
A few of the buildings are filled with residents already. Another three or four are punctuating the Las Vegas skyline with skeleton towers and towering cranes. If current skepticism holds, many of the rest may never be anything more than a scale model and a gleam in a developer's eye. "It's the perception of the marketplace that there is going to be a substantial difference between the number of projects that have been proposed, and the number of projects that ultimately get done," says Ian Bruce Eichner, the chief executive officer of 3700 Associates LLC, the developer of a proposed mixed-use tower complex on the Strip called the Cosmopolitan Resort & Casino.
Recent news supports Eichner's opinion. The Related Companies, the creators of New York's TimeWarner Center, and perhaps the largest condominium developer in Florida-as well as Clooney's big-money partners on Las Ramblas-recently pulled the plug on their twin Icon towers, though deposits already had been placed on most units. Even Las Ramblas itself appeared to be shutting down its hard-driving media campaign late last year amid rising construction cost estimates, though Related executives affirmed their intention to soldier on. "Construction of phase one of the project is nine months out," insisted Marty Burger, the president of Related Las Vegas, in late December.
By dint of its scope and aggressive marketing, Las Ramblas has come to symbolize the audacity of the new developments. Its difficulties are being seen in many quarters, including the local newspapers, as evidence that the condo phenomenon in Las Vegas has been overhyped. And yet, merely the projects that are completed, under construction or about to break ground will alter the dynamic of a destination that runs on transient spending. In that sense, whether the short-term tally is 10 buildings or as many as 30, Las Vegas will have succeeded in reinventing itself yet again.
What was once a weekend haunt of stags, frat boys and conventioneers has morphed in recent years into a full-service adult vacation destination. Now it's being pitched as the second-home and retirement capital of the baby boomers-and a surprising number of empty nesters and successful businessmen with multiple residences have responded by snatching up high-rise units. "There's so much energy and so much money in this town, and so many marketing geniuses, it just doesn't stop," says George Maloof, whose family owns the Palms casino. In January, Maloof broke ground on a Palms-branded condo tower of his own, called Palms Place.
Adds Burger, "This place evolves faster than any other place. It changes every month. There's just so much money here. A $200 million project used to be big. Now a $1 billion project is nothing."
As you might expect from Las Vegas, none of these proposed developments are garden-variety complexes. Many have fanciful names, such as Allure, Panorama, Sky, Streamline, Nouveau, Sandhurst and Vegas 888. Most contain entertainment components, spas, trendy boutiques, even full-scale casinos. Donald Trump is participating, with yet another Trump Tower. (Other ventures, however, have sputtered. Ivana Trump had a sales office and brochures for her own branded building, until that project lost steam. Michael Jordan's proposed building, AquaBlue, has also come and gone.)
Still, the construction boom shows no signs of abating. Existing Las Vegas brands such as the Palms are in on the frenzy, branding or building condo hotels in which turnkey units are purchased by individual investors, then added to a nightly rental pool when not in use. The Venetian has a residential tower going up. The MGM Grand has three. The Hard Rock is talking about one. Starwood is involved in a W condo/hotel project. Hyatt is putting a 1,000-room hotel, one of the largest in its chain, beside 2,000 residential units inside the Cosmopolitan. Even the collapse of various projects such as Icon, high-profile failures that might halt momentum in a less resilient market, hasn't seemed to slow the momentum of the developments perceived as successful.
"All I tell our salespeople to say is, 'Look around,'" says Jeffrey Soffer, the principal of developer Turnberry Associates, which built Turnberry Place, the first large-scale condominium complex near the Strip, and is now putting up a two-building condo project called Turnberry Towers. "I have six towers in the ground in Las Vegas in various stages. Six in the ground! That's all you need to know about my vision of the future."
As late as five years ago, no condominiums of note existed on or near the Strip. That meant no high-rise options for a snowbird looking at sunny Las Vegas, not south Florida or Palm Springs, as a potential retirement home. Or for a businessman or high-volume gambler who found himself flying in so often that he figured it would be more convenient to buy an apartment.
In truth, there wasn't a market for them. Until hoteliers Steve Wynn and Sheldon Adelson altered the paradigm of the city by opening, in rapid succession, the Bellagio and The Venetian in 1998 and 1999, few vacationers, other than the gaming fanatics, wanted to come in for more than the occasional gin-soaked, blackjack-besotted weekend. There was hardly anywhere to eat, not much to shop for, and the nightly entertainment consisted of the usual suspects (Wayne Newton, David Brenner) playing to the same Middle-American mentality that has driven Las Vegas tourism from the start.
Against a changing hospitality market, with gambling on the Internet and spas and top golf courses at chain hotels around the country, that wasn't enough. "Let's face it, if you just had shitty gambling casinos out there like you used to, Las Vegas would be nothing today," says Soffer. "Gambling is a commodity. It's in 48 states. You needed to have the best restaurants, shopping, entertainment and everything else."
"The Bellagio was the first project that attracted the eye of women from Greenwich [Connecticut]," says John Riordan, a Turnberry senior vice president who oversees sales and marketing for the western region. "People who'd previously thought that Vegas was seedy, not for them."
Today, more than a dozen hotels-some of which don't even have casinos-woo the same upscale demographic. Vacationers are likely to come for not just a weekend but a week, and to bring a spouse and maybe even a family with them. They eat, they shop, they play golf, they bask in the 300-plus days of sunshine, they celebrity-spot in the nightclubs-and, oh, yeah, they gamble, too. It's like Boca Raton, but with something to do.
"It is very clear that at least 50 percent of the people who are coming here are coming for a principally nongaming experience," says Eichner. "Which is not to say that they don't gamble, but that isn't what drives them. The combination of entertainment, shopping, fine dining and the weather, which translates into 15 to 20 fine golf courses, has made this into the premier destination in the country."
From there, it's not such a huge conceptual leap to owning a home, perhaps with an eye on retirement. "People who have been here and like what Las Vegas has to offer, they're going to come here before they go to Florida," says Ruth Roth, who arrived from Miami four years ago to sell real estate. "You can go to Mt. Charleston and ski in 45 minutes, or to Lake Mead for water sports. You can drive two hours to Zion National Park, or another hour and get to Bryce Canyon. You're two hours from the Grand Canyon, four hours to L.A. There's no state income tax. And we don't have 13 hurricanes a year."
As a result, says Riordan, "The market has expanded exponentially in the past two years for condos and condo/hotels near the Strip." Turnberry Place followed the 84-unit Park Towers, a 20-story structure, as the first major condo complex to open, in 2000, and now the construction of the last of its four 40-story buildings is under way. "For the first five years, we were the only one spending advertising dollars," Riordan says. "All of a sudden, there's dozens," including four developers that recently placed full-page ads in one issue of Los Angeles Magazine. According to Riordan, Turnberry paid $1.5 million an acre for its land. Now the going rate is closer to $10 million to $12 million.
Turnberry started selling units in 1999, targeting, in part, local couples who were trading down in square footage and wanted the convenience of a high-rise. Other early buyers included Southern Californians seeking second homes. "You look at the trends in the business, you see things," says Soffer. "I figured there were a lot of people who wanted to move here, but not deal with the congestion and the traffic." Now Soffer has almost 800 units filled, many with full-time residents. At Turnberry's posh Stirling Club, the centerpiece of a $45 million, 80,000-square-foot clubhouse that includes a health club and a nightclub, a cigar and billiards room, a pool and spa, tennis courts, and vast amounts of meeting space, members enjoy the ambience of the country club they left behind back home.
It's telling that, in only a few years, Turnberry Place has integrated itself into the deepest levels of the Las Vegas community in a way that hotels never could. On the front steps of the Stirling Club one afternoon last December, Las Vegas headliner Clint Holmes waited for his car. Inside, rival boxing impresarios Bob Arum and Don King were holed up in a meeting room, attempting to hammer out the details of a coming bout between fighters they control. Spread across 15 acres, Turnberry Place's vastness extends both out and up. "There's no way you could build something like this now, with real estate prices what they are," says Soffer.
Yet that's exactly what the most ambitious of the developers are trying to do, albeit usually on far less land. The Cosmopolitan is scheduled to be built beside the Bellagio on the stretch of the Strip that is swiftly becoming the Boardwalk and Park Place of Las Vegas. Besides enlisting Bernardo Fort-Brescia of the renowned Miami architectural and design firm Arquetectonica, Eichner has managed to convince Hyatt to brand the development's hotel component. Not only will that give Hyatt its first-ever presence on the Strip, but along with the condos will create 3,000 rooms of instant clientele for the Cosmopolitan's restaurants, shops, entertainment venues and casino.
It's a level of audacity that seems to match Las Ramblas, but Eichner-a New York developer and former district attorney-bristles at the comparison. "There's smoking dope in the middle of the street, and then there's reality," he says. By the time the Cosmopolitan begins construction later this year, Eichner insists he'll have $1.8 billion in the bank from deposits and bank loans. The development is scheduled to open in mid-2008.
Inside his office at the Bellagio, MGM Mirage CEO Terry Lanni pulls out a Life magazine cover that reads "Las Vegas-Is Boom Overextended?" Inside, the magazine asks if Las Vegas has finally "pushed its luck too far." The date of that article? June 20, 1955. "They've been asking that question ever since," Lanni says.
Lanni's competing vision has Las Vegas continuing to boom as an aging generation of affluent Californians tire of the traffic, the loss of services and a seemingly inevitable increase in taxes in their home state. "Many people I know from there have bought homes here," says Lanni, who has recently invested in his own Las Vegas condo in the nearly completed Panorama building. "But they've always been limited to single-family homes a 20-minute drive from the Strip because that's all there was. That's not the case anymore."
Signature at MGM, which is being built by Turnberry for MGM Mirage, appeals to just that demographic. The average price of a unit is $675,000, which buys a 525-square-foot studio. "People don't need big," says director of sales Dan Riordan, who runs the project for MGM. "They need location, amenities, turnkey and rentable." It must be true; Signature has racked up its $1 billion in sales in less than two years. "People want to say, 'I've got a place at the MGM Grand,' or 'I've got a place at the Bellagio,'" Soffer explains. "There's a mystique to that."
There's an ancillary benefit to the hotels beyond adding hundreds of rentable suites. If it all works as it's supposed to, condo/hotels such as Signature at MGM will also create consumer loyalty, which in Las Vegas translates into more of the ridiculously profitable casino traffic.
For three decades, casinos have been doing everything they can to get heavy gamblers to stay loyal to their property, offering comped drinks, meals and even high-end accommodation to keep them in the building. This scheme might be the greatest inducement of all: get them to invest in the company. "I mean, it's genius," says Dan Riordan. "These people are spending $500,000 to over $2.5 million, and now they own a piece of the MGM. So where will they go to eat, drink and gamble? The MGM!"
Beyond the three towers of Signature, MGM Mirage is halfway through a 20-month pre-production period for a $5 billion, 66-acre development called CityCenter, which if built will be the most expensive private construction project in the history of the United States. CityCenter is so big that a veritable all-star team of architects (including Rafael Vinoly, James Cheng, Norman Foster and Cesar Pelli) has been enlisted to design various parts of it. It is so big that both Mandarin Oriental and the Light Group will build high-end hotels without gaming to serve as gateways to the 60-story, Pelli-designed, 4,000-room hotel/casino tower. It is so big that 1,640 condominium units-far more than exist on the Strip today-will be included; so big that the complex isn't scheduled to open until mid-2008. "The problem with these kinds of things is, you can't just decide on Monday that you want it on Friday," Lanni says.
By 2009, though, who knows how Las Vegas will look? Lanni was getting his hair cut at the Bellagio recently when his stylist confided that she, too, has made a down payment on a Strip-side condo. "She said, 'I'll rent it out and keep it as an investment,'" he says. "'I think it can only go up in value.'" If that sounds frighteningly similar to the famous story of Joseph Kennedy getting a stock tip by his shoeshine boy on the eve of the 1929 stock market crash, an incident he correctly interpreted as a harbinger of disaster, Lanni chooses to interpret it as evidence of the universal appeal of the condo phenomenon.
"We see the demand, and we see it growing," he says. Half a century after that Life magazine cover story, history has yet to prove Lanni wrong.
Bruce Schoenfeld is a regular contributor to Cigar Aficionado.
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