Wednesday, May 4, 2005 | 10:58 a.m.
Developers of the Vegas Grand condominium project are asking potential buyers to rework their reservation agreements in the wake of higher-than-expected construction costs.
The company has notified about 800 potential buyers with existing reservations and their real estate agents that the purchase price for the condo units is going up. Many of those buyers will have to pony up more for their unit. Higher costs for steel, concrete and labor are being cited as the culprits for the price increases.
At this point none of the initial reservations has been converted into contracts and they are voidable by either the buyer or the project developer, Florida-based Del American, said Chris DelGuidice, Del American's chief executive.
In an effort to appease the initial reservation holders, DelGuidice said those who convert to a new reservation based on the higher pricing will receive a discount of 10 percent to 15 percent below the new published prices for the units. Those prices now range from about $300,000 to $1.2 million.
Originally, the units were announced as beginning at more than $200,000.
For those who elect to cancel their reservations, the company will refund deposits plus a 5 percent "cancellation bonus." The average deposit paid was about $25,000.
"We want everybody to buy," DelGuidice said. "Our goal is to have them be satisfied."
He indicated that not everyone is pleased but that the overall response has been positive.
"The reception has been very, very good," DelGuidice said. "Obviously, we can't make everyone happy."
In an August 2003 release announcing the purchase of the 20 acres for the Vegas Grand project near the intersection of Flamingo Road and Swenson Street, Del American said the move marked a $225 million commitment. On Monday, DelGuidice said the company now plans to spend $280 million on construction alone.
Despite the pricing issue, he said the company is pleased with the local market.
"We love Vegas," DelGuidice said. "We think the market is going to be good for everybody."
Additionally, DelGuidice said the company is seeking county approval to add two additional stories to the project, increasing the number of planned units from 880 to 994.
He said the additional units are needed to keep up with demand and to further dilute the higher construction costs.
Site preparation on the project is currently wrapping up with vertical construction expected to begin as early as June, DelGuidice said.
John Restrepo, principal with Restrepo Consulting Group LLC, said Vegas Grand is in a difficult spot because it entered the Las Vegas condominium market early.
"Their project came on early ... before the spike in costs really hit," he said. "They priced their units based on lower construction costs. It's really out of their control that construction costs went through the roof."
Patrick Duffy, managing director of the analyst group Hanley Wood Market Intelligence, said rising construction costs are not unique to Las Vegas.
"Steel has doubled since 2002. Concrete is up," he said. "China is competing for these resources."
Duffy also said that companies such as Del American are able to increase prices because demand in Las Vegas is high.
"Right now, they are hiking prices because they can," he said. "The market is strong."