Friday, Sept. 23, 2005 | 9:51 a.m.
After quietly suspending sales for his condominium-hotel on the Las Vegas Strip several months ago, Lorenzo Doumani said he needed to take a step back to evaluate skyrocketing construction costs.
Doumani said construction costs increased 15 percent in the past year and made it impossible for him to justify building his Majestic Las Vegas resort as planned. Instead, Doumani, who remains partnered with the Hilton's Conrad Hotel brand, will build two towers at the same time.
Previous plans called for building one tower that combined a hotel and hotel-condominium before embarking on a possible second tower.
"The more (units) we sold the more (money) we lost," Doumani said. "We have to have major price increases to keep up with market costs."
Prices for condominium-hotel units at Majestic Las Vegas, planned for the site of the now demolished La Concha Motel on Las Vegas Boulevard, will be raised by $200,000. The average price for a unit before sales were suspended was $750,000, but now they will be $900,000 or more, he said.
Unlike other projects that have folded or become the target of lawsuits from irate buyers when contracts weren't honored, Doumani said he still plans to go forward with his high-rise project and will honor all reservations and contracts at original prices.
"The people that already have a reservation we are going to honor at those prices," he said. "I don't believe in saying 'Guess what? Our costs went up'; we would never do that."
Doumani said he has to build both towers concurrently because it's the only way to make the enormous costs make sense, and turn a profit in the end.
With the increases in construction costs, such as materials and labor, Doumani estimated it would have cost him $520 million to build one tower. The original budget, not including land costs, was about $350 million, he said. By adding a second tower and taking advantage of economies of scale, Doumani can build two for $600 million.
"The costs make one tower unfeasible," he said.
Tim Sullivan, president of Sullivan Group Real Estate Advisors, said he thinks prices have gone up even more than the 15 percent Doumani has seen with his project. Sullivan said he has tracked an increase of at least 42 percent.
"That alone will be a natural governance on our market," Sullivan said.
The new Majestic Las Vegas will include one tower that will be devoted exclusively to the Conrad Hotel. There will be more than 500 suites in the 60-story tower. The rooms will average 800 square feet, Doumani said.
The condo-hotel tower will be about 40 stories and will house 560 units, he said.
Doumani said plans will be finalized at the beginning of October and a public announcement will follow. Hilton executives could not be reached for comment.
Doumani said he does not yet have a contractor, but is in the process of lining one up.
"I thought I had a builder twice," he said, referring to the construction costs that have made planning the tower difficult.
Doumani said part of the problem is that large projects such as MGM's City Center pull away construction companies and supplies from other projects in the valley. They also are able to pay top dollar to construction companies, making smaller projects less attractive.
"Three hundred to $350 million used to be a big project," he said. "Not in today's world when people are spending billions."
Doumani said he plans to break ground in spring or early summer 2006. It will take 22 months to build the two towers, he said.
Last week Doumani dropped his lawsuit against Clark County and the Related Cos. that took issue with the county's approval of a tower planned by Related that would be next door to Doumani's Majestic Las Vegas. Related already had previous approval for one tower on the site, dubbed Icon.
Chris Kaempfer, who represented Related, said it was agreed that the case would be dismissed with prejudice, meaning the lawsuit can not be refiled.
It was previously reported that the disagreement centered on the shadows that Related's buildings would cast on Doumani's building. Doumani said Thursday the crux of the disagreement was about access corridors and proposed garbage and loading docks that would be feet from Majestic's pool.
"They've since agreed to move the garbage and loading docks," he said.
A separate lawsuit Doumani has filed against Related has to do with a disagreement with an easement that Doumani believes encroaches on his property.
"We're currently discussing it with them now," he said. "They're trying to figure out a better solution. We're jointly seeking other options."