Here Come the Luxury Condos in Summerlin by ToddSullivan, ValuePlays
We are looking at 4,000 units (plus more retail) on the 300 acres that remain of the 400 acre site. Howard Hughes Corp (NYSE:HHC), as I’ve said before is building a true upscale downtown urban center in Summerlin. Unless you really dig into this company you just cannot truly grasp the level of activity going on here with this company…
From the Las Vegas Review Journal:
Downtown Summerlin is home to just about everything its developer, The Howard Hughes Corp., imagined.
Upscale resort? Check, in the form of Red Rock.
Shopping center? It has that, thanks to the Oct. 9 opening of a 1.6 million-square-foot retail, dining and entertainment district.
Class A office space? That’s there, too, with a nine-story, glass-clad tower designed to attract corporate headquarters.
Downtown Summerlin is missing one key component, though, and officials with The Howard Hughes Corp. are ready to fix that. The company is partnering with apartment developer The Calida Group to begin Downtown Summerlin’s next big land use: homes for permanent residents. Lassoing onto momentum built with the shopping center’s debut, the companies are scheduled to break ground in coming weeks on a 124-unit luxury apartment neighborhood on 4.5 acres at Griffith Peak Drive and Town Center Drive, east of the shops.
The Constellation, named for the Lockheed Martin Corporation (NYSE:LMT) airliner that business tycoon Howard Hughes financed in the 1940s and ’50s, will be more high-end than just about anything in the local apartment market, with a masseuse and aesthetician on call, as well as a spa, a resort-style pool with cabanas, and a “top-of-the-line” fitness center, said Eric Cohen, The Calida Group’s managing director.
“It’s going to feel like a luxury boutique resort,” Cohen said.
The Calida Group will begin leasing The Constellation in the summer, with residents scheduled to move in during the fourth quarter of 2015. And at that point, the vision for Downtown Summerlin will become more complete.
“Adding residents is critical to providing stability in Downtown Summerlin,” said Julie Cleaver, vice president of planning and design for the Summerlin master plan. “It won’t just be someplace that people visit and leave at the end of the day. They’ll live there. It’s important to build enough of a residential component that the downtown becomes a viable place to be. When people play, dine, work and live in the same place, it creates that urban environment we’re talking about.”
Rental rates haven’t been set yet, but they’ll match the community’s features “at the top of the market,” Cohen said.
Based on current rents, that could mean lease rates higher than some mortgage payments.
The marketwide peak for two- to three-story, garden-style apartment complexes is about $1.10 per square foot per month, said Spence Ballif, a senior vice president in the Las Vegas office of commercial real estate brokerage CBRE. The one- and two-bedroom units at The Constellation will range from 1,000 to 2,040 square feet. If the developers want to at least match the current market high, that could mean rents of roughly $1,100 to $2,200.
It’s a touchy time to test the local apartment market. Like almost every other real estate sector, the multifamily category is still recovering from the Great Recession. Average rents tumbled nearly 20 percent in the downturn, from $932 in 2007 to $759 in 2012, Ballif said.
Rents are finally rising, though. Lease rates grew 2.9 percent in 2013, their first gain since the recession. Rents added another 5.25 percent in the first three quarters of 2014, Ballif said. Rents remain 12 percent below their boom-era high, but that means investors who build and buy apartment communities see both an enduring recovery and some upside yet to come, Ballif said.
“We’re one of the last real markets below peak rents and pricing. If you look anywhere else on the West Coast, rents have exceeded what they were in the peak,” he said.
Beyond those market dynamics, The Constellation’s location is a big plus, said Ballif, who has not worked or consulted on the project.
“That location is fantastic. If there’s a place in the valley to achieve the types of rents they’re hoping for, that would be the spot to do it,” he said.
There’s also some pent-up demand for new apartments here. Local developers have delivered an average of 4,000 units per year over the past 18 years, Ballif said. They built just 367 in 2013, and will add 2,500 in 2014.
Also, the Summerlin master plan has just 2,000 apartments, out of a current base of 40,000 homes and 100,000 people, said Kevin Orrock, president of Summerlin. The master plan’s apartment market is “underserved,” he said.
Finally, broader demographic trends could help The Constellation take off, Ballif said. After a nation-leading housing bust burned hundreds of thousands of local homeowners, fewer people feel great about owning, he said. Nevada’s homeownership rate was 59.7 percent in 2010, down from 62.4 percent in 2009 and 63.6 percent in 2008, according to the U.S. Census Bureau. Nevada had the fourth-lowest homeownership rate in the nation in 2010, after New York, California and Hawaii.
Nationally, homeownership was 64.8 percent in the second quarter, the lowest level since 1995, according to the U.S. Department of Commerce.
Whether it flies or stays grounded, The Constellation is only a small part of Downtown Summerlin’s residential component. Company officials have set a goal of 4,000 homes on the site over the next decade or so. Practically every type of housing is on the table, including brownstones, high rises and mid-rises with ground-floor retail. The only thing you won’t see in the urban core? Single-family homes.
The Constellation will kick things off with 16 three-story buildings of four to 15 units each, some of which will have attached garages. Third-story homes will have rooftop decks. The cabinets and lighting and plumbing fixtures will be on a par with what you’d find in a for-sale home rather than an apartment, Cohen said.
“We’re creating a project that’s pretty unique in the marketplace,” said Kevin Orrock, president of Summerlin. “It will be a boutique luxury product that really hasn’t been done.”
The Howard Hughes Corp. is about halfway through development of Downtown Summerlin, with roughly 200 acres left to build on. Red Rock takes up about 100 acres, with the shopping district consuming another 106 acres. Plans also call for more office space and a potential Triple-A baseball stadium.