In this blog I will discuss the Las Vegas real estate note auction May, 17, 2011 for retail properties.
For one thing, Las Vegas is no Detroit, there are very few undesirable properties here and the majority of retail properties are in good locations and 3-4 in the most desirable locations. For example the property that is located at 11105 South Eastern in Henderson is located at the mouth of and serves the huge Anthem community, awesome location.
I have picked about 10 of the best listings and my picks are viable, occupancy is over 70% and are money making Las Vegas commercial properties. Some with 70% occupancy and in the best locations, however the income gained from these operations can’t service their outstanding loans. In some cases the borrower is two years late and in one, the owner wanted to turn in the title (Deed in Lieu) and the lender refused, why? See Effect of Zombie Loans on Las Vegas real estate market 2011
So if these are great properties, why are they broke, why are banks auctioning off their notes?
1: Well many of these properties have been refinanced in 2004-2007 for stupid amounts of money and the owner (borrower) has already taken their original investment out of the property. In other cases the loan was used to purchase the property at the peak of the real estate bubble. If that was NOT the case many of these properties would NOT be in trouble today. Loan to value (LTV) ratio for some properties are in the 150% range while the property is 80% occupied.
2: The real estate market crash that added to their vacancy, however I highly doubt if these properties would have been viable without the crash. Banks were throwing money away in 2004-2006.
For example; one would be hard pressed to find a better located retail property than one on the corner of Sahara and Decatur. Check out the traffic count: about 90,000 vehicles a day and around 150,000 people within the 3 mile area. Now a foolish bank made a $56,000,000 or about $170 per square foot loan on this property and the post real estate crash has left it with 150% LTV. Auction.com puts the real estate value for this property at $33 million now! I wouldn’t hold my breath to see such a bid. The owner (borrower) has offered to buy back his loan at discount and the bank rejected it because it is NOT in their DNA to cut principal for a borrower, although it has happened for some other large properties in Las Vegas. Now if someone ends up with this property at, say at $15-$20 million, then the LTV ratio will go down noticeably and make this property viable again and a good investment candidate.
I will discuss other Las Vegas Retail Properties in the note auction later
PS: Nevada is NOT a judicial foreclosure state and call me 702-278-7800