Owner of downtown’s Ogden bucks trend with condo sales blitz

When investors bought the Ogden and four other Las Vegas residential complexes last year for big dollars, they were among many laying bets on the valley’s apartment market.

Now they’re betting they can sell those units one by one — but so far, it seems no other landlords share their appetite.

KRE Capital in Beverly Hills, Calif., Dune Real Estate Partners in New York and Las Vegas-based Northcap teamed up in December to buy the Ogden and Juhl — two downtown high-rises — as well as One Las Vegas, Loft 5 and Spanish Palms Condominiums for $237 million combined.

The portfolio had a volatile financial history of foreclosures, lawsuits, bankruptcy proceedings and cancelled condo sales. What's more, construction was financed by Chicago’s Corus Bank, which collapsed in 2009.

But the federal government and private investors took charge of the properties, signed renters for units that were designed as for-sale condos, and unloaded the buildings in the bulk sale.

The Ogden, 150 Las Vegas Blvd. North, has 275 units. Just 10 percent are individually owned, although by late last year, practically all other units were rented, according to KRE partner Uri Vaknin. Residents include Zappos CEO Tony Hsieh, who leased several units and is known for putting up visitors and tech startups in the building.

KRE's group has not been renewing leases for units throughout the building as they come due, to prepare them for sale. They began listing them Wednesday.

The condos, at 815 to more than 2,000 square feet, are priced from around $200,000 to the mid-$600,000 range. One unit, a model home on the 18th floor, is listed at $635,000, compared to $1.2 million when the Ogden, then known as Streamline Tower, opened in spring 2008. The unit has been rented but never purchased.

KRE’s group is only launching sales efforts for now with the Ogden, the most high-profile of the portfolio, and plans to spruce up the building with at least $1.5 million in upgrades. To avoid pushing down prices in the portfolio, they plan to sell units in the other buildings in phases, over the next five years at least.

“We’re not going to flood the market,” Vaknin said. “That would be foolhardy on everyone’s part.”

During the boom years last decade, investors bought valley apartment buildings at bloated prices to turn into condos. But when buyers fled during the recession, landlords were forced to rent the units, leaving buildings with a messy mix of renters, condo owners, homeowners associations and on-site leasing agents.

Sales of apartment buildings are cooling, but investors snapped up rental complexes at a rapid pace the past few years, as many residents are hampered by flat wages and credit woes and can’t buy a house. Locally, investors bought 17,800 apartment units at an average $75,600 each in 2013, up from 3,000 units at $42,500 each in 2010, according to Colliers International.

Many investors have bought mothballed condo projects to turn into rentals, but besides KRE’s group, nobody seems to be converting apartments into condos anymore, said broker Perry White, a vice president of investments with Marcus & Millichap.

“I just don’t see that being successful right now,” he said.

High-rise condos were hit as hard in the downturn as single-family homes, as sales evaporated and foreclosures swept through buildings.

Things are still volatile. Many condo owners on or near the Strip, after waiting years for prices to soar again, are giving up and selling cheap, Award Realty agent Shari Sanderson said.

As she sees it, those buildings pose the most competition to KRE’s group.

“You can (still) find deals,” Sanderson said.

Vaknin spoke with VEGAS INC at the Ogden on Wednesday. The following excerpts have been edited for clarity and brevity.

Question: What are your plans for converting the buildings back to for-sale condos?

Answer: We have a long-term strategy. We picked the Ogden first because it has the perfect story — it’s the most high-profile, there’s so much excitement around downtown, every week there’s something new opening up, (the concert series) Life is Beautiful is at our front doorstep.

Another building you bought downtown was Juhl. Would that be next in the conversion process?

That is not currently in the plan. Part of the reason why: Although Juhl is almost fully occupied, the retail is not. But we’ve picked retailers we wanted to be an amenity for the building and downtown.

Right now there’s zero retail there. The previous owners knew they were going to sell the building, so they did not want to encumber it with leases.

How would you rate the overall health of downtown’s housing market? One of the knocks on downtown is that there isn’t enough housing. There are a handful of high-rises, but other than that, it’s a lot of older single-family homes.

We were getting $2 per square foot in rent on average here, which is unheard of. Off the strip, the Ogden had the highest rent per square foot. Typically, when you convert a rental building to a for-sale property, you get 3 percent conversion. Renters are renters for a reason. But in Las Vegas, it’s still more affordable to buy than it is to rent. We had sales specials for our renters here, and 10 percent of them now have contracts to buy. We're closing some of those sales beginning next week.

Are there other apartment-to-condo conversions going on right now?

No. The reason why is that buyers would not be able to get mortgages in Las Vegas. This building is truly the exception.

One thing maybe working to your advantage is there won’t be any high-rises built downtown anytime soon.

It would cost $400 per square foot to build, so they’d have to sell for $650 per square foot. We’re selling these in the high-$200 per square foot range.

How have resales fared in the Ogden?

There have only been two. One, interestingly enough, was by someone who wanted to upgrade with us. He sold his condo to buy a larger one.