"Given the current fundamentals in the market, speculative landsales have come to a near standstill," says Applied Analysisprincipal Brian Gordon. "The limited number of sales transactionsoccurring during the second quarter reflects previously contractedsales and near-term development deals. This overall slowdown hascome at a price, as average land pricing has declined to levelswitnessed three years ago. This trend is likely to continue untilprice points limit downside risk and reflect improvements inend-user demand for residential and commercial products."

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The biggest deal of the quarter was the sale of 58 acres next tothe Hard Rock Hotel on Harmon Boulevard—the former site of the Whotel-condominium and Las Ramblas condominium projects—for $751million, or $12.8 million per acre. The seller was a TIC thatincludes Africa Israel Investments and Edge Resorts that valued theproperty at $625 million last year; the new ownership is Sapir TICLLC.

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The W Las Vegas property was acquired in mid-2005 for $108.2million, or $5.15 million per acre. One year later, the Las Ramblasproperty was acquired for 55% more, $202 million, or $8 million anacre. Given this latest transaction, it took two years this timearound to get a similar increase in value. The declining values andslowing value growth reflect current economics, Gordon says, whichare impacted by a challenging housing market, tighter lendingpractices, rising commercial vacancies and increasing foreclosureactivity.

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"Land pricing trends are following a clear path paved by fallinghousing prices and rising commercial vacancies," concludes Gordon'spartner Jeremy Aguero. "Continued corrections are likely to prevailas land owner equity has diminished significantly andcollateralized properties have financiers respondingcautiously.

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"Lending requirements will likely impact liquidity within thesector and the viability of development projects. Additionaldownward pressure on pricing is possible as values could fallanother 10- to 15 % in the near future. As with any market,opportunities will emerge, including bail-outs on distressed dealsand bank-owned property sales."

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