By dollar volume, Las Vegas ranks third nationally fordistressed commercial real estate, falling behind only Manhattanand Los Angeles. When the figures are scaled to market size,however, Las Vegas comes in at the top.

The local hospitality sector, which registered a 24% drop inaverage daily room rate year to date, accounts for almost half ofthe distressed dollar volume marketwide. Troubled properties inthis segment run the gamut, ranging from smaller motels andlimited-service Extended Stay properties to mid-sized off-Striphotels and major resort/casinos, such as Planet Hollywood. So far,banks have reclaimed or initiated foreclosure on just a handful oflocal hotels, all of which are relatively small, lower-qualityproperties that were built in the '70s or '80s.

Developments account for another sizable share of distress inthe Las Vegas market, as the weak economy and severe tightening ofcredit markets stalled many projects. Within the local market,several condo and apartment projects failed in the wake of thehousing collapse. In addition, a few large mixed-use developments,including the Fontainebleau project located near the north end ofthe Strip, came to a standstill when lenders cut funding. Therehave been a few offers to purchase the idled project at pennies onthe dollar, but as of now, it remains mired in litigation.

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