Watt Converting Coronado Bay Club Apts.

Holliday Fenoglio Fowler LP says it recently arranged a $40-million bridge loan for the conversion of the 85%-leased property to condominiums. Funded by Babson Capital Management, the two-year adjustable-rate takes out an existing US Department of Housing & Urban Development loan that was used to develop the property.

Coronado Bay Club is located at 7600 South Jones Blvd. west of Interstate 15 in the Coronado Ranch area of Las Vegas. Clark County property records show the complex being transferred from Watt Commercial ownership to Watt Genton ownership when the project was completed in April. Community amenities include two swimming pools, a clubhouse, and fitness and business centers.

A Watt Genton principal did not return a phone call seeking comment on the early conversion of the property. HFF managing director Mark Wintner, the broker in the deal, also was unavailable Wednesday afternoon for comment.

"With the escalation in housing prices and the lag in apartment rents, developers have found financial incentives to convert rather than operate as apartments," says Brian Gordon, a principal with Applied Analysis, a locally based market research firm. "I have seen a handful of these take place either prior to or just after completion, particularly in the southwest area of the city [where Coronado is located] because the area tends to have good accessibility to Interstate 215."

While apartment rents are lagging, they are catching up rapidly, Gordon says. "Where before we could expect 3% annual rent escalations, this year is running 6% higher than 2005 and we expect them to see 8% to 10% annual growth until then become more in balance with housing costs," he says.