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LAS VEGAS-The vacant land market in Las Vegas experienced record low sales volume and declining values in the second quarter of the year, according to the local business advisory firm Applied Analysis. Approximately 223.2 acres were sold during the quarter, which is down 58% from mid-year 2007 and down 11% from March 2008. Moreover, the average price per acre—excluding premium-priced resort properties—came in at $570,300, a 20% decline from mid-year 2007 and a 4.8% decline from March 2008, and is expected to continue.

“Given the current fundamentals in the market, speculative land sales have come to a near standstill,” says Applied Analysis principal Brian Gordon. “The limited number of sales transactions occurring during the second quarter reflects previously contracted sales and near-term development deals. This overall slowdown has come at a price, as average land pricing has declined to levels witnessed three years ago. This trend is likely to continue until price points limit downside risk and reflect improvements in end-user demand for residential and commercial products.”

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

The W Las Vegas property was acquired in mid-2005 for $108.2 million, or $5.15 million per acre. One year later, the Las Ramblas property was acquired for 55% more, $202 million, or $8 million an acre. Given this latest transaction, it took two years this time around to get a similar increase in value. The declining values and slowing value growth reflect current economics, Gordon says, which are impacted by a challenging housing market, tighter lending practices, rising commercial vacancies and increasing foreclosure activity.

“Land pricing trends are following a clear path paved by falling housing prices and rising commercial vacancies,” concludes Gordon’s partner Jeremy Aguero. “Continued corrections are likely to prevail as land owner equity has diminished significantly and collateralized properties have financiers responding cautiously.

“Lending requirements will likely impact liquidity within the sector and the viability of development projects. Additional downward pressure on pricing is possible as values could fall another 10- to 15 % in the near future. As with any market, opportunities will emerge, including bail-outs on distressed deals and bank-owned property sales.”

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