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LAS VEGAS-Demand for vacant land continues to be spurred by lender-involved transactions in the third quarter, further driving down prices, according to research by locally based business advisory firm Applied Analysis. Traditional arms-length transactions represented only 9.8% of total market sales during the third quarter, according to AA principal Brian Gordon.

“Demand for raw land has slid to almost a six-year low across the Las Vegas valley in terms of pricing [and values are] likely to … remain stalled as long as the commercial sector continues to maintain record-high vacancy rates, foreclosure pressures persist in the housing market, and access to credit markets remain tight,” Gordon says. “This does not mean investors will let opportunity pass them by, with nearly 90 percent of recent transactions involving a lender through a trustee sale or a deed in lieu of foreclosure, pockets of opportunity may emerge as both buyers and sellers reset their expectations.”

Sales volumes have increased slightly over the last two quarters but remain below the volume traded during the same quarter of the prior year, according to the report. The third quarter of 2009 marked the third consecutive increase in sales volume in terms of acres, with 415.8 acres being transferred, up 5.1% from the second quarter of 2009 but down 2.7% from the third quarter of 2008. The size of the year-over-year decline in terms of acres has decreased since the beginning of the year, Gordon says.

Excluding resort properties, which skew overall results upward, the average price per acre fell 11.5% during the third quarter of 2009 to $225,999, which is comparable to late 2003 pricing. Compared to the same year-earlier period, non-resort land prices are off by nearly 51%.

Including resort prices, the average price per acre grew 3.4% in the third quarter to $264,040 or $6.06 per square foot. Still, like non-resort land, compared to the same 2008 period, the average price is off by nearly 50%.

Both the third quarters of 2008 and 2009 contained resort-corridor transactions that demand a premium price. The resort-corridor sale during the third quarter just passed was the former Klondike Casino fronting the west side of Las Vegas Boulevard just south of Russell Road. The 5.24-acre site sold for $17.0 million or $3.2 million an acre in a trustee sale, according to AA.

“Historically, raw land investments were made by those with a longer, more secured investment strategy,” says AA project manager Jake Joyce commented. “As southern Nevada’s economy built upon its own growth, the vacant-land market changed as investor speculation equated to overnight-profits, and with good reason as there were few markets providing similar economic opportunity.

“Now, the market faces record-high unemployment and the majority of economic performance measures remain weak, a condition that again impacts the traditional investor’s outlook. Vacant land prices are clearly entering overcorrection territory, which has piqued the interest of some notable stakeholders. These conditions notwithstanding, investments in the land market will require a longer view than at any time in the past decade.”

The fourth quarter also has seen a lender-involved resort land deal and a large residential deal. On the residential front, the liquidation of Kimball Hill Homes closed escrow with SunCal Cos. and D.E. Shaw paying approximately $20.1 million for 1,072 finished and partially finished lots in lots in 11 communities in the Las Vegas Valley, according to Colliers International. The official seller and buyer were KHI Post Consummation Trust and KHI Acquisition LLC, respectively.

On the resort front, a 14.3-acre site here that was to hold the $660-million, 390-unit Spanish View Towers development is now owned by OneCap Mortgage Corp., the lender for the project, which was owed $36.7 million on a $27.7-million construction loan. It won the court-ordered auction with a bid of $15.97-million or $1.12 million per acre, according to court documents.

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