Ritz Carlton Closure; The Latest Saga of Lake Las Vegas Project

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The Ritz Carlton in Lake Las Vegas closed this past week, officially ending the latest chapter in one of the most ambitious, high-profile developments in the country.

The plan was to create an ultra-luxury, 3,600-acre resort and housing development, clustered around a man-made lake in the desert outside Las Vegas. After a bevy of high-profile developers and money players took a shot at the plan, Transcontinental Corp. and owner Ron Boeddeker pushed the project forward, vowing to create an American version of Lake Como for international high rollers and celebrities, who would be eager for a taste of Vegas-style desert living.

Today, the project is only a fraction complete and the developers are in the midst of a bankruptcy proceeding. Two of the golf courses and the casino have closed, now joined by the Ritz Carlton.

While Lake Las Vegas will certainly go down as just another casualty of the economic meltdown, the project represented far more, in terms of sound luxury development. Even in good financial times, the concept was spectacularly flawed, the type of concept that only moves forward in the adrenalin-spiced days of a building boom.

For starters, the project is, at least, a 30 to 40 minute drive from The Strip, the project's main draw. People buy in Vegas to be near the Strip, not to commune with the desert. Building mansions in the middle of nowhere and expecting quick sales is akin to creating a beach resort a 30-minute drive from the beach.

International buyers certainly didn't want to travel to Las Vegas to sit in the middle of the desert.

Lake Las Vegas was also trying to establish a new market, a category of luxury housing that didn't exist in the area. They were not adding to a market of high-end developments in the middle of the Vegas-area desert, they were trying to create demand, all by themselves--always a difficult and expensive task.

Beyond the over-the-top start-up costs associated with any development, Lake Las Vegas was creating every element of its own infrastructure, including the aforementioned lake in the middle of the desert.

At the same time, they were selling houses at a top-end price point, pushing the envelope even as Vegas prices soared far beyond any semblance of traditional levels. Vegas housing prices doubled over a period of years, but Lake Las Vegas was at the top of the scale, even at those inflated levels.

Experts also note the project was too narrowly focused on the second-home and high-end resort market. When the market turned, there was no fall back plan.

"Historically, Lake Las Vegas has targeted one small segment of the spectrum and that is your luxury buyer or investor," Home Builders Research president Dennis Smith told the La Vegas Sun. "When the market went bad and you don't have that diversity, it's going to affect you more," Smith said.

Lake Las Vegas is expected to emerge from bankruptcy in the next two months. But it will be far longer before the early home buyers recover. Last year the bulk of the sales in the project were bank-owned properties, according to published reports. Average home values in the area were down 31 percent from a year earlier.

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