|By Tony Illia, Las Vegas
Review-JournalMcClatchy-Tribune Regional News
Feb. 10, 2008 - Pinnacle Las Vegas was recently slapped with a class action lawsuit by frustrated buyers. The proposed $740 million condominium-hotel development at Tropicana Avenue and Cameron Street was first announced in 2005. Three years later, however, the dirt site remains bare.
Green Cable LLC, in response, last month sued the project's development team for breach of contract. It's seeking at least $5 million in returned deposits, damages and attorney's fees. The lawsuit alleges that buyers bought units with the understanding that Pinnacle would open by August .
The project has changed contractors three times in three years. Dick Pacific Construction, a unit of Pittsburgh-based Dick Corp., replaced Marnell Corrao Associates as builder in mid-2007. Both builders were preceded by Turner Construction Co. -- the New York-based firm now working on the Juhl mixed-use project in downtown Las Vegas.
Dick Pacific, who came aboard last summer, is also a project partner. Turner and Marnell, by comparison, were at-fee, independent contractors. Dick Pacific declined to elaborate on its project investment and ownership share. It's unclear whether the firm simply waived its construction fee in exchange for project equity, or, more significantly, is providing hard-dollar project capital. Calls to Dick Pacific Executive Vice President Norman Fornella seeking comment were unreturned at press time.
Pinnacle calls for two 36-story, faceted gold glass towers connected by three sky bridges. The twin skyscrapers, designed by YWS Architects, contain 1,100 condo-hotel units that allow buyers to rent out residences as guest rooms when not in use. The investment-driven concept allows home buyers to generate revenue from their units to help offset the purchase price. Project plans additionally entail resort like amenities, including a three-acre wet-deck, restaurants, boutiques, a fitness center and a spa.
"Generally, we believe Pinnacle is an excellent project," said Sam Schwartz, a principal in Green Cable LLC. "At this point in time, however, due to the construction delays the project has endured, the buyers I represent, including myself, believe it is in the best interests of all the parties that we go our separate ways."
Schwartz's real-estate brokerage firm, & Opportunities, represents 16 buyers who each paid 10 percent deposits for units priced from the $300,000s to more than $1 million. Their agreements contained addendums with developer benchmarks. Pinnacle, for instance, must deliver 306 purchase pacts or it can be found in default. It must also break ground within a certain time frame. The lawsuit levels an additional claim that the project site is contaminated with high benzene levels as a result of dropping ground water levels. The environmental issue has yet to be resolved, it adds.
"Our initial review is that this action is without merit," said Cynthia LaVasseur, an attorney representing defendants, Pinnacle Las Vegas LLC and 4645 Tropicana Partners LLC. "We are going to file an action to dismiss."
Dick Pacific, Falconi Group, Elysium Enterprises and Praxis Resources LLC are listed as the lawsuit's other defendants. The Falconi Group, the project's principal developer, is known locally for operating Acura and Honda car dealerships throughout the valley. The project's 12-acre property served as an automotive sales site until October 2004.
Pinnacle's current construction status is unknown. The project originally was scheduled to break ground in the fall of 2006 -- a date that has since changed repeatedly. The most recent announcement, released in October, says groundbreaking will occur by midyear. Officials have yet to publicly announce a construction loan.
"Buyers definitely want to know projects are well-funded and successful," said Bruce Hiatt, owner of Luxury Realty Group, a Las Vegas high-rise real estate specialist. "Buyers expect rapid progress, with the period between reservations and groundbreaking taking a year or less. It has become much more important today than a few years ago."
Pinnacle's progress, as a result, could prove problematic. New York-based Moody's Investors Service last month warned that the construction and building industry default rate could reach 12 percent this year , with a possible 6 percent default rate in the hotel, gaming and leisure industries. Securities backed by subprime home loans seized up last summer as loans defaulted. Wall Street writedowns are consequently expected to surpass $100 billion, which may cause wary investors to shun commercial real estate-backed loans.
"The luxury condominium market is facing challenges with a slowdown in demand and number of projects in the pipeline," said Brian Gordon, a principal with Applied Analysis, a Las Vegas economic research firm. "A longer presale phase generally makes it more challenging to generate sufficient sales to move forward in a declining market."
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