Wednesday, February 10, 2010 • Source: Vegas Seven
Entrepreneur Stephen Siegel finds his latest formula for success in our battered apartment market.
By Brian Sodoma
Stephen Siegel is on an apartment-buying mission that could land him in the Las Vegas history books as a serious developer at a time when the city has lost its real estate legs. Siegel, 39, is owner of Siegel Suites,a flexible-stay concept he embraced after buying a Las Vegas apartment complex and realizing the futility in going the route of traditional leases.
“In Las Vegas, people come in and sign a lease, and if they have to leave, they go,” Siegel says. “The lease doesn’t mean anything to anyone.”
The businessman decided not to fight the city’s transient nature. Siegel Suites units come furnished or unfurnished and have no long-term commitments. Stay a week? Two? A month? You pay for the time you stay. (The average stay is five months.)
Utilities, cable and Internet access are included, and Siegel kicks in a free-meal voucher at his Gold Spike Casino or Siegel Slots and Suites with each on-time rent payment.
The formula is working. The company has 3,500 units and is looking to expand to 10,000 with future acquisitions. The Los Angeles market is also on the horizon.
Buying financially troubled apartment complexes is not that different from Siegel’s first venture—when he bought, fixed and sold used cars at age 16 in L.A. (He still owns an auto-collision center there.) “We don’t buy anything that’s stabilized and running right,” he says. “Most of our stuff has problems—deferred maintenance and operational issues. I think it’s fun and challenging to fix those problems.”
A high school dropout, Siegel essentially lived on the streets through his teen years and walks with ease among some of the hard-luck tenants for whom he now provides temporary homes. Siegel found an outlet buying, fixing, then selling cars, which allowed him to sock away some cash. Then he graduated to flipping homes and eventually buying apartments. The rest is playing out as current Las Vegas history.
In 2008 and 2009, Siegel Group of Nevada bought Gold Spike Casino downtown for $21 million and Barcelona hotel-casino (now Siegel Slots and Suites) for $12.6 million. It bought the 330-unit Deer Creek Apartment complex near UNLV, which will be transformed into a Siegel Suites, for $19.1 million. It picked up the shuttered St. Tropez Hotel for $10.5 million. Undergoing renovation this year, St. Tropez will be Siegel’s new yet-to-be-named boutique hotel, a concept he intends to grow aggressively in Las Vegas. Last month Siegel added the Artisan Hotel to the mix.
Despite the growth, Siegel is candid about how tough it is to expand in Las Vegas these days. Some of his assets were bought at the top of the market, when he bought his first property here in 2004, and he holds loans that exceed the property’s current value. Siegel Suites enjoys a 90 percent occupancy rate, but rents are half of what they used to be, putting a crimp on cash flow. Still, Siegel hasn’t shied away from renegotiating interest rates, for the short-term, on existing loans. And at the same time, other lenders that hold debt on struggling apartment complexes in town are approaching him about buying their properties, a testament to his hands-on operating style. Siegel has been seen on ladders working alongside renovators at the Gold Spike downtown.
“People know I’m a good operator,” he says. “I’m seven days bell to bell. I’m super hands-on. If I paint a building and I don’t like the way it looks, I’ll repaint it.”
How Siegel’s free food deal works
It’s seen prominently throughout Siegel Suites’ advertising: “Live Here. Eat Free.”
The free-food concept is simple. Daily food vouchers for a meal at the Golden Grill at downtown’s Gold Spike—which Siegel Suites owns—are given to tenants who pay rent on time. Stay a week and it’s five vouchers; two weeks, 10.
Siegel Suites’ 16 valley locations are close to bus lines for access to the Gold Spike. The company says it gives away about 15,000 free vouchers a month. The program will expand to the Barcelona hotel-casino, one of Siegel’s recent acquisitions, when that site’s restaurant is remodeled later this year.
As altruistic as free food may sound, it’s still a marketing tactic. Siegel Suites residents are introduced to a Siegel gaming property via the token hot dog or grilled cheese sandwich plate. Of course, giving away food and drink to lure in gamblers is as Vegas as neon. And it’s just one of many ideas that owner Stephen Siegel likely has for putting bodies in front of slots at the Gold Spike.
Siegel and his investors have put some serious cash into the Gold Spike, about $5 million and counting. It’s an effort that seems to have gone beyond a labor of love to more of a labor of, well, labor. Underneath every decayed layer peeled back at the old property, Siegel admits, lies another layer that could eat up more time and money. The trials of renovating an old property have pushed back the project’s completion about six months, to the first quarter of this year.
“The Gold Spike will be done this year. Finished,” says Siegel, sounding a bit exasperated. The Golden Grill has been updated with a modern-diner look. The menu is standard American-grill fare: burgers, wraps and a $4.99 prime rib. But the Siegel Suites vouchers are tied to a limited menu tucked between salt and pepper shakers and sugar packets. The menu has a single offering for each day. Items tend to be less exciting—chicken fingers, BLTs and hot dogs to grilled cheese sandwiches and spaghetti with marinara—but still perhaps worth the price of a bus fare.