The Suites Deal
February 10, 2010
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.
âIn Las Vegas, people come in and sign a lease, and if they have to leave, they go,â Siegel says. âThe lease doesnât mean anything to anyone.â
The businessman decided not to fight the cityâs 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 Siegelâs first ventureâwhen he bought, fixed and sold used cars at age 16 in L.A. (He still owns an auto-collision center there.) âWe donât buy anything thatâs stabilized and running right,â he says. âMost of our stuff has problemsâdeferred maintenance and operational issues. I think itâs fun and challenging to fix those problems.â
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 Siegelâs 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 propertyâs 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 hasnât 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.
âPeople know Iâm a good operator,â he says. âIâm seven days bell to bell. Iâm super hands-on. If I paint a building and I donât like the way it looks, Iâll repaint it.â
How Siegelâs free food deal works
Itâs seen prominently throughout Siegel Suitesâ advertising: âLive Here. Eat Free.â
The free-food concept is simple. Daily food vouchers for a meal at the Golden Grill at downtownâs Gold Spikeâwhich Siegel Suites ownsâare given to tenants who pay rent on time. Stay a week and itâs five vouchers; two weeks, 10.
Siegel Suitesâ 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 Siegelâs recent acquisitions, when that siteâs restaurant is remodeled later this year.
As altruistic as free food may sound, itâs 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 itâs 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. Itâs 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.
âThe Gold Spike will be done this year. Finished,â 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 excitingâchicken fingers, BLTs and hot dogs to grilled cheese sandwiches and spaghetti with marinaraâbut still perhaps worth the price of a bus fare.
