I just interviewed Reagan Silber who is principal and co-chair of Edge Group, which has partnered with Starwood properties to build W Las Vegas. I wanted to ask him if it is true that the $15 billion development is being scaled back.

It isn't the money being scaled back, by the way. It is that in today's Las Vegas, when it comes to construction, $15 billion just don't buy what it used to. In an earlier item on the Buffet that Silber read and comments on below, I suggested that the luxury condo projects were finding themselves squeezed out of the market by the gaming properties. Casinos like Wynn and Venetian and MGM enter construction with endlessly deep pockets that suck the talent pool dry as well as drive up construction costs.

Silber reached me while on a cell phone driving between meetings and the connection was not the best, so there is a possibility of small errors in this transcription of the tape. Still, this interview offers the most candid picture yet available about the status of W. Silber also provides some interesting insight into the current state of the Las Vegas construction market for hotels and luxury condominiums.

Q: I was calling you because I was doing a story on the high end luxury condo market and I interviewed a couple people who told me you were planning to scale back W from two towers to one. Is that true?

A: No. I think it is a matter of we're still finalizing our program. I do think it is difficult for development right now in Las Vegas under any circumstances, whether you are a condo or casino or hotel or whatever you are, because of the rise in construction costs. I read what you wrote and you are about 80% right. I don't think the advantage of Echelon or City Center or Wynn or Adelson is an advantage from a monopoly for labor. It is initially easier for them because they have existing cash flow to get started and to figure it out on the fly. If we didn't have Starwood and we weren't able to use the brand to sell condos and to develop the project looking to 2015 or 2020 then it would be difficult or impossible. Look at the wave of cancellations. So, circling all the way back around, for us, we are just making sure that the program we promise is what we deliver and making sure we know what things cost and what we deliver is what is bought.

Q: So, not to be overly simplistic, but are there going to be two towers right out the gate?

A: The answer to that, when you say "right out the gate" is that there will be two towers. We will start building tower one first, and then bring tower two online. I can't tell you if it will start three months later or nine months later. But we have every plan to bring two towers.

Q: Has the timing been affected by the rising cost of building?

A: That is one of the factors.

Q: My essential argument on the Buffet is that when it comes to cost overruns in construction, casinos have a bottomless source of revenue. So, the noncasino projects that don't have that gaming revenue coming in are being forced to put things off because it is too expensive to build. And, as I said, how I heard it is affecting you is that W has decided to go with one tower. So, you are still building two towers, but are you building slower than you thought you would initially?

A: The answer is yes. Two years ago when we started buying land we hurried. We believed there was a big first-mover advantage. We believed the first people out of the ground would have the greatest advantage for costs and labor and material. The great irony is because we waited to make sure to check the program and to get our costs right we ended up with an advantage relative to the nonexisting gaming operators both from accurately knowing what it is going to cost and also being able to accurately price our condominiums to the buyers. Had we sold a year and a half ago, as some people did, and locked it in for the buyers well then when we found out costs were going up 35% beyond what we anticipated, well, then we'd be sunk. I hope this answers your question to the extent that, yes, costs slow things down but for us it has allowed us more certainty both in what we promise to the consumer and what Starwood and we need to do to just to make a modest return on investment.

Q: Is it safe to say Las Vegas has not turned out to be as profitable a place as you hoped?

A: We haven't done anything yet; so who knows? But I think it is safe to say that it costs way more to build today in Las Vegas than anybody anticipated.

Q: When do you think you will break ground?

A: I think we will break ground within 12 months.

Q: When do you think the first tower will be completed?

A: I would say 30 months after that.

Q: When will the breaking ground date be finalized?

A: Within the next 90 days.

Q: You are planning to have gambling in tower one?

A: For sure.

Q: Are you hoping that gaming revenue will provide money for the construction of tower two?

A: I don't look at it that way. No.

Q: Is there anything else you think I should know?

A: I read your blog before I called and I can only speak for us. But the projects that go are the existing casino operators or a product like ours or Trump that has a very powerful brand that can meet consumer's needs and deliver in a difficult market. For us the interesting thing is not withstanding the difficult construction market and rising costs, on the demand side there is almost an insatiable demand for W.

Q: What percent of tower one sold out?

A: We aren't selling the whole tower. But we sold our first 500 released in one month. And demand for second release is much higher than what we will end up selling. We can sell an almost unlimited number. A powerful brand sells, and we have that great location [24.5 acres between Harmon and Koval]. For now you have to say our combination of land and brand is very powerful.

Update: The publicist for W Las Vegas pointed out that the W Las Vegas project alone does not cost $15 billion; I had misunderstood something in the project overview. Thanks for the correction and my apologies for the error.

Hi Richard,

Just saw the piece on your blog. I wanted to let you know that the W Las Vegas project cost is not $15 billion. That number on our project overview refers to the projected development on Harmon, including City Center. As Reagan mention we are still finalizing our program, but rest assured the total cost will be less than $15 billion.