Two more builders back out of downtown projects

Erin Neff

Tuesday, Dec. 7, 1999 | 11:08 a.m.

Downtown Las Vegas revitalization efforts got a double dose of bad news Monday when separate developers confirmed their planned office towers would not be built.

Opus West Corp., a Phoenix-based affiliate of nationally respected office builder Opus Corp., has withdrawn plans for a 130,000-square-foot office tower on the first 5 acres of a 39-acre retail site on Union Pacific property.

The whole development, dubbed Parkway Center, is still proposed by city planners for the site at Bonneville Avenue and Grand Central Parkway. But the Opus project was considered the catalyst needed to spark the rest of development.

A 72,000-square-foot office tower proposed by the Trenton Group at Las Vegas Boulevard and Clark Avenue also has fallen through due to the anchor tenant law firm's decision Friday to build its own building outside downtown.

"I'm very concerned," Mayor Oscar Goodman said of the Opus loss. "What is going on downtown? It is another big setback."

Opus officials refused to comment on why the company decided to pull out. They referred all questions to a Phoenix public relations firm, which supplied the following written statement from David Krumwiede, vice president of Real Estate Development for Opus West:

"While we fully support the city's efforts to redevelop downtown Las Vegas and were excited about the opportunities it presented, Opus West Corporation is no longer involved in the Parkway Center project. We hope to play a part in the redevelopment of downtown Las Vegas in the future and wish the city luck in its efforts to improve the area."

Competition between developers coupled with downtown's historic failures and difficulty pre-leasing space downtown all contributed, according to an industry source familiar with downtown.

City redevelopment officials, who welcomed Opus with glowing praise just months ago, are downplaying the company's decision to leave.

"It's an opportunity," said Ken Templeton, the vice chairman of the City Centre Development Corp., the city's private sector redevelopment arm. "We have a plan now that's worked its way through the city, so they can move forward to bring in new developers.

"It's two steps forward and one step back," Templeton added.

City Centre President Mike Forche said the Opus decision was just a part of that company's due diligence efforts with landowner Union Pacific Railroad.

"The city has no dog in that fight," Forche said. "Developers have got to weigh that for themselves."

Forche said he had not spoken to Opus about its decision and had "no idea" why it pulled out.

In June a panel of experts convened to address the Southern Nevada Chapter of the National Association of Industrial and Office Properties had conflicting views of the Opus project's impact on plans the Pauls Corp. had for an office tower at Fourth Street and Lewis Avenue.

That panel, which included Kevin Higgins and Brad Peterson of CB Richard Ellis -- which is leasing the Parkway Center -- split on whether the Pauls project could draw enough tenants to its location given the Opus project adjacent to downtown.

John McKeown, regional leasing director for the Colorado-based Pauls Corp., was not upset to see Opus leave.

"We look at it as just one less competitor," McKeown said. "It didn't affect us at all when they were here."

The Pauls Corp. is finalizing a development agreement with the city, which should come before the Las Vegas Redevelopment Agency on Jan. 5 for approval.

The successful planning of that Class A office tower with a 600-space garage seems to tip the scale away from both the Opus and Trenton Group's plans.

Robert Wetmore of Keyser Marston Assoc. Inc. warned City Centre officials in August that all three projects, if built, could cause an overbuilding of office space that could lead to blight in existing office buildings if tenants opt for the newer projects.

"If they're all built, we could have a very serious overbuilt downtown," Wetmore told the development corporation when he presented findings of a market study.

Perry Muscelli, senior vice president of CB Richard Ellis, said he disagrees that downtown can be overbuilt.

"We're working right now with two developers and are very close to closing this year," Muscelli said. "That site is developable."

Opus West is a partner in the $500 million Collier Center mixed-use development -- the first new office tower in eight years -- under construction in downtown Phoenix.

But the downtown Las Vegas market proved a scary proposition, the industry source said.

Kevin Buckley, who represented the Trenton Group at Monday's City Centre meeting, echoed that sentiment.

"Pre-leasing has almost become impossible downtown because of the lack of credibility as a result of proposals that have not taken place," Buckley said.

A planned 14-story office tower called Sun Plaza at Fourth and Lewis streets was scrapped in March by developers American Nevada Corp. and Nevada State Bank when their request for additional city funding was rejected.

Sun Plaza developers said they needed additional money -- on top of $7 million already committed -- because they were having trouble pre-leasing the massive building before construction was to begin.

The Greenspun Corp. owns both American Nevada Corp. and the Las Vegas Sun.

That failure came on the heels of a downtown high-rise collapse whose property was dubbed the "Minami hole" after Japanese billionaire Masao Nangaku lost financing for the 35-story building after excavating the site.

After Minami Tower failed, The Koll Real Estate Group announced plans for twin 10-story towers on the site called City Centre.

The Koll project was initially scaled back and then abandoned in 1994 when it couldn't sign tenants for the building.

That site is now downtown's biggest sense of pride as the new federal courthouse rises from the ashes of proposals that went up in smoke.

The federal building, set for a June 2000 completion, the planned Regional Justice Center and the proposed Neonopolis entertainment retail center are now touted as downtown's saviors.

However, even as the last slab of concrete was poured on the Neonopolis parking garage Monday, the entertainment center remains without an anchor movie theater tenant and the subject of mounting criticism.

The bankruptcy of WestStar Cinemas forced Mann Theatres to drop plans for 11 movie screens at Neonopolis. That in turn has stymied attempts by developers to lease the retail and restaurant portion of the planned three-story center on Fremont Street between Fourth Street and Las Vegas Boulevard.

Forche remains confident that Prudential Insurance Co. of America -- which has spent $25 million on the project -- will find a replacement theater tenant.

Goodman, meanwhile, has not warmed to the concept of Neonopolis and last week set a Feb. 1 deadline for a theater tenant to be signed. If not, he said, his staff would "take over."

Forche said that completion of the city-owned subterranean parking garage under the planned Neonopolis may lead to temporary parking in the garage for city or other downtown uses.

Although Neonopolis developers World Entertainment Centers remain confident, others are beginning to have serious doubts about Neonopolis.

Buckley, The Trenton Group representative, told the City Centre board that failed negotiations with Rawlings, Olson, Cannon, Gormley & Desruisseaux created a loss of 50,000 square feet that would significantly alter the size of any building that could be constructed on the site.

"To say we're disappointed is an understatement," Buckley said.

Under terms of its exclusive agreement, the Trenton Group had until Dec. 20 to show a commitment by the law firm for the bulk of the building's space. Although the developer could conceivably construct a 20,000- to 30,000-square-foot building with more time, City Centre board members are hesitant to recommend such an extension to the city's redevelopment agency.

"For us to extend the time is going to be impacting the deal we have with Pauls," board member Peter Thomas said.

"The last thing we want to do is jeopardize our other deal," Templeton added.