Monday, March 1, 1999 | 11:34 a.m.
Developers of the $57 million Sun Plaza office building in downtown Las Vegas have asked the city for additional assistance to get the project off the ground.
But that may not happen.
In a letter delivered today to the city's redevelopment agency, principals of American Nevada Corp. and Nevada State Bank asked the city for an additional contribution to the project to make it economically viable.
The city already is contributing $6.4 million as part of a downtown redevelopment grant approved in 1997. If the project doesn't go forward, the city still has the property at Third Street and Lewis Avenue as an asset and could sell it.
City officials told Nevada State Bank President George Hofmann in informal talks before delivery of the letter that it was not likely the city would put any more into the project, Hofmann said.
The letter is signed by Hofmann on behalf of Fourth and Lewis LC, the company formed to develop the Sun Plaza project.
A lack of pre-leasing on the the 14-story project has made construction and operation of the building economically unfeasible, the letter says.
"Although the city has been generous in the past, there needs to be an additional contribution by the city in order to give this building a chance to be financially successful," said Phil Peckman, president of American Nevada Corp.
Peckman did not specify how much money was necessary to keep the project alive.
The biggest problem facing Sun Plaza is the same one that has dogged the project since its inception -- a lack of tenants willing to prelease the building. Nevada State Bank, the Las Vegas Sun and the law firm Harrison, Kemp and Jones were the only committed tenants.
The Greenspun family controls both the Sun and American Nevada.
"Further financial assistance is necessary ... to help lure potential tenants back downtown at a price that is lower than where they have moved to," Peckman said.
"There's a reason people moved out of downtown in the first place," said Brian Greenspun, head of American Nevada and editor of the Sun. "They've got very comfortable office space in the suburbs. It will take a lot to bring people back to downtown. They need to be excited to come back."
Greenspun said Sun Plaza was designed to generate the kind of excitement needed to lure professionals back to downtown.
Sun Plaza can't be scaled down, Greenspun said, because the cost of redesigning the structure would be prohibitive. The time and expense of re-engineering the building would be greater than the savings realized in having a smaller structure, he said. And losing some of the architectural frills would defeat the purpose of the building.
"Anyone can build an eight-story building," Greenspun said. "But we want to make a statement about the renaissance of downtown."
"It's unfortunate that the partnership hasn't been able to make the economics work," said Hofmann. "I still feel strongly that a building of this magnitude would revitalize downtown and without it, chances of a new central business district are substantially reduced.
Real estate experts who have analyzed the downtown office market said they believe Sun Plaza was too ambitious.
"If they could have built a smaller building, it may have had a better chance for success," said Randy Broadhead, first vice president of CB-Richard Ellis, a commercial real estate company.
Broadhead said his office tracks about 1 million square feet of office space in downtown Las Vegas. Sun Plaza would house 270,000 rentable square feet.
"A quarter of the inventory in one building -- that's a lot to try to lease," he said.
Broadhead said there is a need for Class A offices in downtown. In fact, his company is attempting to develop a five-story, 130,000-square-foot building.
Jim Stuart, president of Colliers Stuart Mixer Inc., a member of Colliers International, said potential downtown tenants weren't willing to pay the prices asked by Sun Plaza developers.
Stuart said the $2.30 to $2.50 a square foot per month Sun Plaza was seeking to lease offices for was about 40 percent over existing downtown rents. Rates in the Northwest and Green Valley are closer to $2 per square foot.
He, too, feels Class A office space can fly if the development is right.
"There is a market for A-quality space in the downtown market, including the Union Pacific land (west of downtown)," Stuart said. "The downtown market should be tested with smaller projects to measure the breadth and depth of the market. But what continues to happen is that developers with grand ideas and plans try to go bigger.
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