Chicago investor picks up prime Nevada Power parcels

Kevin Rademacher

Wednesday, Aug. 13, 2003 | 11:01 a.m.

Cash strapped Nevada Power Co. will have an extra $24.8 million in the bank thanks to a successful land auction.

Chicago-based Newcastle Properties LLC on Tuesday was the winning bidder in the Las Vegas electric company's auction of 22 acres in midtown Las Vegas along Flamingo Road, between Koval Lane and Maryland Parkway.

The land had been appraised at about $24.3 million, but eight bidders pushed the price higher as parties sought a piece of what land experts called prime investment property.

"We are very pleased," said Victor Pena, senior vice president and chief administrative officer for Sierra Pacific Resources, parent company of Nevada Power. "We got a little above the appraised value."

The land includes nine long-term leases and four vacant parcels. The buyer must honor the leases with existing tenants. Some of the businesses occupying the property include an animal hospital, a pawn shop and a Walgreens Drug Store. It also includes some high-profile local restaurants, such as Cozymel's, Roy's and Morton's.

The mix of undeveloped parcels and revenue-generating leases attracted the buyer.

"Basically, it combined the type of investments I'm looking for," said John Gross, principal of Newcastle Properties. "This is a great opportunity."

Immediately following the auction, Gross was fielding inquiries from the other bidders in the auction.

"There's always going to be interest," he said, adding that there are no specific plans for any of the land.

Tuesday's purchase marks the first major Las Vegas acquisition for Newcastle, which owns only one other Las Vegas parcel. It is leased to Walgreens a few miles from the Flamingo Road acquisition.

While the revenue generated from the sale will shore up Nevada Power's next earnings report, company officials emphasized that the proceeds will ultimately benefit ratepayers.

State regulations allow utilities to recover, through a component of their rates, business costs, such as construction or maintenance of its generation and transmission facilities. Those costs, however, are offset by gains, including profits from the sale of assets, in a general rate case reviewed by the state Public Utilities Commission.

"We think the sale of assets, as long as the proceeds are passed on to the ratepayers, is fine," said Phil Williamson, a financial analyst with the state Bureau of Consumer Protection. "It should help improve their balance sheet as well."

The current sale is consistent with the company's effort to generate cash from non-core assets, John Zelling, director of land services for Nevada Power, said prior to the auction.

Pena said Nevada Power acquired the land in the 1920s and 1930s. The company would not disclose the amount of revenue it receives through the leases on the property, citing confidentiality agreements with the current tenants.

The sale is expected to close in mid-September.