Monday, April 2, 2007 | 7:09 a.m.
Las Vegas has begun discussions about turning over the troubled Neonopolis project downtown to the group responsible for bringing the Fashion Show mall, a local developer says.
City officials are not talking, with Mayor Oscar Goodman being the only City Hall leader willing to acknowledge that a meeting about Neonopolis' future even occurred in mid-March.
But local shopping center developer Benson Flanzbaum, who attended the meeting, said a plan to try to squeeze out the current owner is under review. An agreement to provide free parking to Neonopolis patrons - a deal seen as vital to the project's survival - could give City Hall leverage in any negotiations over a possible ownership change.
Flanzbaum says city officials met with Lyneir Richardson of Chicago-based General Growth Properties Inc. to discuss several projects, including the Neonopolis retail center.
Flanzbaum said he, Steve Van Gorp of the city's business development office, another person from that office and Richardson attended the meeting.
"They talked about Neonopolis, and they also talked about a grocery store for West Las Vegas. But Neonopolis was the focus of the meeting," Flanzbaum said.
Flanzbaum, a shopping center developer in the region in the 1960s and '70s, says he has been mostly inactive for some time but is still well connected in the industry.
City officials and General Growth remain mum about the meeting .
"We did have a meeting with the city of Las Vegas (that was) very general," said Richardson, General Growth's vice president of urban land development. "We really have no comment to make about that meeting at this time."
Wirrulla Hayward LLC, a Delaware-based company, bought Neonopolis from Prudential Real Estate Holdings for $25 million last year.
The 250,000-square-foot, $100 million retail center at Las Vegas Boulevard and Fremont Street has struggled financially since opening in May 2002. The structure has three anchor tenants - Galaxy Theatres, Jillian's restaurant and the custom-built Poker Dome, which televises poker tournaments from the site.
The city had hoped the development would turn the corner under the new ownership, but only one retail tenant, Del Prado Jewelers, has been added.
Rohit Joshi, the owner's representative who is spearheading Neonopolis' development, has come under fire recently for the lack of progress.
City officials initially expressed confidence in Joshi's ability to develop the site, but that support has waned.
During a recent council meeting at which Joshi sought an extension of a parking validation agreement, Goodman referred to Joshi's plans for the structure as "gobbledygook."
General Growth, the nation's second-largest real estate investment trust, has interests in more than 200 shopping malls in 44 states.
In addition to the Fashion Show mall, its valley projects include the Grand Canal Shoppes at the Venetian and the Summerlin Centre Las Vegas development, with more than 1.2 million square feet of retail space planned.
In 2004 the company paid $7.2 billion to purchase the Rouse Co., another retail development giant. With that deal it assumed $5.4 billion of that company's debt. The purchase was the largest retail real estate merger in history.
The company also has developed master-planned communities in three states, including Summerlin in Las Vegas, The Woodlands and Bridgeland in Texas, and Columbia in Maryland.
Even if General Growth would be interested in taking over Neonopolis, a key legal question remains: Could the city get out of its contract with Wirrulla Hayward?
Flanzbaum, who set up the meeting and described himself as the point man for the project, said city officials suggested they have a strategy to do so.
City officials "talked in detail about how Neonopolis has not developed the way they would have liked and about what the city could do to get General Growth in there," Flanzbaum said. "They said the whole thing is dependent on the parking validation program, which they only extended for one month this time around."
The city owns the parking garage under Neonopolis and the structure's foundation, while Wirrulla owns the building itself. Under the city's parking validation agreement with Wirrulla, patrons at Neonopolis may park for free.
Joshi has said the parking agreement is crucial to Neonopolis' viability, noting that patrons would not likely pay for parking downtown when shopping malls and the Strip offer ample free parking.
Even with the parking agreement, the businesses in Neonopolis have struggled. Eliminating free parking, Flanzbaum says, could create a domino effect that might force the current owners to sell.
The city added an $18 million note to the deed when Prudential sold the structure to Wirrulla, seeking to provide some protection for its $32 million investment in the parking lot.
If the current owners cannot make maintenance and other payments to the city, it could go after the deed money, perhaps putting pressure on the owners to sell .
Previously, the council had granted 90-day extensions for the parking agreement, but last month, at the meeting at which Goodman admonished Joshi for the lack of progress, the shorter extension was approved.
Goodman also asked the city attorney's office to look into Joshi's background at the meeting, amid claims of impropriety in previous deals by people with civil judgments against the developer.
As to the city's meeting with General Growth, Goodman confirmed that the session occurred, but offered no details.
"I'm ready to talk to all comers who tell me they're interested," he said.
Goodman added that he has "no concerns" that there already is a developer in place, saying he would refer all interested parties to Joshi or the current owners.
Michael Matkins, an attorney for Wirrulla, said the company has not been contacted by General Growth or the city about Neonopolis.
"We have been a good partner to the city and we hope that they would be a good partner to us," Matkins said.
Wirrulla has no interest in selling Neonopolis and is not concerned about the city's discussions with General Growth, Matkins said.
"This property was on the market for a long time and a lot of people had the chance to buy it before Wirrulla did, so we're not worried at this point," he said.
Flanzbaum, however, said there have been discussions about what a Neonopolis under General Growth might look like. In one scenario, Flanzbaum said, the company would buy out the city's end of the deal and unite the property under one owner.
The parking validation agreement comes up for renewal at Wednesday's council meeting.
If there is to be a change at Neonopolis, that vote could send a strong signal.
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