Monday, April 9, 2007 | 7:32 a.m.
It looks as if the city of Las Vegas has finally given up hope that Rohit Joshi and Wirrulla Hayward can turn around the struggling Neonopolis project downtown.
Confirming a scenario reported last week by the Sun, city officials have taken preliminary steps that could facilitate Neonopolis' sale to the group responsible for bringing the Fashion Show mall here.
At a city redevelopment agency meeting last week, city officials acknowledged that representatives from Las Vegas' Office of Business Development met privately last month with a senior executive from Chicago-based General Growth Properties to discuss that company taking over Neonopolis.
"I can confirm ... that the General Growth corporation is interested in purchasing Neonopolis," Scott Adams, the city's business development director, said at the redevelopment meeting.
Adams had refused to comment on the issue before.
General Growth has entered into negotiations with Wirrulla Hayward, a Delaware-based company that bought Neonopolis last year from Prudential Real Estate Holdings for $25 million.
"We recently learned that General Growth has an interest in talking to us about buying," said Michael Matkins, Wirrulla Hayward's attorney. "We've had one lengthy discussion."
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 city initially expressed confidence that Joshi, a local developer and the owner's representative, could breathe life into the beleaguered structure. But while Joshi has presented several ambitious ideas to the council, there has been almost no progress at the site, prompting Mayor Oscar Goodman to recently dismiss Joshi's plans as being "more like dreams."
The structure still has only three anchor tenants and two of them, Galaxy Theatres and Jillian's restaurant, have undergone management changes since Joshi took over. The custom-built Poker Dome, which televises poker tournaments from the site, is the other anchor tenant.
Del Prado Jewelers has been added as a retail tenant but other retailers have left, or been forced out, since the ownership change.
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, locally the company operates 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, in a deal under which it also assumed $5.4 billion of that company's debt. The purchase was the largest retail real estate merger in history.
Last week's meeting dealt with whether the city would renew a parking validation agreement with Wirrulla. The city has been offering free parking to Neonopolis customers to keep the struggling businesses afloat.
The city owns the parking garage under Neonopolis and the land on which it sits, while Wirrulla owns the structure .
The garage has become the key bargaining chip in both the city's efforts to persuade the current owner to sell and the potential new owner's willingness to buy.
Benson Flanzbaum, who set up last month's meeting between the city and General Growth, said city officials indicated then that the success of the project hinged on the garage.
The City Council had previously shortened renewal of the agreement from 90 days to 30 days, and Flanzbaum said the city appeared ready to revoke it if Wirrulla wouldn't come to the bargaining table.
Adams indicated as much at the redevelopment meeting.
"Up until a few weeks ago I was in a position where I could not forward this (parking validation agreement) to you with any recommendation," Adams said.
After learning that negotiations between Wirrulla and General Growth had begun in earnest, however, Adams recommended a renewal of the agreement for 30 days.
Adams said General Growth had informed him that it wanted to buy the property with Jillian's and the movie theater complex open, with renewal of the parking agreement being the best way to ensure that.
Joshi has said the parking agreement is crucial to Neonopolis' viability, saying that customers are unlikely to pay for parking downtown when suburban shopping malls and Strip properties offer ample free parking.
Flanzbaum, an area shopping center developer who would be the local point man for the project , said General Growth would prefer to ultimately buy out the city and unite the project under one owner.
At one point during last week's redevelopment session, it appeared that Matkins was going to short-circuit the deal before it even got started.
After asking the council to extend the validation agreement until the end of the year to allow time for sale negotiations, Matkins engaged in a heated exchange with Goodman after the mayor said he was going to recommend a 30-day extension.
"If you just think about how long it took somebody to buy this property from Prudential, I can guarantee you in 30 days nothing's going to happen ," Matkins said.
"Probably a sale's not going to happen," Goodman said. "I hope that they are going to report back to us. General Growth will tell us that there is a likelihood or that there's no likelihood, so we know what to do here. That can take place within 30 days."
Matkins said: "I'm not sure this is the right forum or venue to do that."
"Well, I'm going to look at it here," Goodman replied.
Matkins later responded angrily to the formal recommendation of a 30-day extension by interim Ward 5 Councilwoman Brenda Williams, whose district includes Neonopolis.
"I would suggest you give us 10 days," Matkins said sarcastically. "Nothing's going to happen in 30 days."
Goodman shot back: "I'll give you 10 days . Give him 10 days. And I'll take away the validation and blow your deal."
Williams, attending her first council meeting as a temporary replacement for newly appointed Clark County Commissioner Lawrence Weekly, calmed the storm.
"I really think the 30 days is sufficient," Williams said. "It simply says, look, in good faith this is what we've accomplished or have not accomplished and we need more time. I'm sure that given the right circumstances we would grant that."
The council unanimously approved the extension.
Although Matkins' comments suggest the sale could take at least several months, Flanzbaum said there is no timetable for completing a deal.
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