City didn’t ask, so REI didn’t tell of Michigan project’s woes

By Mark Hansel (contact)

Saturday, Aug. 4, 2007 | 7:42 a.m.

When REI Neon /Warburg Pincus entered the bidding to build an arena in downtown Las Vegas, company officials probably hoped that the city would not ask tough questions about an $800 million REI project in Michigan that has been in limbo for two years.

REI executives need not have worried.

Despite what Las Vegas city officials have described as a thorough screening process, REI President Jon Weaver said the city's blue-ribbon committee that reviewed arena proposals did not check on the status of the developer's troubled Northville, Mich., redevelopment project.

The Las Vegas panel selected REI over four other groups to be the preferred developer for the arena. The proposals have not been released, but REI's project, at Charleston Boulevard and Main Street, has an estimated cost of $9.5 billion.

That is nearly 12 times the price tag of the Northville project, which would use space previously occupied by a state psychiatric hospital for a 414-acre residential and commercial development. The site, purchased by REI for $35 million from the state, has been vacant for several years.

REI has been trying to work out a compromise with Northville Township for more than two years, Weaver said. Although the project is not in litigation yet, both sides agree it appears to be headed there.

"There's a lot of distinctions between the Michigan marketplace, the Detroit metropolitan marketplace , versus Las Vegas," Weaver said.

Jennifer Frey, director of community development for Northville Township, said REI's proposed project would dramatically alter the community's master plan.

Despite the project's multimillion-dollar price tag and the thousands of construction jobs it would create, the increase in density and the amount of commercial space requested by the developer make the plan unacceptable, she said.

"The zoning and design guidelines were in place well before they took control," Frey said. "Once this is built and they go away, we have to live with it."

The contentious negotiations in Michigan have no bearing on Las Vegas' arena project, Weaver said.

"Out here in Las Vegas, the benefit of the doubt goes to developers from a market and knowledgeability standpoint," Weaver said. "In this particular community, that benefit of a doubt did not exist. Northville Township has a history of litigation over land-use issues."

Weaver stressed that REI has many success stories in Michigan, including its Waterstone project in Oxford Township, a 1,400-acre project featuring 2,000 homes, a 27-hole golf course and 11 lakes built on a former sand and gravel extraction site.

William Dunn, the township supervisor, said that community had a good relationship with REI.

"We are very pleased with the Waterstone project," Dunn said. "It has probably added at least $1 billion in tax base here."

That does not explain, however, why a panel designed to choose the best project for Las Vegas did not bother to inquire why its recommended choice was involved in a contentious land-use battle elsewhere.

A developer who submitted an arena proposal not chosen said it was a question that should have been asked.

"It seems like something they would want to know," said the developer, who asked not to be named to avoid compromising a potential chance to build an arena if REI's bid falls through.

"There have been a lot of questions raised about this project and what the intentions of this group really are."

Committee members contacted for this story - Rossi Ralenkotter, president of the Las Vegas Convention and Visitors Authority ; Tina Kunzer-Murphy, executive director of the Las Vegas Bowl ; and Pat Shalmy, president of Nevada Power - referred questions about the screening process to Las Vegas Mayor Oscar Goodman, who chaired the committee.

Goodman said that REI was not asked about the troubled Michigan project because officials here were unaware of it during the review process.

"I have talked to (REI officials) about it since then and they have assured me it is being resolved," Goodman said.

Some have suggested that REI's real objective is to secure a gaming overlay, which by allowing casinos to be developed on the site would increase the land's value and make it more attractive to potential buyers.

"The arena was just thrown in," attorney Chuck Gardner said. "What they really wanted was the (gaming) enhancements."

Gardner argued on behalf of local resident Charles Weiner before a state gaming review panel last week that the gaming overlay, approved by the Las Vegas City Council, should be disallowed.

Despite Gardner's assertion that the developer has not named a casino operator or that needed infrastructure and traffic improvements were not guaranteed in the project, the review panel of the State Gaming Policy Committee voted 4-0 to uphold the council's decision.

That ruling cleared another hurdle for REI. Even so, many, including Goodman, have called the project a long shot to be built.

If the entire project is completed, in addition to a 22,000-seat arena, it would include three casinos, 6,000 hotel rooms, nearly 4 million square feet of convention space, 785,000 square feet of retail, 500,000 square feet of office space, 1,500 condo unit s and 1,600 time-share units.

Weaver dismisses the claims that the gaming overlay makes it more likely that REI will sell the property, insisting that the company is committed to building the entire project.