Las Vegas City Council approves final deal bringing Zappos downtown

Zappos CEO Tony Hsieh speaks Wednesday, Dec. 1, 2010, at the Las Vegas City Council meeting, when it was officially announced the existing City Hall building would be used as the corporate headquarters for online retailer Zappos.com.

By Dave Toplikar (contact)

Wednesday, Feb. 1, 2012 | 3:12 p.m.

Zappos CEO Tony Hsieh, Las Vegas Mayor Oscar Goodman and members of the Las Vegas City Council answer questions in November 2010 at the Las Vegas City Council meeting, when it was officially announced the existing City Hall building would be used as the corporate headquarters for online retailer Zappos.com.

With some calling the vote "historic," the Las Vegas City Council today unanimously approved the final deal to relocate Zappos to downtown.

"This was a huge effort," Mayor Carolyn Goodman said of the complex financial transaction involving about eight acres of city property.

Goodman stood up at the meeting and led the applause for the city staff, plus those from Zappos and Resort Gaming Group who set up the deal for the soon-to-be-vacated Las Vegas City Hall complex at 400 Stewart Ave., which will become the company's corporate campus.

The city staff will be moving out of that building through the end of February into the new City Hall at 495 S. Main St. The new City Hall will have a grand opening March 5.

Then renovations, amounting to about $40 million, will begin on the old City Hall complex for the next 18 months. Zappos officials said they have about 1,200 employees but expect to bring about 2,000 employees downtown when the company finally moves in during fall 2013.

Goodman asked Zappos CEO Tony Hsieh to say a few words after the council unanimously approved the final development agreement with RGG, which will lease the property to Zappos for at least 15 years.

"This has been such a long process," Hsieh said. He said the company, now located in Henderson, had been looking for a new place for about five years.

Originally they had considered building a "dream corporate campus," such as they had seen built by Apple, Google and Nike, he said.

"When this opportunity came up to move downtown, we actually started to rethink that and actually started thinking, 'Let's not be like the other companies. Let's not be insular and only care about our employees,'" Hsieh said.

"So, for me what's really exciting is, really, we're not building a campus. We want to help contribute and help build a community and really integrate into a community around our campus," he said.

Hsieh said he has been working to get other businesses to move downtown.

"In the past five months, we've actually already had five other technology start-up companies move from other states to here," Hsieh said. "So we're already seeing a lot of things that extend well beyond Zappos."

When Zappos moves in, the city is expecting an economic impact to the downtown of more than $336 million, according to Bill Arent, the city's economic development director.

Businesses that are expected to benefit by the Zappos move include food services and drinking establishments, real estate businesses, health care providers, employment services, couriers and messengers, private hospitals and retail stores.

Under the deal, RGG will pay the city $18 million for the City Hall complex, which includes the adjacent parking garage and an annex structure.

In addition to a $3 million cash payment at closing, the city will get a $15 million promissory note with a market interest rate over the second half of the note. Escrow is expected to close by April 1.

The deal also involves an option for RGG to purchase 10.13 adjacent acres across Las Vegas Boulevard east of City Hall.

Amazon, the parent company of Zappos, is guaranteeing the mortgage on the 7.7-acre City Hall complex.

Councilman Bob Coffin said the last time he remembered such a major event taking place in the city was during a recession in 1967, when Howard Hughes started making his investments in the city. Coffin said Hughes' investments of millions of dollars changed the chemistry of the town.

Although Coffin said he wasn't trying to say that Hsieh is similar to Hughes, "it is eerily similar to me that someone is coming into town who believes in this town, who wasn't here, stuck in the old ways and sees something here that others didn't."

Coffin said part of the reason, or maybe the only reason, that some companies are investing in the city is because of Hsieh and his partners.

Councilman Steve Wolfson, who is leaving the council on Feb. 20 to become Clark County's new district attorney, said he was pleased to take part in the vote at his last meeting.

"This is probably, in the seven and a half years I've been on the council, one of the most significant votes I can make," Wolfson said.

He told Hsieh the Zappos renovations to City Hall would be on par with other major downtown developments such as the Lou Ruvo Center for Brain Health, the World Market Center and the Smith Center for the Performing Arts.

"I think when you talk about something that can affect so many people over time, this is an incredible, incredible opportunity," Wolfson said.

Andrew Donner, founder of RGG, told the council that Wednesday's action by the city council in approving the transaction "represents much more than a deal."

"Today represents the future of our city and sets the stage for a broad-based transformation that will not only make downtown a more vibrant business center but will make downtown a better place to live, work, play for both Southern Nevadans as well as tourists," Donner said.