Sahara Pavilion among distressed sites up for auction


Surrounded by empty storefronts at Sahara Pavilion North, a dying shopping center at Sahara Avenue and Decatur Boulevard, Reese Dossa has somehow been able to survive the first year of his full-salon wig business.

Dossa, owner of Reese's Wigs and More, knew the center was in trouble when he negotiated the lease for his 7,000-square-foot store, but he said it really hasn't affected business.

"It's been pretty good -- a little slow because we're still getting our name out there," Dossa said as a few customers came and went Wednesday afternoon. "I picked it because it's close enough to Summerlin and close to the Strip. Why not? I know I can make a go of it. I love it here. It would be busier if it was fuller, but wigs are a niche market, a necessity for some women, so they'll find it."

Once a thriving commercial hub at one of the busiest intersections in Las Vegas, Sahara Pavilion fell into default in February on a $56 million loan. The property is now listed among 65 distressed assets and nonperforming notes in Nevada going to auction May 17-19. Minimum bid is $12 million.

The long-predicted commercial real estate tsunami is finally hitting Las Vegas.

The three-day auction, billed by Auction.com as the largest commercial auction in U.S. history, brings about $1 billion in Nevada commercial properties and loans to market.

And that's just the start.

New York investment firm T2 Partners estimated that loan losses of $3.5 trillion in commercial real estate would start to surge in early 2008. Commercial mortgage defaults in Las Vegas doubled by 2009, starting with vacant land and working into apartments, shopping centers and professional offices.

Town Square Las Vegas defaulted on a $450 million note last year and The District at Green Valley Ranch was sold at auction for $50 million. There's probably another $1 billion auction on the way.

"This is the tip of the iceberg," said Todd Gladis, senior vice president of Irvine, Calif.-based Auction.com, at his office at 4615 W. Flamingo Road. "I think you're going to see identical or greater sales like this in the future in terms of volume and value of assets, particularly in loan space.

"I know Las Vegas has seen a substantial uptick in multifamily loan delinquency. Those are hot commodities now not only for local investors, but for equity hedge funds and opportunity funds."

The auction has created quite a buzz among real estate brokers and investors who see an opportunity to pick up distressed assets at a discount. It could set the floor for commercial property prices in Las Vegas, said Cathy Jones, president of Sun Commercial and lender representative on three bank-owned properties in the auction.

"I feel like this auction environment will definitely set guidelines for pricing," she said. "We do a lot of ... bank-owned sales and we feel like the pricing is starting to stabilize. It was dropping like a brick. Now we're at price points where buyers feel comfortable and we're getting stability in lease rates."

Real estate consultant John Restrepo of RGC Economics said both the amount bid and the number of bidders set fair market value. If a property has 30 bidders, that's probably a good indicator of price. If there are only two bidders, the price could be skewed, he said.

The upcoming auction will be the first in Las Vegas to allow smaller investors with $1 million to $1.5 million to bid on individual properties, Jones said. In past auctions, the number of buyers was limited due to the size of the note, often a community bank portfolio taken over by the Federal Deposit Insurance Corp., she said.

"I think it's going to be interesting. We've been on the phone constantly for the last couple of weeks with all types of buyers, from institutional investors to retired individuals," the broker said.

Last week the prospective buyers were checking out the offerings.

On Wednesday, a group of white-collared men got out of their BMW with clipboards in hand and roamed around Sahara Pavilion, taking notes on the 29-acre retail property's condition.

They saw a number of Kimco Realty signs advertising space for lease, light customer traffic and plenty of available parking. Businesses such as Aaron Bros. Art and Framing, Cold Stone Creamery and Thai Cuisine restaurant have closed, leaving 20 percent of the 333,000-square-foot shopping center empty.

Shepler Western Wear, Furniture Outlet Center and TJ Maxx are among 42 retail tenants hanging in there, and Ross Dress for Less opened a store about a month ago.

The auction will offer retail, office, industrial and multifamily properties, primarily in Southern Nevada. Nine are bank-owned; the rest are nonperforming notes often held my multiple lenders.

The top starting bid on bank-owned properties is $3.5 million for Southfork Pointe, 2950 St. Rose Parkway, a 6.3-acre, 66,000-square-foot retail center built in 2004. It's 60 percent occupied. On the low end is a 20,000-square-foot office building at 3085 E. Russell Road, at $300,000.

The auction is held online as most bidders prefer the privacy and comfort of bidding from their homes or offices, Gladis said.

Bidders must create a profile account at www.auction.com, and must provide a deposit ranging from $10,000 to $50,000, depending on the asset value. The deposit can be in the form of a credit card, cashier's check or wire transfer.

Each bidder must also provide current proof of available money. This can be a bank statement or brokerage account statement, for example, that shows liquid funds to buy the asset.

The final day of the auction will go live at Cashman Center for bidders who may have questions about the properties, Gladis said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.

Commercial assets for auction

1. Sahara Pavilion North retail center, northeast corner of Sahara Avenue and Decatur Boulevard. Starting bid of $12 million on $56 million on performing note secured by 333,234-square-foot shopping center on 29 acres. Occupancy: 79 percent.

2. Retail shopping center at 5115 Spring Mountain Road. Starting bid of $1.7 million on $18.3 million nonperforming note secured by 77,900-square-foot shopping center on 4.2 acres. Occupancy: 77 percent.

3. Retail shopping center at 6310 W. Charleston Blvd. Starting bid of $2.5 million on $18.3 million nonperforming note secured by 55,583-square-foot shopping center on 5.8 acres. Occupancy: 73 percent.

4. Retail shopping center at 4669 W. Ann Road. Starting bid of $1.35 million on $6.8 million nonperforming note secured by 27,685-square-foot shopping center on 2.6 acres.

5. Retail shopping center at 7293 W. Sahara Ave. Starting bid of $500,000 on $5 million nonpefrorming note secured by 14,880-square-foot shopping center on 2.6 acres. Occupancy: 60 percent.

6. Retail shopping center at 9700 W. Tropicana Blvd. Starting bid of $850,000 on $6 million nonperforming note secured by 19,886-square-foot shopping center on 1.9 acres. Occupancy: 50 percent.

7. The Shops at the Village, 1107 California Ave. in Reno. Starting bid of $900,000 on $6.6 million nonperforming note secured by 45,000-square-foot shopping center on 5.2 acres.

8. The Fountains at Flamingo. Nonperforming note of $50 million secured by 524-unit gated apartment complex on 28 acres.

9. Montego Bay Apartments in Henderson. Nonperforming note of $38 million secured by 420-unit apartment complex on 23 acres.

10. Nine additional notes of $20 million or larger.

Source: Auction.com
 

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