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Chapter 1: A desire for downtown

Natalie Young
Natalie Young, chef and owner of Eat: Young was persuaded to open her downtown restaurant, Eat, after she met Tony Hsieh. The Downtown Project, who works with small businesses interested in opening in downtown, provided funding for the restaurant.
Eat kitchen

Natalie Young was so close to reaching her dream of opening a restaurant she could taste it.

The longtime Las Vegas fine dining chef could even envision the clientele and the menu.

“All my life I’ve been cooking for the rich; I just want to give people like me and people like you the same experience,” said Young, 49. “Why can’t you have a nice clean glass and a linen napkin and eat a grilled-cheese sandwich? I say you can.”

And with a no-interest $225,000 loan from the Downtown Project, an urban renewal drive backed by Zappos CEO Tony Hsieh, Young was eager to open a restaurant she hoped to make a social hub in Las Vegas’ burgeoning downtown.

But there was a problem. After walking away from a lucrative but soul-sapping job on the Strip, Young was flat broke. With her restaurant not yet open, she fell three months behind on rent, couldn’t afford car insurance and was even running out of food.

Unwilling to touch the restaurant loan for personal expenses and ready to give up her dream and move to New Mexico for work, Young called a friend, downtown bar owner Michael Cornthwaite, to deliver the news.

“I’m crying, the whole full-on, snot everywhere,” she recalled. Cornthwaite, who with his wife, Jennifer Cornthwaite, owns the Downtown Cocktail Room and the Beat Coffeehouse, told Young to wait.

About 10 minutes later Jennifer Cornthwaite showed up to calm Young down, write a check for the rent and provide a month’s worth of groceries. It kept Young afloat long enough to open Eat, now the social hub she envisioned.

“Every time I tell that story I get choked up,” Young said. “That is a lesson on humility, and it is also a lesson on how to treat other people while they are struggling.”

It’s also a lesson in how the Downtown Project is supposed to work.

In the past 18 months, the organization’s investment team has provided $350 million to bankroll everything from restaurants to tech startups and garment makers to real estate developments. Those are all business investments, but they’re also much more.

At a recent Las Vegas Chamber of Commerce panel discussion, City Manager Elizabeth Fretwell listed the Downtown Project’s investments and described the unusual approach.

The organization, she said, has taken responsibility for turning around “a drug-ridden, crime-infested area of our downtown. Before that happened, that’s what governments did.”

Hsieh’s people also want others in the community to make their own contributions. That combination of capitalism and communal values is what they say separates the Downtown Project from other urban renewal programs. Hsieh and others call it “return on community,” a value they put above profit.

“Part of it is it just becomes self-selecting and growing on its own,” said Hsieh, whose evangelism about corporate culture has made him a star in the world of business and technology. “You can just feel it when you are participating in it.”

beforeafter
Interactive | Then and Now: The Union Pacific railroad depot at Fremont Street and Main Street as seen in 1947 in this aerial view looking east. The Plaza Hotel-Casino occupies the train station property in 2013.

At Zappos, Hsieh and a small group of friends turned a struggling startup into a retail superstar. They did so by cultivating a workplace culture that kept the focus on their core product, online shoe sales that made happy customers come back for more.

But in taking on the already difficult task of revitalizing the core of a major American city, Hsieh and his acolytes must deal with an entirely different environment. Overlooked, dilapidated and populated with a hodgepodge of scrappy business owners, fixed-income residents and those who are down-and out, downtown already has a culture all its own.

Hsieh, however, is undaunted.

“There is the opportunity to help shape the future of a major city,” Hsieh said. “It is the blank-slate feeling in which anything is possible, and that is exciting.”

Whether Hsieh can build a community the same way he built a company remains to be seen. The effort so far has earned plaudits in City Hall and put Hsieh on the cover of national magazines.

But the cameras and microphones pointed at Hsieh are available to critics as well, including people who feel shoved aside, not uplifted, by the Downtown Project.

“To hear people from the Downtown Project talking about downtown Las Vegas as a blank slate or as a startup is offensive to the people were already there,” said Michael Borer, a University of Nevada, Las Vegas associate professor of sociology.

Chapter 2: A long, slow decline

Workers stand in the alleyway between Fremont Street and Carson AvenueA man walks near El Cortez hotel-casino at 600 E. Fremont Street.William Miller leans against a pole on the corner of Ogden Avenue and First Street

Las Vegas is an American original, but it has one thing in common with all cities. Starting with the economic boom after World War II, people moved to suburbs, taking with them social and economic vitality once concentrated downtown.

A seminal moment for Las Vegas came in 1968, when Boulevard Mall opened on Maryland Parkway south of Desert Inn Road. It helped pull department stores like Ronzone’s, JC Penney and Sears away from the Fremont Street business district east of downtown’s casinos.

Open spaces south of downtown, toward the UNLV campus and the Strip, proved fertile for new housing.

There was little need or desire for aspiring homeowners to buy or build near downtown.

“It is just cheap land,” said historian Brian Paco Alzarez, the son of Argentine immigrants who moved to Las Vegas in the late 1960s.

Watch | Delivering a New Las Vegas, Part One: Losing Downtown: Downtown Las Vegas was the epicenter of the valley until the 1960s. With the creation of the Strip and the expansion of suburbs, downtown Las Vegas became an afterthought.

That land made large, master-planned communities with single-story homes, large lawns and pleasant surroundings attainable for the middle-class.

“The ability to be in a safe area with a wall around it and a gate,” is how Alvarez, now a cultural curator for Zappos, described the appeal of the suburbs.

That suburban growth came at the expense of downtown.

“I wouldn’t walk from Las Vegas Boulevard to the El Cortez on Fremont Street,” Alvarez said. “I would get hit up for drugs, prostitution, seedy characters on the corner. It was rough and tumble.”

The demise had been evident for decades, Alvarez said. As early as the 1960s, city leaders realized tourism was migrating to the Strip and sought ways to keep customers downtown.

Their strategy was to modernize pioneer-era casinos with new neon-and-metal facades, build parking garages behind them and install big signs advertising the “casino center.” But aside from the development of the Sundance, now the D, and of the Lady Luck in the 1980s, downtown continued to slide.

In the 1990s the Fremont Street casinos and the city closed Fremont Street to vehicle traffic from Las Vegas Boulevard to Main Street and installed the Fremont Street Experience canopy.

The canopy helped keep tourists coming downtown, but did little to attract new residents, jobs or businesses to the city center.

With the economy still running strong in the early 2000s, the bulk of the economic action was on the Strip and in the suburbs. But that investment dried up after the economy crashed, leaving downtown Las Vegas to emerge as one of the few spots in the valley with a concentration of new development.

“I have always said that downtown redevelopment is economic development; it is not just about elimination of slums and blight,” said Scott Adams, the chief urban redevelopment officer for Las Vegas. “It really is at its very core and foundation rebuilding the core of a city and the city’s economy.”

Chapter 3: The charmer

beforeafter
Interactive | Then and Now: Fremont Street and Las Vegas Boulevard, looking west down Fremont Street as seen on April 1, 1956. Now replaced by the Fremont Experience as seen June 11, 2013.

It’s easier to learn the history and values of Las Vegas by visiting the Strip or Fremont Street on a Saturday night than by going to a library or museum.

The progression of buildings in the skyline, from the modest Riviera hotel-casino built in 1955 at the north end of the Strip to the massive CityCenter resort opened in 2009, tell the story.

The blaring classic rock under the Fremont Street canopy, throngs of alcohol-soaked tourists gawking at casino facades and mobile billboards advertising “hot girls direct to your room” demonstrate the values.

“Most cities have some sort of connection to an image or an idea or a dominant narrative,” said Borer, who has done academic research on the18b arts district downtown as well as the role of religion in Las Vegas. “Las Vegas has a very strong dominant narrative, that being sex and gambling.”

Interactive | Timeline: Walk through the history of downtown Las Vegas' development including the recent push to revitalize the neighborhood.

Gambling long ago went mainstream and corporate, but the city’s culture remains shaped by its outlaw past. And if there’s a living icon of that era, it’s former Mayor Oscar Goodman.

Goodman and his wife, current Mayor Carolyn Goodman, left Philadelphia for Las Vegas in 1964. In the decades that followed, Goodman rose to prominence as a criminal defense lawyer, often representing underworld figures. His flamboyant style made him famous – so much so that he played himself in the 1995 movie “Casino,” loosely based on real-life clients, mobsters Frank “Lefty” Rosenthal and Tony “the Ant” Spilotro.

Goodmans
Above: Former Las Vegas Mayor Oscar Goodman talks to his wife and current Las Vegas Mayor Carolyn Goodman outside the mayor's office at Las Vegas City Hall. The Goodmans are instrumental in transforming downtown Las Vegas into a live-work cultural center.

But when he wasn’t cracking wise or using the nearest microphone to lash out at critics or rivals, Goodman was making downtown his “hill to die for.”

“The downtowns of cities where I tried cases all over the country became war zones – rubble – and I did not want that to happen here,” Goodman said in a recent interview. “When (tourists) hear Las Vegas, they think of the Strip. And when they read that Las Vegas’ downtown went into the toilet, they will equate it with the Strip and it will have a devastating affect on all of us.”

His predecessor, Jan Jones, had overseen creation of the Fremont Street Experience. During his tenure, largely during an unprecedented economic boom, Goodman pushed for more cultural and political monuments around downtown.

Goodman saw opportunity in the 61-acre former Union Pacific rail yard west of the casino center, between Main Street and Interstate 15. Private developers acquired the land in 1996 for a stadium project that never got off the ground. In 2000 the city took over, trading Lehman Bros. Holding Inc. 97 acres near Smoke Ranch Road and Tenaya Way, plus $2 million, for the land.

Largely working through its redevelopment agency, the city plowed tens of millions of dollars in subsidies and tax breaks into the old rail yard. Private developers built a major outlet mall and the massive World Market Center. Philanthropist Larry Ruvo, of Southern Wine & Spirits, backed the Lou Ruvo Center for Brain Health. The crown jewel of the new projects, however, was the $485 million Smith Center for the Performing Arts, which opened in 2012.

The reuse of the rail yard, now called Symphony Park, remains Goodman’s proudest mayoral accomplishment. Just ask him.

Carolyn Goodman

Mayor Carolyn GoodmanCarolyn Goodman moved to Las Vegas in 1964 but didn’t give much thought to downtown until her husband, former Mayor Oscar Goodman, ran for office. After three terms with an intense focus on downtown revitalization, Oscar Goodman left office – to be replaced by his wife, who ran on the promise to continue his agenda.

Unfinished elements of her husband’s mission include building out Symphony Park and convincing someone to build a professional basketball arena.

“Carolyn gets angry at me because I say 'I’ all the time; she says it should be 'we,’ ” Goodman said. “Well, no, I was doing this. I was on the phone and I was negotiating, and I’m the guy who went back to New York and spoke to Lehman Brothers.”

Developer Bob O’Neil, one of three partners who invested in the rundown Lady Luck hotel-casino in 2003, saw Goodman’s methods first-hand.

O’Neil, whose former partner, Andrew Donner, is now working with Hsieh, said Goodman’s powers of persuasion led to a major invest in downtown.

A meeting at a charity event not long after Goodman’s election led to an invitation for drinks at the Goodman home, where the mayor laid out his vision for downtown and urged O’Neil to invest.

O’Neil responded that he was cutting back on his workload and “had no interest whatsoever in starting up again.”

That didn’t dissuade Goodman, who launched a kind of good cop-bad cop routine whenever the two met. O’Neil recalls dining at the Palm steakhouse in Caesars Palace when the mayor came in.

“He kind of says things like, 'I dare you.’ ” O’Neil said. “Here comes the mayor, calling you a loser and a lowlife, like a football coach.”

Yet when entertaining at his home, Goodman was a charmer, a master of the soft-sell.

“You have a martini, he whispers the right word in your ear and all of a sudden you end up pregnant and downtown,” O’Neil said. “How the hell did that happen?”

O’Neil’s investment in the Lady Luck grew to involve property for bars and restaurants on the west side of Third Street, as well. The hotel, now under new owners, is being remodeled and is expected to open at the end of 2013.

Chapter 4: The power of silence

Below: Zappos CEO Tony Hsieh sits for an interview at the Downtown Cocktail Lounge. Hsieh is transforming downtown Las Vegas into a live-work cultural center.
Zappos CEO Tony Hsieh

Tony Hsieh does things Oscar Goodman cannot. Blend into a crowd, for one.

But soft-spoken and most at home in a Zappos T-shirt and jeans, the 39-year-old entrepreneur is in his own way just as unique as Goodman.

Asked whether he had ever worked with anyone like Hsieh before, Donner said, “It would have been impossible to have worked with anyone like Tony because there is only one Tony.”

His first meeting with Hsieh, before the decision to purchase City Hall for a corporate headquarters, “did not go well,” Donner said.

Hsieh and his friends had been scoping out downtown, frequenting Cornthwaite’s Downtown Cocktail Room after it opened in 2007 at Fremont Street and Las Vegas Boulevard.

In early 2010, Hsieh and Zappos executive Fred Mossler approached Donner, who is known as a downtown deal-maker. Hsieh asked a few general questions about downtown but “said very little.” Donner thought little would come of it.

But a couple of weeks later, Hsieh sent a text message asking to meet. This time, as he and Donner walked around downtown, Hsieh asked about the odd-looking building at Stewart Avenue and Las Vegas Boulevard.

That, Donner explained, was City Hall for the moment, but it would soon be vacant. A new one was under construction.

“His comment was that it would be a cool corporate office,” Donner said.

Nothing in the Zappos CEO’s nonchalant reply told Donner that Hsieh was doing more than making idle conversation.

Fred Mossler, an early Zappos hire and now a Downtown Project partner, said Hsieh embodies understatement.

“Tony always thinks he can learn something from everyone,” Mossler said. “So he listens. He listens intently. If you don’t know Tony and haven’t spent a lot of time with him, that silence and quietness can be a little intimidating.”

Hsieh’s approach helped Zappos grow from a startup in 1999 to a company sold to Amazon for $1.2 billion a decade later, Mossler said.

Much of the success of Zappos is attributed to Hsieh’s belief that a positive workplace culture results in good customer service, productivity, lots of sales and growth.

Hsieh developed his approach at LinkExchange, an Internet advertising company he co-founded in 1996 and sold to Microsoft for $265 million. Money from that deal, plus $27 million from LinkExchange colleagues, created Venture Frogs, a venture capital firm that invested in Zappos.

In his book, “Delivering Happiness,” Hsieh said he almost took a pass when Zappos founder Nick Swinmurn first pitched his company in a voice mail.

“To me, it sounded like the poster child of bad Internet ideas,” Hsieh wrote. But before Hsieh could punch 'delete,’ Swinmurn said that footwear was a $40 billion industry, and 5 percent of those shoes were sold mail order.

“I did some quick math and realized that 5 percent was equal to $2 billion. It didn’t matter whether I would be willing to buy shoes without trying them on first. What mattered was that consumers were already doing it, and it seemed pretty reasonable that Web sales would one day be as big as catalog sales.”

A more personal revelation helped guide Hsieh’s investment in and re-creation of Zappos. He had come to realize that selling LinkExchange made him rich, but it didn’t make him happy.

“I didn’t realize it at the time, but it was a turning point for me in my life,” he wrote. “I had decided to stop chasing the money, and start chasing the passion.”

His early days at Zappos were rocky, bedeviled by deliveries that failed to meet customer expectations. Running in the red in 2002, Hsieh had to sell his San Francisco apartment to keep the company going. But a year later, with shipping and inventory issues solved, Zappos made $70 million. When it came time to open a call center in 2004, Hsieh moved the company and its 70 employees to Henderson.

On its surface, Zappos culture appears dominated by extroverts who decorate work spaces with outlandish trinkets and host elaborate, impromptu workplace parades and parties. But it also leaves room for people like Hsieh, who are soft-spoken and reserved.

“He thinks of it as a greenhouse,” Mossler said of the culture. “In a lot of companies the CEO is trying to be the tallest plant. (Hsieh) wants to create the perfect environment, the perfect greenhouse to grow wonderful plants.”

Chapter 5: A new kid in town

BelowTony Hsieh, CEO of Zappos, passes the "Welcome to Downtown Las Vegas" sign on Las Vegas Boulevard.
Tony Hsieh, CEO of Zappos

There was irony in the air at City Hall in late 2010, when Tony Hsieh turned to Oscar Goodman and said, “I think you’re sitting in my seat.”

The City Council was set to approve the sale of the old City Hall for $25 million to developer Andrew Donner, who was already working with Zappos on a lease agreement that could move as many as 2,000 employees downtown.

The quip was more than an unusually saucy departure for Hsieh. It marked a change in both strategy and style in revitalizing downtown. Goodman’s bombast and emphasis on powering through building projects would give way to Hsieh’s subtle confidence and interest in first cultivating a community.

Despite disparate styles, Goodman and Hsieh each needed to make a deal.

Goodman, nearing the end of his third and final term, wanted to burnish his legacy and leave a rejuvenated downtown in his wake. Yet many of the city’s signature projects remained incomplete, and the Las Vegas area was mired in a deep recession that cast doubt over the economic future of the entire region. Economically speaking, it was hard to find a worse place to be in the United States than Las Vegas.

“Although much of the action during the anxious days of late 2008 took place on Wall Street and in Washington, the Las Vegas housing market was in many ways the epicenter of the financial crisis,” one analyst wrote in December, 2010.

Times were tough at City Hall. In October of that year, the council cut city office hours to four days per week to save money. The city budget called for 205 layoffs, and Goodman was at odds with employee unions after threatening firings to force pay concessions.

The last thing Goodman wanted was for the pending move to a gleaming new $146 million City Hall to be overshadowed by the old one left an empty husk.

“It could have been like a house of dominoes or a house of cards and collapsed, but it didn’t,” Goodman said. “We got lucky because Zappos comes down.”

Hsieh saw Goodman’s need to sell as a way to get a greenhouse where he could cultivate an even bigger experiment in culture that he hoped would bear fruit.

“It really was one of those magical coincidences that turned out almost too good to be true,” Hsieh said.

Zappos had outgrown its leased Henderson headquarters and needed a new home. Hsieh considered building a corporate campus, as have Apple, Google, Nike and other big, progressive companies.

But Hsieh is a fan of urban thinkers who see hip, pedestrian-oriented neighborhoods with a cafe culture as incubators where creative professionals drawn by quality of life will interact, growing new ideas and building a healthy economy.

Cornthwaite’s urban vibe appealed to Hsieh, who was beginning to realize a suburban campus could not sate employee demand for gyms, bars, doggie daycare and other amenities.

“We started compiling a list and realized we couldn’t possibly fit all those things in our own building,” Hsieh said.

Slideshow | From City Hall to Zappos: The former City Hall building will be the new headquarters for Zappos.

That interest in a more urban setting led to an introduction to Donner, a former Lady Luck partner and owner of the Timbers tavern chain. Donner’s connections to both Hsieh and Goodman allowed him to broker the deal with his company, Resort Gaming Group, in the middle.

“I ... got into a contract with the city predicated on 'I can bring Zappos,’ ” Donner said. “I didn’t have anything. I had no binding deal. The city took a huge risk.”

Under the original terms, Resort Gaming Group would buy the building for $25 million, with the city doing owner financing. Zappos’ lease would pay the note.

The city also had to pay Cordish Companies $2.4 million for the rights to develop an arena there. It was seen as a good deal in light of the dismal economic climate.

“I’m getting giddy. I’m so excited,” Councilman Steve Ross said.

“Las Vegas is on the tipping point on being the greatest city in America,” Councilman Ricki Barlow added.

Later, after the buyers assessed the condition of the 40-year-old building, the council knocked another $7 million off the purchase price.

The Zappos deal drove hopes sky high even before Hsieh and friends announced their audacious next move.

Chapter 6: Evolution never stops

beforeafter

Interactive | Then and Now (Above): The Mob Museum at 300 Stewart Avenue was originally the United States federal courthouse and post office as shown in August 1957.

(Below): The Las Vegas Grammar School/Fifth Street School, as seen on Jan. 1, 1947, now houses the City of Las Vegas Office of Cultural Affairs, Nevada School of Arts and the American Institute of Architects offices.

beforeafter

Aside from a few bars, convenience stores, casinos and the Beat coffeehouse, downtown lacked the amenities Hsieh believed would appeal to the workforce he wants to attract.

"There weren't any people walking around," Michael Cornthwaite said. "You would walk down the street during the day and scary people, just homeless people or whatever, would probably outnumber the average person 30-to-1. At night it would probably be 50-to-1."

beforeafter

Interactive | Then and Now (Above): The building at 520 E. Fremont St. was the J.C. Penney's department store as shown April 3, 1952. It was then known as the Fremont Medical Center.

The building is now the Emergency Arts building and the Beat Coffeehouse.

If the Zappos move was going to succeed, those ratios needed to change.

So on the heels of the City Hall deal, Hsieh and his investors created the Downtown Project to weave Zappos culture into the city center's fabric far from the company's headquarters.

"Downtown Project company thinks about downtown much the same way as Tony and we thought about Zappos," said Mossler. "Zappos wants to be part of the community; the company doesn't want to be the community."

Hsieh, Mossler, Donner and other players in the Downtown Project were willing to spend some $350 million to speed evolution in the blocks within walking distance of City Hall. The project set aside $200 million for real estate and $50 million each in funds to aid small businesses, technology startups and education.

First Friday
Slideshow | First Friday: First Friday, which occurs on the first Friday of every month in the Arts District, allows local artists to showcase their work and includes live entertainment and vendor booths.

Watch | Interview: Zach Ware, leader of the Zappos campus development, talks about residential density and collisions.

The effort is influenced by urban scholars such as Edward Glaeser and Richard Florida.

Florida is best known for tying the economic success or failure of cities to their ability to attract "creative class" professionals, a group that includes everyone from professors and poets to artists and architects.

Glaeser is best known for his book, "Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier." Hsieh and others often cite Glaeser's observation that half the world's population lives in cities and that productivity increases along with urban density.

"But as companies get larger they typically get less productive. It just made a lot of sense that we should have an urban campus," Mossler said. "We think it is going to be really good for our culture and our employees and continue to make us all more intelligent, more productive and be good for the company."

Mossler says the project is about much more than Zappos or even downtown Las Vegas, considering the global migration of people into cities.

"Having successful cities I think is just super important to the human race," he said.

It's a work very much in progress.

Early on Hsieh spoke of needing residential density of 100 people per acre, a tall order in a downtown with few high-rise apartments or condos.

"We started out with this idea we needed to build residential density and everything would sort of fall into place," said Zach Ware, a technology fund partner and leader of Zappos campus development. "But ultimately how do we guarantee that once the residential is in place the activity is going to happen on the ground?"

The goal shifted to density of activity, and the standard is 10,000 "upwardly mobile" people downtown for any reason.

The group is now pursuing a holistic approach that includes attracting skilled workers, artistic and cultural events, nightlife and other amenities to make downtown a more desirable place to live.

Ware said they would "really try to make the area we focused on the best place to be, day and night. If we do that then residential will solve itself."

The project's most obvious progress so far has been in locking up real estate. The $200 million property budget has so far bought dozens of properties, including the former Western and Gold Spike casinos; the majority of Fremont Street frontage between Eighth and Maryland Parkway; at least two full blocks between Fremont and Ogden Avenue; a convenience store at Fremont and Las Vegas Boulevard now being converted to a speakers venue; a convenience store/car wash at Stewart Avenue and Las Vegas Boulevard; and a former church at Bridger Avenue and Ninth Street.

The most significant residential acquisition so far is a 300-unit apartment complex at Alta Drive and Shadow Lane.

That's in addition to the old City Hall, an associated parking garage and an option on 10 acres nearby for Zappos.

Interactive | Map: The announcement in 2010 that online retailer Zappos would move its headquarters to the former Las Vegas city hall building touched off a flurry of real estate activity downtown.

The biggest player has been the Downtown Project, a company formed by Zappos CEO Tony Hsieh and partners to breathe new life into the area. The Downtown Project's real estate partner, Resort Gaming Group, or RGG, was instrumental in helping close the city hall deal. It's also helped Downtown Project and subsidiaries acquire dozens of downtown properties, mostly along and around Fremont Street.

Click below to view the properties affiliated with the Downtown Project, along with their recorded values and transaction dates.

Source: Focus Commercial Group/Clark County Assessor and the Resort Gaming Group

 

Owning the real estate is considered crucial to the Downtown Project's ability to provide workspace, storefronts and gathering places for the people and companies it recruits and supports.

"What we want to do is kind of be the landlord for the core," Hsieh said. "What you'd call the heart and soul of the community."

After scooping up the available rundown motels, empty lots and small, older buildings, the Downtown Project decided that new construction is also needed. The most high-profile example of its approach is the Container Park at Fremont and Seventh Street.

Container

Above: Men work on fresh poured concrete at Container Park along Fremont Street and Seventh Street. The $15 million to $20 million project, which is backed by Zappos CEO Tony Hsieh's Downtown Project, is scheduled to open next summer.

Below: Zappos employees from left, Mikela Lee-Manaois, Audrea Hooper and Loren Becker plan a corporate event with Tom Link of Plan-In Interactive in the Gold Spike. The Downtown Project recently purchased the property from Siegel Group of Nevada. It is used by Zappos employees as a work and play space and is open to the public.

Gold Spike

onceived as an economical, short-term way to house new businesses, the Container Park is modeled on similar developments using disused steel shipping containers in San Francisco and New York. But like many Downtown Project ideas, it evolved and grew more ambitious as backers dreamed up new uses while seeking to appease city officials who couldn't bend building codes to accommodate shipping container construction.

The result: a bigger site on Seventh Street for more people-friendly glass-and-steel boxes made to look like shipping containers.

Don Welch, a friend of Hsieh's who moved to Las Vegas to run the small business fund, said Container Park is a prime example of the Downtown Project's flexibility and ambition.

"It started off as this boutique-y, experimental smaller project, and I literally went on my honeymoon and came back and that project was scrapped and it was quadruple the size," Welch said. "That is just how a lot of projects go. When things evolve it makes things difficult, but the end-product is so much better."

Another unconventional move involved buying the Gold Spike hotel and casino and converting the casino, bar and restaurant into an informal meet-mingle-work space for laptop-toting downtowners.

In addition to managing the real estate portfolio and supporting new businesses, the Downtown Project is making progress with the $50 million technology fund.

So far the fund has supported more than two dozen companies.

One, consumer robot maker Romotive, moved to Las Vegas and grew from two to 20 employees before receiving more outside money and relocating to the Bay Area to be closer to technical support not available in Las Vegas.

Another, Ticket Cake, is making inroads as a marketplace for buying and selling event tickets.

Unlike venture funds that focus on a specific sector of technology, such as health care or robotics, the Vegas Tech Fund is for companies that will attract talent to downtown as well as provide a return on investment.

"There is no set metric on this, but nine out of 10 companies you invest in are going to in some way fail," Ware said. "It works because one out of 10 are generally very, very successful."

And even when companies fail or move, as Romotive did, the talent they attract to Las Vegas can help others.

Jacob Bronstein, founder of Flint and Tinder: Las Vegas has inspired countless visitors to overspend, overeat and even get married. It inspired Jacob Bronstein to start an underwear factory.

Bronstein is a "purposeful visitor," someone recruited by Zappos CEO Tony Hsieh to spend money and look for inspiration downtown.

Bronstein, from Brooklyn, NY, founded Flint and Tinder, a company looking to break into the premium underwear market.

Not long ago he asked Hsieh to advise the company; Hsieh suggested Bronstein make regular visits to the Stitch Factory, a Downtown Project-sponsored fashion venue.

After mixing with other entrepreneurs, business leaders and creative types, Bronstein decided to make Las Vegas home to a factory that could experiment with products and processes before scaling up for manufacturing. If it works, it will prove Hsieh's belief that when capable and enthusiastic people circulate in a given space, good ideas and new businesses follow.

"It is not formal conversations that come out of that but it is relationships and it is networks and it is ideas," said Bronstein. "I think that is valuable."

Chapter 7: “Very, very exciting for people.”

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Above: A view of Fremont Street looking east between Las Vegas Boulevard and Sixth Street.
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Above: A motion blur photo of El Cortez Hotel & Casino on Fremont Street.

Below: The north side of Fremont Street in the entertainment district between Las Vegas Boulevard and Sixth Street.

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Aside from some newfound street life and creative construction plans, one of the Downtown Project’s biggest achievements may be in getting attention. The story of a corporate idealist trying to create a hipster haven in a downtrodden downtown makes headlines.

Zappos CEO gambles on reviving downtown Las Vegas,” reported American Public Media's “Marketplace” program.

What happens in Brooklyn moves to Vegas,” is how the New York Times sees it.

The shift of media fascination from the Strip to downtown was a welcome change, considering the area had long been overlooked by outsiders.

“It wasn’t that things immediately got better. But the articles, the attention that was being given to downtown, but specifically Fremont East, was very, very exciting for people,” Cornthwaite said.

While the spotlight is aimed squarely at Hsieh, decades of spadework by others prepared downtown for his vision to take root.

“I don’t know if a Tony Hsieh would have shown up if all this wasn’t germinating,” said O’Neil, describing the Third Street area when he invested in the Lady Luck as “a crooked mess.”

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Left: Radio City Pizza waiter Nelson Michel delivers pizza on opening night. The pizza joint, located at 508 E. Fremont, closed its Summerlin location and reopened in East Fremont.

Right: Crowds gather in Don't Tell Momma at 517 Fremont Street. The music venue opened around a year ago.

And while the city was focusing most of its attention and public money on Symphony Park, limited help for Fremont East has resulted in some improvement.

In 2002 the city created the Fremont East entertainment district by easing the minimum distance allowed between bars. And in 2010 it waived the $20,000 tavern license fee in the area. The result:The Beauty BarInsert Coinsthe Downtown Cocktail Room and other watering holes were starting to liven up the street when the recession bit hard.

“It is like a neutron bomb exploded. Everyone is still walking around, but everyone wants to know where did it all go,” O’Neil said. “It just became pretty apparent you just couldn’t get it to go.”

After closing the Lady Luck in 2006, O’Neil and Donner’s investment group couldn’t get financing to remodel, even though they held nearby properties and had developed a restaurant and two bars at street level. The investors considered themselves lucky when CIM Group, a Southern California company that develops upscale urban shopping and lifestyle centers, bought them out. The long-dormant hotel is scheduled to reopen this year as the Downtown Grand.

The recession also had another, less predictable consequence. It focused city attention on Fremont Street’s small businesses, Cornthwaite said.

“Everyone was so desperate at that time,” Cornthwaite said. “In prior years it was more about Symphony Park, you know, these $200 million projects. All of a sudden these $200,000 projects became really important.”

Michael and Jennifer Cornthwaite , owners of Downtown Cocktail Room, the Beat Coffeehouse and Emergency Arts: It’s tough to imagine a couple more committed to Fremont East than Michael and Jennifer Cornthwaite. It’s even tougher to imagine them leaving Las Vegas.

But that’s something they considered in the darkest days of the recession in 2009. Michael opened the Downtown Cocktail Room, which consumed more time and money than planned, just as the economy tanked. He watched as residents of the new luxury high-rises – his customers – packed up and left.

“I heard stories of jobs being lost and people moving back home and foreclosures,” he said. “It just got worse and worse.”

Adding to his distress was his belief that his bar was an important step to creating an upscale, urban neighborhood in the heart of decrepit downtown. “We thought there was a good chance this might not happen,” he said. “We were deliberating what our options were.”

He credited Jennifer, then his fiancee, with helping him focus more on making it through the next year, not worrying about the future. The couple soon opened Emergency Arts and the Beat Coffeehouse at Fremont and 6th Streets, and Zappos CEO Tony Hsieh hatched a plan to move his corporate headquarters and 2,000 workers downtown.

“At that time if someone would have opened a shoeshine chair outside the place it would have been a big deal,” he said.

Michael is also a partner in Oscar’s steakhouse at the Plaza, and the couple is now working with others to revive the historic Huntridge Theater.

But whether attracting the creative class will improve life for people outside Zappos and immediate beneficiaries of the Downtown Project is a matter of debate.

Joel Kotkin, a fellow in Urban Futures at Chapman University in Orange, Calif., and internationally known author of books on urban development, economics and social trends, said the power of the creative class to revive local economies is greatly exaggerated. He argues that even when a revival succeeds in convincing wealthy and upwardly mobile people to shift activity from the suburbs to the urban core, it’s not enough to beat back the creeping poverty he considers the real threat to cities.

“Yet even accounting for these shifts, cities continue to contain pockets of wealth and gentrification that give way to swathes of poverty,” Kotkin wrote in a Daily Beast article. “In Brooklyn, it’s a short walk east from designer shoe stores and locavore eateries to vast stretches of slumscape. The sad fact is that in American cities, poor people — not hipsters or yuppies — constitute the fastest-growing population.”

Chapter 8: Haves and have-nots

They called it Fremont Family Market and Deli for a reason. Actually, many reasons.

The market in the 600 block of east Fremont Street employed three generations of the Yono family, led by brothers Steve and Manny Yono.

The Yonos moved to Las Vegas from Michigan to follow their dad, an Iraqi immigrant who got into the grocery business in Detroit in 1966.

Steve Yono’s daughters worked behind the counter.

And after 15 years in business, even some of the customers were like family. In a recent interview the brothers recalled that after their father died customers signed condolences and well wishes on a big white sheet of paper they brought into the store.

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Slideshow | The Yonos, co-owners of the Fremont Family Market and Deli: Though the deli moved to a new location in 2012, the Yonos' store is again in the path of the Downtown Project's development.

Watch | Delivering a New Las Vegas, Part Three: Pushed Aside:Several businesses and residents are being pushed out with the land the downtown project has acquired over the last 18 months.

Their story is often overlooked by the many national media stories about downtown Las Vegas.

“My brother, father and I put our blood, sweat and tears into this,” Steve Yono said of the market, which closed in March.

But not everyone is being invited to be part of the new downtown, even if their businesses appear to fit the criteria set by the Downtown Project: Owner-operated, sustainable and responsive to the needs of the immediate area.

The Yono’s store, which they said earned about $1.6 million in annual revenue, was a fixture for more than a decade. It shared a building with a Mexican restaurant, now closed as well.

The brothers said they were able to build a thriving business in a tough part of town because they listened to their customers.

They stocked the store with some basic food necessities to serve people from nearby motels and apartments, things like off-brand cigarettes, beer and wine.

“We have to treat everyone the same that has money in their pocket willing to spend in our business,” Manny Yono said. “If someone needs a cheaper brand of cigarettes, we have to carry that. If someone is looking for Perrier water, we have to have that.”

But as their neighborhood started to fill with young professionals and upscale small businesses, the Yonos started worrying that they no longer fit in.

In mid-2012 they sought a new, five-year lease that would allow them to recoup $50,000 in planned upgrades that would take advantage of new activity on Fremont and attract the trendy young people moving into the nearby Ogden residential high-rise.

Their landlord offered three years, then stalled before taking even that off the table. They had just four months to get out. The lease went to a Downtown Project entity. What it will do with the place is unknown.

The Yonos reject any suggestion that their business was based on cheap beer and cigarettes, and took advantage of low-income shoppers. What comes next, they said, will be worse for those who can least afford it.

“I’m selling you a Pabst Blue Ribbon 24-ounce can for $1.50,” Manny Yono said. “Because you put up fancy paint and fancy wallpaper and a pretty girl behind the bar, you are going to charge $6. ... Who is taking advantage here?”

He also noted that downtown’s working class already live the values touted by the Downtown Project.

“What they are doing now was already happening,” he said. “Live, work and play downtown, but they are just not as flashy.”

The Yonos now operate a market at Fremont and 11th streets owned by a family friend, but they aren’t confident it will last. The Downtown Project has scooped up property all the way to 11th Street.

“We’re trying to survive on what’s left,” Steve Yono said. “How long is it before we are out of business or they approach us to get out of here?”

The Yonos aren’t the only ones nervous about the future.

At A Cut Above The Rest, a barbershop at Carson Avenue near Seventh Street, Tim Wilkinson wonders if his business will be pushed out as well. He and his two partners have been in business for 20 years, and at the current location since 2000.

Business downtown has been good for Wilkinson, a lifelong Las Vegan who got into the business after his brother, an electrician, gave him clippers and advised him to learn a trade. Cutting hair helped him put two sons through college and pay private school tuition for a third.

The partners have two years remaining on their lease, but they know that when Downtown Project developers wanted a barber in the Container Park they imported the retro-style, hipster barbershop Bolt from Los Angeles instead of looking up the street.

“We’re totally for change; we would just like to be part of the change,” Wilkinson said.

A sign on the barbershop wall advertises $12 shaves, $14 haircuts and $18 Afros, among other services like mustache trims and blowouts.

The banter between the barbers, customers and neighborhood visitors on a recent afternoon showed the shop offers more than the cuts posted on the wall.

“It is the headquarters of the community,” Wilkinson said. “We do a lot of counseling, we give a lot of good advice, we do a lot of fellowship, testimony. It covers A-to-Zeke when it comes to barbering.”

Now he sees that community dwindling, the market, a smoke shop and a beauty salon pushed out, and wonders how much longer A Cut Above The Rest can survive in the path of the Downtown Project.

“It is kind of hard to see it raining on your neighbor’s house and you are right next door and it is not raining on yours,” he said.

Below: Tim Wilkinson, co-owner of A Cut Above the Rest, wants to be given a chance to compete during downtown's redevelopment.
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Chapter 9: "Is it just?"

Slideshow | Hassan "Gino" Massoumi, owner of Downtown Express Oil & Tune: His name is Hassan Massoumi, but everyone knows him as Gino.

Born in Iran, Massoumi studied architecture at the University of Rome before emigrating to the U.S. in 1983. A longtime automotive tinkerer, he opened a downtown auto repair shop about 10 years ago.

A friend suggested he would do better if he used a European name, so he put "Gino" on his coveralls.

"Gino is easy for everyone to remember," he said.

Business was good at first, said Massoumi, 66, whose shop is across the intersection from what will soon be Zappos headquarters. Things have been tight since the recession, followed by city government's move to the new City Hall.

Then a company affiliated with Zappos CEO Tony Hsieh's Downtown Project bought the property and told Massoumi to catch up on back rent or get out.

"They want to make better this downtown but unfortunately, I'm sorry, at least in my case my life is going to be destroyed," Massoumi said.

Borer, the UNLV professor who criticized Hsieh's characterization of downtown as a "blank slate," said it's too easy for outsiders eager to colonize an urban area to overlook an existing culture that has high numbers of people struggling with low incomes, physical and mental disabilities and unemployment.

"You end up implying those lives didn't have value," Borer said. "They don't have the type of economic capital or social capital to become a part of the new culture that emerges."

He said viewing downtown as an existing community needing help would be more productive than considering it no community at all. The former, he said, makes room for newcomers while taking into account the lives of people already there.

Watch | Interview: Michael Borer, UNLV Associate Professor of Sociology

That's especially important considering the relatively low number of people in the Las Vegas area who fit the highly educated and well-paid definition of the creative class.

n addition, the preservation of existing businesses run by longtime locals would bolster the newcomers' claim they're building an organic community more authentic than the Strip and more desirable than the suburbs.

"If the Downtown Project is supposed to be about putting down roots that might actually be a positive culture (counter to) the dominant narrative of Las Vegas, that remains to be seen,'' Borer said.

Kotkin, too, is skeptical.

Author of the book "The Next 100 Million: America in 2050," Kotkin questions using public resources to festoon central cities with amenities for the creative class. He acknowledges this is not a popular stance.

"What you have in the urbanist circle is unanimity of views – 'Let's give money so we can have yuppies living downtown,' '' Kotkin said. "I think there has to be some sort of skepticism about that. Is it just?"

In Kotkin's view, downtown revivals largely benefit people who don't necessarily need help while diverting resources away from suburban neighborhoods which long have delivered a lifestyle and jobs that appeal to most Americans.

For example, he points to Phoenix and Los Angeles, cities like Las Vegas that have made downtown the focus of civic ambition.

Between 2002 and 2011 more than $4 billion was invested in Phoenix's 1.5 square-mile downtown. In Los Angeles, a revitalization effort that began in the 1990s and included tax breaks for developers resulted in the Walt Disney Concert HallStaples Center and thousands of new, upscale residential units.

Above: A man smokes a cigarette on Carson Street near Seventh Street. The former tenant of the recently closed John E. Carson Hotel at 124 S. Sixth St. was forced to move after Downtown Project partners purchased and closed the property, relocating the building's 43 residents to Dragon Hotel.

"They don't care for us anymore," quipped the man, who did not want to be identified.

The movement in those cities, Kotkin said, reflects a general trend in urban planning that benefits downtown property owners and urbane residents at the expense of middle- and working-class neighborhoods.

"Do the downtowns and the property owners in the downtowns have a priority over the neighborhoods? I think great cities are made up of neighborhoods," Kotkin said, noting that good schools, parks and jobs are critical to successful cities. "If you have neighborhoods that are desolate they deserve attention, too."

Kotkin said Southern Nevada clearly gained when Zappos moved from the Bay Area in 2004, creating more than 1,000 jobs and continuing to grow.

But the move downtown doesn't necessarily benefit the entire Las Vegas valley, Kotkin said.

"It's not like somebody is coming from Shanghai and building something in downtown Las Vegas," he said. "What you want to do is attract capital and investment from the outside instead of moving things around in your same region."

Moreover, Kotkin said, civic boosters tend to overvalue the benefit of a trendy downtown and underplay the direct and indirect costs of creating one.

The costs of reviving downtown Las Vegas are myriad.

The city's redevelopment agency has bankrolled more than $100 million in debt to pay for projects, with most of the repayment generated by property tax gains attributed to redevelopment. And in recent years the city's general fund has subsidized redevelopment by diverting millions of dollars to help repay debt, build the new City Hall and fund programs that pay business owners who improve building facades or cover the cost of their sewer hookups.

Even the heralded deal that brought Zappos downtown was an expense – the purchase of the old City Hall was largely financed by the city itself, which also agreed to option nearby vacant land at below-market value. Plus the city paid to clear another developer's option on the building.

Kotkin said taxpayers should weigh those kinds of costs against the potential benefit when agreeing to invest public money that might otherwise serve a broader swath of the population.

"Would the money be better spent on training programs? Would it be better spent on parks? Local buses? The debate has been so dominated by one point of view and nobody raises these issues," he said.

Chapter 10: Happiness delivered

For Natalie Young, who has realized her dream of owning a restaurant, there’s no question what’s happening in downtown Las Vegas is both unique and good for the community.

Aerial views of downtown Las Vegas | Slideshow: The transformation of downtown Las Vegas from above.

A self-described cynic, Young said that before coming downtown she wouldn’t have believed people like Hsieh and the Cornthwaites would have done so much to help her open a restaurant.

“You know, people question Downtown Project and they question what is going on here,” she said. “What I can tell you, my experience, my personal experience, has been authentic and community-based and just love.”

Yet her journey followed a long and winding path, and it wasn’t a sure bet that she would succeed in life.

Expelled from high school in Aurora, Colo., she finished her degree at an alternative school. When her parents wouldn’t pay for art school, she took a job at the antipasto bar in a downtown Denver restaurant, making art out of olives, peppers and cured meats.

And when she failed as an executive chef in Telluride, Colo., because of drug and alcohol abuse, she entered rehab in Las Vegas, where she’s been sober for more than a dozen years.

Young learned French cooking at a fine dining restaurant on the Strip, ran an off-Strip casino restaurant that made quality food at a pace of as many as 2,000 covers per day and graduated to a high-paying executive chef position that didn’t make her happy.

She credits a decision to spend more time downtown, where she met people like Hsieh and Cornthwaite, for the opportunity to open Eat.

“I never thought I would go from being a worker to an owner,” Young said. “If this restaurant closed today I’d be happy with my experience. I’m not in it to be a millionaire or to be famous or rich, I’m in it to be happy, and I’ve already achieved that.” 

Video Glossary

Delivering a New Downtown

Delivering a New Downtown | Watch the 28-minute, full-length piece on the issues surrounding the redevelopment of downtown Las Vegas.

Delivering a New Downtown, Part One: Losing Downtown

Delivering a New Downtown, Part One: Losing Downtown | Downtown Las Vegas was the epicenter of the valley until the 1960s. With the creation of the Strip and the expansion of suburbs, downtown Las Vegas became an afterthought.

Delivering a New Downtown, Part Two: Hsieh's Influence

Delivering a New Downtown, Part Two: Hsieh's Influence | The eccentric millionaire originally was just going to move Zappos downtown, but that idea blossomed into a project that will try to revitalize the core of downtown Las Vegas.

Delivering a New Downtown, Part Three: Pushed Aside

Delivering a New Downtown, Part Three: Pushed Aside | Several businesses and residents are being pushed out with the land the downtown project has acquired over the last 18 months. Their story is often overlooked by the many national media stories about downtown Las Vegas.

Zach Ware discusses the evolution of residential density

Zach Ware discusses the evolution of residential density | Vegas Tech Fund partner Zach Ware talks about how the Downtown Project plans to attract people to live in downtown Las Vegas.

Michael Borer on the resort industry and Tony Hsieh

Michael Borer on the resort industry and Tony Hsieh | UNLV associate professor of sociology Michael Borer talks about the possible division between the Strip and Tony Hsieh's vision for downtown.

Staff Contributors

Benjamin Spillman | Writer
Lynnette Curtis | Research
Jeff Scheid, Justin Yurkanin, Jason Bean | Photos
Mark Damon | Photo Editor
Melissa Nunnery | Print Presentation
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Mark Antonuccio, Mike Johnson, David Stroud | Graphics
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Justin Yurkanin, Michael Quine, Jason Bean | Video
James G. Wright | Editor