September 23, 2017 - 9:50 am
The swimming pool is filled with rocks at one boarded-up motel. A short walk away, pigeons rest inside a motel sign whose missing letters make it all too easy to fly in.
At another shuttered inn, someone scrawled a message on an outside wall: “Im A Million $ Mack. I Need A Billion $ B——.”
The fenced-off, decades-old properties are on Fremont Street in downtown Las Vegas, and all are owned by Zappos chief Tony Hsieh’s Downtown Project.
Hsieh has pumped money and foot traffic into the city’s core, giving the area a sorely needed boost of commerce. But for the most part, his group isn’t doing anything with a cluster of closed motels on Fremont that sit blocks from the street’s nightlife scene.
Formed in 2012, Downtown Project went on a real estate buying binge as part of its $350 million campaign to fund tech startups, restaurants and other ventures. With a $200 million allocation, real estate constituted the bulk of Hsieh’s plans, with his group assembling a portfolio of some 90 properties.
Among other things, it operates apartment buildings and retail complex Downtown Container Park, and it partnered with Arizona real estate firm The Wolff Co. to develop Fremont9, a five-story apartment complex under construction next to Atomic Liquors.
Hsieh’s group also bought motel properties farther east on Fremont, in an area that was a “hotbed” for drugs, prostitution and other crime, according to management. And it bought them not knowing what it would do them.
It launched redevelopment efforts at the Fergusons. But otherwise, its Fremont Street motels are boarded-up and fenced-off, with a noticeable touch-up: Plywood sheets covering doors and windows were painted to look like cartoonish doors and windows.
Downtown Project’s real estate portfolio manager, John Curran, spoke with the Las Vegas Review-Journal last month about the motels and other properties. The interview has been edited for length and clarity.
Do you have plans to develop other residential projects besides Fremont9?
We don’t have any specifics to share, but it’s certainly something we’ll be looking to do. Fremont9 is going to open by the end of the year. We’ve gotten an incredible outpouring of interest, more than 700 pre-leasing inquiries, and we’re still a few months away from opening.
It looks like the only motel with any notable project plans on file with the city, and the only one you’ve started any work on, is the Fergusons. What’s being built there?
Tony Hsieh lives in what we call the Airstream Village, which is condensing and moving to the back of Fergusons. A section of the motel has been demolished, and that will be a courtyard with Airstream trailers, a pool, a small stage area and lounge area. That’s basically Tony’s residence with a bunch of his friends and other downtowners. The next phase will be for the front of Fergusons. We hope to have two food and beverage anchor tenants here. There will be boutique retail, and the second floor would have office space. We would do major renovation work on the inside.
Do you have a next motel in mind for redevelopment?
The next block will be the Travelers. We’re not prepared to share anything about that; it’s still very fluid. Candidly, we bought all these blocks a few years ago with no idea of what we were going to do with them, but they were a hotbed for a lot of unsavory activity — crimes, drug use, prostitution, all those things. We knew someday that market conditions would allow for redevelopment, but in the meantime, us boarding them up, fencing them off, really gave us a buffer from a lot of that activity. It’s not great to look at a boarded-up motel, although we have stenciled designs on the doors, so at least aesthetically, it looks a little better than just plywood.
Why buy all these motels and sit on them?
People think, ‘Wow, $350 million, that money’s going to last forever.’ Ultimately, we’re restricted by bandwidth and resources. If we opened a major development on 14th and Fremont today, I don’t know if the market’s ready for that. It doesn’t get the foot traffic down there just yet. It’s not uncommon for developers to buy things and sit on them and wait until market conditions allow for development. We have a massive portfolio of real estate; a lot of them are ripe for future developments. We can’t do it all at once. We just opened a bar, Corduroy, for instance, and that was a major production. We’re focusing on Fremont9 and some other renovation projects. We’re never not busy.
For the motels, do you get calls from developers looking to do joint ventures? Like the project with Wolff, is that what you’re looking to do?
Definitely. We recognize two things: One, everybody’s bandwidth is limited, and we also figured out what our core competencies are. With Fremont9, we recognize that Wolff can take us further and better than we could on our own. We’ve talked to boutique hotel operators about renovating these motels and other properties. It’s definitely something we’re open to.
Have you considered knocking the motels down, scraping the sites and starting from scratch?
We have; we’ve even probably got hard demo numbers. But from an urban design perspective, I think it’s much more aesthetically appealing to look at a boarded-up motel that has some sort of history — perhaps some people find some charm and character in them. I think it is actually more interesting looking at a vacant, boarded-up motel rather than just pieces of dirt.
Do you get vandals or people climbing the fence?
That happens. It’s a never-ending battle. We’ve got around-the-clock security presence in the neighborhood. They usually report graffiti to us before the city gets it. We’re usually pretty quick to address it; we paint over any graffiti. But it’s always a moving target.
Contact Eli Segall at email@example.com or 702-383-0342. Follow @eli_segall on Twitter.