Family borrows $6 million to build office-retail center but is having trouble filling it

Maybe the Patel family of Las Vegas didn't pick the best time for such an ambitious business venture.

In the teeth of the Great Recession, Kam and Rajesh Patel bought a 3.4-acre parcel, took out a $6 million construction loan and built a 50,000-square-foot office and retail center.

At Craig Road and Tenaya Way, just west of U.S. Highway 95, the center would make an ideal location for fast-food restaurants, coffee and smoothie shops, bar and grills, dry cleaners, maybe a flower shop. It has 100,000 residents in a three-mile radius and daily traffic count of 20,000 vehicles.

Like most commercial centers in Las Vegas, it's struggling to find tenants.

"When we were doing our plans, the boom was still here," said Kam Patel, whose father came to the United States from India in the 1970s. "You can't go back or forward. We just decided to move forward and started construction at the end of 2006."

Craig and Tenaya Shopping Center, which was finished in 2008, is about 40 percent occupied, anchored by a CVS Pharmacy, McDonald's and Quiznos, barely generating sufficient income to pay interest on the debt. Annual asking rent for retail space in Las Vegas dropped from $24 a square foot in 2006 to $17 a square foot at the end of last year.

"We wanted to just lease it out and this would be a cash cow," Raj Patel said. "Apparently, the cow went dry for us."

If the Patels can continue to service their debt and hold on until the market turns around, they could be in good shape, said Stephen Brown, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.

It could be five years before the commercial market improves in Las Vegas.

"The tendency is to sort of look at trends and think they will continue forever," Brown said. "We've experienced a negative trend the last couple of years and now the tendency is that's going to last forever."

Commercial markets are very much driven by location and the type of space available, so what works in one area may not work somewhere else, Brown said.

Since they couldn't secure long-term tenants even at discounted lease rates, the Patel brothers took advantage of their own misfortune. They opened Saffron Flavors of India restaurant four months ago and set up their sister's Stonewater Dentistry practice on the second floor.

Sarika Patel, a 2008 graduate of the UNLV School of Dental Medicine, spared little expense in furnishing her office with state-of-the-art equipment and high-end finishings, including tile floor and marble counter in the reception area.

Her patients sit in three massaging chairs with computer screens that teach them about oral hygiene, different types of crowns and surgical procedures. The 2,600-square-foot office was outfitted by Pelton and Crane, a recognized leader in dental products and equipment.

Patel spent about $700,000 on the office, borrowing $500,000 from Bank of America. She could have cut costs, picking up used equipment like most startup dentists. That's not her mindset.

"We had this building here. It seems like a good location with residential all around and we thought we would do a high-tech office. It's pretty modern," she said. "We thought it would be a good time to start right now, still work and build this office little by little and with customer and patient care, we're pretty confident this will work out. Like any new business, you have to be patient. It takes time to be successful, at least three to five years."

The Patels bought the commercial property at Craig and Tenaya as part of an IRS code 1031 exchange for property sold in Nogales, Ariz. The code allows sellers to avoid paying a capital gains tax if they invest in like-kind commercial property.

Kanu Patel, the father of the family, founded Basic Food Flavors in Chicago and brought the company to North Las Vegas about 20 years ago.

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