Outlet mall’s expansion a boon to local developers

A 2004 decision to sell surplus land next to a downtown Las Vegas outlet mall now looks like a $11.5 million misstep by national retail real estate giant Simon Properties Group - and a big windfall for local real estate developers.

In 2004, Simon Properties Group completed the wildly successful Las Vegas Premium Outlets-North in the old Union Pacific rail yard redevelopment area west of downtown. The mall giant's local subsidiary, Simon Chelsea Las Vegas Development LLC, then sold 4.48 acres of vacant land adjacent to the mall at 511 S. Grand Central Parkway to Las Vegas investors Mark and Jeffrey Fine.

The Fine's FDG-Grand Central LLC, a segment of Fine Properties Group paid $4.88 million, or $1.09 million per acre, according to Clark County Assessor's records.

The Fines in 2005 proposed a 1.09 million square-foot mixed-use development on the site, which included a 32-story hotel, 16-story office tower and 24-story residential tower. However, the project was rejected by the Las Vegas City Planning Commission, and the site remained vacant as real estate prices skyrocketed, then fell to earth.

From 2004 to 2011, commercial real estate values in the Las Vegas Valley dropped by 51.4 percent, according to data from the Applied Analysis research firm. Since the market's peak in 2007, values have fallen an average of 79.8 percent.

But some properties defy recession. Fast forward to earlier this year, when Simon Chelsea Las Vegas Development LLC bought back the parcel for $16.03 million, more than three times the 2004 sale price at $3.58 million per acre, for a mall addition. The expansion plan first became public in June, but the purchase price is only now being reported.

For Fine Properties Group, the decision to sit on the land means a $11.15 million payday.

Jeffrey Fine confirmed the sale, but was reticent about details, as was Simon Properties.

Bridget Richards, principal of New Growth Commercial Real Estate Co., initially said the sale price "sounds very high to me, because the last sale was in 2004 in an escalating market" and because there's a "considerable" inventory of available land in Southern Nevada.

But as in all real estate deals, location sets the price.

Richards, whose firm was not involved in the deal, said the parcel's proximity to the Clark County Government Center and the World Market Center adds to its value, particularly because the area lacks easily accessed dining amenities that, presumably, would be part of the mall expansion.

Add that to media hype about downtown, and "maybe $3.5 million is not that high for right there." But, she cautioned, if more people don't start bringing usable amenities to the area, "it's probably a bubble."

But a bubble is better than most commercial property owners have seen elsewhere in the Las Vegas Valley in recent years. In its first-quarter 2012 land sales report, Sunbelt Development & Realty Partners LLC found the average price per acre for commercial land away from Downtown and The Strip to be $248,864.

Sunbelt owner Bill Lenhart cautioned against putting too fine a point on land values downtown and the regional average, however. Downtown in general is supply constrained, and many buyers have special needs or particular circumstances that don't apply to other sub-markets.

That $16.03 million price tag doesn't seem outlandish, Lenhart said.

"That number reflects special circumstances," Lenhart said. "No other buyer would pay that price."

Both in 2005, when Fine's hotel plan came before the Clark County Planning Commission and again this year when Simon sought approval for mall expansion, the county's packet of documents included a statement of financial interest naming former Mayor Oscar Goodman and his wife, current Mayor Carolyn Goodman, as having financial ties with the Fines. The Goodmans are partners with the Fines in ownership of another commercial property at 1707 W. Charleston Blvd.

In statements provided by a city spokesman, the Goodmans said they had no knowledge of FDG-Grand Central or its activities.

Las Vegas Premium Outlets-North opened in 2004 and was last expanded in 2008. The addition to be finished in 2015 includes nearly 160,000 square feet at the southwest corner of Grand Central Parkway and Bonneville Avenue. New stores expected for the site include Saks Fifth Avenue OFF 5TH. Current tenants include Armani Exchange, Ann Taylor, Banana Republic, Burberry, Coach, David Yurman and Diesel.

Today, Las Vegas Premium Outlets-North encompasses 539,000 square feet. Included in the expansion is a four-level addition to the existing parking garage.

Renovations would add 513 parking spaces for a total of 2,561.

Contact reporter Laura Carroll at lcarroll@reviewjournal.com or 702-380-4588.