Valley’s recovering economy sparks deluge of deals

The recession left a lot of local commercial properties underwater.

But the dam has broken, thanks to Southern Nevada’s slow yet steady economic recovery, and that’s unleashed a flood of deals on assets that languished for years during the downturn.

Some of the biggest deals were on display Oct. 17 at The Orleans during DEALing in Vegas 2014, a panel discussion held by NAIOP Southern Nevada, the Commercial Real Estate Development Association.

Making many of those contracts happen required creative negotiating and broker persistence. But the mere passage of time also helped, as investors began to believe the city’s economic improvements were real — and sustainable.

Consider the tortuous path of The Boulevard, which endured a series of distress-related ownership changes over three years. Retail developer General Growth Properties sold the mall out of bankruptcy in 2011 to The Rouse Co. Rouse in turn handed the mall over to Midland Loan Services in 2013 via deed in lieu of foreclosure, because a property loan of $168 million was more than double what the shopping center was worth.

The bank sold the 878,235-square-foot mall in December to local real estate firm Sansone Cos. for $54.5 million. Company executive Roland Sansone said he wanted the mall for its central location at 3528 Maryland Parkway, between downtown Las Vegas and McCarran International Airport.

“It’s an area on the upswing,” Sansone said.

The company has boosted the occupancy of the center from 65 percent to 90 percent, Sansone said. The company also plans a new facade that will “change how it looks 100 percent,” and that will incorporate three new sit-down restaurants, he said.

Nor was it easy getting deals into the newly opened shopping center at Downtown Summerlin. General Growth started construction on the 1.6 million-square-foot center in 2007, stopped building in 2008 and spun the unfinished property off to The Howard Hughes Corp. in 2011. The Howard Hughes Corp. began building again in 2013 and opened the center on Oct. 9, bringing conclusion to deals that had been in the works for the better part of a decade.

Leasing agents Brian Sorrentino and Dan Adamson of ROI Commercial Real Estate nursed along the center’s Ethan Allen store for eight years, finally closing on a lease in August. They also baby-sat a small Sunglass Hut lease for three years, and held their breath on an 18,000-square-foot lease to Off Broadway Shoe Warehouse, which was contingent upon Nordstrom Rack agreeing to be part of the center. Nordstrom Rack opens Oct. 24. Off Broadway was up and running Oct. 9.

Just down the street, it also took Adamson “six birthdays” to wrap a $4 million deal on an Ashley Furniture store at 9002-9232 W. Sahara Ave., inside the Canyon Lakes Shopping Center. The 42,680-square-foot store was initially set to be a grocery store, but three separate grocers were unable to finish the building. The last potential lessee, Smith’s, managed to get a deed restriction barring other grocers from the site. With the economy on the upswing and local furniture sales increasing, Ashley finally stepped up in March.

Recalled Adamson, “I can’t tell you how many friends and colleagues said to me, ‘What are you going to do with that vacant store?’ It was an eyesore. Now, it looks really good.”

In another case, it was a tenant that languished on the market in want of a deal.

Living Ecology, which makes organic fruit bars for Trader Joe’s, looked for two years for a property suitable for relocating its California-based corporate headquarters to Southern Nevada. It finally found what it wanted in July, when it leased 75,362 square feet inside the Henderson Commerce Center Eastgate at 7330 Eastgate Road.

Broker Jarred Katz of MDL Group, which represented landlord Harsch Investment Properties LLC in the 60-month deal, thanked “all of the other leasing agents for wearing them (the tenant) down for two years.”

Living Ecology’s lease price of 42 cents per square foot was 9 cents above what the landlord had been asking in the spring, Katz said.

Also showing how much the market has turned in recent months is the sale of the Eldorado Industrial Park at 7445 S. Dean Martin Drive. The center was listed for just 75 days when Stockbridge Capital Group snapped it up in March for $21 million — a price that Stockbridge acquisitions expert Mark Carlson said was “well below” replacement cost.

“What we saw was a high-quality product in a market that was in recovery,” Carlson said. “We felt we could see a lot of rent growth over time.”

In another sign of how far the local market has come, Stockbridge, which owns 90 percent of the SLS Las Vegas, isn’t done here.

“Our long-term perspective is that Las Vegas is a good place to be,” Carlson said. “We’re still looking for more, so bring it on.”

Contact Jennifer Robison at jrobison@reviewjournal.com. Follow @J_Robison1 on Twitter.