Three years ago, the Southern Nevada Water Authority entered into an agreement to move its headquarters into a new high-rise office building downtown.
Now it looks as if one of the valley’s more prominent commercial developers could end up taking a bath on its lease-purchase deal with the water agency.
The building in question is the Molasky Corporate Center, a 14-story office complex at the corner of F Street and Ogden Avenue, just south of U.S. Highway 95.
Water authority board members on Thursday approved a plan to purchase five of the seven floors the agency currently leases in the building.
Buying the space rather than renting it will save the authority about $1.9 million a year over the next 20 years, said Deputy General Manager Richard Wimmer.
“Financially this is just an excellent move for us at this time,” he said.
The authority’s purchase price for the floors is $34.6 million. The Molasky Group’s construction costs were about $48 million, Wimmer said.
Actually, it’s more like $50 million, according to Richard Worthington, president and chief operating officer for the Molasky Group of companies.
“It doesn’t feel good but we’re sticking by our commitment,” Worthington said. “It’s a win for the water authority and it’s a bruising loss for us, but a deal is a deal.”
The first water authority employees began moving into the Molasky Corporate Center in August. Members of the Las Vegas Valley Water District’s design team have also set up shop at the 285,000-square-foot high-rise.
About 420 employees in all now work at the building, which has allowed the water authority to move out of the space it once leased at the Greystone Office Complex on Flamingo Road and Spencer Street.
Wimmer said the authority was running out of room at Greystone, where the lease was amended 11 times in 13 years to accommodate a growing staff of engineers and water experts.
Under its agreement with the Molasky Group, the authority has the option to gradually buy the rest of the building over the next 15 years.
Wimmer said the lease-purchase agreement was perfect because it gave the authority the flexibility to add more space as necessary or walk away from the building altogether if it didn’t meet the agency’s needs.
For public entities, he said, “it’s hard to build something that you can grow into. And to build something you don’t need, well that’s just unacceptable.”
Worthington blamed the sharp rise in construction costs nationwide for the beating the Molasky Group will take on its agreement with the water authority.
The high-rise was originally slated to cost $75 million. The final price tag now is expected exceed $100 million.
The authority’s $34.6 million purchase price for the first five floors was embedded in the original agreement it signed with the Molasky Group in 2004.
Worthington said the Molasky Corporate Center is one of only about 200 in the world to earn gold certification from the Leadership in Energy and Environmental Design, or LEED, program.
To qualify for gold certification, a project must meet LEED’s rigorous standards for environmentally sustainable building practices.
In the case of the Molasky Corporate Center, 97 percent of the steel used in the structure is recycled and its landscaping is watered using the treated waste water generated on site. The insulation in the walls is made from old blue jeans and the counter tops are made out of broken glass.
Worthington said the facility uses up to 35 percent less water and 37 percent less electricity than a non-LEED certified structure of similar size.
“We’re very proud of this building,” he said.
Water authority board member Rory Reid abstained from Thursday’s vote because his law firm has done some work for the Molasky Group in the past.