(Read more on the multifamily market.)

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LAS VEGAS-The Las Vegas City Council this week approved adisposition and development agreement with Robert Zarnegin for thedevelopment of World Jewelry Center, a 1.2-million-sf developmentin the city's new Union Park district. The project includes 815,229sf of for-sale office space, 139,052 sf (98 units) of ultra-luxurycondominiums in a 50-plus-story tower and 225,000 sf of retailspace and structured parking.

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The DAA calls for Zarnegin's Heritage-Nevada VIII LLC to acquirethe 5.9-site for the project by August 2009 and to commenceconstruction by October 2009, though it can use two six-monthextensions to push that deadline back to October 2010. The purchaseprice for the land is $10.3 million. The estimated cost of theproject is $927 million. As part of the development deal,Heritage-Nevada VIII will receive for 20 years a 50% rebate of theincreased taxes it will pay based on the increased value of theland due to the development.

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Before Heritage-Nevada VIII can acquire the land it must proveto the city that it has all the necessary equity and debtcommitments in place to develop World Jewelry Center. Before it canobtain debt financing, it will have to pre-sell a significantportion of the tower's space. The project's day-to-day manager BillBoyajian tells GlobeSt.com that he has letters of intent for aboutone-third of the office space. The residential units have not yetbeen marketed for sale.

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"Our 2008 will be about signing up more buyers; there will be alot of travel for us this year," says Boyajian, a former presidentof the Gemological Institute of America. "We'll be attending 25different jewelry trade shows around the world, getting the nameout there. There are about 15,000 to 20,000 jewelry manufacturersand dealers around the world and our building will hold between 400and 500 of them. Robert [Zarnegin] is very confident."

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To date, about two-thirds of the companies have signed up forthe minimum amount of space in building, 1,000 sf. The currentasking rate is approximately $800 per sf. The plan is to startconverting the LOIs into hard contracts later this year. In April,Boyajian told GlobeSt.com he expects a high conversion rate.

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"The hard part is getting people in the industry--[people] whousually make commitments via verbal agreements and handshake--tosign on the dotted line, even a non-binding letter of intent," hesaid. "The good news is that while it is harder on the front end,it should result in a higher conversion rate than is normal. I'mhoping [to convert] 80% not 50%."

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The asking price for the residential units will be about doublethat rate, Boyajian says. "This will be ultra-luxury, penthousetype product on the building's top 10 floors," he says. "Ownerswill have their own private lobby and elevator bank."

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As for the retail, Boyajian says at least 40 of the companiesthat have signed LOIs for commercial condominium space in the towerare "very interested" in setting up a business-to-consumerstorefront at the development. "I think the retail will be ano-brainer," he says.

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"This will be a one-of-a-kind jewelry industry hub in thewestern hemisphere," Boyajian says. "With a magnificent towercomprising both wholly owned, class A office condominiums andultra-luxury residential condominiums, a retail center open to thepublic, advanced security systems, and a designated Foreign TradeZone, jewelry business leaders will have many strategic advantages,with the added benefit of the Las Vegas location."

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The foreign trade zone designation, secured in September, meanssignificant savings for major jewelry industry players, therebyenhancing the center's appeal as a place from which to operate.Trade and customs consultant Tommy Berry, owner of PointTradeServices told GlobeSt.com in the that being an FTZ means jewelrymakers can import raw goods into to the building and then add valuein cooperation with other tenants in the building without payingduties. After that, the product may be exported back out of the USwithout paying any duties at all or may enter US commerce at areduced duty rate.

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To be operated by the Nevada International Trade Corp. on behalfof the WJC, the FTZ also will allow companies to save on theadministrative costs of importing by not having to pay merchandiseprocessing fees or user fees and not having to pay a broker pershipment. Additionally, due to the tremendous amount of intermodalfreight that goes in and out of Las Vegas, the industry also willbe able to save on freight rates.

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"With the building, housing, manufacturing and processingfacilities, the Foreign Trade Zone opens up all kinds of legalopportunities for having lower duty rates," said Berry, who hasbeen acting as a consultant to the WJC. "There are hundreds ofsaving ideas in general as an FTZ, but this will be a pretty neatapplication for it."

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The development site is located near South Grand CentralParkway, W. Charleston Boulevard and Interstate 15. Other projectcompleted, under way or planned in the city's 60-acre Union Parkredevelopment area include the Lou Ruvo Brain Institute, the SmithCenter for the Performing Arts, the Charlie Palmer Hotel, and theAccess Medical-Kimpton Hotel projects.

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