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LAS VEGAS-Clark County recently approved a 10-year extension of its lease-option agreement with EJM Development Co. for 430 acres here known as the Arroyo. The land is located along Interstate 215 between Rainbow Boulevard and Buffalo Drive. The agreement, now extended to 2022, lets EJM to develop the land in exchange for a piece of the profit.

EJM has taken down nearly 200 acres in eight separate 50-year ground leases since the agreement was initiated, four times the required minimum pace. EJM’s Kirk Boylston tells GlobeSt.com that the company has developed 2.5 million square feet of office, retail and industrial space at the Arroyo in the past two-and-a-half years and has 14 additional buildings that will be delivered this quarter and next.

“The county receives a percentage of the net income and we have no carry costs,” Boylston says. “It’s a really good arrangement and I think you’ll see more of it; it gets rid of the uncertainty of the carry while also creating a long-term revenue stream for the public entity and at the end of the lease term they get it all back.”

Completed projects at the Arroyo include Arroyo Market Square, a 910,000-square-foot retail center anchored by Walmart and Sam’s Club; Arroyo North Industrial Center (Phases I and II), which totals 617,000 square feet; and Arroyo Corporate Center, two speculative class A office buildings totaling 120,000 square feet. Boylston says the retail center is very well leased while the industrial, completed 12 months ago, is 70% leased and the recently completed office buildings are 45% leased.

The buildings under construction at the Arroyo are spread among three different developments: the Arroyo Tenaya Office Park, a 138,000-square-foot office development consisting of three 46,000-square-foot buildings; the Arroyo South Business Center, a 450,000-square-foot flex-industrial development designed as seven multi-tenant buildings broken into 5,000-square-foot to 15,000-square-foot spaces; and Arroyo Buffalo Plaza, a 32,000-square-foot retail development anchored by PT’s Pub. All three projects are slated for completion by the end of the first quarter of 2009.

Boylston expects the already completed industrial space to be fully leased by the time the new industrial space is completed early next year. “Las Vegas has been very land constrained for industrial development for a long time,” he says. “There has not been any of this type of product in our submarket except for us and it’s still in favor.”

The newest office development is meant to attract larger users who don’t want to be a part of the typical multi-tenant lobby, who want to enter into their own building. “The office market is slower but we are finding that because of how this project was master planned, with all the amenities directly adjacent, we are gaining much more than our fair share of the market.”

EJM’s focus in 2009 will be on leasing. “We have minimally a year and potentially two years worth of lease up,” he says. “We were fortunate that we got all these under way [before the credit markets collapsed; finding construction loans is much more difficult than the perm side.”

An official within Clark County’s property management division could not be reached for comment on the success of the program, but the extension of the agreement is a sign the county is at least satisfied with the progress to date. Boylston says that “Everything we’ve done has given them returns exceeding the majority of the other ground leases they have.”

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