Walking All Over City Hall
Shoe magnate Tony Hsieh (Zappos.com) has made a deal to buy the City Hall building from the city of Las Vegas. Anyone who has visited downtown Vegas has noticed the curious building just off Glitter Gulch but with few windows facing the teaming activity on Freemont Street.
After they move in, a thousand Zappos employees will be able to walk a couple blocks and have a shrimp cocktail for lunch, maybe buy a dice clock or play some single-deck 21 on their lunch breaks.
Zappos and partner Resort Gaming Group will pay the city $25 million for the building which is $91 per square foot. Zappos will put $3 million down (of which the city must pay $2.5 million to Cornish Cos for it to release its rights to the property) and the seller will carry the remaining $22 million in two separate notes in second position behind an $18 million loan from another lender that is funding the remodeling.
The $17 million loan calls for payments through 2043 with a fixed interest rate of 5 1/8 percent. The other $5 million note is also due in 2043, but accrues no interest and requires no interim payments.
Sellers who carry back paper rarely would take a second position and fixed-rate 30 plus-year financing in the commercial real estate finance world is unheard of. Not to mention the no-interest, balloon payment-in-2043 note and the low required down-payment.
“There is a legitimate purpose in trying to boost downtown and job creation,” Robert Moore, the managing director of Faris Lee Investments told the Las Vegas Review Journal. “Otherwise, I would hate to think the city would do a deal this dumb.”
Mr. Hsieh sold Zappos to Amazon last year for $1.2 billion after growing annual revenues from $185 million in 2004 to over $1 billion in 2009.
Meanwhile finances at Las Vegas city hall aren’t that hot. Mark Vincent, the city’s chief financial officer recently told the mayor and council members that the city will have a $12.7 million shortfall next year, with the good news being that since May, the city’s projected budget deficit for the next five years has dropped from $270 million to $66 million.
But deal making Mayor Oscar Goodman found Vincent’s budget numbers boring. “You’re putting us all to sleep up here,” Mayor Oscar Goodman groused.