Parking garage prompts another setback
City says Neonopolis developers are using request as ‘stall tactic’
By Erin Neff
LAS VEGAS SUN
Developers of the stalled Neonopolis project have asked the city of Las Vegas not to cash a $9 million letter of credit until even more proof is presented about the city’s completion of the center’s parking garage.
In a May 8 letter to the city, a representative of World Entertainment Centers offered a 72-hour window in which the city can draw upon the letter — but only after satisfaction that garage issues are resolved.
The request did not land softly into the hands of City Centre Development Corp. board members, especially, since by contractual right they can order the letter cashed any day.
City Centre board President Ken Templeton said he considered the request “a stall tactic” to further delay the project because developers can’t ink a tenant to anchor the project.
Mike Forche, the private sector committee’s chief staff member, said negotiations with developers are in a “dead zone.”
Under terms of the original development agreement, the city was to construct a two-story underground parking garage and then turn the parcel over to World Entertainment Centers, which would construct a three-story entertainment retail center.
Completion of the garage was to trigger a 90-day window in which developers had to begin construction of the center.
But months before the garage was completed, Neonopolis lost its anchor tenant and sole lessee, Mann Theaters, to bankruptcy. Attempts to sign a replacement tenant are still in their infancy.
On March 22, when a third-party engineer signed off on the garage, the city was supposed to be able to cash Prudential’s letter of credit — in a sense the bill for constructing the garage.
Instead of signaling a milestone in the project, the engineer’s certification simply spelled another snag for Prudential because World Entertainment is nowhere near ready to start construction of its portion.
“If they had a theater tenant, they’d already be out there hanging steel,” Forche said.
Even though the city and World Entertainment are using Kitchell Contractors, World Entertainment wants Kitchell to now write a “punch list” of items that need to be corrected in the garage before the city can cash the check.
Once the list is complete and both sides agree to the scope of work that remains to be done, World Entertainment suggested, the city should be able to cash the letter of credit within 72 hours.
“The real nuts and bolts is they don’t have a tenant, and they need more time,” said board member Marty Keach. “These defects have nothing to do with the letter of credit.
“Right now, the $9 million is ours, and all we have to do is go get it,” Keach added.
But if the city did cash the letter, say today, Forche thinks World Entertainment would file suit.
Once Prudential pays for the garage, he added, they feel they have no leverage to negotiate time extensions. The current development agreement specifies very specific time schedules for completion of certain steps of the project. Failure to meet those could result in a breach and leave the $99 million center without the city’s support.
“If they want to talk about an extension, they’ve got to stop saying a duck is a dog,” Templeton said.
By harping on relatively-minor construction issues, developers are attempting to create their own stall without seeking extensions.
Mayor Oscar Goodman, already frustrated by the project’s rocky start, has pledged not to grant the developers prolonged extensions. In fact, he once set a Feb. 1 deadline for developers to find an anchor tenant.
Keach suggested that cashing the credit is akin to “drawing the line in the sand” with World Entertainment.
But Templeton suspects that would lead to a lawsuit, which could drag on for three years.
“The reality is that if they have no anchor tenant, it’s cheaper to pay legal fees (than construction costs),” Templeton said.
The board agreed it would likely grant a 90-day extension if developers prove that more time is needed to make legitimate strides.
“I don’t want to be in the same boat we are right now 90 days from now,” Keach said.
Neonopolis was originally supposed to open this Thanksgiving. The construction alone will take at least 12 months.
Prudential has since changed the project’s logo, added 20,000 square feet of retail, escalators on the second level and tacked on roughly $5 million to the cost.
The board agreed that the city attorney’s office should write back to World Entertainment saying that the city is not waiving any rights over its letter of credit.
The letter from the attorney’s office also will say that the city is willing to negotiate on both construction issues and possible amendments to the development agreement to give World Entertainment more time.
World Entertainment President Robert Gorlow and Prudential’s Joyce Storm could not be reached for comment Tuesday.
Erin Neff covers Las Vegas government for the Sun. She can be reached at (702)
259-4062 or 229-6436, or by e-mail at email@example.com