Final Part of Showcase Mall on Strip Sold for $83 Million

Though it took more than a year, a group of New Yorkers have completed their nearly $370 million buyout of Showcase Mall on the Strip.

Jordache jeans founders, the Nakash family, and real estate investor, Eli Gindi, recently paid $82.85 million for a roughly 42,000-square-foot section of Showcase, which is known for its giant Coke bottle and M&M’s out front.

Property records show the sale, by Showcase’s original developer Barry Fieldman, officially closed on December 2, 2015.

Fieldman first invested in the site in the early 1990s. Back then, he said, Showcase’s current footprint had Chevron and Union Oil gas stations, as well as Island Plaza, a pink, single-story retail center.

The sale marks his exit from a property with a complex history of multiple owners, expansions, ground leases, and spats with higher-ups at neighboring MGM Grand.

“This has been a 25-year journey for me and my partners,” he said.

The purchase also gives the Nakash and Gindi group full control of a roughly 330,000-square-foot mall with little vacant space and heavy foot traffic out front, complete with street performers, in the pedestrian-packed casino corridor.

The sale marks the latest investment in a Strip retail property.  Over the past two years, a handful of new retail properties have opened as more tourists avoid card tables and slot machines to shop, dine, party, and enjoy other activities.

Fieldman sold the mall’s southern portion, whose tenants include the Adidas sports-apparel store and the Grand Canyon Experience souvenir shop.

Showcase, on Las Vegas Boulevard just north of Tropicana Avenue, is almost fully occupied and sits in a “prime location” on the Strip, Nakash Holdings managing director Jonathan Bennett said.

Foot traffic is “only getting better,” he said, noting that the 20,000-seat Las Vegas Arena is being built across the street. It’s scheduled to open in spring 2016.

He also said Showcase would get improvements to its facade and have an “ever-increasing variety of stores.”

Gindi, of Gindi Capital, did not respond to a request for comment Tuesday.

The Nakash family’s Jordache Enterprises conglomerate has investments in agriculture, clothing, real estate, aviation, and television. Last year, after the Nakashes and Gindi bought their first portion of Showcase, Bennett indicated the group might spruce up the Coca-Cola bottle with LED lighting, Times Square-style.

They bought that 190,000-square-foot chunk in May 2014 for $145 million from New York investment firm Angelo, Gordon & Co. and San Francisco-based developer City Center Realty Partners. In January 2015, they teamed with New York home-curtains manufacturer Elyahu Cohen to buy a roughly 100,000-square-foot section for $139.5 million from Beverly Hills, Calif.-based Unilev Capital Corp.

Fieldman and developer Bob Unger opened the first phase of Showcase in 1996, said Fieldman, who butted heads with the MGM Grand.

“In board meetings, they called me ‘the cancer that grew,’” he said of casino management.

Only one or two people from those days still work for MGM, he said, and relations have been fine in recent years.

Fieldman, who moved to the valley in 1978, also said that in the late 1980s and early ’90s, Las Vegas “was a pariah” largely shunned by corporate America. He noted that even when Citicorp opened a credit-card processing center here in 1985, which business boosters saw as a major victory for a casino-heavy economy shaking off decades of mafia power, the New York financial giant scrapped “Las Vegas, NV” for its mailing address and opted for “The Lakes, NV.”

But in the ’90s, Fieldman said, his group signed deals with Coca-Cola and M&M’s, brands that are as “apple pie” as any, to open stores on the Strip with prominent signage.

“Nobody else was heading that direction,” he said.

Today, the sidewalk in front of Showcase, like other parts of the Strip, is a magnet of sorts for another type of enterprise: busking.

On a visit this week, people dressed as Batman, Captain America, the Incredible Hulk, Iron Man, Mr. T and Tupac Shakur had gathered near an entrance to MGM Grand not far from Showcase, to take photos with tourists in exchange for tips. Others had lined up in formation, preparing to dance to thumping music.

Outside Grand Canyon Experience, 63-year-old Boris Ruiz, a Guatemala native who lives near UNLV, was wearing a Santa Claus outfit with the head of Mickey Mouse. He said he goes there three times a week sometimes and has made more than $200 a day.



Large Private Equity Firms Among Most Active Buyers and Lenders for Commercial Property

Major private equity firms are increasingly pursuing a dual-track commercial real estate (CRE) investment strategy as they remain among the most aggressive buyers of commercial property and most active lenders in the market.

American Realty Capital, Blackstone Group, Colony Financial, Northstar Realty Finance, and Starwood Capital have originated more than $1.8 billion in CRE loans in the last five months. All of them have also been making headlines with their property buys.

For example, Blackstone Group recently agreed to acquire Chicago’s Willis Tower (the former Sears Tower) for $1.3 billion. At 110 stories, the 3.8 million square-foot office building in downtown Chicago is the second-tallest office building in the country.

Blackstone has also been active on the lending side. In Q4 2014, the private equity giant closed eight loans totaling $781 million. The largest was a $181 million loan on a New York City condominium project.   In Q1 2015, Blackstone has originated another $315 million in loans.

“We have an additional $1 billion of loans with agreed terms that we expect to close over the coming months and our pipeline remains active, reflecting strong borrower demand and our ability to succeed in an increasingly competitive market for senior mortgage loans,” Steve Plavin, president and CEO of Blackstone Mortgage Trust (Blackstone Group’s public held mortgage banking REIT), told investors last month.

Private equity firms like Blackstone are targeting the bigger deals on which to make loans where they think they offer an advantage over bank consortiums.

“The banks often look to syndicate bigger exposures, which limits their ability to commit quickly and efficiently,” Plavin said. “With our increased scale and Blackstone real estate affiliation, we are strongest on bigger deals. The larger loans have the added benefits of better institutional sponsorship and higher quality real estate collateral located in stronger gateway markets.”

The average size of loans Blackstone has closed since the start of the fourth quarter is $148 million as compared to $89 million to its existing portfolio heading into the fourth quarter.

Unlike banks, Blackstone and other private equity lenders are focusing on short-term transitional lending. The three largest U.S. loans Blackstone has made in the last five months all have 3-year maturities as compared to a typical 10-year maturity generally offered by banks.

Starwood Capital Group, with more than $42 billion of CRE assets under management, is also active on both the buying and lending fronts. This past week, Starwood Capital closed on its 10th opportunistic real estate fund at $5.6 billion, its largest fund to date.

Starwood Global Opportunity Fund X is off to a strong start. The fund has already closed or is committed to $6 billion worth of transactions- roughly split equally between real estate investments in the U.S. and in Europe.

Its acquisition deals include the $1.2 billion purchase of TMI Hospitality, one of the largest owners, managers and developers of select-service hotels in the country, with 184 operating hotels and more than a dozen in the development pipeline. It also has a pending acquisition of a prime suburban office portfolio totaling almost 7 million square feet in fast growing areas including Raleigh, NC, Nashville, TN, South Florida and St. Louis, MO, for a purchase price of $1.1 billion.

On the lending side, Starwood’s mortgage lending arm, publicly held Starwood Property Trust Inc., has originated or co-originated nearly $835 million in loans. Among its most recent loans was a $201 million first mortgage and mezzanine loan for the acquisition and recapitalization of a 49-story and a 23-story office tower complex in Chicago; a $200 million first mortgage and mezzanine loan for the acquisition of a office buildings, a sports club and a 294-room hotel in Dallas/Fort Worth; and a $120 million first mortgage and mezzanine loan to refinance two office buildings in New Orleans, one of which includes a new 195-room hotel.

It also co-originated a $224.5 million first mortgage and $74.8 million mezzanine loan for the refinancing and redevelopment of two office buildings located in New York.

Looking forward, Starwood said it continues to have a strong pipeline of high-quality transactions that meet its criteria.

“You will see us probably do more in the core space, core-plus space, value-added space and the equity and will grow as a percentage of our assets. It’s in our pipeline in several transactions,” Barry Sternlicht, chairman and CEO of the REIT told investors last month.

Despite the dwindling supply of distressed property, Sternlicht says he still sees opportunity iin that sector.

“I’m particularly looking forward to the maturity of the 2016 and 2006 and 2007, 10 years legacy CMBS investments. They should provide further growth and opportunities for us, both to buy assets out of trust and also to lend, then refinance and restructure the loans that are coming due,” said the Starwood chairman.

Additional recent private equity CRE lending highlights include:

  • Colony Financial Inc. in the fourth quarter originated 10 first mortgage loans and four mezzanine loans totaling $328 million within its transitional CRE lending platform. It also originated a $77 million first mortgage acquisition loan on a 2.5 acre land parcel in San Francisco. And in February, it agreed to fund up to $80 million of preferred equity to recapitalize a primarily stabilized multifamily portfolio of 16 communities with 4,800 units in Georgia, Texas and Louisiana.
  • Northstar Real Estate Income II Inc., which originated an $84 million senior loan on a Class A office complex Irving, Texas, a $41 million senior loan on a state-of-the-art data center in Norwalk, Connecticut, and a $42 million senior loan on a Marriott-branded full-service hotel located in Coraopolis, Pennsylvania.
  • Realty Finance Trust Inc. (formerly: ARC Realty Finance Trust), an affiliate of American Realty Capital, originated a $38.5 million loan on Denver Highlands, comprising 362,234 square feet of office space at 10065 & 10375 East Harvard Avenue in southeast Denver, Colorado.

To learn more about commercial real estate investing and current investment opportunities, please contact Antone and Stacy Brazill.