The Las Vegas City Council today approved a final development agreement with Resort Gaming Group (RGG), which will see the current Las Vegas City Hall site turned into a corporate campus for Zappos.com, Inc. The deal made between the city and RGG, owned in part by CEO Andrew Donner, will bring at least 1,200 total jobs initially to the city and a total economic impact of more than $336.6 million when Zappos opens its doors.
“The relocation of Zappos’ corporate headquarters to downtown is triggering more interest, more business investments and a resurgence of enthusiasm for living and working in the heart of the city,” Mayor Carolyn G. Goodman said. “You can already see the investments that Zappos CEO Tony Hsieh is making downtown with sponsoring events like First Friday and being so supportive of small, start-up business development. The entrepreneurs in the Fremont East Entertainment District and the city’s work in revitalizing the area have really been the catalysts that have sparked Zappos’ interest in downtown, and we are ecstatic to welcome the company and its employees.”
Ranked for the fourth straight year among FORTUNE's "100 Best Companies to Work For," the Zappos Family of Companies intends to relocate its corporate headquarters to the current City Hall site in late 2013, after completing building renovations. Zappos’ plans for the site include adapting the site to accommodate up to 2,000 employees.
Zappos is funding the building improvements at a projected expense of up to $40 million. More than 100 construction jobs are expected to be created during the renovation, according to a study prepared for the city in December 2011 by RCG Economics.
Zappos’ corporate headquarters is expected to generate $126.3 million in employee wages and benefits, according to the RCG report. In addition, the redevelopment of the site is projected to increase the taxable value of the site from $33 million (exempt) to approximately $64.5 million (non-exempt), resulting in the city collecting approximately $395,900 annually in property taxes not previously received.
RGG and Zappos have an option to purchase an additional 10 acres directly east of the City Hall for the expansion of its corporate campus. The development of the additional acreage would bring a direct investment of approximately $269.5 million in private funds to the area, which would establish recurring operational benefits of approximately $275.3 million per year within the city’s downtown core, according to the RCG Report. The development of the additional parcels would create approximately 2,148 full-time and part-time construction jobs over the course of six years and approximately 3,203 full-time and part-time permanent jobs once construction is completed, according to the report. In addition, the development of the additional parcels would add more than $258 million of taxable property to the assessor’s tax rolls at the completion of construction on a site that is currently vacant and owned by the city.
In addition, according to the RCG report, the top industries to benefit from Zappos.com moving to the Las Vegas City Hall building include:
• Food services and drinking places
• Real estate establishments
• Physicians, dentists and other health care providers
• Employment services
• Couriers and messengers
• Private hospitals
• Private household operations
• Retail Stores - Food and beverage
• Retail Stores - General merchandise
According to Donner, who, along with his partners, brokered the deal that brings Zappos downtown, this transaction helps to ensure the ongoing downtown revitalization that began many years ago. “While progress on downtown redevelopment has made great strides in recent years, today, with the realization of this deal, downtown is on the cusp of becoming the next great place in Las Vegas,” Donner said. “And in a city like Las Vegas where there are few limits on imagination, that’s quite a statement. We are incredibly humbled, excited and thrilled to be part of this landmark deal that will help downtown Las Vegas to make history.”
The property is being purchased by RGG for $18 million. In addition to a $3 million cash payment at closing, the city will receive a $15 million promissory note with a market interest rate over the second half of the note. Escrow is scheduled to close on or before April 1, 2012. The promissory note will be secured by a mortgage on the building and a 15-year triple-net lease with Zappos, which in turn is guaranteed by Amazon, parent company of Zappos. The city is protected in the event of a default; the property will revert back to the city, complete with any building improvements.
Proceeds from the sale and tax increment revenue will be used to offset the cost of a new City Hall that is nearing completion at 495 S. Main Street. The new City Hall is the lynchpin in a downtown redevelopment plan that is creating thousands of jobs, bringing billions in private investment and millions in new tax revenue to the city.