The commercial real estate market is in the gutter. Sales are down everywhere. Housing? Wait ’til 2015. Suicides are up. Depression. Recession. Yawn. There you have it, all the tempering and caution needed for stories like this, about the opening of a luxury, $850 million retail site in Las Vegas.
But despite a seemingly endless run of delays, Tivoli Village at Queensridge, a mixed-use center at the northeast corner of Alta Drive and Rampart Boulevard, refuses to be another hard-luck development story. If anything, it’s a testament to patience, a builder’s obsession with European-village architectural details and the fortitude necessary to hold out until the timing is just right.
Yohan Lowie, project visionary and CEO of developer Executive Home Builders (EHB), is routinely on-site making sure rocks mined from around the world are properly shaped, set and configured. The site’s granite sidewalks and marble streets are pieces of the rest of the world and all seem to have a story Lowie or other craftsmen on the grounds are willing to share.
“We’re perfectionists,” says Tonia Chafetz, Tivoli’s manager of specialty retail and marketing. “We’re not going to rush a project like this.”
After purchasing the 29-acre parcel from the Peccole family in 2004, EHB went right to work, getting permits and re-engineering a site that was previously a wash. It took two years just to build out the 3,000-space underground parking garage, which forms the foundation, or podium, on which the developer could finally go vertical.
All that fuss for an underground parking garage was actually a blessing, says Patrick Done, Tivoli’s executive vice president. Finishing the project two years sooner would have brought its own set of problems.
“Even now when we sit around in our meetings, we think, ‘What if we could’ve gotten things done sooner?’ That sounds great, but think of all the tenants that would probably be leaving. We’d be dealing with tenants asking for rent relief and taking space back,” he says.
The next delay came in September 2008, compliments of investment house Lehman Brothers. Done remembers the day the news hit about its demise.
“We actually had retailers in town from California, and they said, ‘We gotta go home,’” Done recalls. Up until that time, the project had been running three shifts a day and 55 percent of its leases were executed. “We had lights on in the middle of the night, approval from the nearby neighborhoods to continue that way. … In one day the world just stopped.”
And so did Tivoli Village, for about a year. Full-time construction levels resumed in late 2009 with an eye toward a late 2010 opening. Tivoli brass has been pushing the date off a month at a time of late, and a quest for artistic perfection seems to be a more realistic excuse these days.
The money is there to handle these setbacks. Owner IDB Group, an Israeli business conglomerate with $30 billion in assets, can wait for things to get better on an $850 million project in the middle of a desert half a world away. To them, EHB—which also developed nearby Queensridge Place—is like having one bum leg on a centipede. But EHB has shown signs of improvement itself—the company picked up 23 bank-owned acres across the street from Tivoli Village in late 2010 for $11.75 million, acreage now slotted for Tivoli’s future fourth phase. The developer also bought the former Great Mall of Las Vegas site, a 60-acre property adjacent to the Centennial Hills Medical Center, to its local portfolio. The Great Mall site was formerly owned by Canadian-based Triple Five Group, which was hoping to re-create its massive Mall of America concept, similar to malls it built in Minnesota and Edmonton.
Done knows the retail market isn’t back, and admits sleep doesn’t come easy these days. That’s also why, instead of the whole chunk, we’ll get a piece of Tivoli for now. The second phase, at 300,000 square feet with a movie theater, is under way and slotted for a late 2012 opening.
For the first phase, set to open April 28, nearby Summerlin residents will get 225,000 square feet of retail and restaurant space, along with 145,000 square feet of office space. Three tenants—Merrill Lynch, Regus executive suites and the Kolesar & Leatham law firm—will occupy about 77,000 square feet, covering more than half of the first phase of office.
Tivoli will seem a little dining heavy at first. Brio Tuscan Grille, which also has a Town Square location, will have a spot at Tivoli. Leone Café, YoScream, Cantina Laredo, Tivoli Irish Pub and Petra Greek Taverna are all on the list for the first phase. Retailers include: Republic of Couture, Charming Charlie, Jeff White Custom Jewelry, Bobby Wheat Gallery, Crystal Medical Spa, David Barton Gym and Kidville. Done says not all the stores and restaurants will be open in late April. But all, and probably more, should be up and running by August.
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Tivoli, for now, is winning the cash battle; but its future fight will undoubtedly be a psychological one. Convincing nervous consumers to spend on a little fun is a tall order.
Mike LaTour is a professor of marketing and a Beam Research Fellow at UNLV. He focuses primarily on consumer psychology. LaTour says that now more than ever, shoppers are still looking for enjoyment and are willing to pay for it.
“People are in need of positive experiences, even though it’s somewhat tempered by this overarching awareness of financial constraints.”
He argues that gauging Tivoli’s success by “hard numbers and utilitarian calculations” isn’t fair. He says its success will lie in its ability to create a shopping experience that puts people in a comfort zone so they spend. He explains that during the real estate boom when people saw their home as ATMs, there was irrational spending. But now, he says, we have “irrational non-spending.”
“The key in the retail environment is not just bringing people in, but having them leave with shopping bags,” LaTour says. “The shopping bag sends a signal, psychologically, that these are not just people checking this out. There must be something of value here. It cues others in on the value proposition.”
Dina Brichok, vice president of merchandising for Republic of Couture (ROC), says the boutique’s first Las Vegas location at Tivoli will be about entertainment as well as customer service. The site will host weekend DJs and fashion shows.
The “mini-department store” concept ROC brings is a slight departure from the Florida-based retailer’s earlier efforts that had a heavy South Beach theme and a higher-end product. Now the store, adjusting to the new economy, offers more at all price points.
“We entice a wide variety of people. Anyone can come in here and find something,” she says.
Chip Rodgers, vice president with Texas-based retail consulting firm Buxton, says the perception of value is one of the top things on the minds of today’s consumer.
“It’s just perception,” he says. “It’s the feeling that I’m going to get more. I think it’s just the mentality of the shopper right now.”
Done agrees that while Tivoli’s initial marketing push had a luxury focus, many retailers have come down to earth with pricing and now are trying to appeal to a wider range of customers. He calls the shift “being approachable.”
Dan Kouretas, owner of Petra Greek Taverna, is bringing his San Francisco-based dining concept to Tivoli as well. The two-story restaurant with patio seating is not your typical “blue and white” Greek restaurant, the owner says. Kouretas grew up watching his mom cook great meals and used that as a muse for his venture several years ago in Northern California. A Summerlin resident, he had been eyeing Tivoli for a long time.
“I saw they stopped the construction but I called and was surprised someone answered the phone,” he says with a laugh.
Beyond psychology, Tivoli may have very well secured one of the top locations in the city. The Valley average for retail vacancy is at roughly 12 percent according to Douglas Crook, head of the Nevada chapter of the International Council of Shopping Centers. (CoStar Group, a Maryland-based research firm, put national retail vacancy at 7.4 percent late last year.) Crook says a 7 percent retail vacancy rate is considered equilibrium, and the boom days of 4 and 5 percent vacancy rates are an anomaly.
But he also believes that Summerlin and areas bordering it may still be seeing boom-day vacancy rates of 4 percent, hinting at the “need” for more retail in the area.
Also potentially boding well for the area is an emerging consciousness of growth among retailers, even nationally.
“You still have demand out there,” Rodgers says. “I think you’re going to see retailers getting more aggressive to open new stores in the next year to 18 months. Anytime someone has something unique and they have the opportunity to go into something like the Las Vegas market, they’re going to explore that.”
But Crook warns that opening too small could be a problem for Tivoli. If General Growth Properties, owner of the Summerlin Centre site, decides to re-start that project, a retail war could ensue in the area. And even in the near term some tenant migration will likely occur between Tivoli and nearby Boca Park.
“They’ve been able to sneak in right now, which is good for them,” Crook says. “Retailers like to be where the action is. They like to gravitate toward a central hub. Hopefully, they can create that.”