Neonopolis had serious problems long before Rohit Joshi took control of it.
Since opening nearly 10 years ago, the three-story, 250,000-square-foot entertainment and retail complex has been crippled by a variety of drawbacks: bad design, bad management, a lack of tenants and the wrong tenants. Even its opening was delayed by 18 months after the original anchor tenant, Mann Theaters, declared bankruptcy. But when Joshi’s development group, Wirrulla Hayward, bought Neonopolis in mid-2006 for $25 million—a quarter of its original price—he made grand promises of prominent tenants and unique stores coming to the high-profile corner of Fremont Street and Las Vegas Boulevard. Instead, the last five years at Neonopolis have been a disaster, and Joshi has become the most vilified man in downtown Las Vegas.
Much of the criticism comes from Joshi’s decision to keep Neonopolis largely vacant, even before the recession hit in 2008. He’s also been called out numerous times by former Mayor Oscar Goodman for his inability to make good on his promises, and for his failure to help the city recoup the $32 million it spent to buy the land and build an underground parking garage for Neonopolis. There have also been tenants forced to try to do business without air-conditioning. But through all of the criticism, which Joshi says is largely deserved, he remains optimistic—based on a nearly 40-year track record in commercial real estate—that he will ultimately succeed.
“We know when to open and when not to open, how to start and how not to start projects,” Joshi says, “not because of some pressure from political leaders and not because the press says we’re doing a bad job. That’s not the reason we do it. We do it because it’s good for our tenants, it’s good for us, and it’s good for the citizens. That’s the reasons we should be doing it. And the last two or three years we said, ‘No more; it’s a disaster. The tenants cannot make it,’ and they did not make it.”
Joshi’s third-floor office is inside the carcass of one of those tenants, Galaxy Theaters, which closed in May 2009. The walls of the office are decorated with renderings of concepts for Neonopolis that were conceived and abandoned during his first two years at the helm, providing daily reminders of lost time, money and energy. First there was the Great Wave, an ocean-themed project proposed by a group of former Disney executives; then La Azotea, a Hispanic “roof garden” festival village that was a mix of residential and commercial use. The Gardens of Babylon, a residential high-rise project surrounded by commercial tenants, was next, followed by interest from rocker Sammy Hagar, who wanted to turn the place into Cabo Wabo Village. There was even a proposed hotel-casino, despite the property not being zoned for one.
Even with five years of failure looming over him, the 65-year-old Joshi exudes a youthful energy while discussing Neonopolis. He has been described as media-shy, yet he is friendly and animated while being interviewed—even as he addresses criticism of his handling of the property. He comes across at times more showman than businessman, which makes sense when you consider the man’s past.
• • •
Born and raised in Bombay, India, Joshi (pronounced YO-shee) came to the United States in 1964 to attend college. Unable to speak any English, he decided on the University of Akron (Ohio) after finding it first alphabetically on a list of universities at the U.S. Information Services Office in Bombay.
Joshi was and remains a proficient musician—he plays classical and flamenco guitar, sitar and piano. In college, he gave music lessons and performed in coffeehouses to support himself, and even hosted his idol, Ravi Shankar, when the sitar master performed in Akron in 1969. (Joshi is a diehard Beatles fan—his wife, Lorraine Kusuhara, has “Obladi” as her license plate, while Joshi has “Oblada”—and he’s met each member of the Fab Four except George Harrison.) It was Joshi’s connection to music that led him into the business world.
During his senior year at Akron, where he ultimately earned an M.B.A., Joshi bought a music store (a friend’s father helped him secure financing). By 1974, he had expanded to 12 stores. That year, he sold all of them to a company in Chicago. He was still in his 20s, and suddenly he was a millionaire. From there, the self-proclaimed “hippie from the ’60s” turned his focus toward real estate, landing K-Mart Corp. as his first client working in tenant-driven development, in which major retailers hire developers such as Joshi to find and acquire desirable locations for them. He says he has helped develop 22 million square feet of shopping centers around the world, including in Dubai and China, where he secured locations for Wal-Mart. Joshi believes this experience gives him the playbook on how to turn Neonopolis into a profitable enterprise.
• • •
“We want seasoned retailers; we want tenants who have at least three to five years of experience,” Joshi says. “I understand the business inside and out, and I can tell you that start-ups are not the way to go now. You can hit and miss. You can do good for the first year or two, but then they go out of business. That is the problem with this particular downtown, and especially Neonopolis. You have to be careful who you lease it to. You would rather be vacant than have a reputation that everybody who goes in there goes out of business.”
Wayne Lau, a loan officer at Avatar Financial Group, has worked in commercial real estate in the Pacific Northwest for more than 30 years and remains friends with Joshi long after they collaborated on the development of several shopping centers in the early ’80s. He says Joshi’s charisma, perseverance and business acumen have fueled his success in the past.
“He has a tremendous amount of credibility with retailers, especially with major anchor retailers,” Lau says. “These people are always looking for good locations, but they are very selective in terms of what developers they work with to acquire the sites for them, so that is a pretty good endorsement of their confidence and trust in him.”
But Joshi has yet to earn the confidence and trust of many Las Vegans, especially those whose fortunes have been tied to Neonopolis. Longtime local entertainer Tony Sacca says he put his trust in Joshi and came away more than $500,000 poorer from the experience. Sacca opened his Las Vegas Rocks Café in December 2009 in the first-floor space formally occupied by original tenant Jillian’s. At the time, the company that supplied air-conditioning to Neonopolis said Joshi owed it $300,000, which Joshi refused to pay, so it cut off service to the entire complex.
Sacca says Joshi promised him that the A/C issues would be resolved before temperatures rose, and opened on New Year’s Eve after making more than $100,000 in improvements. Sacca, who had paid rent through May, says he was assured by Joshi that at “a flick of a switch” his restaurant would have its own cooling system in place. But even after summer approached and the mercury began to climb, there was still no A/C. Eventually, Sacca made arrangements for a temporary A/C system, but that became too expensive to maintain and he was forced to shut down for much of the summer. With such a large investment in the restaurant, Sacca decided to try and work things out, but he says further broken promises led to him being locked out of the restaurant in January. Sacca says he was warned beforehand by several people not to do business with Joshi.
Meanwhile, others have had problems with Joshi. Monique Reeder-Sain opened NV Sweets, a small bakery, inside Neonopolis about two months ago but decided to shut down recently after her complaints about a lack of A/C and exterior lighting went unheeded.
“Joshi is a very sweet, smooth operator—very likeable, always has a smile on his face,” Sacca says. “But he’s slime; you can’t trust him. In the old days, this was a town where if someone looked at you and told you something, you believed them. So what he stands for is totally different from how to develop Las Vegas. He goes against the grain of what this town was made of.”
One of those people who told Sacca not to get involved with Joshi was Goodman, who hailed the developer upon his arrival but quickly became an outspoken critic of him. The former mayor says there’s no reason Neonopolis shouldn’t be successful, citing the organic growth of the adjacent Fremont East district. “I’ve been disappointed time and time again, so I can’t get my hopes up,” Goodman says. “But I wish him well.”
Joshi admits that he has failed to deliver success as quickly as he anticipated, but he adds that factors such as the recession’s severe impact on Las Vegas created obstacles he couldn’t foresee. He had flipped other properties in the Valley, and thought he could do the same with Neonopolis—essentially getting into it so he could get out of it. Now stuck with it, Joshi argues that if anyone should be upset with his inability to turn things around at Neonopolis, it should be him, since his company has lost $40 million with its acquisition.
“It is a collaborative failure,” he says. “You cannot fault anybody for it, except that everyone is impatient—politically and otherwise. Believe me, nobody wants to do it more than I do. But sometimes it’s better to step back and learn the lesson. Some of these things cannot be solved.”
• • •
In early 2009, Spanish-language television station Telemundo, which is owned by NBCUniversal, began occupying 17,500 feet of space on the complex’s third story, giving Joshi one of the corporate-backed major tenants that he has been seeking. The Southern Nevada Museum of Fine Arts and Del Prado Jewelers have stuck by Joshi and Neonopolis throughout the turmoil of the past few years, and now they are getting company: The list of incoming tenants includes the Heart Attack Grill, Luna Rossa Italian restaurant, a Mediterranean eatery—all of which are scheduled to open in November—and Denny’s, which is opening at Neonopolis early next year.
Another newcomer is Toy Shack, which specializes in collectible toys and has been featured on Pawn Stars. Owner Johnny Jimenez was looking to relocate his business from Paradise Road to downtown, and decided to move into Neonopolis after Joshi convinced him that he has become more flexible when it comes to tenants.
“A guy like Joshi is used to the big shopping centers and all the corporate stuff,” Jimenez says. “But this is downtown; it’s a different crowd. I think he’s open now to the idea of having a tattoo place in the shopping center and stuff like that.”
Joshi says his approach will be proven right by the summer of 2013, although he understands that Las Vegans will not believe it until they see it. Until then, he says he will do whatever is necessary to get to that point, even if he remains largely unpopular in the meantime.
“I believe until you become successful, you cannot have allies,” he says. “You have to prove that you deserve respect. And we are not there yet. We are still a work in progress. I don’t think we have really shown what this property is worth, and what we are worth. It goes hand-in-hand. You can say anything you want, but we aren’t going away. We have to stay here until we succeed.”