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VCC Goes Big in Vegas with $344M Downtown Summerlin Project

4 min read

Completing a half-built, 1.5 million-SF retail-office center in less than 18 months presented a desert challenge for VCC LLC. The sprawling Downtown Summerlin project in the western suburbs of Las Vegas also represented unfinished business for the Little Rock general contracting firm.

The Great Recession brought construction to a halt in October 2008, and work didn’t resume on the 106-acre development until May 2013.

Touted as a showcase of new urbanism design, Summerlin is home to a nine-story, 200,000-SF office building and more than 1.3 million SF of stores, restaurants and entertainment venues. The development is portrayed as the largest retail project in the nation to come on line since 2008.

Its owner, the Howard Hughes Corp. of Dallas, tallied the development costs of the project at $344 million as of Sept. 30.

“We’re proud of it,” said Sam Alley, VCC chairman and CEO. “I told our management team that I feel like we’ve won the Super Bowl. It’s an iconic project.”

The grand opening on Oct. 9 was greeted by an enthusiastic throng treated to pyrotechnics and fanfare in keeping with a super Vegas event. Summerlin attracted more than a quarter million visitors during the flashy music-filled, four-day celebration.

Among the 85 shopping carnival hosts was Dillard’s Inc. The Little Rock department store chain held a soft opening Oct. 4 at its 200,000-SF Summerlin store in advance of the big Oct. 9-12 blowout.

“The fireworks show was bigger than any Fourth of July I’ve ever seen,” said Derek Alley, senior vice president in the Dallas office of VCC. “It was quite the party.”

Dillard’s was a committed anchor to the project when it was envisioned as a regional mall development, the Shops at Summerlin Centre.

The original fortress mall concept called for a retailing destination designed to capture and contain money-spending patrons all surrounded by a huge moat of parking.

Over time, that old-school plan morphed into the trendy pedestrian-friendly lifestyle center formally unveiled in October. The city-block layout features one-way streets with parallel parking, a modern interpretation on downtown set in the suburbs.

The numbers of this open-air retailing stronghold reflect a grand commercial castle-building endeavor with 63 subcontractors who erected 4,405 tons of steel, installed 8,200 metal panels, 8,158 light fixtures with more than 2.65 miles of linear lighting and 54,205 SF of fabric shade structures and planted more than 2,800 trees.

Overseeing it all was VCC.

The company remained aboard to restart the project after cultivating a relationship with the Howard Hughes Corp., which succeeded General Growth Properties Inc. of Chicago as the owner-developer. HHC was spun off as a separate public company under new leadership in November 2010 with the Summerlin property among its holdings.

“We pride ourselves on going above and beyond with customer service,” Derek Alley said. “We helped them understand the project and the vision for it.”

$28.3 Million in Liens

Laden with a staggering $27 billion of debt and confronted with constricted financial markets, General Growth entered Chapter 11 in April 2009, five months after suspending work on Summerlin.

By December 2009, VCC was pressing lien claims of $28.3 million for unpaid Summerlin bills owed by General Growth.

The foreclosure efforts by VCC, Precision Concrete of North Las Vegas (owed $2.8 million) and Clark Pacific of West Sacramento, California (owed $2.4 million), produced a financial settlement two months later.

VCC received monthly payments of $1.5 million until the reorganization plan for the Summerlin debts was confirmed and was concluded with a final payment settlement.

“General Growth Properties came out of bankruptcy and paid us everything,” said Sam Alley. “Howard Hughes Corp. believes in our company and came back to us and told us they wanted us to do the project.”

Getting Summerlin back on track was a huge preconstruction effort, with scheduling

materials and labor under pressure to meet the fall deadline for completion.

“You can’t build the project if you don’t have the material on hand,” said Sam Alley. “There was a lot of overtime, logistically.”

The project was accomplished with changing details dictated by tenant finish-out specifications and while HHC staffers signed new leases in the midst of construction.

“Their decision-making really helped us make it to the finish line,” Sam Alley said. “If they don’t make timely decisions, we don’t complete the project on time.”

Today’s edifice, which serves as a symbol of a rebounding real estate market, was yesterday’s monument to financial excess that ushered in the 2008 bust.

The retail portion of Summerlin is 69 percent leased, but the office building is only 25.2 percent pre-leased as of Nov. 1, according to the Howard Hughes Corp.

While overall retail occupancy in the Vegas market is about 91 percent, the average occupancy rate in the office market is 77.8 percent with Class A space commanding only an average rental rate of $1.88 per SF.

Helping make the ambitious Summerlin relaunch feasible is a surrounding mosaic of rooftops developed as part of the 22,500-acre master-planned community.

The Summerlin property, assembled by Howard Hughes Jr. in the 1950s and named for a grandmother, began to really take shape in the 1990s.

The head count of residents in Summerlin and Summerlin South totaled about 125,000 in 2010, and homebuilding in the affluent area has been on the upswing.

Residential and commercial activity at Summerlin is viewed as welcome harbingers of better things to come for a market that was among the hardest hit by the Great Recession.

Hotels, apartments, condominiums and a possible minor league baseball park are among the projects that the Howard Hughes Corp has on the drawing board for Summerlin.

“We’re talking with them about other opportunities,” Sam Alley said.

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