Nothing has occupied the first floor of downtown Henderson’s Pinnacle Building for three years, but a sale of the structure was approved last week, paving the way for an urban lounge to fill the empty space.
“We’re looking to bring some night life to Water Street,” City Manager Jacob Snow said.
The Henderson City Council, sitting as the Redevelopment Agency, approved the agency’s plan to sell the building for $510,000 to Agua Street Gaming LLC.
As part of the deal, the city has agreed to forgive $2.1 million in debt owed by the Redevelopment Agency, which bought the building with a $2.6 million loan from the city in November 2007.
Michelle Romero, Henderson’s redevelopment manager, said the Redevelopment Agency bought the Pinnacle Building before it could go into foreclosure. At the time, property values “were way higher than they are now,” she added.
Redevelopment Agency staff recently had two appraisals performed on the Pinnacle Building, and they resulted in value estimates of $650,000 and $725,000.
The appraisals were reduced from higher estimates because of the building’s below-market lease rates.
Records also show that the building, at 203 S. Water St., needs renovations and repairs that will cost about $166,000.
Romero said that estimate does not include the cost of needed roof repairs, which could run around $75,000.
“There’s significant improvements that need to happen to that building,” she said.
One nearby property owner publicly opposed the sale. Tom Foster operates Professional Design Associates Inc. in a building he owns at 108 Market St., not far from Water Street. He also sits on the Henderson Redevelopment Advisory Commission and was its chairman until recently.
Foster has argued that this “short sale” will lower the value of all Water Street properties, “perhaps initiating a downward financial spiral in the business district.”
“To me, it’s an extremely poor stewardship of the public’s money,” he said.
He also questions the viability of an urban lounge that will be located across the street from the Eldorado Casino, where patrons can drink for free while gambling.
But Snow thinks the sale will benefit the city, including nearby property owners.
He also said those involved in the purchase have proven they can run a successful business in downtown Henderson. Agua Street Gaming was formed by brothers Tim and Mike Brooks, who have owned the Emerald Island Casino in downtown Henderson for the past 10 years, and Doug Beavers.
“We think there’s great potential to have a first-class eatery — restaurant — and a lounge go into Water Street,” he said. “And we want to see the Pinnacle Building occupied. We want to see bodies going in and out of the building. We want to see employment.”
The sale “also places the property back on the tax rolls,” the city manager said.
Romero said she asked the Clark County Board of Equalization whether selling the building at a price lower than the appraised values would negatively affect surrounding properties.
“The answer was no, because of the way they do their calculations,” she said.
Snow said Agua Street Gaming will continue to lease space on the second floor to the Henderson Police Department and on the third floor to the city’s Cultural Arts & Tourism Department. The lease rates will remain the same, Snow said.
Foster had asked the Redevelopment Agency to consider options other than the deal it approved last week, such as keeping the building until the market improves, or selling it at its full assessed value, without deductions for below-market lease rates or improvement costs.
He said the building has been paying for itself, even with the low rents and a vacant first floor, “so why are we so anxious to dump this property?”
Romero said the agreement with Agua Street Gaming included several important conditions. For instance, the company must provide proof it spent $166,000 on renovations. If it spends less, it must pay the difference to the Redevelopment Agency.
The company also must complete the renovations within three years.
“They’re hoping to have everything done within 18 months,” Romero said.
In addition, Agua Street Gaming may not resell the property for three years and will not be eligible for any other financial assistance from the Redevelopment Agency, which already has invested a total of $3.9 million in the building since 2005.
Romero said restaurants previously tried and failed to operate on the first floor of the Pinnacle Building, which was built in 2006, but the kitchen was too big and the dining area too small.
“It has to be completely gutted and reformatted,” Romero said.
Tim Brooks declined to comment when initially contacted about the proposed sale of the Pinnacle Building. He could not be reached after it was approved.
The Henderson City Council voted in October 2011 to allow a limited number of urban lounges in the Water Street corridor.
The city code defines an urban lounge as “a place where the primary business is the service or sale of alcoholic liquors at retail by the drink to the general public, with a live entertainment component wherein no other business, except gaming, a dance hall or the service of food is conducted.”
City officials said the urban lounge planned for the Pinnacle Building would be the first of up to five in the area.
“We’re excited about the prospects,” Snow said.