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Downtown Commerce: Neonopolis Rethinks Tactics

LAS VEGAS -- On their way from Los Angeles to New York, Christian DiMarzio and Alycia Buck pulled off the highway Monday for what they hoped would be a leisurely lunch at Neonopolis.

Instead, the couple's visit lasted less than 10 minutes and ended without either person spending a cent.

"What drove us in was a sign for the food court," DiMarzio said as he walked out of Neonopolis, the nearly $100 million shopping and entertainment complex in downtown Las Vegas. "But there wasn't much of a food court. To be brutally honest, there wasn't much of anything."

Such experiences have become all too common at Neonopolis, which opened last May near the intersection of Fremont Street and Las Vegas Boulevard.

As its first anniversary nears, Neonopolis general manager Frank Wheat hopes a renewed focus on entertainment and dining, as well as the addition of office tenants, will be enough to turn the fortunes of the approximately 250,000-square-foot center owned by World Entertainment Centers of Newark, N.J.

"We certainly felt going in that the property should be a strong mix of retail, restaurants and entertainment," Wheat said. "As we've gone through the first 11 months or so, we've stood back and said ... we need to focus on adding some entertainment and restaurants; that seems to be the thing that's getting a response from local residents and tourists.

"There is a niche for retail down here, but it's finding the right types of retail establishments.We'll look harder at who we do deals with and will probably downsize the percentage of retail" at Neonopolis.

Wheat said the addition of gaming also remains an option, though he added it's still too soon to comment on whether such amenities might someday be available in the center.

Gaming is now prohibited at the center under the 1998 development agreement that provided $32 million in public money to help develop the project. The city, World Entertainment and the Fremont Street Experience signed the agreement.

Although Las Vegas Mayor Oscar Goodman has said he may back allowing slot machines at the mall, the Fremont Street Experience has been cool to the idea.

President Mark Paris, who represents a consortium of downtown casinos, said Neonopolis was meant to complement, not compete with those casinos.

Though he declined to provide specific sales figures, Wheat said Neonopolis's casual dining and entertainment tenants -- specifically Jillian's restaurant, arcade and bar; Crown Theatres' 14-screen cineplex, The Saloon and La Salsa Mexican cantina -- are all doing "quite well." So was the French Express coffee and sandwich shop before an out-of-control car recently crashed through its front window, temporarily shutting down the eatery.

The same cannot be said for many of the center's retail and fast-food tenants, though.

Outside of Jillian's, Neonopolis's first level includes just a handful of small stores, kiosks and fast-food shops. Upstairs, the second-level food court today looks much as it did when it opened nearly a year ago: largely deserted. An original tenant, Three Boys Pizza, has long since departed, leaving only Muscle Beach Lemonade & Hot Dogs, Panda Express and the Popolini dessert shop to attract would-be diners.

A visit around dinner time last week saw only three patrons inside the glass-enclosed dining area; just one was present as DiMarzio and Buck strolled through around noon Monday.

Denied satisfaction at the food court, DiMarzio and Buck looked to whet a different appetite at a nearby Frederick's of Hollywood lingerie store. Again, they were disappointed to find workers packing up a store that closed for good over the weekend.

Heading downstairs, a sign on the eclectic Zinc retail store said the shop's last day of business was Sunday.

"It's a shame," DiMarzio said. "I liked the mall's layout, but really, there's no reason to go in there."

Shortly before it opened last year, Wheat said Neonopolis had signed leases with tenants who would take up about 75 percent of the complex's space by September; he had hoped to reach 90 percent occupancy sometime this year.

Today, the center is only 59 percent leased, Wheat said. Still, he hopes the addition of commercial tenants will bring in much-needed foot traffic. A company called Resort Gaming has agreed to place its corporate offices inside a 12,000-square-foot pad on Neonopolis' third level, and management is now working on similar deals to lease office space to two more businesses, Wheat said.

Wheat said he's also involved in early negotiations to add two to three restaurant/entertainment businesses to the center.

"There's interest in the property," Wheat said. "We certainly would like to have been further along than we are, but it's a work in progress, something that we kind of have to keep our hands on and mold as we go along."

Tyler Warfield, a senior vice president of operations for Jillian's, said Monday his Louisville, Ky.-based company's roughly 41,000-square-foot Neonopolis restaurant and entertainment complex has so far met expectations. Sales for corporate events have been building since Jillian's opened in mid-October, Warfield said, adding the site typically draws strong crowds on evenings, weekends and whenever a popular sporting event is televised.

"Business hasn't been off the hook, but it's building," Warfield said.

Optimism also abounds from Neonopolis' primary third-floor tenant, South Norwalk, Conn.-based Crown Theatres. Marketing director Jeremy Welman described his company's Neonopolis venture as "a five-year-project" and added its first-year ticket and concession sales have so far met expectations.

"We didn't expect to hit a home run right out of the gate, but business has improved and we're looking forward to hosting some blockbuster films this summer," Welman said.

Both Jillian's and Crown Theatres expressed support for Wheat's plans to expand Neonopolis' food and entertainment offerings, with Warfield particularly excited about the prospective addition of offices.

"That's the best thing for a food operator," he said. "With an office going in, you'll get a lunch crowd, happy hour and all that."

Wheat said the stigma of downtown Las Vegas has hurt business at Neonopolis, though he believes the city is making progress to improve the image of an area some still view as a seedy haven for the homeless.

"It's a ways off," Wheat said. "We're not going to be home free by the end of this year, even by probably the end of next year, but I certainly believe we're making some headway" at improving the image of downtown.

Mike Hansell, a senior vice president with the Las Vegas office of Lee & Associates Commercial Real Estate Services, said the pro-entertainment concept is a step in the right direction but believes Neonopolis will continue to struggle until more people reside downtown.

"Retail is developed because of (home) rooftops, and you just don't have enough in the downtown area," Hansell said. "Whoever takes that over has got to sell downtown Las Vegas as a destination."

Neonopolis' struggles have not affected plans for two additional projects in downtown Las Vegas: the $90 million Las Vegas Premium Outlets scheduled to open this August along Interstate 15 just north of Charleston Boulevard, as well as the $1 billion World Market Center, a 7.5 million-square-foot furniture home furnishings complex that broke ground March 20.

Les Morris, spokesman for Simon Property Group of Indianapolis, said Monday his company remains confident in the outlet mall it's co-developing with Roseland, N.J.-based Chelsea Property Group. Separately, World Market Center managing partner Shawn Samson said the center's $200 million first phase remains on schedule to open in late 2004.

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