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Shopping Centers Today -> September 2001
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TRIZECHAHN ‘VERY HAPPY’ WITH DESERT PASSAGE SO FAR
By Debra Hazel
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| Desert Passage, TrizecHahn’s theme mall in Las Vegas, is drawing 50,000 visitors a day, according to the company. |
Despite discord with the owners of the adjacent casino and complaints by some tenants about slower-than-predicted traffic, TrizecHahn says it is satisfied with the performance of its $285 million Desert Passage specialty center after its first year of operation.
The 500,000-square-foot theme mall on the Las Vegas Strip is producing more than $600 a square foot in sales and drawing 50,000 visitors a day, a number verified by “one of the most sophisticated people-counter systems in the industry today,” said Andrew A.L. Blair, executive vice president and COO of TrizecHahn, San Diego.
“We are mystified with some of the coverage,” Blair said of several negative press accounts about the mall’s performance. “We are very happy with Desert Passage.”
The center, according to TrizecHahn, is 80% occupied as of late July, with 90% of the mall committed and leased.
In February some retailers complained loudly about the lack of promised traffic. Several filed papers to overturn eviction notices from TrizecHahn, claiming their withholding of rent was defensible because Desert Passage had failed to bring the “quantity and quality of customer traffic” promised to the mall, according to published reports.
Part of the problem, Blair said, is that the legal system in Nevada means that renegotiations almost invariably end up in a public forum.
“We’re not going to tell you that there aren’t a few disputes,” he said. “But with 150 tenants, there is only a handful, and you almost automatically end up in court.”
The reports led at least one potential tenant to question the wisdom of taking space at the mall.
“I had many a sleepless night over this,” said Dave Marshall, president and CEO of Chicago-based Chiasso. The 16-store, privately held home decor chain eventually opened a 2,200-square-foot unit at the center in May.
Marshall admitted that local newspaper reports of unsuccessful retailers at the center led him to do some serious research. He called tenants, local brokers and the attorney representing several disgruntled retailers to find out what he should expect. But he has done well, Marshall said.
“It’s our best store,” projected to do $700 per square foot this year, Marshall said.
The main perception problem may be in comparing Desert Passage with its older rival, the nearby Forum Shops at Caesars. Sales at The Forum Shops have remained steady throughout the first year of Desert Passage’s operation at about $1,300 per square foot, according to Michael P. McCarty, senior vice president of research and communications for Indianapolis-based Simon Property Group, The Forum Shops’ co-developer and manager. Further up the Strip, The Grand Canal Shoppes at the Venetian has listed average sales of $950 per square foot, according to published reports. Expecting a brand-new center to match those figures is unfair, several observers say.
“If you think you can replicate $1,200 a foot in an environment where you’ve added 1 million square feet over the last 10 years, it’s ludicrous,” said Daniel Alpert, managing director of New York City-based Westwood Capital, the investment bank that arranged the financing for both the Aladdin casino/hotel and Desert Passage.
Another factor is the project’s size, twice the space of Forum Shops at its debut in May 1992.
“The fact of the matter is that it’s a monstrous property. It’s huge,” Alpert said.
The entire property, including the casino, cost $1.3 billion. Size and design may also be reasons why some tenants are unhappy. During the ICSC Spring Convention in May, some attendees who visited the center said they saw several “dead spots.”
Desert Passage’s circular layout leaves some corners less accessible than others. Marshall said that the center feels dark to him and that there are weak corners.
“People that are not doing well are the independent operators, or those that are tucked away,” said Charles Creigh, principal at local brokerage Newmarket Commercial Real Estate Advisors/Chain Links, adding that client Ann Taylor is “doing great” at the center.
The other factor may be TrizecHahn’s partner: the Aladdin, which has not attracted high rollers to the extent originally projected.
“The Aladdin is not doing as well as people had hoped. It’s been forced to go down-market and that probably has had an impact on the retailers,” Alpert said.
The mall’s relationships with the casino staff, too, were strained early on. Less than a week before the opening, the mall dropped the Aladdin name from its own, changing from Desert Passage at Aladdin to simply Desert Passage. The situation was rectified when personnel changes were made at both the mall and the hotel.
Many observers said that Desert Passage has been hurt by the lack of major events at the attached Theatre for the Performing Arts concert hall. In coming months, a spa will open on the property, and Aladdin said it is adding a show starring Carmen Electra to draw entertainment-oriented visitors.
“There’s probably not a new mall that doesn’t open where some people are unhappy,” Marshall of Chiasso noted. “Everything that opens in Las Vegas takes a year to settle in. This project, in another four years, is a $1,200 project.”
By then, it should be remembered, Desert Passage will have a new owner: TrizecHahn’s corporate parent has announced it will sell all of its North American retail projects by 2004.
Meanwhile, Desert Passage continues to operate, re-tenant and re-lease as needed in what its officials say is a typical shakeout period for a new center. TrizecHahn officials say it continues to negotiate with some of its tenants; several tenants and the attorney working with them earlier this year did not return SCT’s phone calls. Jeweler Tresor, which had filed suit against the center, has since resolved its difficulties with the mall, reported a store manager who declined to give his name or comment further.
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