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Goodman: Zappos move a ‘watershed moment’ for downtown Las Vegas


Justin M. Bowen

Zappos CEO Tony Hsieh and Las Vegas Mayor Oscar Goodman answer questions Wednesday, Dec. 1, 2010, at the Las Vegas City Council meeting, when it was officially announced the existing City Hall building would be used as the corporate headquarters for online retailer

Updated Wednesday, Dec. 1, 2010 | 2:41 p.m.

Zappos at City Council (12-1-2010)

Zappos CEO Tony Hsieh speaks Wednesday, Dec. 1, 2010, at the Las Vegas City Council meeting, when it was officially announced the existing City Hall building would be used as the corporate headquarters for online retailer Launch slideshow »

"Tipping point." "Watershed." "Game changer."

Las Vegas City Council members used those descriptions to explain the significance of their decision today to approve selling the existing City Hall to be used as the corporate headquarters for online retailer

The sale not only will help the city pay for the new city hall under construction a few blocks to the southwest, but will eventually lead to more bars, restaurants and bookstores downtown, city officials say.

Mayor Oscar Goodman said it was more than a real estate transaction.

"Today is a transaction that is going to forever affect the social fabric of our community," Goodman said. "The way we think about ourselves and our inner core will be different from this moment forward.

"There are certain watershed moments that a city may celebrate and consider while evaluating the historical perspective. This is one of them."

The council voted unanimously to approve the eventual sale of up to 18 city-owned acres, including the City Hall building, the city parking garage and KLVC offices for $25 million to the Resort Gaming Group Inc.

The deal calls for RGG to buy the City Hall site by November 2011, then begin doing work on it to prepare for Zappos' move as the city starts moving to the new city hall site.

The city's move into the new building, under construction between First and Main Streets and Lewis and Clark Avenues, is expected to be complete by April 1, 2012.

Deal to spur more downtown eateries

After today's city council meeting, Zappos CEO Tony Hsieh told reporters he wasn't sure yet how many of his 1,000 employees might decide to relocate and live downtown.

But Hsieh said he envisioned more businesses would spring up downtown to meet their dining and entertainment needs, including more restaurants, coffee shops and bookstores.

"I guess for me the closest analogy would be downtown Austin, when you go down Fourth Street and Sixth Street," he said.

Asked what the online shoe retailer would do to the exterior of City Hall to make sure the world knew it was the company's corporate headquarters, Hsieh said it was a little too early in the process to speculate.

"Our employees literally found out about this two days ago," he said. "So we've just begun the brainstorming process. But pretty much every place we've gone we've left a Zappos mark on it. So I would assume we would do the same thing here."

Zappos, a leader in online footwear and clothing sales, is known for its corporate culture. It was named in Fortune Magazine's "100 Best Companies to Work For" in both 2009 and 2010.

Andrew Donner, owner and founder of RGG, first came to the city with an unsolicited offer to buy the site and seven surrounding acres a few months ago, with Zappos's corporate campus in mind.

However, the city was unable to negotiate with the hospitality management and development company. That's because the city had an exclusive negotiating agreement with the Cordish Companies to market the City Hall site for a sports arena, an entertainment district and a hotel/casino.

Without revealing that was the company, the council took action during its last two meetings to change its contract with Cordish, so it will focus those efforts at the 61-acre Symphony Park, the former Union Pacific railway yard.

That move paved the way for the RGG and Zappos deal to move ahead. With today's approval of the sale of the property to RGG, the parties will enter a "due dilligence" period. The entire transaction is expected to take several months to finish and is expected to close by the middle of 2011, according to the city.

East Fremont vibe appealing to CEO

Hsieh said he hit upon the idea for the City Hall location in a roundabout way.

He said they had been exploring moving the corporate campus from Green Valley area in Henderson to other sites in the Las Vegas area, looking for fun places that employees liked to gather.

"I've been here seven years and I didn't even know about the East Fremont area until one or two years ago," Hsieh said. "It seemed like it was one of those hidden secrets of Vegas, the non-gaming bars and lounges and so on.

"And it was actually in meeting Michael (Cornthwaite), who owns the Downtown Cocktail Room, and hanging out in his place a couple of times and I got to get to know him and learn about why he was passionate about East Fremont."

The 37-year-old CEO said he then found out that his employees were independently discovering the East Fremont arts district, and enjoying Griffin, Vanguard and Beauty Bar.

That's when he started thinking that it would be a great move to have the corporate campus in that area, he said.

"And just completely coincidentally — I didn't even know about it at the time — I found out that City Hall was moving," Hsieh said. "...So I just started asking around to see if that was even a possibility."

Hsieh said he began working with RGG through mutual friends and acquaintances.

RGG's Donner said that Cornwaith and other downtown business owners were to be commended for creating "a vibe that captured the attention of Zappos."

Move a 'tipping point' for downtown redevelopment

"When I first met Tony Hsieh and Fred Mossler (a top Zappos officer), we walked the streets of downtown," Donner told the city council.

"And I can remember standing on the corner of Stewart and Sixth with Tony and him looking at me and saying, 'Can we build a ski slope right here?'" Donner said, getting some laughs. "And I think it was Einstein who said that imagination was more important than knowledge."

Donner said it was at that time that he realized that Hsieh was "someone very special."

He also noted, getting some laughs, that there's no intent to build a ski slope now, "it's just an idea."

"But the campus will spawn new surrounding restaurants, eateries, bars and boutiques, stores, galleries and businesses, and yes, a few built-in surprises to meet the entertainment and lifestyle needs of the Zappos family," Donner said.

Donner said construction on the building's renovation for Zappos will begin as soon as the new City Hall is complete and the transition over to it takes place.

The developer called the Zappos deal "historic" and "truly a tipping point" for downtown.

"Look around you. You don't just have a company. You have one of the leading companies. You've got a community that has expressed excitement that I have never seen in a decade of being down here," Donner said.

Donner, who privately owns RGG, which he founded in 2002, is a partner in the redevelopment of the Lady Luck Casino and Hotel. The Lady Luck is expected to open under a new name in the fall of 2012, along with many new food, bar, club and retail venues along Third Street.

RGG is also working with others to develop about 100,000 square feet of retail, food, beverage and convention space around the Mob Museum, about a block west of what will be's new campus. The Mob Museum is expected to open in the fall of 2011.

Hsieh hoping to build downtown's culture

Bill Arent, the city's director of business development, told the city council the Zappos project was "the most rewarding project I have ever worked on."

"The reason is, if you're a family, you choose your home. And Zappos is actually choosing their home. They're choosing to stay in Las Vegas. And they're choosing to locate in downtown Las Vegas," Arent said. "To the Zappos family, welcome to downtown."

More than a dozen Zappos employees who accompanied Hsieh to the meeting cheered and applauded.

Coming to podium, Hsieh was roundly applauded.

"This is a little surreal because it's kind of weird that you're going to vote on something in what's going to be our future auditorium," he said, getting laughs. "And Mayor, I think you're sitting in my future seat."

He said Zappos got its start in San Francisco and moved to Las Vegas seven years ago, bringing 70 employees. Now that the company is part of, it's not allowed to give future projected earnings, he said.

"What I can tell you is we've grown from 70 employees to over 1,000 employees here in the Vegas area," he said. He said the company hit $1 billion in gross merchandise sales in 2008.

Despite the down economy in the last 24 months, sales have continued to grow, he said. First quarter net sales were almost 50 percent above the same time in the previous year, he said.

"So we're very excited about our future and super excited about this whole downtown project," he told the council. "For Zappos, our number one priority is our company culture. And we not only wanted to bring our company culture out to the next level, but help build the culture in Las Vegas. We'd love to be in this building."

Wolfson: Move to create synergy

Mayor Pro Tem Gary Reese thanked Hsieh for moving to the downtown and providing the opportunity to employee Las Vegas residents at the location.

"This here today to me is the real deal," Reese said. "It's going to be the turning point of downtown."

Councilman Steve Wolfson asked if there were any risks to the city in the deal.

Arent, the city's director of business development, said the biggest risk to the city would be inaction and carrying an asset that wouldn't be generating any value to the city.

He said the other risk was that escrow doesn't close on the deal next November. Another risk is that the city could be late in moving into the new City Hall building by April 1, 2012.

Another risk is how long the company plans to stay in Las Vegas, he said.

"The company choosing to stay here after growing and being successful speaks volumes," Arent said. But he said with RGG holding the lease on the property, that risk has been mitigated.

Wolfson said the economy and jobs are most important to the city of Las Vegas.

"This is creating the live, work, play environment," Wolfson said. "The synergy that you, Mr. Hsieh, and your folks are going to bring to this downtown area is going to be remarkable.... We're going to add many, many people to our downtown area."

Ross: A 'major game changer'

Councilman Steve Ross said the Zappos project will fit into the city council's vision of what it has hoped to accomplish downtown.

"This is the major game changer that's going to change the dynamic of downtown tremendously," Ross said.

He said by having an internationally known company move to the downtown has changed the values of the properties downtown.

"I can't tell you how excited I am for this," Ross said. "I told the mayor when this started I'm getting giddy, I'm so excited.... We're going to see this city change in our lifetimes for the benefit of the people who live here. And that's what's really exciting."

Councilman Stavros Anthony said the city needs Zappos and "Zappos needs us because this is the perfect place for them to move. This fits their culture perfectly, the downtown fits their culture perfectly. And they have lots of room to expand."

Anthony said having a major company's headquarters in the downtown "is really huge."

"This is going to be a game changer for downtown," he said. "It's really going to impact what happens downtown, the growth downtown, the excitement downtown."

But what's also just as important are that the funds that come from the transaction are going to help offset the cost of the new city hall. He said the funds that the city gets from the transaction will go into an account that will be used to pay for the new City Hall.

Part of the funds to pay off the new City Hall will come from tax increment financing, Arent said.

Barlow: Zappos fits downtown 'like a hand in a glove'

Goodman compared Zappos moving to the downtown with the significance of the Cleveland Clinic Lou Ruvo Center for Brain Health and the Smith Center for the Performing Arts being built at Symphony Park.

"Today's event is going to shape and mold the future destiny of Las Vegas," Goodman said. "We are in a position ... To crow and brag to the rest of the world that a major business has made a considered judgment to pick our downtown as the place for its future growth. We'll be able to sell that around the world to industry, to businesses, to folks who are looking to relocate and even those who are not looking to relocate, to attract them to Las Vegas.

The proposal has "validated" and "legitimated" the city today, he said.

"We have gone, as they say in professional sports, to a whole new level," he said. "We're major league."

Councilman Ricki Barlow, who said he grew up in the downtown area, said called the Zappos decision to move to the downtown "really cool."

Barlow said it took the public and private sector working together to make the Zappos deal happen and to bring the vision to improve the downtown.

"They have a culture that fits like a hand in a glove right here in downtown Las Vegas," Barlow said.

He also thanked Donner for bringing the proposal forward.

"Las Vegas is on the tipping point, as you mentioned Mr. Donner, it is on the tipping point of being the greatest city in America," Barlow said.

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