Search
 

First Payment for Palazzo Retail Misses Mark

LAS VEGAS-The $290.8-million payment from General Growth Properties to Las Vegas Sands Corp. was some $200 million less than initially expected.

By Brian K. Miller | Updated on March 26, 2008

LAS VEGAS-The ultimate sale price for the 536,000-sf, Barneys-anchored retail component of the new Palazzo casino resort won’t be known for a few years, but the initial payment was approximately $200 million less than initially expected. Las Vegas Sands Corp., which has sold the retail component to General Growth Properties, said that it received $290.8 million as an initial payment a few weeks ago, well below the $500 million it was expecting as recently as January.

The purchase price will be equal to the property’s net operating income in month 30 of operation divided by a capitalization rate. The capitalization rate is 6% on the first $38 million of net operating income and 8% on the net operating income above $38 million. Given the lease agreements in place, Las Vegas Sands said in January that it expected an initial payment of more than $500 million and total payments of at least $750 million. The cost to develop the Palazzo retail was $580 million, according to SEC filings.

An industry source familiar with the transaction tells GlobeSt.com that the decreased initial payment is due to the fact fewer stores than expected were up and running at the time of the initial close, so their rents were not taken into consideration. As a compromise, the Las Vegas Sands and GGP agreed to revisit the total more often than was agreed to previously. Previously, GGP was to make additional payments based on the property’s NOI in months 12, 24 and 30. Now, the NOI will be reviewed and additional payments (if necessary) will be made in months 4, 8, 12, 18, 24 and 30.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.