Palazzo Retail Opens Under GGP Ownership

by Brian K. Miller
GlobeSt.com

Las Vegas - The 480,000-sf Shoppes at the Palazzo opens today, the day after Las Vegas Sands Corp. the grand opening ceremonies for the overall resort. The hotel and casino portion of the $2.1-billion, 3,066-room development opened quietly during the first week of January, a couple of weeks later than expected due to a delay in the approval of its occupancy permit.

With the opening of the $580-million retail piece its ownership transfers to General Growth Properties. GGP acquired the neighboring Venetian's 407,000-sf Grand Canal Shoppes from Las Vegas Sands upon its completion in May 2004 for $776 million, and at that time also agreed to acquire the Palazzo retail upon its completion.

Anchored by an 85,000-sf Barneys New York, the ultimate sale price for the Palazzo retail is expected equal to or greater than that of the Venetian. Per the purchase and sale agreement, GGP's price for the Palazzo retail will be equal to the property's net operating income for months 19 through 30 of its operations 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 to date, Las Vegas Sands says it expects the opening of the Palazzo retail to trigger an initial payment of more than $500 million from GGP, and expects at least another $250 million—or a minimum of $750 million in total—by the end of the 30-month period, according to SEC filings.

The Palazzo retail will feature more than 60 high-end boutiques, including 20 stores that will be making their Las Vegas debuts. The newcomers include Chloe, Tory Burch, Christian Louboutin, Diane Von Furstenberg, Van Cleef & Arpels, Anya Hindmarch, Poleci, Lambertson Truex, Phillipe Charriol, Edidi, Piaget and Michael Kors. Rounding out the offering will be high-end staples including Ralph Lauren, Jimmy Choo, Piaget, Burberry, Salvatore Ferragamo, Fendi, Bottega Veneta and Montblanc.

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