Las Vegas Agency Readies Biggest Redevelopment Deal in State History

SAN FRANCISCO - The Las Vegas Redevelopment Agency is planning the biggest redevelopment deal in Nevada history, tentatively slated to price today if market conditions permit.

The $187.7 million transaction will help the city of Las Vegas finance its ongoing and ambitious efforts to reinvent its historical downtown area, which had been overshadowed by the giant themed casinos to the south on the Las Vegas Strip.

"They would describe themselves as really being in the process of creating a downtown in Las Vegas," said Stephen Heaney, managing director at underwriter Stone & Youngberg LLC.

The bonds come in three series - a $121.6 million tax-exempt Series 2008A, a $35.4 million taxable Series 2008B, and a $30.7 million taxable Series 2008C for housing.

The issue marks an exponential increase in borrowing by the LVRA, which has less than $20 million of outstanding debt.

That is in part a reflection of the level of development and change in the city's redevelopment area, said Jose Vera, a Stone & Youngberg vice president. The bonds are secured by tax increment, the difference between property tax levels when the redevelopment area was created and the revenue generated today.

The city first formed the redevelopment agency in 1985, and it has since expanded its footprint to more than six square miles.

"A lot of it has been new construction and new projects," Vera said. "It's land that hasn't been on the [tax] roll that has been owned by the city and redevelopment area." As the city sells the land and it is then developed, the land becomes taxable, creating a "pop" in the tax increment, he said.

The LVRA has one underlying rating, from Standard & Poor's, which gave it a two-notch upgrade to A in advance of the transaction.

"Currently, the downtown area is undergoing major redevelopment, with about 160 various commercial and residential projects underway that are expected to add about $2.7 billion to project area [assessed valuation] during the next several years," the Standard & Poor's report said.

While Las Vegas has been in the headlines for its foreclosure-plagued residential real-state market, the redevelopment area has largely avoided those problems, Heaney said.

Less than 20% of the area's assessed value is residential property, according to the preliminary official statement for the transaction, with single-family homes only accounting for 3.7% of the total.

"We're not quite sure at this point whether we'll have insurance or whether we'll go with the A rating," Heaney said last week. "The A rating indicates a strong redevelopment credit and I think the marketplace will be very receptive to it."

The pricing date, originally planned today, is now subject to last-minute change as the team weighs the market fallout after the Lehman Brothers bankruptcy and sale of Merrill Lynch & Co., he said.

Proceeds of the issue will be used for a variety of purposes.

"One of the major components of that is Union Park, a 61-acre area that the city actually owns," said Venetta Appleyard, manager of Las Vegas' financial services division.

The development is envisioned as a mixed-use urban center anchored in part by the Lou Ruvo Brain Institute.

NSB Public Finance is financial adviser. Swendseid & Stern is bond counsel.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER