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Interview with Fernando Leal:
The Montage, The Fitz, STAR Bonds and Downtown

9-26-09 - I caught up with Fernando Leal of L3 Development today, to ask a few questions about the Montage, the Fitz, and downtown in general. I hadn't talked to any of the Corus or Montage staff since the transfer of the Montage to Corus and then FDIC, so I was eager to see what was up and how things were going.

DTM: You kind of disappeared from the limelight.... The Montage first being acquired by Corus, and then Corus being acquired by the FDIC I am sure wasn't easy. How are you doing these days?

LEAL: I am almost fully recovered. It was a very emotional and exhausting time, given the amount of time, capital and effort that went into the project.  After the Deed in Lieu, I focused on assisting the buyers that wanted to close in getting the best pricing. Once those buyers closed there was very little for me to do there So I began working on projects outside of Reno and outside of real estate. However I remain as committed to downtown Reno as ever.

DTM: Let's talk about downtown Reno. A lot of my readers became concerned when it was announced by the City of Reno that you would not be submitting a bid for the retail portion of the retail cover, and also did not submit a STAR Bond request for the retail portions of the Montage and the Trench Cover Retail. Did the events at the Montage spoil your plans for these two properties? Or did the credit Market in General? Or are they not 'spoiled' and just delayed?

LEAL: If there is one thing the last 24 months has taught me, is that development timing trumps location. I thought the political and economic timing was way off to pursue STAR Bonds or to contemplate initiating a development project in the near future.  That said, I wish all the developers well and hope the community supports their efforts.  STAR Bonds are one of the most misunderstood redevelopment tools.  This contributes to creating a negative and visceral response form many because they are viewed as 'handouts.'  I assure you that the positive economic benefits of STAR Bonds are only a small, yet important factor, that a developer weighs when determining the feasibility of a project.

DTM: The Fitz was originally conceptualized as being part of this STAR Bond district before the STAR Bond request was nixed. There is a lot of concern about the Fitz being dark next to the Reno Arch, which has a lot of symbolism for this city. Last we chatted, there were plans for a Lucky Strike element inside the Fitz. Is this still happening and is Cashell Jr still a part of it?

LEAL: Rob Cashell hasn't been involved with project since the casino closed in November. Since then, we have done quite a bit of work on the Fitz as far as planning and development.  We even built out a model room that came out great.  However, I am in no hurry to do anything right now given the instability in the economy. I remain in contact with Lucky Strike, and worked with their architects over the past 90 to 120 days to redesign the Fitz into a non gaming hotel with the Lucky Strike bowling venue on the 2nd floor.  It would be nonsensical to move forward right now, given the state of hospitality nationwide and especially in our region.  I am weighing every option, including holding the property for development later, leasing to another game developer or an outright sale.

DTM: Speaking of outright sales, It would be a dream scenario for a Reno based developer or firm to purchase the Montage from the FDIC. I know the FDIC would like to unload their assets within 30 days. Do you have an interest or are you actively pursuing buying the Montage back for far less than what it cost to build?

LEAL: The Montage is being sold as part of a bulk package that includes between 100 to 105 projects.  The bids were due in yesterday and they expect to announce winning bidder within next couple of weeks.  Then it will take 30-45 days to actually complete the sale.  At that point, it will be up to the new owner and the FDIC which will remain as a 60% partner, whether they will manage the project themselves or sell it.  I would have bid for the Montage had it not been part of the bulk sale. I look forward to working with the new owner as either a potential buyer, Joint Venture Partner, consultant or concerned citizen.

DTM: I talk with folks who live at the Montage quite often, and even attended a pool party and have been invited over for drinks by a weekend resident there. Despite all the recent events, they seem quite happy with their purchases and living at the Montage. If it's not you, do you see a new owner of the Montage drastically changing its game plan and affecting the residents that live there?

LEAL: I talk with many of the owners on a regular basis. The vast majority are very happy with purchase and most bought the property under a long term buy and hold strategy. I think the sale of the Montage is the best thing that could happen to the project. I think it would make no sense for the new owner to do anything to diminish the value of their newly acquired asset. 

DTM: On the point of diminishing assets - The HOA Dues - Is the building at risk of falling into disrepair?

LEAL: The FDIC is very proactive in maintaining HOA fees and “preserving the asset value”.   Corus also put $1 million into escrow specifically for this situation, but at this point I don't think that will even need to be tapped.

DTM: Let's pull back from the Montage a bit and talk about downtown in general. More and more businesses are closing downtown, increasing the vacancy rate and number of empty buildings downtown. I've been wondering if it's such a good idea to be potentially adding thousands and thousands of square feet of NEW retail with these two STAR Bond projects, when so much of 'old downtown' is still left vacant. What are your thoughts on this?

LEAL: Real estate development is not excluded from adhering to the most basic of economic principles; supply and demand. We have a tremendous amount of supply and very little demand. For this reason and many others, I put a low probability on any new major development in the next couple of years. Despite these unfortunate closings, this town is very fortunate to be filled with many creative entrepreneurs that will continue to open great new places in existing “in fill” locations.

DTM: Focusing on that keyword 'demand', I consistently get people searching for the Montage on my web site, and keywords like 'Montage Reno Pricing', even to this day, over 500 people a month, and I'm not even the Montage's 'official' web site. There's obviously interest of some kind. What do you think it will take for people to start buying? I've heard on blogs that prices under $160,000 would really make the units start moving. As gut wrenching as that is to for you to hear considering the Montage is a premium product, do you agree? How do we get people in that building and downtown?

LEAL: What is gut wrenching to me is seeing the building empty and not providing the economic and social vitality that was always intended.  Regardless of who the owner ultimately ends up being prices will need to adjusted significantly to reach a point where buyers feel comfortable going forward.  The real estate market has swung dramatically and sitting around contemplating when it might swing back is not a subject I will expend my few remaining brain cells on.

DTM: Do you think downtown Reno will survive this recession, in your opinion?

LEAL: Downtown Reno and its growing number of supporters are much bigger than this recession.

DTM: What's the most important thing the city council should be focused on to break the 11-year trend of declining tourism?

LEAL: Listening to the marketing experts that have been hired to FINALLY address the negative image/branding/reputation that has plagued this beautiful City for decades. Everyone needs to lighten up.

 

Comments:

Post your comments
Posted by: RenoFan - 9/26/2009 9:41:22 PM
DTM, great scoop. Please keep up the great reporting and commentary. You can't find this in the RGJ...

Posted by: downbutnot out - 9/26/2009 9:51:19 PM
I like that. Let's just lighten up. No harm. no foul.

Posted by: exactly! - 9/27/2009 7:31:08 AM
right on, Fernando. The strong will survive.

Posted by: Native - 9/27/2009 8:59:22 AM
What Fernando Leal has done for our community will never go away. His personal and financial dedication to creating The Montage will stand in testimony to his passion for making this a better place to live. In time, Fitzgerald's will return in some form - when it makes financial sense. That's not entirely his responsibility - we need to position Reno as a destination with assets other than gaming and outdoor "adventure". Kudos to you, Mike, for getting this interview done for us to read and think about.

Posted by: Crystal - 9/27/2009 11:54:53 AM
Great interview. Although not the best of news, I hope it means the Montage will fill up with people soon.

Posted by: Bugsy - 9/27/2009 2:08:23 PM
Good to see that Mr Leal is thinking of making the fitz into a gaming Hotel again. I believe the heart of downtown should remain gaming hotels, and have the non gaming hotels on the out skirts of downtown like the proposed new Mariott by basin street properties. If Lucky Strike is looking for a downtown location for its business, look at the ground retail space of the Riverwalk Towers..Im sure you can get that space REAL cheap. Please!!!!

Posted by: Wiley_n_Reno - 9/27/2009 5:18:25 PM
If it's done correctly the first floor of the Fitz can be a great gaming property. People are sick of walking into a place that still looks like it's 1982 if you get my drift!

Posted by: Natalie - 9/27/2009 8:07:21 PM
I hope Fitzgeralds opens as something soon.

Posted by: downbutnot out - 9/27/2009 9:37:13 PM
'Good to see that Mr Leal is thinking of making the fitz into a gaming Hotel again' I'm afraid you read a different interview than I did.He stated he's looking at all options including selling the project.

Posted by: Bugsy - 9/28/2009 7:10:12 AM
Hey downbutnotout, look at the interview again..3rd reponse, last sentence. Mr Leal mention that he would look into leasing to another gaming developer. Thats the interview I read! And believe me, If he does sell the property, it would most likely have gaming involved because of its location.

Posted by: RenoSteve - 9/28/2009 4:43:37 PM
Great interview Mike. And, all the best to Fernando.

Posted by: mattyo - 9/28/2009 8:42:11 PM
Excuse me, but I think "Game" means someone who will be able to redevelop the Fitz, I don't think it means gaming, sorry. And also, to those who said that Leal will reopen the hotel with a gaming component, READ IT AGAIN, it says in the text he is working with Lucky Strike to redevelop the hotel into a NON GAMING, no Gaming.

Posted by: pat - 9/29/2009 10:43:52 AM
I do not know Mr. Leal, having said that I have followed every interview and find him greasy, as many are at his corporate level. If he wanted to help the people, economy, and society of Reno why did he target two hotel casinos and close them down for his project? He thought he could make the most money for himself. I do not begrudge this at all, but I think turning the Fitz into a non-gaming hotel and adding a bowling alley to it, albeit better than empty blight as it is now, is an enormous ill-conceived endeavor. The thing that enrages me is that he and the journalists paint leal as a good and noble person when he was and is trying to make as much money as possible for himself with the least risk. That is smart business, but if he were noble he would have renovated blight turning the king's inn and the adjacent mission into socially and economically productive componenets, instead of closing down places that were already productive. He's about capitalism and greed plain and simple.

Posted by: Bugsy - 10/1/2009 9:31:08 AM
Game means game. Someone who redevelopes is a redeveloper....This is english 101. Fernando Leal dosn't use ghetto talk and refer a redeveloper or a developer as "game"....He got game bro!! PLEASE!

Posted by: remano - 10/2/2009 2:59:36 PM
My 2 cents worth, if it's worth even that: Bugsy - "game," when used as an adjective, means "willing to act." It's not ghetto talk or slang. It's had that meaning for decades, if not longer. I understand him to be saying he would transfer the property to someone who is willing to develop it, either as a gaming or non-gaming property. mattyo - he said he "worked" with Lucky Strike in the recent past, but is not prepared to go ahead with anything right now. It looks like all options are open, both gaming and non-gaming. pat - it is a bit of a stretch to say that Leal targeted properties that were "already productive." The Golden Phoenix never seemed to have much business. I know someone who worked there as a bartender and he said it was heading down long before Leal came on the scene. The location couldn't make it as the Flamingo and I think Golden Phoenix suffered the same fate. As for Fitz, it had been in bankruptcy for years. The Fitzgerald's operations in other cities had all been sold out of bankruptcy but there was no interest in the Reno location. That's not an indication of an "already productive" property.

Posted by: Rory Butler - 10/6/2009 9:28:11 AM
Darn right Fernando! Everyone needs to lighten up and be positive about things. Bemoaning what could or should have been is a losers mantra and I'm sick of the naysayers. The city of Reno needs to focus all of its efforts into infill projects in the downtown corridor, and engaging the property owners to lower lease rates to lure in potential new businesses who will eventually reinvest in Downtown Reno. Reno has so much going for it, let's not let the naysayers sabotage all the hard work of the past decade.

Posted by: nativegal - 10/6/2009 4:12:17 PM
Thanks Mike at least you can quote people right unlike the Reno enquirer. And Mr Leal thank you for all you have done for our community.

Posted by: Anakin-Marc - 10/6/2009 11:46:16 PM
Speaking of infill projects in the downtown area... What about the talk regarding redeveloping downtown's various alleys into pedestrian-friendly areas that could house various shops and other attractions? I seem to remember that idea being thrown around along with developing Commercial Row by Amtrak and the retail under the bowling stadium. Any idea what's come of that?

 

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