Three Big Vegas Resorts in Question, Several Not

This morning, publish reports state that the Wet 'n' Wild site is up for grabs and plans for the multibillion-dollar Crown Las Vegas development on the site are in flux. Texas developer Christopher Milam and Australian billionaire James Packer have an option to acquire the property from Archon Corp. and have made tens of millions of dollars worth of refundable and non-refundable option payments to keep alive their opportunity to acquire the property for $475 million. Another published report states this morning that Milam reportedly hopes to maintain his interest in the property.

Last week, as the developers of the Plaza project, EL AD IDB Las Vegas LLC, received county approvals for its site development plan and special use permit, published reports were speculating that the project may be delayed due to the dislocated credit markets. Miki Naftali, president of El-Ad Group, the parent of one of the joint venture partners, refuted those reports, saying the project is moving forward. The partnership, which also includes Property & Building Corp., a subsidiary of Israeli-based IDB Holdings Corp., says design completion and the start of the excavation are scheduled to occur before the end of the year.

Also last week, Deutsche Bank notified developers of the Cosmopolitan that it will begin foreclosure proceedings on the $3-billion, center-Strip mixed-use development for which it is the lender, according to Reuters. As recently as the end of February, it was reported that to fix a month-old default on its $760-million construction loan from Deutsche Bank, Global Hyatt Corp. and New York City-based Marathon Asset Management had agreed to provide the equity necessary to keep the project moving forward toward its scheduled completion in late 2009.

Cosmopolitan chief operating officer Scott Butera reportedly told a local newspaper at that time that the parties were finalizing the terms of the recapitalization agreement with Deutsche Bank and that Eichner would continue to have a role in the four-million-sf development under construction next to the Bellagio.

In a statement sent to GlobeSt.com when the troubles with the Cosmopolitan began, Eichner said 3700 Associates LLC, the official development entity, was working with Deutsche Bank and Merrill Lynch to find new investors and that conversations were ongoing. "This [default] action by our lender comes as no surprise," he said. "With the current challenges within the real estate and debt capital markets, which are out of our control, being felt across the country, we both anticipated and planned for this." In a statement issued earlier this week, Eichner said the foreclosure move by Deutsche Bank was merely a means for the lender "to engage a greater number of serious potential [new] investors" in the project.

Whether or not these projects get under way as scheduled, several other major Strip projects have just been completed or are under construction and not under any official financial troubles. The $2.1-billion Palazzo resort just opened. Wynn's $2-billion Encore project is on track to open at year's end. Further out, MGM's $7-billion Project Citycenter is moving toward a late 2009 completion, Boyd Gaming is under construction for the $4-billion Echelon Place complex, which is scheduled to open in 2010, and Packer's company Crown, according to the Sydney Morning Herald article, remains committed to the $3-billion Fontainebleau Resort that its US partner Turnberry Associates has under construction across from Circus Circus at the north end of the Strip.

Beyond that, investors are still planning new mega projects and major renovations of existing properties, and assembling big chunks of gaming-zoned land. FX Real Estate and Entertainment Inc., the publicly traded owner of 17.72 acres across from Project Citycenter, revealed its development plans this week in a filing with the Securities and Exchange Commission. Formed in 2007 and run by Robert F.X. Sillerman and Paul C. Kanavos, the company said it plans to spend $3.1 billion redeveloping the site with 3,047 hotel rooms, a 93,000-sf casino, 94,000 sf of retail, 100,000 sf of entertainment venues and 147 private residences.

"Our current operations do not generate sufficient revenue, when combined with cash on hand, to support our development plans for the Park Central site," the company states in its filing. "Therefore, the redevelopment of the Park Central site is dependent upon our ability to raise significant amounts of additional capital, likely through debt and/or equity financings."

In February, the new owners of the Sahara Hotel and Casino won county approval for a planned renovation and expansion of the 1950s-era Strip property featured in the original "Ocean's Eleven" film. Plans call for demolition of the mid-rise hotel tower, renovation of the two high-rise towers and development of a third high-rise tower. The resort would remain open throughout the project, which is slated for completion in 2011.

Also on Las Vegas Boulevard but well south of what is considered the Strip, an international group of investors over the last several months have assembled 110 acres of raw land across from the Las Vegas Outlet Center at a cost of approximately $360 million, or $3.3 million per acre. The group is led by SDS Investments, a private equity real estate fund sponsored by the Sapir Organization, a privately held New York City-based real estate holding and development firm that controls some seven million sf of New York City commercial office space.

S. Lawrence Davis, who left Emmes & Co. to form SDS Investments with Alex and Tamir Sapir and Robert Ivanhoe, chair of the New York City office of GeenbergTraurig, tells GlobeSt.com that while there are no near-term plans for the property and no development time line, the group does not see itself as a land speculator. "We bought it with the intention of developing it with a large, multi-use commercial development," he says.

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