MGM’s CityCenter ignites
surge in casino construction

Jul 4, 2006 2:57 AM

Last week, MGM Mirage unveiled a new model of its Project CityCenter, earmarked for 66 acres between the Monte Carlo and Bellagio hotels on the Las Vegas Strip.

The models provide glimpses of an unprecedented sustainable vertical city, at an approximate cost of $7 billion, which will set the tone for the Las Vegas experience and influence contemporary urban design throughout the world.

"Project CityCenter confirms a cultural and lifestyle revival of city living, reaffirms the growing sophistication and maturity of Las Vegas and sets a benchmark for new growth and exciting new experiences," said Terry Lanni, chairman and chief executive officer of MGM Mirage.

The project features a stunning 60-story, 4,000-room hotel/casino, two 400-room, non-gaming hotels, about 500,000 square feet of retail shops, dining and entertainment venues and 1,640 units of luxury condominiums.

Project CityCenter is the first of several sprawling, multi-use projects planned for the Strip. Others on the way include Boyd Gaming’s Echelon Place, planned for the site currently occupied by the Stardust, Olympia Gaming’s Southern Highland’s at the south end of the Strip, and Phil Ruffin’s $2 billion Montreux, designed by architect Paul Steelman (see related sidebar story) on the site of the New Frontier.

Experts believe the flurry of new development in Las Vegas can only fuel more growth and help keep real estate prices high — currently at about $20 million an acre on the Strip.

"A collection of new developments gives others the confidence to put money in the ground," said Deutsche Bank analysts Bill Lerner.

Among the "others" is Harrah’s, which last year purchased the Imperial Palace for about $20 million an acre. The gaming giant would like to acquire the Barbary Coast in order to control the massive stretch of Las Vegas Boulevard, from Flamingo Road to Harrah’s casino.

A few weeks ago, Columbia Sussex won a bidding war over the Tropicana, with the $1.9 billion takeover cost equating to about $30 million an acre for the premium Trop site.

"We think additional Las Vegas Strip real estate acquisitions/transactions will likely be announced in the near term in the $20 million-an-acre range," said Bear Stearns analyst Joe Greff. "We think properties with suitors include Westward Ho and Sahara."

Gary Tharaldson, owner of the 15-acre Westward Ho site, said he would "probably sell at that price," which means it would take $300 million to swing the deal.

The hotel owner and developer said he bought out joint venture partner Centex Corp. in March in a deal that valued the property at only $170 million. At the time, he intended to build a casino, hotel and condo complex.

"But (land) prices are getting crazy and construction costs are going up," Tharaldson said. "I’m still debating, do I want to be in the casino business or not?"

Among other available properties is the Sahara, which consists of several parcels totaling around 55 acres, and the former Wet and Wild water park next door, which has about 27 acres.

The Sahara is owned by the family of the late casino entrepreneur Bill Bennett, and the property has reportedly been available for sale, though no deals have been announced.

The water park site is owned by Paul Lowden, the former owner of the Sahara, who two years ago announced plans for an "under the sea" themed resort. But in the past year, there’s been no further public announcement on the future of the prime acreage.

Two companies that might be interested in either or both parcels are Pinnacle Entertainment and Ameristar Casinos, unsuccessful bidders for the Tropicana property.

"Strategically, Las Vegas is of course of interest to us, but I can’t tell you whether we will be there next year or five years from now," said Pinnacle spokeswoman Pauline Yoshihashi.