Wynn Resorts is putting up $336 million to buy the vacant land on the Las Vegas Strip where James Packer had planned to build a luxury resort
The purchase, which is expected to close in the first quarter, encompasses 38 acres in all that sit just north of the Fashion Show Mall and almost directly across Las Vegas Boulevard from the company’s Wynn Las Vegas and Encore resorts. The deal includes 18.4 acres purchased from Packer’s Crown Resorts, 16.2 acres leased from the Elardi family, owners of the long-gone New Frontier, and a small parcel purchased from Treasure Island owner Phil Ruffin.
In a news release Wynn said only that it’s acquiring the land for “future development” and did not elaborate. A spokeswoman for the company declined to comment further, according to the Las Vegas Review-Journal.
It’s expected, however, that some details will be disclosed on Wynn’s fourth-quarter earnings call, normally held the end of January. Not that Wall Street is anticipating anything dramatic at that time, given the major projects the company has on its plate, namely the $2.4 billion Wynn Boston Harbor, slated to open in 2019, the $1.5 billion Paradise Park project, which will replace the golf course the company owns behind Wynn Las Vegas, and Wynn Macau’s ongoing ramp-up of its multibillion-dollar Wynn Palace resort in the Chinese casino enclave. The company also is lobbying for the chance to develop an integrated resort in the promising Japanese market that would easily scale into the billions of dollars.
It’s also a move contemplated against the backdrop of a seven-year drought since a casino hotel opened on the Strip as a ground-up development; and while visitation, hotel occupancy and gaming revenue are steadily recovering from the hard hit they took in the recession, land sales on the famed neon way have remained sluggish.
The north end, especially, has languished relative to its neighbors farther south behind a parade of abandoned mega-projects―most recently, Packer’s abortive Alon, an 1,100-room luxury resort that was to occupy 34 acres of the Wynn purchase. Alon was preceded at the same spot by another failed grandiosity, the Plaza Las Vegas, which was to replace the demolished New Frontier but was abandoned when the recession hit without ever commencing construction. The recession claimed two other notable casualties: one just to the north, Boyd Gaming’s $2 billion Echelon, and just below Sahara Avenue on Wynn’s side of the street, the unfinished 60-story Fontainebleau. The only new resort to open at the north end since Encore debuted almost a decade ago―SLS Las Vegas, which was grafted onto the old Sahara Hotel, has struggled under a succession of owners.
It’s a checkered history. Yet one that could spell opportunity for Wynn. An East Coast investment group bought the Fontainebleau in August for $600 million. At the Echelon site Genting is ramping up construction of its much-anticipated Resorts World Las Vegas after numerous delays and now plans to open in 2020. The Las Vegas Convention Center is being expanded to the tune of $1.4 billion, and ground is set to be broken on a $1.9 billion domed stadium to host a National Football League franchise for the start of the 2020 season.
In the midst of all this Wynn will have assembled some 280 acres of contiguous real estate stretching from the Convention Center on the east to Industrial Road on the west with a combined Strip frontage of more than 3,500 feet and rights to approximately 1,000 acre feet of water at a bargain price, averaged over the total 280 acres, of less than $3 million per acre.
“Many operators are likely sensing the potential for pent-up demand,” said Brian Gordon of Las Vegas economic researchers Applied Analysis. “There is limited opportunity for Las Vegas Strip frontage in the balance of the resort corridor. In the absence of a wholesale redevelopment project, future activity will be forced to migrate to the north and south portions of the Strip.”
Addressing the Wynn deal, Deutsche Bank said, “Clearly, they are warehousing this land for future use.”
