Vegas Gang #14 is online: http://www.vegasgangpodcast.com
This time we feature:
* Echelon Work Stoppage
* LVS and MGM Financials / City Center Financing
* Steve Wynn in the New York Times
* Mirage Renovation
Feel free to comment below.
Minor correction/clarification about Cotai "Site #3" that I mentioned during the LVS discussion. Site #3 is the Far East Consortium jv just south of Four Seasons Macao, not the proposed second ferry terminal.
Best show ever, as usual. Regarding Echelon, I have developed an opinion, based on my observations of Las Vegas related writings, that Bill Boyd is the most highly regarded individual in the Las Vegas area. I'm not saying the smartest, or most visionary or powerful. But simply the nicest guy at his level. And I think his company is seen, (Rightly, in my opinion) in those same terms. So much so, I think, that that other Las Vegas based Casino companies are extremely relunctant to look at taking them over. Besides the fact that they are seen as extremely effecient.
My 30 years in the auto body business in OKC makes me think that Echelon can sit untouched for 5 years, based on the Las Vegas rainfall totals, and probably 10 with minimal treatment.
Speaking of the Echelon lot, VegasRex has a drive by video along three sides of the Project -- LV Blvd, Desert Inn Rd, and Industrial.
The chain link fencing seems to go on forever. You can see Trump Tower hovering right by the property and Wynn/Encore in the distance. Interesting how the drive ends up kind of near Circus Circus.
John, thanks for the VegasRex link. I hadn't realized how far along Echelon was and how big. Amazing.
The LV Sun has a story on it today and quotes James Murren:
"As MGM Mirage President and Chief Operating Officer Jim Murren put it last week: "If you're not almost done (with a project), you're just not going to do anything for a long time in Las Vegas."
It mentions Fontainebleau and Cosmo as being beyond the point of mothballing. I worry about how Fontainebleau will find retail tenants for its 300,000 sg ft of shopping space, the same size as was planned at Echelon.
Posted by: detroit1051
"I hadn't realized how far along Echelon was and how big. Amazing."
It is big, 87 acres but frontage on the strip was shorter than that on Desert Inn Rd. This is leaving a gaping hole in the new "north strip" thinking. The problems with Cosmopolitan didn't seem so alarming since that project seemed to riding on a lot of hype, the construction on such a thin sliver of land and the fact that the public areas were going to be stacked vertically almost seemed risky but Echelon is such a vast "city" of land , everyone in town must be rethinking their strategies -- Station's enormous "Viva" project opposite City Center, the Sahara expansion are a few.
Still, a lot can change in a year. I'm wondering what the effect on construction costs will be once the City Center structures are standing.
"I hadn't realized how far along Echelon was and how big. Amazing."
I had very much the same reaction when we drove past it last night at dusk. It seems to go on forever. I guess this means McDonalds will have to "make do" with its on-Strip site a while longer. :-)
Amen to what Jeff in OKC said about Bill Boyd. Over the last 10 years, Boyd Gaming has been a low-key company that comports itself with dignity, and I think a lot of that flowed from the personality of Boyd himself, and also from Don Snyder when he was president there.
I have a question. In the Sun article it mentions that without the boutique hotels and shopping mall, Echelon wouldn't make sense. But up to about 5 years ago, a standalone hotel with casino (and a pool, showroom, and a couple restaurants) would do just fine. Trump may be proving that a standalone hotel-only might not work (possible exception if it is next door to the convention center) but does a brand new casino hotel really need other hotel towers and shopping malls to be successful from a visitor standpoint nowadays? Or is it just that the economics of those amenities support/subsidize the main hotel tower and casino? Will we never see something like Paris (one hotel, limited retail) ever get built on the Strip again?
You pose a most interesting question, Gregory, one that might well be worth debating on a future podcast. While Paris-LV's offerings are somewhat circumscribed by its modest footprint, it contemporaries -- Bellagio, the Venetian, the Aladdin -- all went pretty heavy on retail and, coincidentally or otherwise, marked the point where Strip megaresort costs shot past the $1 billion-plus mark, never to return.
Personally, I think if you lop off the southern half of Echelon (i.e., the mall and boutique hotels), it still makes perfect sense, as you would have the main hotel(s), casino and concert hall. The rest could be built out later. (Remember, the "Lido" phase of the Venetian was postponed several times over before evolving into The Palazzo; initially, Sheldon Adelson expected to go almost straight from opening the Venetian into building the Lido.)
You could even make the case that the boutique hotels were Echelon's undoing. Once Boyd hooked up with so fickle a partner as Morgans, that's when the skein began to slowly unravel.
I also think Gregory's question is an interesting one, and I wonder if the answer depends on whether anyone will ever build another mid-market hotel. Gregory mentioned Paris � I'd say Monte Carlo (which I think gets a bad rap), TI and most of the Harrah's properties fall in the same basic category.
All of the multi-tower and/or retail-heavy stuff is targeted at the big spenders, but my understanding is that mid-market places like Paris and MC generally chug along at a pretty healthy profit margin. Are we ever going to see new construction geared at that segment of the market, or will today's fancypants properties slide down to my level? Or, as Hunter has suggested previously, will all of us on a budget just go downtown?
That's a lot of questions for a post about someone else's question. But my first thought is that the answers to both might be somewhat connected.
Sam, the reason everyone is building hotels that command $300+ a night is because that is the kind of property you have to build in order to realize a positive return on the colossal investment that is required to build in this town anymore. If people here will remember, properties like NY-NY, Excalibur, Paris, TI, etc. all cost well less than $1 billion to build. That would not be the case were they to be built today. Well, maybe TI would because it's tiny, relatively speaking. If it costs you $2 billion to build a hotel, $99 rooms and $13.99 buffets isn't going to pay the bills.
Also, if I remember correctly, the MGM Grand was the first property in town to break the $1 billion mark for construction cost way back in 1993. Bellagio was the next to do it at $1.6 billion. I can only imagine what these places would cost were they to be built today, in their current forms. I would venture that Bellagio would cost twice what it did.
Yeah, some numbers:
The Mirage (1989): ~$600 million
Treasure Island (1993): ~$450 million
MGM Grand (1994): ~$1 billion
Luxor (1993): ~$375 million
Excalibur (1990): ~$300 million
Bellagio: (1998): ~$1.8 billion
The Venetian (1999): ~$1.6 billion
Mandalay Bay (1999): ~$900 million
Paris Las Vegas (1999): ~$785 million
Just to give you an idea.
Well, the reason everything had condos and high prices is because of the land value, and when the Elad group paid whatever it was for the Frontier everyone realized that you basically need to close condo sales to swallow the land values.
But the property market is in the process of going back a few good years, and I honestly feel a correction is long overdue. A place like NYNY or MC might be doable again soon.
On the subject of Steve Wynn, this makes for some good reading:
Just pay your damn gambling losses like a man!
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