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Gaming Guru

Tony Cook
 

In race, downtown arena plan falls back

13 December 2007




LAS VEGAS, Nevada -- If the effort to build an arena in Las Vegas is, as many believe, largely a race to see who gets a shovel in the ground first, this week's developments clearly left the city's preferred developer in second place.

In both timing and financial feasibility, the ambitious $10.5 billion downtown arena project proposed by REI Neon/Warburg Pincus now appears to be at a decided disadvantage relative to an arena plan by Anschutz Entertainment Group and Harrah's Entertainment for a site just off the Strip.

While the AEG/Harrah's plan remains on target for a 2010 opening, REI Neon's request to the Las Vegas City Council for yet another time extension to negotiate a deal leaves the company trailing on the calendar. The council is to vote on that request next week.

If REI Neon cannot complete its deal with the city by February the company could lose the rights to a separate 12-acre parcel which, if developed, could generate revenue to help pay for an arena. And that deadline is looking problematic, given that at least one property owner in the 85-acre site where the Michigan-based company plans to build said REI recently asked for a 16-month extension on its option to buy his land.

REI Neon spokesmen could not be reached for comment Tuesday, but there seemingly is little they could say to put a positive spin on the newest chapter in the arena saga.

Although Mayor Oscar Goodman has said he believes the Las Vegas region is big enough and robust enough to absorb two arenas, most believe that, as long as the city lacks a major league sports franchise, only one arena, at most, will be built in the near future.

Even the mayor concedes that the would-be arena builder that breaks ground first would be the one most likely to succeed. And this week, the odds of REI Neon getting its shovels dirty before AEG/Harrah's got even longer.

Jacqueline Peterson, spokeswoman for Harrah's Entertainment, said plans for the $500 million arena the gaming giant plans to build with AEG just east of Paris Las Vegas and Bally's remain on track for an opening in fall 2010.

Clark County Commission Chairman Rory Reid said he met with representatives of Harrah's and AEG late last month. The companies will submit plans to the county soon and break ground next spring, he said.

"They are continuing to develop the plans," Reid said. "They are both very substantial companies that have a record of building the things they say they will build."

Although REI Neon has never before built an arena - or a project costing more than $1 billion - AEG has developed and operated sports facilities that include Los Angeles' Staples Center, Toyota Park for Major League Soccer's Chicago Fire and London's O2 arena and entertainment complex. AEG also developed the Sprint Center Arena in Kansas City, Mo., which opened this year and will be the centerpiece of that city's search for a professional basketball or hockey franchise - the same hunt Las Vegas has been on for years.

Timothy Leiweke, AEG's president and chief executive, did not return phone calls Tuesday. But AEG spokesman Michael Roth said: "I know we are on schedule.

"I know we continue to have conversations with both leagues," Roth said, referring to the NHL and the NBA.

At City Hall, Business Development Director Scott Adams insists negotiations with REI Neon are going very well. He noted, however, that those negotiations have nothing to do with REI Neon's attempts to secure financing for the multiphase project.


Three months ago, Jon Weaver, REI Group president, said that in the few weeks since the city decided to enter into exclusive negotiations with REI Neon, banks had made it more difficult to secure large loans.

If that problem is not resolved quickly, it could cost REI Neon the rights to the lucrative 12-acre parcel near the 85-acre site of the company's proposed Project Pulse, which in addition to an arena would include three casinos, 6,000 hotel rooms, 1,500 condominium units, 1,600 timeshare units, 785,000 square feet of retail, 4 million square feet of convention space and 500,000 square feet of office space.

Assembled over years by the city, the 12-acre tract lies almost directly east of City Hall on Las Vegas Boulevard, near ramps to and from U.S. Highway 95. It also is about a block from Streamline, a 20-story, $200 million luxury high-rise being built at Las Vegas Boulevard and Ogden scheduled for completion in February.

As Adams put it, the 12 acres would be ideal for many uses. If REI Neon develops it, the site could create a revenue stream to help finance an arena and the rest of Project Pulse.

But that land could become available to other interested developers in February. If the city extends its time frame with REI Neon, Adams said, the city will add a clause to release the 12 acres for negotiations with other interested parties. The release is needed because REI Neon requested an option on the land in its proposal to the city.

Early in the process of procuring an arena developer, the city thought the possibility of buying those 12 acres would be an incentive to a developer. As negotiations progressed with REI Neon, Adams said, it became clear that REI Neon "no longer needed our site."

"So we said, 'Let's cut it loose; there might be developers who want to do something there,' " he said. Adams added that there already have been inquiries from developers.

"We're going to be very careful about what goes there because we want to be sure it's something incredible," he said.