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Gaming Guru

Ed Koch
 

Landowners stand in way of 'the gorilla'

18 December 2006

LAS VEGAS, Nevada -- Although he's not talking about it, Oscar Nunez is literally in a position to write the next chapter of Las Vegas Strip lore.

Nunez owns six aging, cinder-block apartment buildings between Koval Lane and a stretch of the Strip where Harrah's Entertainment owns side-by-side casinos Barbary Coast, Flamingo, Harrah's, Imperial Palace and O'Sheas .

Harrah's Entertainment, the world's largest gaming company, wants to freshen up and redevelop that part of the block, a project that could cost billions of dollars - maybe more than any other project in Strip history.

To make it all work, Harrah's is buying up the property behind its casinos where private investors own time-share condos and blue-collar apartment houses.

But so far Nunez hasn't sold his French Villas apartments to Harrah's. The situation has all the makings of another great Strip showdown, the kind that has played out over the years when relatively small property owners have threatened big resorts' plans.

Probably the most notorious occurred in the 1980s, when casino owner Steve Wynn was about to redefine the Strip with the Mirage. The property Wynn wanted included a 36-unit apartment building. Its owner, Michael Flores, refused to sell.

So Wynn built around him, and the apartments stand to this day, a testament to stubbornness, tucked out of view in a back lot, sandwiched between the Mirage and Treasure Island.

The lesson: Nobody gets in the way of Strip developers. If the small guy doesn't sell - usually for a nice profit, thank you - the big guy will just build around him.

"It's an ages old process that I like to call standing in the way of the gorilla," said David Atwell, president of Resort Properties of America and one of the leading brokers of Strip acquisitions.

Atwell said a developer's plan to build or enlarge a project generally plays out in three stages: He, or his agent using a different name to disguise the plans, tries to buy sufficient land early without revealing what's up. Once that cat is out of the bag, the developer hopes for reasonable negotiations. And then, you have to deal with the hardball holdouts.

Nunez is a holdout. And the question is: Will he eventually exact his price from Harrah's or force it to build around him?

Harrah's has been tight-lipped about its redevelopment plans but its land-buying spree in the area has been no secret. It has obtained development rights to the Summer Bay Resort time-share condominiums behind the Strip and has gobbled up and bulldozed other crumbling properties in the 44-year-old Flamingo Estates subdivision.

Nunez is one of two holdouts. The other, according to Clark County assessor records, is a Beverly Hills, Calif., company that owns a six-unit apartment building.

Bob Rose, the company's Las Vegas-based property manager, hinted that there is nothing wrong with waiting for the right price on any deal, adding: "It could be sold any day now."

Calls to Nunez were not re-turned, nor did he respond to a reporter's visits to his property.

Two French Villas tenants said they've received no word about the fate of the complex, a collection of studio and one-bedroom apartments.

In fact, the French Villas, like the neighboring two-story apartment complexes that are owned by holding companies of Harrah's, are still advertising for weekly and monthly tenants.

The neighboring Desert Club Apartments has been purchased by a Harrah's holding company, according to Clark County assessor records, and are still offering tenants six-month leases - an indication nothing is going to happen right away.

Speculation is that Desert Club will become the replacement time shares for the doomed low-rise Summer Bay Resort buildings .

But change is clearly under way, and not many tears are being shed over the seemingly inevitable loss of the Flamingo Estates community.

"I'm going to miss it because it's hard to find a studio in Las Vegas for $130 a week," said Jimmy Marks, a Flamingo Estates resident for 15 years. "But it's due for a change. You go behind the Strip casinos now and you find yourself in the ghetto. That's just not going to work."

Clark County historian Mark Hall-Patton says Flamingo Estates was a far more significant neighborhood when it was built in 1962 by developer Albert Winnick.

"In the 1960s a lot of families had only one car, so if both parents were going to work, at least one had to be within walking distance of a job," Hall-Patton said. "Today because many families have multiple cars, proximity to a job is not the issue it once was for so many."

Even Nunez is an agent for change in the neighborhood. Harrah's intentions notwithstanding, Nunez has won Clark County Commission zoning approval for his own 16-story condominium tower to replace his aging apartments.

Since Nunez isn't talking, it's not known whether he is seriously pursuing those plans or trying to strengthen his negotiating position with Harrah's.

Atwell says the mere act of obtaining land-use approval for a condo high rise may have added as much as $30 million to the currently assessed $3 million value of Nunez's property. It raises questions, Atwell said, about whether Harrah's will have to rethink its plans for that part of the site or offer Nunez a wheelbarrow of money for his land.

Atwell said such a dilemma is nothing new to major Strip developers who go into such acquisitions aware they may have to pay handsomely for properties late in the game - or take other action.

"Some landowners believe they are sitting on gold mines, but if some developers cannot reach a deal with them they will simply build around the holdouts," Atwell said.

That's what happened when Wynn built around the 36-unit Villa de Flores apartments.

Wynn encountered another showdown in 2000 when he bought the Desert Inn and started buying up golf course homes in the adjacent Desert Inn Estates.

When at least 10 homeowners refused to sell , he blocked some roads in the neighborhood and built large berms behind the homes of the holdout property owners, blocking their views of the venerable golf course. A bitter four-year legal battle ended in March 2004 when the holdouts received a total of $23 million for their homes - in some cases, getting double Wynn's initial offer, according to Atwell.

Other holdouts also have commanded and raked in big numbers.

Bob Cohen fetched a premium price when he sold his Vagabond Motel to Wynn, Atwell said. Bellagio escalators now stand on the site.

Owners of the Desert Rose Motel also received a hefty price from the Monte Carlo's developers for that 2.5-acre frontage parcel, Atwell said.

Still other negotiations with holdouts have had unusual endings.

In the late 1970s, Atwell said he was quietly buying parcels to make way for the Forum Shops at Caesars. One of the last landowners in the way of the project was Louis Brauer, who found out that Caesars was behind Atwell's purchases. When Brauer drove his asking price way up, Atwell's wife cooked the elderly bachelor a Thanksgiving dinner that the couple delivered to Brauer. By meal's end, a touched Brauer agreed to sell at the going rate.

Harrah's might need not only a turkey with all the trimmings but also a generous Christmas goose to seal a deal with Nunez.

Landowners stand in way of 'the gorilla' is republished from Online.CasinoCity.com.