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Howard Stutz

Harrah's paid premium for Barbary Coast land

27 October 2006

LAS VEGAS, Nevada – (PRESS RELEASE) -- To acquire the Barbary Coast, Harrah's Entertainment sent the value of Strip land skyrocketing.

The casino operator is paying what amounts to $84.8 million an acre to pick up the 4.3 acre site at the corner of the Strip and Flamingo Road, the last piece of a 350-acre land parcel. Much of the land is contiguous along the east side of the Strip.

In a straight land swap announced Oct. 2, Harrah's is trading 24 acres located next to the Stardust to Boyd Gaming Corp. for the Barbary Coast in a deal expected to close by February.

According to documents filed with the Clark County's Assessor's office, Harrah's paid a combined $365 million for four land parcels north of the Stardust that stretch from the Strip to Industrial Road. The 24 acres, a portion of which housed the now demolished Westward Ho, will be blended into Boyd Gaming's planned $4 billion Echelon project that totals 63 acres.

Harrah's spokesman David Strow said Thursday the Barbary Coast site was important to his company's overall plans. He said the casino operator spent almost $1 billion to accumulate the land package. Last year, Harrah's spent roughly $20 million an acre to acquire the Imperial Palace and its 18-acre site.

"On average, we paid less than $13 million an acre overall for what we assembled," Strow said. "This site had enormous importance and strategic value (to Harrah's)."

Real estate analysts said Harrah's was the only casino company that would be willing to pay the Barbary Coast's inflated cost.

"When it's the last piece and it's the corner piece, there is what we call 'plottage value' added to the cost," said Jeremy Aguero, a partner in Las Vegas-based financial consultant Applied Analysis. "You would be hard pressed to find an intersection that has more value. You can't look at this as a stand alone transaction. You have to look at what Harrah's paid for the whole site."

Las Vegas real estate consultant John Restrepo said on an open market, no one else would have paid what Harrah's spent on the Barbary Coast.

"This was the keystone piece and in reality, there was just one buyer," Restrepo said. "There was economic value to Harrah's as opposed to fair market value."

Boyd Gaming said it expects to recognize a $280 million gain from the transaction when the deal closes next year.

Harrah's paid premium for Barbary Coast land is republished from