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Nevadan at work: From Strip to Singapore, real estate exec helps buyers find places on map22 January 2007
The process wasn't as simple as placing a cost on Strip real estate, something Knott has been doing for more than a decade. "It was really two different exercises," Knott said. "In Singapore, we were starting from the ground up because they never had gaming. In Las Vegas, we have all types of statistics to put projections forward. The Singapore government wanted us to maximize the value of the land. We looked at all elements of what would go into an integrated resort, including gaming." The value of the two parcels, Marina Bay and Sentosa Island, was added into the proposal packages companies used to bid on the potentially lucrative sites. When the process ended in December -- Las Vegas Sands Corp. was awarded Marina Bay and Malaysia-based Genting International won Sentosa Island -- Singapore officials seemed happy, Knott said. "Singapore is a market with 8 million to 9 million annual visitors," Knott said. "It has an unbelievable airport and the infrastructure is there to make gaming work." In Las Vegas, Knott has witnessed an escalation in Strip land values during his career. Harrah's Entertainment, for example, paid the equivalent of $20 million an acre when the company purchased the Imperial Palace for $370 million in 2005. In a land swap with Boyd Gaming Corp. for the Barbary Coast last year, Harrah's is paying what amounts to $84.8 million to acquire 4.3 acres, the last piece of a 350-acre land parcel. That type of activity excites Knott. "All this has happened in the last 17 years," Knott said, surveying his view of the Strip from the CB Richard Ellis' seventh-floor offices in the Hughes Center. He used the opening of The Mirage in 1989 as a point of reference. "Think about the market 17 years from now," Knott said. "There will be some magnificent changes. Developers will have to push west and east of the Strip. That's urban development, and as a consequence, the land price is not a substantial portion of the overall project's cost." Question: Is real estate on the Strip overvalued? Answer: Strip real estate was actually undervalued for many years. Finally, people started to look at the amount of density you could construct in Las Vegas on these properties. There was no reason the values on the Strip should not be the same as they are for prime properties in Los Angeles, New York or Chicago. The prices today, such as $20 million an acre, are not ridiculous. It's comparable to other major metropolitan areas. Question: What has changed about real estate development in the Strip corridor? Answer: There are limited opportunities to buy land on the Strip. There continues to be demand for properties and we're continuing to see interest on the north end of the Strip now. There is a lot of open space north and prices on the north end are moving higher. It's still not the same when you talk about prices at the corner of Flamingo (Road) and the Strip. Question: How has CB Richard Ellis participated in selling the Strip? Answer: We advised Harrah's Entertainment on several purchases and we have the Sahara on the market. A number of people from around the country have come to Las Vegas to look at opportunities. CB Richard Ellis is obviously a large company and people want to get our opinions about the resort corridor. Question: Is residential high-rise still a viable option? Answer: There was a big push for the residential component, but that market has evaporated. I like to talk about it as spigot on, spigot off. The investor demand was high when those projects were being contemplated. Now there is very limited investor demand. Ten years from now, we will see a number of high-rise residential projects that will have been completed successfully. But today, no one is really buying land for that type of use. Question: What is the Global Gaming Group? Answer: It was launched in late 2001 because our expertise is unique. Our vision was that real estate would become a more important attribute for company values and we saw this synergy between real estate values and the gaming operation. We're seeing that all over the world. We have nine people on our team in Las Vegas. Question: What is the Global Gaming Group's strength? Answer: We know more about what's going on in the market than anybody else. I think that's a fair statement. When people come to us, they want our opinions on how a transaction might work from a strategic perspective. We're usually able to come up with some ideas that others aren't able to generate based on market knowledge. Question: Do you work more with buyers or sellers? Answer: We work both sides of the fence depending on what the circumstances are. We've helped numerous sellers in the marketplace and we've also helped numerous buyers be successful in their acquisitions. Question: The Global Gaming Group is involved in trying to sell the Sahara. Where does that deal stand? Answer: The Sahara is unique because it is on a heavily traveled east-west thoroughfare (Sahara Avenue) and there are three separate land parcels. We've had interest from people who want the operating asset (the 17.45-acre land parcel that houses the Sahara), people who have a development vision and people who want to speculate on the land. Interest has been robust. The Sahara is performing well and for an operating asset, it's pretty affordable. If we got an offer of $400 million for just the parcel with the operating asset, I think everybody would be happy. Question: How did your company's work in Singapore come about? Answer: The Singapore government found us. They weren't sure how to value the land. They wanted to make their decision based on what the best concept would be given their objectives. They asked us to determine what the land price should be. You couldn't just look at the gaming component. You had to look at the overall resort and all the components. We figured what the land price should be and they fixed that land price in the RFP process so that everybody was on a level playing field. Question: How did you get into real estate? Answer: My family had a printing business here but I wasn't interested in printing. I went to Los Angeles to be a stock broker, and after 11 months, I really didn't like it. I had a couple of good friends who were in the real estate business and that's how it happened. Question: What brought you back to Las Vegas? Answer: The Northridge earthquake (in 1994) trashed our house. We could have gone anywhere in the country. I wanted to run my own business and Las Vegas seemed to make sense to me. I had a lot of institutional real estate knowledge and Las Vegas seemed like a good place for opportunity. Question: What do you believe is the future for the Las Vegas real estate? Answer: Las Vegas is a strategic location in the southwest United States. We will continue to grow as long as we're able to continue to provide infrastructure. The key is land values. Being what those values are today, the developer has to figure what they need to do to get the maximum density that works on a site to extract the best value from the land. There's a deal now for a 6-acre site on which the developer can build 2,500 hotel rooms if it wanted. That's the direction we probably will start to go, particularly as the big sites are already gone. The question is where does the market push as the Strip is developed. Copyright GamingWire. All rights reserved. Related Links
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