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Howard Stutz

What is Strip land worth? Echelon deal offers ideas

28 April 2014

LAS VEGAS -- For now, we have a benchmark on Strip land values.

The sale by Boyd Gaming Corporation of the 87-acre Echelon site to the Genting Group for $350 million — roughly $4.02 million an acre — gave analysts an idea of what property on the Strip might be worth in today’s market.

We’re long past the 2007 apex when owners of New York’s Plaza Hotel paid Phil Ruffin $1.2 billion — about $34 million an acre — for the aging New Frontier. The old casino was imploded and when the credit markets dried up, so did plans for a $5 billion resort version of the Plaza.

Newmark Grubb Knight Frank Executive Vice President John Knott, who was involved in several Strip real estate deals in the previous decade, said he estimated land prices were about 90 percent below their peak.

For example, the former Klondike Casino site on the Strip’s south end had been valued at $15 million an acre at the market’s peak. The location fetched $1.5 million an acre recently, Knott said, which solidified his hypothesis.

“I think we go up from there,” Knott said. “There are just a limited number of sites out there.”

Boyd Gaming cleared about $1.8 million an acre for the Echelon deal. In a statement, the company said it expected to receive $157 million in net proceeds from the transaction after closing costs and paying a portion to a third party to fulfill the company’s obligations to LVE Energy Partners.

Boyd Gaming CEO Keith Smith said the 87-acre site was the last large parcel left on the market. He thought smaller parcels will cost more than $4 million an acre.

“It certainly can be used as a comparison,” Smith said the site, which has east-west boundaries on the Strip and Industrial Road. “You’re going to be hard-pressed to find a parcel like this site that has frontage along both sides.”

The bulk of the Echelon site was once home to the Stardust, but Boyd Gaming bought several adjacent parcels to increase the acreage. The largest acquisition was 27 acres on the northern end of the parcel in October 2006.

Harrah’s Entertainment (now Caesars Entertainment) acquired the former Westward Ho site for $18.4 million an acre and then swapped the land to Boyd in exchange for the Barbary Coast. Caesars renamed the casino Bill’s Gamblin’ Hall, which has since been closed for a planned remodeling.

Other Strip land deals of that era were mind-boggling.

SBE Entertainment and Stockbridge Real Estate paid an estimated $19.7 million an acre for the Sahara in 2007, which is now being transformed into SLS Las Vegas.

MGM Mirage — now MGM Resorts International — paid $17.2 million an acre across from the Sahara for a vacant 25.8-acre parcel at the corner of the Strip and Sahara Avenue, which is still vacant.

Harrah’s paid $20.1 million an acre for the Imperial Place in 2005. The resort has been rebranded as The Quad. In 2006, Columbia Sussex paid $30 million an acre for the Tropicana Las Vegas. The company eventually lost the casino in a bankruptcy reorganization.

Many of those deals will go down in Las Vegas lore.

“I think where we’re at now seems about right,” Knott said.

Smith said Boyd’s sale of Echelon doesn’t mean the company has given up on the Strip. He said there might be opportunity in the future to make a return.

The company retained the name Stardust, which it is using within its 22 hotel-casinos in eight states. In Las Vegas, one of the meeting suites in The Orleans casino conference center is named the Stardust Suite. At Boyd’s Blue Chip Casino in Michigan City, Ind., a showroom is called the Stardust Events Center.

Knott said Boyd might find a way back onto the Strip, but it seems as if the company is focused elsewhere for now.

Boyd’s $1.45 billion acquisition of regional gaming operator Peninsula Gaming last year gave the company casinos in Iowa and Kansas, while strengthening its hold on Louisiana.

Boyd Gaming is still tied strongly to Las Vegas, through its Coast Casinos brand and the company’s downtown properties.

RBC Capital Markets gaming analyst John Kempf said Boyd Gaming’s locals market will benefit from Genting creating thousands of construction jobs when the company begins turning the Echelon site into the $2 billion Resorts World Las Vegas.
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