W developer to consider options

LAS VEGAS, Nevada -- Las Vegas-based Edge Resorts, developer of the W Las Vegas on Harmon Avenue, has hired Credit Suisse Group of New York to explore "strategic partnerships" in the $1.7 billion mixed-use project, Edge principal Reagan Silber said.

The 46-acre property is not being listed for sale, though Silber said he has no doubt that there are investors who would like to buy the land.

Edge bought 21 acres from home builder D.R. Horton at the northeast corner of Harmon Avenue and Koval Lane, the site of a former nightclub, for $108 million last year. The group acquired an adjacent 25 acres this year that was going to be developed into the Las Ramblas condo project backed by actor George Clooney.

The W is planned for a mix of 3,000 hotel and luxury condo units, 10 restaurants and nightclubs, 75,000-square-foot casino, 300,000 square feet of convention and meeting space, Fred Segal fashion emporium, spa and fitness center. It was scheduled to open in 2008.

Silber said he's been approached by a number of gaming and lodging operators, private equity partners, financial sponsors and real estate developers who have expressed interest in becoming part of the W Las Vegas project. He wouldn't name any of them.

"It's impossible for us to do everything we're doing without a process to run it," Silber said Tuesday. "Credit Suisse is exploring all of these relationships from people that called us."

Edge Resorts' principals have yet to decide what they'll do. The company could bring on a financial partner to help with development or, given the land's strong underlying value, possibly sell one or both parcels outright.

Based on Morgan Hotel Group's appraisal of roughly 25 acres acquired in the Hard Rock Hotel deal and the $205 million that Edge paid for Las Ramblas, real estate along the Harmon corridor east of the Strip is estimated at $8 million to $10 million an acre.

"Depending on the outcome of the process, we may also elect not to pursue any transaction with a third party," Edge spokeswoman Maggie Feldman said.

Edge is no longer taking unit specific reservations for condos after selling out the first two releases, she said. Interested buyers are being placed on a priority waiting list. After the new year, the company will make a determination on the release of more units, contacting people on the list.

"The upside of building a hotel-condo is not as favorable as it was 24 months ago or even 12 months ago," said Jeremy Aguero, principal of Applied Analysis research firm in Las Vegas. "That being what it is, those with development interests are going to begin rethinking projects. A lot of the value is tied up in land. All the risk is tied up in development. Why take that risk, especially in today's market?"

It's a lot easier for multibillion-dollar companies such as MGM Mirage, Boyd Gaming Corp. and Station Casinos to start construction of a condo-hotel project than it is for the individuals at Edge, Silber said.

"There's no doubt construction costs are high and because of that, we slowed down the last four months to go out and raise money," Silber said. "Exactly what's the cost and what programs can we provide? Do we have nine restaurants or seven restaurants? Do we have a 3-acre pool or a 4-acre pool? Should we have 2,000 units in the first phase or 4,000? You've got all these questions.

"The one thing I don't worry about is condo buyers and I mean that as sure as I'm sitting here," he added. "We could sell them all day long. We took reservations and sold 500 units in the first release and raised the price and sold another 250 units in the second release. ... I'm not worried about our location and I'm not worried about Vegas as a destination. The other thing I don't worry about is money. There is a lot of money in the world that wants to invest in real estate, gaming and lodging," he said.

Edge was already looking for a gaming partner to operate the casino at W Las Vegas, a high-end hotel brand of Starwood Hotels and Resorts, Silber said.

"The market's gotten white-hot again with these private equity groups and gaming and real estate companies that want to be here. The phone calls came in and we had to look broader," he said.

From a business and hospitality perspective, Las Vegas is entering another building boom with private equity funds, institutional investors and commercial lenders seeking out strategic investment plans in the market, said Christopher Bentley, principal of The Bentley Group Real Estate Advisors.

"While not all of the proposed developments will come to fruition, several high-profile, world-class developments will pique the interest of travelers and Wall Street," Bentley said.

Sources in Las Vegas suspect that the land is being put on the market because Starwood is pulling out of the project. Calls to Starwood Senior Vice President Ross Klein in New York and to Credit Suisse were not returned.