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Jennifer Robison

Strip Land Deal: Harrah's, Boyd Swap Plots

3 October 2006

LAS VEGAS, Nevada -- Two of the city's biggest gaming operators have struck a strategic land deal key to their future growth.

Harrah's Entertainment and Boyd Gaming Corp. said Monday they will swap two key Strip parcels in a tax-deferred exchange that will enable each company to expand their resort-corridor redevelopment plans.

Boyd Gaming will trade its 1.8-acre Barbary Coast property at Flamingo and the Strip for a 24-acre parcel Harrah's is assembling on and around the site of the former Westward Ho next to Boyd's Stardust property.

"The additional land will provide us with the opportunity to develop future phases related to our Echelon project, and it will extend our strategic growth pipeline well into the next decade," said Rob Stillwell, a spokesman for Boyd.

With the Westward Ho parcel, Boyd now has 87 contiguous acres on the Strip.

Stillwell said the additional land does not change Boyd's plans for Echelon Place, the $4 billion resort the company will begin building in the second quarter on the Stardust site.

The Stardust is scheduled to close Nov. 1 to make way for Echelon Place.

Harrah's didn't return phone calls seeking comment on the land deal.

But gaming-industry watchers say Harrah's has long been interested in acquiring the Barbary Coast because the hotel-casino stood in the middle of two Strip blocks Harrah's owns. With the Barbary Coast, Harrah's would hold adjacent properties spanning from its namesake hotel just south of The Venetian down to Paris Las Vegas just north of the Aladdin. Owning the Barbary Coast would enable Harrah's to create a unified master plan in the center of the Strip.

Brian Gordon, a gaming analyst with the research firm Applied Analysis, said the trade was "very strategic for both companies."

"The Barbary Coast allows Harrah's to control a large contiguous property that includes the corner parcel at one of the busiest intersections in the world," Gordon said. "I think they've wanted to acquire that parcel for quite a while. Now they can increase the potential of their master plan in that area."

Smedes Rose, a gaming analyst with Calyon Securities, agreed the swap would benefit both companies.

"For Harrah's, having that corner certainly caps whatever their eventual master plan is," Rose said. "For Boyd, companies always like to have more land to build out on."

It's not the first time in the past year that the Westward Ho site, which has frontage on both the Strip and Industrial Road, has been sold.

In September 2005, Texas-based home builder Centex Destination Properties and North Dakota hotel developer Tharaldson Cos. bought the 15-acre site for $145.5 million, with Centex as the managing partner. The plan: to build a high-rise condominium project.

The Westward Ho closed in November and subsequently fell to the wrecking ball.

In June, Centex ceded most of its share of the vacant property to Tharaldson, which has built hotels under nameplates including Marriott's Residence Inn and Hilton's Hampton Inn.

At the time, company owner Gary Tharaldson said he'd propose a $1.8 billion mixed-use development with 1,000 condominium-hotel units, 600 residential condos, a 600-room hotel, an 80,000-square-foot casino and 200,000 square feet of retail space.

Now, Harrah's is buying that parcel, along with nine acres an entity called Yarrow owns just to the south, between the Westward Ho lot and Boyd's Stardust.

Boyd is leasing the lot, which contains a roadway connecting the Strip to Industrial, from Yarrow.

Once Harrah's has completed its 24-acre land assemblage, it will trade the property to Boyd for Boyd's Barbary Coast, a small but storied hotel-casino.

Longtime local casino owner Jackie Gaughan and his son, Michael, built the Barbary Coast for $12 million in 1979. When Michael Gaughan proposed the 150-room property in 1976, representatives of the neighboring Flamingo Hilton and the MGM Grand, which is now Bally's, sued, alleging the property's casino would take up so much space that parking would be inadequate. The Gaughans agreed to scale back the casino to accommodate more parking places.

Stillwell said the Boyd-Harrah's land deal should close in the first quarter.

Because the deal is a tax-deferred exchange, no cash is involved.

Data from the Clark County assessor show that the 15-acre Westward Ho site carries a value of $101.6 million, while the Yarrow parcel is worth $43.2 million.

The assessor's office has valued the Barbary Coast plot at $15.7 million.

Stillwell said neither Boyd nor Harrah's plans to shutter the Barbary Coast.

In a statement, Boyd said it expects to recognize a noncash gain from the deal of about $280 million in the quarter during which it closes. The company plans to begin reporting the results based on discontinued operations at the Barbary Coast in the third quarter.

Strip Land Deal: Harrah's, Boyd Swap Plots is republished from