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Jennifer Robison

Westward Ho Site Could Join Mixed-Use Craze

21 June 2006

LAS VEGAS, Nevada -- Just months after it bought the Westward Ho on the Strip, Centex Destination Properties has ceded most of the property to a partner involved in the purchase.

And plans for the site have shifted from a high-rise condominium project to a $1.8 billion mixed-use resort tentatively set to include 1,000 condominium-hotel units, 600 residential condominiums, a 600-room hotel, an 80,000-square-foot casino and 200,000 square feet of retail.

"It sort of goes along with what everyone else is doing, with what the Stardust is planning next door (with the $4 billion Echelon Place) and what MGM (Mirage) is doing (with the $7 billion Project CityCenter)," said Gary Tharaldson of the Tharaldson Cos., a North Dakota business that is the new majority owner of the Westward Ho site. "It's the only use you can build when you pay the kind of money we paid."

Centex Destination Properties and Tharaldson bought the Westward Ho parcel together for $145.5 million in September, with Centex as the managing partner. Centex Destination Properties is a subsidiary of publicly traded Centex Corp., a Texas home builder with a market capitalization of nearly $6 billion and $14 billion a year in sales.

In March, a separate Tharaldson business shelled out $170 million to buy all but one acre of the 15-acre plot. Centex continues to own the one-acre sliver that Tharaldson didn't buy.

David Atwell, a real estate broker specializing in properties on and around the Strip, said the land's location could boost its prospects.

"It's dynamite. It's between two major hotels," Atwell said. "They're not making any more Strip property. It's like having gold bars in the bank."

Tharaldson said he wasn't sure when construction on the now-vacant Westward Ho site would begin.

However, he said he was readying plans for county approval and preparing for the construction-permitting process. He noted that it took two years to finish planning and development paperwork and begin construction on the Bond, a five-story, 118-unit timeshare a Tharaldson affiliate is building near Russell Road and Interstate 15. The Bond is scheduled to open in 2007.

Tharaldson said he will finance the construction of the Westward Ho land's condominiums through his existing business.

Because he hasn't owned a gaming property before, Tharaldson said he's considering a joint venture on the casino with an experienced industry operator. If he strikes such an agreement, Tharaldson said, he'll seek casino-construction funds from institutional investors and banks on Wall Street.

The 24-year-old Tharaldson Cos. encompasses a multitude of businesses. A development division builds hotels, while a property management entity operates 355 hotels with 6,000 rooms in 36 states under nameplates such as Marriott's Residence Inn, Courtyard and Fairfield Inn brands and Hilton's Hampton Inn and Homewood Suites concepts. Tharaldson has also built and operated Holiday Inn Express and Comfort Inn properties.

In Las Vegas, Tharaldson developed four hotels clustered around Russell and Interstate 15: Las Vegas Courtyard, Las Vegas Fairfield Inn & Suites, Las Vegas Holiday Inn Express and Las Vegas Residence Inn.

On March 31 -- the same day Tharaldson closed on its majority takeover of the Westward Ho property -- Whitehall Street Real Estate Funds bought 130 Tharaldson hotels for $1.2 billion. Tharaldson said Whitehall is under contract to buy 10 more of the company's properties.

Whitehall, a Goldman Sachs-managed real-estate investment firm, has retained Tharaldson as the hotels' property manager.

Tharaldson is also slowly unloading its ownership interest in Urban Village, a mixed-use project that Centex Destination Properties is developing on Las Vegas Boulevard South near Cactus Avenue.

Urban Village will include about 2,700 homes. C.J. Julin, vice president of marketing for Centex Destination Properties, said it will also have a "resort-style amenity and club" and commercial space with restaurants, entertainment and retail. Centex officials haven't yet planned the size and design of Urban Village's commercial space.

"With I-15 right there and a large part of the Las Vegas market being from Southern California, the access point with the Cactus interchange that's going to be put in is exciting," Julin said. "We're not going to have a casino, but casino developers are in that area, and with the proposed airport location (in Ivanpah), the South Strip is really a great place to have a development in Las Vegas. We're excited about the opportunity we have down there."

Tharaldson assembled the 48.6-acre Urban Village site in 2004 for about $71 million, Clark County Assessor records show.

Tharaldson said he has sold about 30 percent of the site to Centex, and will spin off the rest of the property to the home builder as it builds out the land.

Julin said company officials shifted their efforts from the Westward Ho parcel to the Urban Village project because Urban Village is further along in the development process and will enable Centex to sell homes sooner.

The company is already accepting reservations for its four-story brownstones, which will range from 870 square feet to 1,805 square feet and are priced from $375,000 to $795,000. Grading on the site began in May, and residents will move in about two years from now.

By contrast, it could take up to three years to obtain plan approvals and building permits on a high-rise condominium tower, and an additional two years to build the property. That places residential occupancy about half a decade away.

Tharaldson said investors frown on publicly traded companies that hold undeveloped land for several years, and the pressure to "turn their money every four to six months" led Centex officials to approach him about buying most of their share of the Westward Ho acreage so they could focus on Urban Village.

"Wall Street doesn't like the time it takes to build a high-rise," Tharaldson said.

Julin declined to discuss any profit Centex made on flipping its Westward Ho holdings.

But Tharaldson said the $24.5 million difference in the property's purchase and sale prices likely wasn't the quick profit it looks to be on paper.

First, while the Centex purchase closed in September, the sale price was likely negotiated several months earlier, he said. Thus, it took well over six months for the price to jump from $145.5 million to $170 million.

Second, Centex demolished the 700-room Westward Ho.

"Centex tore the building down and incurred some additional costs during that period," Tharaldson said. "It's not all profit."

Atwell agreed.

"Any time you can sell for more than you paid, it's worthwhile, but I think this was more a prearranged deal for (Centex)," Atwell said. "I don't think anyone walked away making a lot of money on it."

Tharaldson said that though he's committed now to building his mixed-use resort, he wouldn't rule out selling the land if its value jumped significantly.

"You've always got to be taking a look at what your best options are," he said. "If prices continue to rise, the nice thing is, you always have the option of exchanging it for something else. I think you've always got to keep your options open. But from the day I bought it, it had casino rights, and I was going to figure out a way to do that part of it."