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Major events underscore business news in Las Vegas in 2014

29 December 2014

LAS VEGAS -- You’ve gotta hand it to Nevada.

Whatever this state does, it does big. When it booms, it leads the nation in growth. When it busts, well — that’s epic, too. And in 2014, when the “r” word on everyone’s lips became “recovery,” the Silver State again found itself at or near the top of several key economic indicators. Consider job growth, for which it landed back in the top three. Or look at development: The $10 billion or so in projects planned or underway in Southern Nevada alone would be the envy of some communities with two or three times the market’s population.

Although Southern Nevada’s economy has been on the upswing since 2011, some of the gains became especially noticeable in 2014.

After three years of healthy annual gains, Clark County’s taxable sales surged to record levels in May, when total sales of $3.2 billion bested the previous high for the month of $3.17 billion, set at the peak of the boom in 2006.

Consumers may have felt better about spending thanks to big declines in unemployment.

The local rate fell from 9 percent at the beginning of the year to 6.9 percent in November, as every sector save mining and government added thousands of jobs. For sheer growth rate, construction outpaced every category, as projects including Downtown Summerlin and SLS Las Vegas Hotel & Casino helped the sector add upward of 12 percent to its workforce by midyear.

That’s not to say 2014 was all sunshine and roses. The Downtown Project, an embodiment of Southern Nevada’s high-tech hopes, laid off dozens. Internet gaming, once considered a rich, new frontier for the state’s key economic engine, languished with subpar financial results. Caesars Entertainment Corporation, the second-biggest gaming operator on the Strip, ended the year facing down bankruptcy.

Nevertheless, the state and local economies have strong momentum going into 2015, driven partly by a $5 billion Tesla factory planned outside Reno and passel of stadiums either on the drawing boards or underway in Las Vegas. Throw in a few restarted local master-planned communities and looming groundbreakings on some multibillion-dollar Strip hotel-casinos, and Nevada should keep going big for the foreseeable future.

Here is a recap of the top business stories of 2014.

1. CAESARS UNDER FIRE

As the year ends, it appears Caesars Entertainment has a date in U.S. Bankruptcy Court.

The nation’s largest casino company has a gaming industry-high $22.8 billion in long-term debt.

Caesars has spent much of the past 18 months trying to restructure the obligations, including creating different operating divisions.

It’s largest division, Caesars Entertainment Operating Co., which owns 80 percent of the debt, is expected to file a prepackaged bankruptcy plan in January. Part of the plan is to split the division — which controls the flagship Caesars Palace, Harrah’s Reno Casino and Hotel, Caesars Atlantic City and several regional properties — into a real estate investment trust.

A framework for the agreement is in place after Caesars negotiated the terms with the company’s primary banks and bondholders. Late in the year, Caesars Entertainment said it would merge with an affiliate to help it fund the restructuring.

However, analysts have warned the company’s financial structure is too complicated to be resolved in a prepackaged bankruptcy. Also, the deal could unravel between now and when the bankruptcy filing is planned.

As this edition went to press, events were unfolding and key developments may be imminent.

2. TESLA A MAJOR COUP

When the news broke in September that electric car maker Tesla has picked Nevada to build its Gigafactory, boosters said it wasn’t just a Top 10 story of 2014, but a Top 10 economic success story going back to the building of Hoover Dam.

The $5 billion Tesla battery plant that will employ an estimated 6,500 workers and crank out 500,000 lithium-ion battery cells per year by 2020 is under construction in Storey County in Northern Nevada.

In a demonstration of just why Nevada may have won the coveted manufacturing project, the state Legislature convened a week after the announcement by Tesla CEO Elon Musk and a day later, four bills implementing the $1.3 billion tax incentive package proposed by Gov. Brian Sandoval to bring the company to Nevada were signed into law.

Nevada won by beating out Texas, California, New Mexico and Arizona.

Musk, who visited Carson City to talk about the project, said Nevada won out for reasons other than the incentive package.

“What the people of Nevada created is a state where you can, where you are very agile, where you can do things quickly and get things done,” he said. “It’s a real get-things-done state. That was a very important part of the decision.”

Sandoval said: “Isn’t this a great day for Nevada? This is as big as it gets.”

3. UBER SHAKES UP TRANSIT INDUSTRY

The company that may have experienced the wildest roller-coaster ride on Nevada’s economy in 2014 was Uber, a transportation network ride-sharing company based in San Francisco.

Uber has been attracting customers and building support worldwide since its founding in 2009. But company leaders knew Nevada would be a tough market to crack because transportation regulators have deemed the service in violation of several laws governing taxis and limousines.

Regulators warned Uber and its contracted drivers that they would be cited and have their vehicles impounded if they tried to serve customers.

Uber in late October tried to avoid controversy by directing drivers to neighborhoods underserved by taxi companies.

But the company failed.

Drivers were cited, vehicles were impounded and the state took Uber to court in Washoe County. Once Uber lost that court case, company leaders agreed to shut it down in Nevada the night before Thanksgiving.

In the aftermath, Uber promised to return and began working to hire a Las Vegas general manager and more drivers. Meanwhile, taxi companies scrambled to develop a smartphone app similar to the successful technology Uber uses.

4. TOURISM SHATTERS 40 MILLION MARK

Southern Nevada’s tourism industry this year hit a milestone that it has been looking forward to since 2012.

The Las Vegas Convention and Visitors Authority said in mid-December that it believed that the 40 millionth Las Vegas visitor of the year arrived sometime around the end of the National Finals Rodeo, the first time that level had ever been reached.

Much of the increased tourism has been driven by additional use of McCarran International Airport, particularly Terminal 3, which serves international arrivals.

International arrivals were trending at 12.8 percent ahead of 2013 as of October.

5. STRIP SHOWS SIGNS OF LIFE

After several years of uncertainty because of the recession, the Strip showed signs of life in 2014.

Two new hotel-casinos — built out of the shells of old resorts — opened.

The Cromwell, a $185 million project, was unveiled in May. Caesars Entertainment built the 181-room hotel-casino from the remains of the Bill’s Gamblin’ Hall/Barbary Coast.

At the end of August, the $415 million SLS Las Vegas revived the former Sahara site on the Strip’s north end. Private equity company Stockbridge Real Estate and Los Angeles-based nightlife company SBE Entertainment own the 1,600-room hotel-casino.

Other Strip locations had behind-the-scenes activity.

Genting Berhad of Malaysia was found suitable by state gaming regulators in May for the planned $4 billion Resorts World Las Vegas at the shuttered Echelon site. Construction is expected to begin in 2015.

Nearby, the empty New Frontier site was bought by Australian billionaire James Packer and a group that includes former Wynn Las Vegas executive Andrew Pascal. The group is planning a hotel-casino.

6. HEALTH CARE EXPERIMENT FALLS SHORT

It was a grand experiment that fell well short of expectations.

When Sandoval became the nation’s only Republican governor to both launch a state exchange and expand Medicaid under the Affordable Care Act, the idea was simple: Take total control of efforts to chip away at the ranks of Nevada’s uninsured. With about 600,000 residents — more than 20 percent of its population — lacking coverage, the state needed new solutions.

Medicaid expansion, at least, delivered. The state-run program for low-income earners signed up nearly 200,000 new enrollees in 2014.

But Nevada Health Link, the online marketplace through which Nevadans could buy subsidized private plans, was a disaster from the start. Technical glitches led to national headlines, from the enrollee who couldn’t get his $400,000 bypass paid for to the member who died of a brain tumor waiting for her coverage to come through.

The health link’s board fired website contractor Xerox in May and threw in with the federal government’s healthcare.gov for the current enrollment period. The system works, but a class action lawsuit over the first sign-up session promises this story will haunt Nevada well into 2015.

7. STADIUMS, ARENAS SNARE HEADLINES

It was the year of the stadium and arena in Las Vegas in 2014.

Four stadium and arena deals unfolded amid varying levels of drama in downtown Las Vegas, along the Strip and at the University of Nevada, Las Vegas.

Let’s start with the Strip. That’s easier to explain because two arena projects broke ground without public dollars. On May 1, the partnership of MGM Resorts International and Anschutz Entertainment Group broke ground on a $375 million arena behind New York-New York’s parking garage.

Then, on Oct. 29, Las Vegas businessman and former UNLV basketball star Jackie Robinson did the same for a $690 million retractable-roof arena on the old Wet ’n Wild site next to SLS Las Vegas on the Strip’s north end.

In the stadium front, things were politically messier.

On Aug. 28 at UNLV, acting President Don Snyder delayed pursuing a $523 million campus stadium. He said the timing wasn’t right to ask for public funding because of a higher priority of pursuing a medical school.

But the Las Vegas City Council believed the timing was right to use public dollars to help pay for a $200 million Major League Soccer stadium on 13 acres in downtown Symphony Park.

After several controversial stadium deal extensions with a private development partner, the City Council voted 4-3 on Dec. 17 to give $25 million in funding and $31.5 million in infrastructure work to the partnership of Findlay Sports &Entertainment and the Cordish Cos. The city also gave land for the site to Findlay-Cordish that was appraised at $38 million to $48 million. The soccer stadium is contingent on Major League Soccer awarding a franchise, a decision that will come in 2015.

8. DOWNTOWN SUMMERLIN ARRIVES

Fireworks lit the Summerlin skies and it wasn’t even the Fourth of July.

Downtown Summerlin, The Howard Hughes Corp.’s 1.6 million-square-foot outdoor urban shopping, dining and entertainment center, opened to thousands of consumers in October, reawakening Southern Nevada’s retail scene.

Ground was broken on the project in 2007 and it initially was scheduled to open two years later. But the Great Recession derailed those plans and the project went dormant until 2013.

When the property finally opened, the biggest complaints were the crowds and a lack of parking — great problems to have in the retail world.

Downtown Summerlin wasn’t the only big retail project making headlines in 2014.

Phase 2 of Tivoli Village began in October with a different favorable problem. The unidentified lead tenant told developer partners EHB Cos. and IDB Group that it wanted 70,000 square feet for its outlet, not the 22,000 square feet it originally planned.

The timetable for opening Phase 2 has been extended to winter 2015 or spring 2016.

2015 is expected to be a big year for prep work for the Las Vegas Convention and Visitors Authority’s Global Business Center, a $2.3 billion revision of the Las Vegas Convention Center campus.

The project was announced in 2013 and the authority spent most of 2014 acquiring property south of the campus for expansion, parking and a major transportation element.

9. HOUSING SEES STABILITY

A new visitor named sanity dropped in on housing in 2014.

Nowhere have Southern Nevada’s economic highs and lows been more evident than in its real estate market.

Just as the median price of a single-family resale soared to an unrealistic $315,000 in 2006, it dropped to an undervalued $118,000 in 2012. Prices spent 2013 and early 2014 catching up, spiking 25 percent to 30 percent year over year. No one believed that clip was sustainable.

In the fall, the market proved the skeptics right. Value gains slipped back into a healthier, single-digit-percentage range and prices settled in at around $200,000 — the first time since 2008 the median breached that barrier.

There were glimmers of old times, though: Two master plans that went comatose in the recession — Inspirada and Cadence — revived with sales bonanzas reminiscent of the heady boom days. Skye Canyon, a new master plan in the northwest, broke ground in June.

Nevertheless, development activity remained a fraction of what it was. The market added about 6,500 homes in 2014, down from more than 35,000 a year during the boom. Experts say construction should stay at current levels in 2015.

10. SLOTS CONSOLIDATION

The long-expected consolidation of Nevada’s slot machine industry began in 2014.

By next year, lottery companies will control the gaming industry’s largest manufacturers.

New York-based Scientific Games Corp. bought WMS Industries Incorporated in 2013 for $1.5 billion. This year, the company acquired Las Vegas-based Bally Technologies, Inc. for $5.1 billion. A year earlier, Bally purchased table game maker SHFL entertainment for $1.3 billion.

The Bally buyout closed in November and Scientific Games became the gaming industry’s most diversified global business with 10 components that touch all aspects of legalized gambling — lotteries, slot machines, table games, casino and lottery management systems and interactive gaming.

Scientific Games is expected to move its corporate offices to Las Vegas.

Scheduled to close next year is GTECH Holding’s $6.4 billion purchase of slot machine giant IGT - International Game Technology. GTECH is headquartered in Rome and the new yet-to-be-named company will be in the United Kingdom.

IGT is still considered the gaming industry’s largest slot machine maker with dual headquarters in Las Vegas and Reno.

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Major events underscore business news in Las Vegas in 2014 is republished from Online.CasinoCity.com.