TIME COULD BE RIGHT FOR RETAIL ON SITE
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Phil Ruffin, now owner of Treasure Island, bought the property from the Elardi family in 1997 for $165 million. At first, Ruffin had plans to build a $700 million San Francisco-themed resort. Then he changed course and proposed a $2 billion Swiss-themed resort called the Montreux, which would house the Montreux Jazz Festival and an observation wheel to be called the “Las Vegas Eye.”
Ruffin never pulled the trigger on the Montreux, deciding he didn’t want to take on the debt. And in 2007 he sold the land for $1.24 billion to El Ad Group, an Israeli firm with plans to build a $6 billion Strip resort on the site to be called The Plaza.
El Ad got as far as imploding the New Frontier but was unable to get the financing needed to build something in its place. And in 2014, it sold the land to Australian businessman James Packer’s group for $280 million.
So with a casino resort seemingly unbuildable, what could come next? Mixer says retail is a distinct possibility.
Development costs are much lower, he said, and several recent high-dollar sales of Strip shopping centers proves the retail market in Las Vegas is growing.
“These (buyers) are savvy investment firms that need to provide a growth story to continue to sell stock and validate their investments,” Mixer said. “And if they didn’t see a path for growth in those multibillion-dollar investments on the Strip, they probably wouldn’t be buying them.”
A list of recent transactions seems to support Mixer’s theory. There were at least four major sales of Strip shopping centers last year
• Crystals was sold to Invesco Real Estate and Simon Property Group
• The Miracle Mile Shops at Planet Hollywood was sold to Institutional Mall Investors LLC.
• Wynn Resorts sold almost half its interest in Wynn Plaza
• General Growth Properties Inc. sold 50 percent of the Fashion Show mall
Michael Parks, senior vice president of the Global Gaming Group of CBRE, the commercial real estate firm selling the land, agreed that retail would work just as well as gaming on the site. CBRE is, in fact, reaching out to all kinds of developers, he said.
“We are marketing the site not only to gaming developers but to high-class development firms from around the world,” Parks said. “There is a pretty comprehensive marketing push on this assignment.”
But one of the people charged with making those investment decisions says if there is any new retail built on that parcel it will have to be something special.
Michael Fisk is the head of strategic transactions for TH Real Estate, the firm that controls 50 percent of the Fashion Show, 50 percent of Grand Canal at the Palazzo and 87 percent of Town Square.
Fisk confirmed his firm in bullish about Las Vegas retail. “We’re very happy with (our investments),” he said. But the Strip, he said, already has enough retail. “Really, I would question what else is needed on the Strip that’s not already there.”
A project would have to be very special, he said, to lure tenants away from existing retail properties.
“It’s possible someone could do something like an indoor ski resort or something like the Triple Five guys are talking about doing in Miami,” Fisk said. “A huge project with things you wouldn’t typically find in a traditional mall.”
Projects like that, of course, also tend to be very expensive. And given the state of the retail industry in the country right now, getting money for a new mega-mall could be just as diffi- cult as getting investors to back a mega-casino.
“It’s very difficult to get financing given the press about retail right now,” Fisk said. “Construction financing in general is not that easy to get in the U.S. And banks are being very careful. I think it would be tough to get it financed.”
While not familiar with the particulars of Las Vegas, retail analyst J. Rogers Kniffen agreed with Fisk and said new retail development anywhere in the country has to be unique to have a chance.
“The ones that get done are experiential and mixed-use with stores but also apartments and then retail tied into them,” Kniffen said. “So you’re not just depending on the walk-in buyers. Even so, it’s really hard to get math to work on that.”
Mixer agreed that it would be difficult, but if any place could come up with a new take on retail it’s Las Vegas.
“I think it would have to be evolutionary for retail development, but there are some creative folks out there who could take retail development to the next level. And that site warrants a special project.”
“I don’t think building what we already built will work. And we’ve seen great development here. The Forum Shops (at Caesars Palace) has stood the test of time,” Mixer said. “But there could be something new we haven’t seen yet that might be appropriate for the site that is still retail-oriented. Someone comes out with a new hook and something special that hasn’t been done before, but that is not quite as capital intensive as a resort.” thomas.moore@gmgvegas. com / 702-513-2612 / @thdomo