A Las Vegas Strip site, once planned for an Elvis Presley-themed resort, has been sold for $172 million and will be developed for retail, entertainment and dining.
Gindi Capital, a New York-based investment company and co-owners of the nearby Showcase Mall north of the MGM Grand Las Vegas, announced Friday it was acquiring 9.5 acres from FX Luxury Las Vegas, an affiliate of Spectrum Group Management, for $18 million an acre.
The original owners, who planned the Elvis casino, forfeited the land to lenders when the Great Recession hit a decade ago.
The site has the Hawaiian Marketplace and retail shops at 3743 to 3759 Las Vegas Boulevard with 700 feet of street frontage.
Gindi Capital, without going into detail, said in a statement it was working with its development and design teams to unveil plans for a “new flagship retail, entertainment and dining experience” that will be announced in the coming months. The company said professional services firm JLL will oversee leasing of development on the site.
“I see the Vegas strip as Time Square West, with an incredible amount of foot traffic at a fraction of the rent,” said Eli Gindi, principal of Gindi Capital who described it as one of the best retail streets in the nation.
“It means that resort retail is alive and well on the Strip,” said Mike Mixer, executive managing director for Colliers International Las Vegas. “Justifying a major casino development on the Strip at these prices is a challenge. I think retail proves it can pay more than casinos, and time and time again we have seen that in the last decade.”
Michael Parks, senior vice president with the Las Vegas-based Global Gaming Group for CBRE, said the transaction shows the “highest and best use for land” on Las Vegas Boulevard any longer isn’t necessarily a hotel-casino.
Developers are looking to get returns other than what casinos can provide for the last remaining undeveloped parcel in the middle of the Strip, he said.
“I don’t believe they had a ton of interest from groups that wanted to develop a hotel casino on the site,” Parks said. “I think with the current market dynamics, there’s not a lot of new developers coming into the market that want to build a new hotel casino at this point in the cycle. You have the two massive projects under construction (with Resorts World Las Vegas) or about to start construction (in The Drew). The market is waiting to get those open and see how it responds before looking to add any more supply to the market right now.”
Mixer said the diversification along the Strip fits in what’s happened to the casino industry. Non-gaming revenues – including hotel rooms, retail, day clubs, night clubs, shopping, food and beverage and entertainment – now account for more than 60 percent of all annual revenue.
“It’s healthy for our local economy to diversify away from dependence on gaming revenue,” Mixer said. “The casinos on the Strip now will continue to be successful, but they won’t face as much competition in the future.”
Brian Gordon, a principal with Las Vegas research firm Applied Analysis, said the transaction demonstrates that someone can acquire real estate at $18 million per acre and generate sufficient returns for its investors once developed.
“While casino gaming will remain a staple in the Las Vegas market, overall consumer behavior continues to evolve in response to the economy, demographics and available product offerings,” Gordon said. “The property is located along the Strip frontage between the 5,000-room-plus MGM Grand and Planet Hollywood resorts and directly across from Aria and Park MGM. Its location provides an opportunity to capture a share of the visitor’s wallet.”
Parks said he expects the developers to expand off what they have at the Showcase Mall that’s undergoing an expansion with a Target and Burlington after it acquired the former Smith & Wollensky steakhouse for more than $30 million an acre. Value-oriented retail has proven to be attractive to people who walk along the Strip, he said.
“I think with the strong pedestrian counts in front of the property you have a captive audience with discretionary money to spend, and they are sending those discretionary dollars on retail purchase other than putting those dollars in slot machines or on craps tables,” Parks said.
The reason retailers can justify high rents is the foot traffic is “absolutely incredible” at that stretch of the Strip, Mixer said.
“And it’s the eyeballs – the number of people that see that end of the Strip through photographs and videos for any event in town,” Mixer said. “They can get brand exposure. They can pay more rent than normal because the marketing departments see the value in having that exposure.”
Analysts said FX Luxury has retained about six acres at the corner of the Strip at Harmon Avenue that would have been used if a resort-casino, like the Elvis-themed property, would have been built.
Mixer said that property is more valuable because not only is it on a prime intersection, but it doesn’t have the height restrictions on the adjacent parcels because of the Polo Towers. That held down the price to $18 million an acre on the 9.5 acres, he said.
“They anticipate they can get more than $40 million per acre,” Mixer said. “It’s a great site at the 50-yard line of the heart of the Strip.”
Parks said he foresees the corner property being a dense mixed-use development incorporating retail and residential or a boutique hotel.
Mixer also sees the potential for time shares and added there would be experiential uses for entertainment like has been happening along the Strip.
“There might be things we haven’t thought of yet, but it will force some creativity to come about,” Mixer said.
