Strip land values react to deal for Frontier site

But he found support from a potential competitor.

Packer, CEO of Melbourne-based Crown Resorts Ltd., is forming a company with ex-Wynn Las Vegas President Andrew Pascal and investment firm Oaktree Capital Management to construct a hotel-casino on the 35-acre site where the New Frontier once was.

MGM Resorts International Chairman Jim Murren was questioned about the transaction during his company’s quarterly earnings conference call a day after Packer announced the deal.

“It’s certainly a bullish sign for investors that want to come into the market,” Murren said.

Plans for the hotel-casino are sketchy, but that doesn’t concern Murren.

“We know they will do something compelling and different,” he said.

What caught Murren’s attention: The transaction marks a change for Strip land values.

MGM Resorts owns 800 acres on the Strip, much of it under 10 resorts, including the MGM Grand, Mandalay Bay, The Mirage, Bellagio and the 67-acre CityCenter.

Some of MGM’s land is vacant. The company has development plans, including a 33-acre open-air concert venue between Circus Circus and Sahara Avenue, and The Park, a dining and retail district, anchored by a $350 million sports arena-events center on 23 acres between New York-New York and the Monte Carlo.

Crown spent $280 million for 53.2 percent of the site across from Wynn Las Vegas and adjacent to the Fashion Show mall.

Based on that deal, Murren says, the value of Strip land at $9 million per acre. In a note to investors, Union Gaming Group went even higher, to $15.2 million per acre, based on conversations with sources close to the transaction.

The values are far below the $33 million per acre two Israeli companies paid New Frontier owner Phil Ruffin in 2007, but still more than the $4 million per acre Malaysia-based Genting Berhad paid Boyd Gaming Corp. last year for the 87-acre Echelon site, which it will build out as Resorts World Las Vegas.

Whatever the Strip land value, Murren told investors, “we like that a lot.”

Packer — whose net worth is $6.5 billion — is No. 212 on the Forbes List of World Billionaires and Australia’s second-richest person.

Crown operates casinos in Melbourne, Perth, Macau and London. The company is also planning new casinos in Sydney and Brisbane, as well as in Sri Lanka. Crown has publicly indicated interest in Japan’s potential casino expansion.

Packer has flirted with owning or developing a Las Vegas casino several times, only to see potential deals collapse.

In 2007, he ended plans for Crown Las Vegas on the Strip when the Federal Aviation Administration rejected a proposed 1,888-foot hotel tower. Two years later, Crown terminated a deal to buy Cannery Casino Resorts for $1.8 billion and was forced to pay a breakup fee and other penalties totaling $320 million.

Packer’s name was floated in April as a potential buyer of The Cosmopolitan of Las Vegas. The property was sold a month later to a subsidiary of the Blackstone Group, for $1.73 billion.

Oaktree President Bruce Karsh said the New Frontier site “was the best piece of undeveloped land on the Las Vegas Strip.”

Pascal is the other piece to the puzzle.

The nephew of Elaine Wynn, Pascal, 48, was president of Wynn Las Vegas from 2005 to 2010. Since 2011, he’s operated PlayStudios Inc., a Burlingame, Calif.-based technology company that created MyVegas, the social casino website for MGM Resorts.

Murren called Pascal “our friend, a great operator and great guy.”

Although development is a ways off, Murren said the transaction could “stimulate” Genting to begin construction of its $4 billion Resorts World.

“We’re talking about what Las Vegas might look like in 2017 or 2018 or 2019,” Murren said. “There will be thousands of jobs created — construction jobs. It will help the local economy … there will be thousands of permanent jobs when these projects are opened.”

Both Genting and Crown would spend millions to bring visitors to Las Vegas, Murren added. That translates into more airline flights, especially international flights from Malaysia and in Australia.

“As someone that has 42,000 hotel rooms here, we think that’s a very big positive,” Murren said.

There’s a lot of Las Vegas lore associated with the New Frontier site.

The hotel-casino was once part of the Howard Hughes gaming empire.

Ruffin purchased the hotel-casino in 1998 from Margaret Elardi for $165 million, helping end the nearly 6½-year strike by Culinary Workers Local 226 that remains the longest labor dispute in U.S. history.

The Israeli buyers demolished the aging hotel-casino with plans for a $5 billion hotel-casino based on New York City’s famed Plaza Hotel, but the recession killed the credit markets and the development.

Wynn Resorts Ltd. Chairman Steve Wynn so hated the eyesore across the street from Encore that he paid to landscape the front of the vacant property in 2010.

The foliage died.

A year later, he told analysts the Israeli businessman asked him “on a monthly basis” to develop something that could be connected to Wynn Las Vegas and Encore, and offered to give him the land and pay management, design and supervisory fees just to get out from under the heavy burden.

Wynn declined. He said he couldn’t determine the project’s return on investment.

Fast-forward three years and the New Frontier site could give an added boost to the Strip’s northern end. The $415 million SLS Las Vegas — the redeveloped Sahara — opens Saturday. Resorts World is slated to open in 2017.

Murren said the Packer-Pascal-Oaktree announcement also helps the aging Circus Circus.

“(It) has been a lonely soldier up there in the north for quite a while and now getting some much-needed company,” Murren said. “We think that’s good for our portfolio.”

Howard Stutz’s Inside Gaming column appears Wednesdays and Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. Follow on Twitter: @howardstutz.