Potential competition for UNLV's $900 million "Mega-Event Center"?
The Las Vegas arena race drew a new deep-pocketed private competitor Friday when MGM Resorts International said it will partner with a powerhouse arena builder and break ground late this year for a new 20,000-seat arena on the Strip without a nickel of public money.
MGM Resorts will join forces with national arena developer AEG to build the sports and entertainment venue on its land behind the Monte Carlo and New York-New York. MGM did not offer a price tag or drawings. Construction should take 24 to 30 months after a late-2013 groundbreaking.
MGM, which owns 10 Strip hotel-casinos and the 17,000-seat MGM Grand Garden and 12,000-seat Mandalay Bay Events Center, moves to the head of the pack of contenders aiming to build an arena in the Las Vegas market.
Developer Chris Milam’s proposed arena in Henderson crashed and burned in 2012 when he said he could not rope in the NBA’s Sacramento Kings. Meanwhile, the city of Las Vegas’ agreement with The Cornish Group development company to build an arena in Symphony Park appears to be stalled. The exclusive deal between the city and Cornish will expire by the end of this year.
Clark County Commission Chairman Steve Sisolak welcomed MGM’s proposed arena. Sisolak said he was especially pleased the plan includes a green, parklike commons that would lead into the proposed arena.
“It’s a fabulous idea. It will create a lot of jobs,” Sisolak said. “I know when MGM builds something, they will build it big and glamorous, and it will be a jewel for the Strip and Clark County.”
Arena proposals come and go in Las Vegas, but the MGM proposal has legs because it’s not relying on public financing such as a sales tax or hotel room fee.
“It’s being built with private money, which is the best way to build an arena. They’re not asking for a taxpayer subsidy nor should they,” Sisolak said.
“The extent to which it can be done with private funding always helps,” said Don Snyder, the former bank and casino executive charged with coordinating UNLV’s effort to build a new 60,000-seat domed stadium on campus.
MGM’s arena will proceed without a tenant such as an NBA or NHL team – and that is not a problem in a one-of-a-kind entertainment market such as Las Vegas, said Chris Lencheski, president of Philadelphia-based Front Row Marketing Services, a Comcast-Spectacor company that does arena consulting.
“The normal matrix of having an anchor tenant doesn’t apply,” said Lencheski, noting the market’s 40 million annual visitors.
AEG Chief Executive Timothy Leiweke addressed that in a statement.
“Our extensive sports and music assets together with our global network of venues, including arenas in key West Coast markets, will allow us to maximize booking and operations opportunities,” Leiweke said.
LITTLE IMPACT ON UNLV PLAN
University of Nevada, Las Vegas officials said the MGM arena would not compete for events with their own $900 million proposed sports and entertainment venue, which UNLV has dubbed the “Mega-Event Center.”
Each venue would draw different sports, music and entertainment events, officials said.
Snyder updated the Board of Regents late Friday afternoon on the stadium. Snyder is trying to reduce the project’s price after the local resort-casino community expressed concerns over the project’s cost. MGM issued a statement last month saying UNLV’s proposed center project costs too much.
Unlike MGM, UNLV is asking for public dollars to help pay for its stadium project. UNLV has asked state lawmakers to approve a campus tax district to generate revenue from the sales of items such as food and beverages, but a hotel room fee proposal floated by the university drew a cool response from the local resort-casino industry.
UNLV is partnering with Majestic Realty, owned by billionaire developer Ed Roski, on its domed stadium proposal. Majestic has committed $360 million toward the UNLV deal, which encompasses a far-reaching face-lift of the campus called UNLVNow to build more student housing and retail space.
The planned MGM arena could, however, go head-to-head with UNLV’s Thomas & Mack Center, which is a key money-maker for the university.
However, UNLV President Neal Smastrek said the university is not concerned by the effect that MGM’s arena plans would have on the Thomas & Mack.
“It’s our assumption that they will add more events to Las Vegas,” he said.
But Lencheski said Thomas & Mack and the proposed MGM arena can coexist because the two buildings could draw different content.
“It’s hard to suggest one will knock out the other. There’s enough content because of the nature of the Las Vegas market.”
MGM Resorts has a strong partner in AEG, which operates more than 100 sports arenas worldwide, including the Staples Center in Los Angeles and sports venues in Minneapolis, Kansas City, Portland, Ore., and China.
MGM Resorts also has an impressive inventory, which includes Strip heavyweights such as Bellagio, The Mirage and CityCenter .
In an interview last month after the company’s fourth-quarter earnings release, MGM Resorts Chairman Jim Murren said the company had been evaluating building a third Strip arena.
“We’re in a very strong position because we own two arenas that we built with private money,” Murren said. “We’re evaluating if another arena makes sense. We would move forward if we conclude there is a market opportunity to enhance our overall entertainment offerings.”
REVITALIZATION BENEFIT
The arena will be financed by MGM Resorts and AEG with privately funded third-party financing.
Murren said the design process is “well along” and MGM Resorts would seek the proper zoning and Clark County approvals.
MGM Resorts said the arena is expected to help revitalize an area connecting the Monte Carlo and New York-New York between the Strip and Frank Sinatra Drive. The development will include retail shops, dining and entertainment offerings.
Deutsche Bank gaming analyst Carlo Santarelli called the arena development was “a modest positive” for MGM’s stock over the long term but might be “ruffling some feathers” given investor interest in the company’s effort to refinance more than $13 billion in debt.
“We think the new arena could serve as an interesting way to generate foot traffic around some of the mid-tier assets in the MGM portfolio that have struggled to regain traction in the Las Vegas recovery,” Santarelli said.
AEG was originally connected with an arena development planned by Caesars Entertainment Corp. on the east side of the Strip. That arena project died when a judge ruled against a public vote on a local sales tax to help pay for it.
Reporter Alan Snel contributed to this report. Contact him at asnel@reviewjournal.com or 702-387-5273 and Howard Stutz athstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.
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