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November 21, 2018

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Despite Wynn’s move, gaming grows slowly on north Strip

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Steve Marcus

A view of the former New Frontier casino site Tuesday, Nov. 3, 2015, on Las Vegas Boulevard South.

Whether Wynn Resorts’ purchase of the site where the New Frontier was located will be the spark that ignites development on the northern stretch of the Las Vegas Strip remains to be seen since many proposed projects have significant issues that could delay or even prevent them from coming to fruition.

Steve Wynn did not reveal its plans for the 38 acres north of the Fashion Show across Las Vegas Boulevard from Wynn Las Vegas and Wynn Encore. The news, along with other announcements over the past year, added to hopes that the north Strip might come into its own.

In November, the Las Vegas Convention and Visitors Authority approved the design for the Las Vegas Convention Center expansion. Once complete, the center will stretch from Paradise Road to the Strip on the site where the Riviera once stood.

And in its third-quarter earnings call, Wynn Resorts announced it will start building Paradise Park, the lagoon-based project that includes an entirely new hotel tower and casino, next year.

In October, the Genting Group, the company building the proposed Asian-themed Resorts World project just of north of Wynn’s new lot, said it hired a construction manager and would soon start erecting construction cranes. Those cranes are up and running.

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The steel frame of a building rises out of the dirt on the northeast side of the Resorts World project. Genting Group says the new Asian-themed casino should be complete in 2020.

In addition, New York developers bought the long-shuttered Fontainebleau in August, and the SLS, reported to be struggling to gain customers, was sold in May to Alex Meruelo and Meruelo Group, owners of the Grand Sierra Resort Hotel & Casino in Reno.

There was even progress at the All Net Arena, a project on the lot just south of the Fontainebleau that many have doubted. In early fall, earth-moving equipment could be seen working on the site. In October, the developer Jackie Robinson won Clark County approval for an expansion to the project.

A look at the some of the issues affecting development of the north Strip:

Wynn’s new property

In its announcement, Wynn Resorts said it paid $336 million for the site of the New Frontier and the defunct Alon project. Unless Steve Wynn finds himself in front of a camera over the holidays, there probably won’t be any hint of his plans for the property until the company’s next earnings call.

Odds are, experts say, that Wynn Resorts will not start a project on the land in the near future if only because the company is already working on some major developments.

“Wynn has its hands full right now,” said Colin Mansfield, a gaming analyst with Fitch Ratings. “They are still building (their project) in Massachusetts and starting on development of Paradise Park.”

In addition to projects in the U.S., Wynn Resorts has also been angling to get a foothold in Japan, if and when that country develops its gaming regulatory structure.

“The biggest X factor is Japan,” Mansfield said. “That’s sort of a large overhanging factor on the balance sheet of every major global gaming company.”

Both Mansfield and John DeCree, a gaming analyst with Union Gaming Group, think Wynn may simply hold on to the land until business picks up on the north part of the Strip.

But, both analysts agreed, the purchase is also a smart strategic move.

“It does limit potential competition next door if you think about what was going to go there when it was the Alon site, and you think about who else has that potential,” Mansfield said. “As long as that land was for sale, Caesars, MGM, anybody could have came in and competed more directly with Wynn.”

And of course, the purchase could also be just a smart real estate play. “Over time I think the Strip keeps spreading north,” DeCree said. “And real estate values will only go up.”

Other developments

There are also issues facing two other north Strip developments, the All Net Arena and the Fontainebleau.

Although New York development company Witkoff and Miami company New Valley LLC bought the Fontainebleau in August for $600 million, neither of the two developers have released their plans for the property. Financing for construction has not yet been secured, a source well-placed in the development community said.

If the project ultimately does not work out, the last owner of the property, Carl Icahn’s Icahn NV Gaming Acquisition LLC will probably retake ownership of the property. That’s because Witkoff borrowed $345 million of the $600 million he paid for the hotel from Icahn’s company.

A representative of the Witkoff group did not respond to requests for comment for this story.

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A view of the former Wet 'n' Wild water park site, foreground, and the stalled Fountainebleau casino project Sunday, March 22, 2015.

As for the All Net arena, former NBA player Jackie Robinson won Clark County approval in October for an expansion to his arena project. Besides a long and wide hole dug on the site earlier this year, there has still been no actual construction on the land, which sits between the Fontainebleau and the SLS. All Net did not respond to an email asking for comments.

Lucky Dragon and SLS

Two casinos operating in the area, SLS and Lucky Dragon, are privately held, and neither one will talk about their financial performance.

Lucky Dragon opened with traditional Asian fanfare last year, with a unique strategy of relying almost exclusively on Asian customers.

When the company went before the Gaming Control Board for its license, then General Manager Matthew Harkness said the casino would rely on Asians in Las Vegas and the West Coast of the U.S. for 70 percent of its revenue. Customers from Northern California, Washington state and Vancouver would make up 10 percent and tourists from Asia itself, would make up the rest.

In March, executives with the casino said things were going well, and that they were planning on a second VIP gaming lounge to better cater to higher-end players. Nine months later, a proposed new VIP lounge never opened, and Harkness has been replaced with former vice president of marketing Jordan Seager.

Seager, who would not comment whether the Lucky Dragon is doing better, would only say the planned changes weren’t made because they found better uses for the space.

While other media reports have the property struggling, DeCree said it’s difficult to know exactly what is going on.

“It’s hard to gauge profitability,” DeCree said. “But it’s an interesting place there. Everyone hears mixed reviews. Some say it’s doing well, some not so well.”

The sale of SLS to Alex Meruelo and Meruelo Group also appears to be in trouble. Until the SLS stopped publicly reporting its finances in 2015, the news wasn’t good. The casino was laden with debt and reporting losses.

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An exterior view of SLS Las Vegas.

The sale was supposed to rescue the property. But the transaction appears to be stalled, and the Meruelo Group has not come before the Nevada Gaming Control Board to ask for final approval of the sale.

At the end of November, a group of Asian investors — who had lent SLS money before the announcement of the sale — sued the current SLS owners in a Los Angeles court.

The investors, all from China, helped finance the hotel in the hopes of getting an American green card under a federal program meant to spur foreign investment. In their suit, they allege that SLS is close to bankruptcy and that the sale to Meruelo violates the terms of their investment deal putting their green cards at risk.

A spokesperson from Meruelo refused to comment on the lawsuit or its possible effects on the deal.

Although news on the north Strip is mixed, experts say the pace of recent transactions may be better for the entire resort industry in Las Vegas.

“On a wholistic basis, we’re net positive on development at the north end of Strip,” Mansfield said. “New capacity does reinvigorate the new market. And pulling the center of gravity from center Strip, we think, is a positive. But in the more near-term, we’re probably viewing it more favorably from a citywide perspective that we don’t have two or three big new resorts going up at the same time.”