Development in Las Vegas resort corridor is pushing east

By Thomas Moore

Thursday, July 6, 2017 | 2 a.m.

Capitalizing on an increase in the number of tourists it serves relative to locals in the last few years, the venerable Ellis Island on Koval Lane east of the Las Vegas Strip broke ground Wednesday on an expansion it hopes will lure more pedestrians.

The two-story expansion will have a restaurant and bar separate from the casino’s other food and beverage offerings, as well as a beer garden. Management says the new venue, which sits right up against the street and can handle 300 guests, will help it serve its traditional local clientele as well as the growing number of tourists who visit the property.

While much of that growth has come from savvy tourists looking for Strip alternatives, a significant portion comes from the fact that development in the resort corridor has been steadily heading east, drawing more attention to the almost 50-year-old casino.

“Now that there is Topgolf and things are moving in our direction, we welcome it,” Ellis Island marketing director Christina Ellis said. “We do get a ton of walk-in traffic and hope to increase that with our new venue because it’s going right out to Koval Lane.”

By expanding, Ellis is joining other larger gaming companies that have plans for land they own east of the Strip.

Strip real estate has become so rare and expensive, experts say, it is forcing gaming companies and other developers to push farther east than they’ve ever gone.

John Knott of the commercial real estate firm CBRE, which is trying to sell the site of the Alon project for Crown Resorts Limited, says gaming companies and other developers wanting to be in the middle of the Las Vegas tourism market don’t have many other options.

“If Genting (the developers of the Resorts World project on the Strip) goes forward and we are able to sell the Alon property, prices off-Strip will go higher because there really isn’t much opportunity left on the Strip,” said Knott, CBRE’s executive vice president and head of global gaming.

Mike Mixer, executive managing director of the Las Vegas office of commercial real estate company Colliers International, agrees.

“I think we’ll start to see some perpendicular development on the east side of the Strip,” he said, mentioning both Harmon Avenue and Flamingo Road as possible development routes. “Things like the Linq Promenade and the Park show us glimpses of the kind of future growth we might see. Not just for on-Strip development but also for off the Strip to link together other drivers like the Convention Center.”

To an extent, the move east has already begun. Last year, Topgolf opened at MGM Grand last year. More recently, the company announced plans to expand its convention center next to its parking garage at Koval Lane and Tropicana Avenue.

The Las Vegas Convention and Visitors Authority is bridging the gap between the Strip and Paradise Road with the purchase and destruction of the Riviera and the expansion of the Las Vegas Convention Center.

Lately, the trend seems to be gaining speed. Gaming companies have been buying up small plots of land to combine them into larger parcels and talking publicly about their plans for the east side of the Strip.

Executives with Caesars revealed their thoughts about land the company controls along Koval Lane during the company’s 2017 first-quarter earnings call.

“We have sizable land holdings on the east side of approximately 80 to 90 acres,” Caesars CFO Eric Hession said. “And then we own about 7 acres of undeveloped land in front of Caesars Palace, all of which would be prime for potential developments from additional convention space to retail to other offerings that our customers would desire.”

According to Knott, Caesars has made significant investments in this eastward push.

“Caesars has everything on the west side of Koval from Flamingo to where it shares driveway with the Venetian,” Knott said. “They paid $20 million an acre for some of that dirt.”

And Caesars isn’t alone.

Last spring, Steve Wynn announced a huge eastward expansion of his properties when he revealed plans for a lagoon-based attraction on the golf course behind the Wynn and Encore.

And in recent earnings calls, Wynn has hinted he may open up some of that land to other developers, which could spur even more development.

Wynn hinted at the possibility in 2016’s third-quarter earnings call while describing the scope of the project.

“And then there's the lagoon, the new rooms that are going to be available on both the north and south side of Wynn Park and the other features that go around the lake,” he said. “Then the issue is adjacent properties that will be available for smaller operators on Paradise Road.”

In 2017’s first-quarter earnings call, Wynn talked about how the lagoon project could increase the real estate values of his property.

“We have no better use for our money,” Wynn said, talking about the lagoon. “This would allow us to take the most conservative, but the most dynamic approach to creating this, in effect, this tremendous uptick in the value of our surrounding real estate,” he said.

Formally, Wynn Resorts hasn’t discussed the possibility of selling the land to other developers. And Wynn may simply be trying to increase the value of the land.

“With companies like Wynn and Caesars, the things that enter into decision-making are multifaceted,” Knott said. “If he’s got extra land and it’s worth more, it could create some financing options he didn’t have.”

If Wynn does decide to sell the land, which runs along Paradise Road very close to the monorail and the Convention Center, it will definitely become very desirable, Knott said.

“He’ll get a premium, mostly because he’s Steve Wynn and people want to be near successful people,” he said.

Allowing other hospitality developers to build hotels along the lagoon project is a very savvy business move, Knott said.

“If he opens (that land) up to other real investors and developers, he’s not going to allow gaming, right?” Knott said. “So if someone else puts up 500 hotel rooms or 1,000, then he gets potentially the food and beverage spend and the retail and the nightclub spend. It’s a pretty good formula to have someone else build capacity for you with their capital.”

Regardless of any individual project, Knott definitely thinks there’s a good chance for development heading east on Harmon toward Koval Lane.

“When you go off-Strip, you don’t have same the pedestrian counts, like say when you come down Harmon from CityCenter to the Hard Rock. But a lot of people are trying to make it a pedestrian-friendly street. I don’t think it will ever get to be like the Strip but we could see some nice development if it’s pedestrian friendly and brings the people out.”

And he also sees the potential along Paradise Road.

“That’s a whole different dynamic,” Knott said. “If Steve Wynn opens his side of street, it’s close to that monorail and also to the Convention Center. The location dynamics are pretty darn good. I like that area.”