New MGM Mirage Project Reflects Growing Urban Mixed-use Trend

Las Vegas Real Estate

 

 

MGM Mirage's new "Project CityCenter," the recently announced "city within a city," reflects the growing trend of urban mixed-use lifestyle developments targeted toward the baby boomer generation or those people born between 1946 and 1964. Although only 20 percent of the population, baby boomers control 40 percent of the nation's disposable income and 77 percent of its private investments.

Baby boomers favor living in denser environments with convenient amenities nearby such as restaurants, shopping, and clubs. The lifestyle development enables more efficient land use and resource conservation, while creating a synergistic draw for visitors and residents alike. Meanwhile, land near the Strip is reportedly selling for up to $20 million an acre.

"There aren't many Strip property owners who are selling," says Scott Gragson, a land broker for Colliers International. "Instead, they're looking to joint venture with someone on a development."

Designed by Ehrenkrantz, Eckstut and Kuhn Architects, the firm who created New York City's Battery Park, "Project CityCenter" will be built in phases starting in 2006. Located on 66 acres between the Monte Carlo and Bellagio resorts, the $4 billion first phase will consist of a 4,000-room hotel with a casino, three "boutique" hotels, 550,000 square feet of retail shops, plus dining and entertainment venues. There will also be 1,650 units of luxury condos as well as "hotel-condominium" units and "private residence clubs."

It won't open until 2010, however, which suggests that the announcement was carefully timed to attract new investment capital as well as development partners. Soaring land prices and rising construction costs are driving developers to defray expenses and mitigate risk through joint-venture arrangements with other companies.

MGM Mirage, for instance, is currently involved in a joint-venture with Turnberry Associates Inc. of Aventura, Florida to build "the Residences at MGM" - a $1.2 billion, six-tower hotel-condo complex, located at the northeast corner of MGM Grand's 116-acre property at Flamingo Road and Koval Lane. The project calls for six 40-story high-rise buildings with for-sale condominium units that double as hotel rooms when not in use. Typically, the developer has a management company that brokers the unoccupied units on behalf of the residents for a fee.

The double-use space approach is a successful selling product that is popular for both consumers and developers, enabling ownership and equity while still providing an income for each. It's a model that's being applied to "Project CityCenter," as well as other local projects, including the $300 million, 1,000-unit "Trump Tower Las Vegas" being built by Donald Trump and the New Frontier's Phil Ruffin, at Fashion Show Drive and Las Vegas Boulevard. The partnership enables each to leverage the other's experience and resources, while minimizing their financial exposure.

MGM Mirage's new urban metropolis has a crossbreeding of functions, incorporating retail with entertainment, and residential with recreational, in order to attract more visitors and retain them longer. It attempts to offer everything under one-roof, capturing any potential revenue loss from offsite activities. Future development partners may also help MGM Mirage mitigate rising construction material prices with steel and concrete costs increasing by nearly 30 percent since January.

"One of the biggest factors for builders in 2004 was the dramatic increase in the cost and availability of building supplies," says Gary Siroky, president of CORE Construction of Nevada Inc., a Las Vegas-based general contractor. "That trend will continue to affect the construction industry next year. For now, contractors and subcontractors are hedging their bids to account for escalation or limiting the acceptance time of their proposals."

The costliness of construction has additionally resulted in more vertical projects. "There are 80 projects at 10 stories or higher planned throughout the Las Vegas Valley," says Gragson. "We're seeing a revolution in the local high-rise market."

It's all an end result of making projects affordable and attractive to consumers, while enabling an equitable return for developers. Compact, well-planned projects can minimize operation costs and maximize space use for the best expense versus profit ratio, which is increasingly the tale of today's projects.

This article appeared in the Las Vegas Business Press on 11/15/2004 and was written by Tony Illia