Evaporation of $4B Crown Project Proves Vegas Not Immune to Credit Crunch

As a handful of multibillion-dollar mixed-use projects move forward in Las Vegas, one has fallen prey to the crippling lending markets. Joint venture LVTI L.L.C., in which Melbourne, Australia’s Crown Ltd. has a 37.5 percent stake, has decided to nix plans to develop a 27-acre site at the intersection of Las Vegas Blvd. and Sahara Ave. on the Strip. Crown announced that following a strategic review of the planned project, the company and joint venture partners investment management concern York Capital Management and real estate developer IDM Properties had decided to put the kibosh on the endeavor, citing “recent upheavals in world credit markets,” as impediments to moving forward. The partnership aborted its option to purchase the site and will write-off its AUD$44 million–or approximately U.S.$42 million–investment in the project. IDM and York optioned the highly coveted parcel for acquisition from Archon Corp. for $450 million in 2006. In March, the Wall Street Journal reported that LVTI had put the property on the market, having found itself unable to meet lenders’ increasing equity demands. The joint venture’s plans for the prominent locale were grand. The vision included a 142-story high-rise with 4,700 condominium residences and 300 hotel rooms; approximately 600,000 square feet of casino, retail and public space; in addition to about 440,000 square feet of convention space. While Crown and partners are bowing out of the Vegas game, others are still charging forward with major mixed-use projects. Development details emerged last month about the $1 billion M Resort, Spa & Casino, which is expected to offer 390 guestrooms, 92,000 square feet of gaming space, a 100,000-square-foot entertainment piazza and 60,000 square feet of meeting space designed to cater to small and mid-size meetings and events. Boyd Gaming Corp. is developing the $4.8 billion Echelon destination resort on the Strip, which will be highlighted by two entertainment venues with an aggregate 6,000 seats. And MGM Mirage and joint venture partner Dubai World are in the midst of constructing the behemoth 18 million-square-foot, 4,000-hotel room CityCenter, which carries a development price tag– presently at a reported $9.2 billion–that keeps rising and rising. LVTI, however, was not alone in its struggles, but some projects that ran into financial roadblocks have managed to secure assistance. In March, Ultimate Sports Entertainment Inc., developer of a planned sports-centric mixed-use project, agreed to be acquired by American Southwest Music Distribution Inc. in a deal that will facilitate financing for the $5 billion development. The $3 billion Cosmopolitan hotel-casino also found life support in the form of a recapitalization agreement with Global Hyatt Corp. and Marathon Asset Management L.L.C.