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Packer Buys Strip Site, Plans New Resort

Newsdesk by Newsdesk
Mon 4 Aug 2014 at 03:00
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James Packer’s Crown Resorts has acquired a majority stake in 34.5 acres of prime Las Vegas Strip real estate for development of a resort casino.

The land, once occupied by the venerable New Frontier hotel and casino, will serve as the foundation for a new company bringing together Melbourne, Australia-based Crown and US hedge fund giant Oaktree Capital Management. The company will be headed by Andrew Pascal, a nephew of Steve Wynn’s ex-wife, Elaine Wynn, and a former president and chief operating officer of Wynn Las Vegas. Oaktree, which owns half of a loan tied to a casino plan at the site that collapsed when the recession hit, will provide “financial support,” according to a statement.

“As we have built Crown Resorts into a thriving international company with successful casino ventures in Australia, Macau, and London, we’ve always kept our eye on Las Vegas,” Mr Packer said. “You can’t be in the gaming industry and not have a special reverence for Las Vegas—that’s where it all began.”

“When Andrew approached us and shared his vision for the site and his partnership with Crown, we were eager to invest a portion of the proceeds from our debt investment and become an equity partner,” Oaktree President Bruce Karsh said. “We acquired our interest in the Frontier site because we believed it was the best piece of undeveloped land on the Las Vegas Strip.”

Crown said in a release to the Australian Securities Exchange that its total costs up to and including the acquisition of the land were US$280 million. Crown’s share totals 18.4 acres, a controlling stake representing 53.2% of the site and implying a value of $15.2 million per acre. The company has an agreement to lease the remaining 16 acres.

Crown expects to break ground in the latter part of 2015 and complete the resort in 2018, or about a year after Genting is slated to open its $4 billion Resorts World Las Vegas just up the street at the site of the former Stardust. Genting bought the mostly vacant site from Boyd Gaming last year for $350 million.

It is Mr Packer’s second major foray into Las Vegas. The first, in 2008, was disastrously timed and cost him upwards of $1 billion through a series of investments that unraveled in the global financial crisis, including two abortive Strip projects: Crown Las Vegas and Fontainebleu, which remains half-finished and cost Crown a reported $347 million. Investments in then-Harrah’s Entertainment, locals giant Station Casinos and regional operator Cannery Casino Resorts were also subsequently written off.

But he had plenty of company. A consortium led by Israeli developer Elad Group paid $1.2 billion to buy the New Frontier from Phil Ruffin in 2007 and had the aging property demolished to make way for a resort to be themed after New York’s famed Plaza Hotel and pegged at $5 billion. It never got off the ground, the plans abandoned when the US economy went into free fall the following year and Strip property values plunged. Elad later relinquished the debt-laden site.

Oaktree, the world’s biggest distressed debt investor, bought the debt at a discount of as much as 50%, people close to the situation told Bloomberg. Credit Suisse Group helped arrange a $625 million loan tied to the property and sold Oaktree at least a portion of it.

Mr Packer is the biggest shareholder in Crown Resorts, which owns Australia’s Crown Melbourne and Crown Perth hotel casinos and 33% of Macau casino giant Melco Crown Entertainment. Melco is developing a resort casino in Manila scheduled to open this fall and is expanding in Macau with a third gaming resort expected to open on Cotai next year. Separately, Crown owns half of UK operator Aspers and half of online betting exchange Betfair’s Australia subsidiary and is licensed to develop a luxury hotel and casino in Sydney. The company also is pursuing a gaming resort in Sri Lanka.

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