08.23.07

Arena Plan Unveiled

Original Article

Plans unveiled Wednesday outline a new sports and entertainment arena off the Strip, a facility to be built without taxpayer dollars jointly by Harrah’s Entertainment and AEG, the biggest worldwide player in sports facilities and events.

The $500 million arena is to be built about a block off the Strip behind Bally’s and Paris Las Vegas, officials for Harrah’s and Los Angeles-based Anschutz Entertainment Group said during a news conference at Bally’s.

The 20,000-seat arena to be built on 10 acres owned by Harrah’s will be funded privately by both companies. In a joint venture, AEG will develop, build and manage the arena for Harrah’s.

“I’m 100 percent for being in a position where taxpayers are not at risk,” AEG Chief Executive Officer and President Tim Leiweke said. “Harrah’s presented us with the best opportunity.”

AEG and Harrah’s said they have funding for the project and will not have to rely on the volatile credit market.

“We have never announced a deal and not built,” Leiweke said. “We’ll save our bluffing for the tables downstairs.”

The announcement was made by Leiweke, Harrah’s Chairman and CEO Gary Loveman and Clark County Commission Chairman Rory Reid.

Reid said it was important that the arena be developed privately while addressing the issue of the 24-year-old Thomas & Mack Center and other older venues.

“Las Vegas has always been able to compete as the entertainment mecca of the world,” Reid said. “To continue, we need a new and superior arena.”

The new arena must be available to the entire community, Leiweke added, not just visitors filling the 200,000-hotel rooms within “comfortable” walking distance of the facility.

Plans are to break ground in June and open by September 2010.

The arena still needs to receive approval from the county. A traffic study of the area also will be necessary.

The arena will be built to National Basketball Association and National Hockey League standards so it can be home to one of their franchises.

Although no team has agreed to move into the arena, AEG officials said they have had discussions with an undisclosed investment group interested in bringing a sports team to the city.

Leiweke said he hopes the arena could lure a team from both leagues, much like Staples Center, which has the NBA’s Lakers and Clippers and the NHL’s Kings. AEG built and operates Staples Centers.

Leiweke, however, said the arena would be profitable even without a professional sports serving as its anchor.

The developers said they expect the new arena to become the premier venue for sporting events, concerts and special events in the city.

It will be the third large arena along the Strip.

MGM Mirage has the 16,000-seat MGM Grand Garden Arena and the 12,000-seat Mandalay Bay Events Center.

“We are not here to put any existing facilities out of business,” Leiweke said, adding that the new state-of-the-art facility probably will draw some events away from the other venues.

AEG, an entertainment and sports presentation company, operates 50 venues worldwide, including Staples Center and The O2 in London.

The site for the arena is part of 34.5 undeveloped acres along Koval Lane from Flamingo Road to Harmon Avenue that Harrah’s had assembled for future development.

Reid, along with Las Vegas Mayor Oscar Goodman, was among the area officials that announced the formation of an arena task force in April 2006 to look into the need for a new arena. A report issued late last year said a new arena was needed to keep the Las Vegas market competitive.

The report, paid for by the city and county, put the cost for a new arena at $404 million, including at least $11 million in public financing.

Pat Christenson, arena task force chairman and president of Las Vegas Events, said he was pleased by Harrah’s and AEG’s announcement, especially because no tax dollars will be used in the construction and operation.

“I don’t know how it could be any better,” Christenson said. “You have the top sports and events producer in the world.”

The arena proposal comes just a month after plans were announced for a new arena that would be built in downtown Las Vegas as part of a $10.5 billion development by Michigan-based REI Neon/Warburg Pincus.

Goodman said the downtown project would not be affected by the latest proposal.

“I spoke to Mr. (REI Group President) John Weaver this morning, and it’s business as usual,” Goodman said.

REI does not have a construction plan nor has a financing plan been announced.

Later Wednesday, Goodman said he supports the off-Strip arena proposal although he believes downtown will ultimately be the better place for an NBA franchise.

Loveman said there is no plan for the arena to have a gaming component.

AEG has been looking to build an arena in Las Vegas for the past two years. AEG operates the Colosseum at Caesars Palace where Celine Dion performs. AEG had been interested in the downtown arena project until company officials decided to pursue a facility away from downtown.

Leiweke said he talked to various developers, including other gaming companies, before deciding to partner with Harrah’s.

“If this arena was built too far from the Strip, if it’s not within walking distance of the major developments and hotel rooms, quite frankly we would have missed the opportunity,” Leiweke said.

One of the keys to the success of the new arena will be working with other gaming companies to bring events to the new facility, he said.

If the arena was able to bring in a professional sports franchise, Leiweke said, companies such as Wynn Resorts Ltd., MGM Mirage, Las Vegas Sands Corp, Boyd Gaming Corp and others might buy luxury suites and ticket packages to support the franchise.

Darren Libonati, director of the Thomas & Mack, said the arena can be successful if AEG can market the new arena to people other than Strip customers.

“If AEG manages as a neutral operator,” he said, “the sky is the limit as to what they can attract.”

He said the Thomas & Mack has a contract with the National Finals Rodeo through 2014, but promoters have the ability to opt out at any time.

The announcement comes with Harrah’s in the middle of getting regulatory approval of a $17.1 billion buyout by private equity firms Texas Pacific Group and Apollo Management.

This is the third large capital investment project by the company since May.

In May, the company announced plans for a $704 million Margaritaville Casino & Resort in Biloxi, Miss. It was followed in July by the announcement of a $1 billion expansion and renovation of Caesars Palace on the Strip.

All three projects had to be approved by the pending ownership group.

Harrah’s Entertainment stock increased 52 cents, up 0.61 percent, to close at $85.55 Wednesday on the New York Stock Exchange.

Filed in Press Coverage


 


 
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