Tropicana's impending demolition sparks fears over Frontier Redux
In May 2007, billionaire Phil Ruffin sold the historic Frontier casino resort on the Las Vegas Strip to an Israeli real estate investment group for a then-record $1.2 billion.
“We had success with the property,” Ruffin told the Las Vegas Review-Journal at the time, “but it got to the point where it was better to have someone else come in and redesign the place.”
El-Ad Properties demolished the 65-year-old landmark in November and plans to build a replica of New York's 4,100-room Plaza Hotel on the 35-acre site (the company also owns the hotel). Construction costs are estimated at $6 billion.
Almost 17 years later, the 35 hectares remain empty.
Another abandoned plan?
Last week, Bally's Corp. announced it would demolish the Las Vegas Tropicana Hotel in October after permanently closing at 2 a.m. on April 2.
The Rhode Island-based company said its plans to build a $1.5 billion baseball stadium for the relocated Oakland Athletics are still moving forward, with construction on 9 of the 35 acres at the Tropicana site originally scheduled to begin in April. Acres will begin construction in 2025.
But many knowledgeable Las Vegas observers worry the plans are hitting an iceberg, leaving the Strip with something it doesn’t need — another 35 acres of undeveloped land for nearly two decades.
"You can never have enough imaginative stages," said Scott Robben sternly rant on his blog Vital Vegas.
While the Las Vegas Stadium Authority last week denied that Moody's recent further downgrade of Bally's credit rating to junk would derail the company's stadium-building plans, many financial analysts disagree.
They speculate that the downgrade may have been the iceberg that sank the ship. They noted that high leverage and junk credit ratings pose problems for companies seeking financing. Because when these companies issue corporate bonds, they must compensate creditors for the perceived risk with high interest rates.
On Monday, a third rating agency, Fitch Ratings, downgraded Bally's credit rating to B from B+.
In addition to building a baseball stadium and an adjacent casino-hotel on the Tropicana site, Bally's also attempted to build a casino-hotel in downtown Chicago, but those plans reportedly fell through at a reported investment of $800 million .
Failed Coronation
The Great Recession was like an iceberg, sinking El-Ad's Plaza Replica project and stalling the nearby Fontainebleau project for more than 15 years.
It was not until 2014 that the hope of a "new frontier" resurfaced. At the time, Australian billionaire James Packer paid more than $240 million for the property across from the Wynn Las Vegas. His casino company, Crown Resorts, has also announced major plans in this regard. It will cost $6 billion to build a resort called Alon Las Vegas, by far the most expensive resort on the Strip.
However, Parker reportedly had trouble raising capital, and the site and three adjacent acres were sold in 2017 to Wynn Resorts, which paid $336 million.
Wynn Resorts Chairman Steve Wynn has announced his big plans. The site will be home to a 1,100-room casino resort called Wynn West on the west side of the Las Vegas Strip across from Wynn's two other towers. Wynn West will be connected to them via a climate-controlled bridge.
"I don't think the design and development phase will take a long time," Wynn Analytics said on a fourth-quarter 2017 conference call.
The tip of the iceberg of this project needs no explanation, as it was one of Wynn's final actions before he was forced to step down as chairman of the company he founded in 2018.
On the eve of Tropicana's closure, one couldn't help but wonder whether history was repeating itself.
"Of course, the true believers will continue to believe because Las Vegas is built on optimism and short memories," Robben noted.
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Source: www.casino.org
