When we look at the Strip, the builders get all the headlines. We read about the towering figures who transformed the Strip with Caesars Palace, Bellagio and CityCenter. They take an empty space’which, given our penchant for implosions, might be relatively recently empty’and create something that benefits the community.

But before those city-defining resorts were built, they had to secure the land to build upon. That’s where David Atwell came in. Atwell, who died November 25 at the age of 63, is an almost-native Las Vegan. Moving here with his family in 1955, he grew up watching the city grow up around him. Armed with a degree from UNLV, he went into real estate in the mid-1970s, soon focusing on hotel and casino transactions. Among the numerous deals that Atwell helped broker, three stand out as particularly important to both his career and the current shape of the Strip.

The first came in 1979, near the start of Atwell’s career, when he put together several parcels north of Caesars Palace that housed a number of low-density buildings, including the Sage & Sand motel, Caesars Shell, Holiday Texaco, Kontiki Apartments and the Deville Apartments. He didn’t have a particular use for the land in mind, but he had a buyer’Caesars World, then the casino’s owners. Atwell was able to sell the Perlman brothers, who then ran Caesars World, on the value of the land (Caesars was then in growth mode, with a new high-end tower at the Palace and expansion into Atlantic City and Lake Tahoe).

It took more than a decade, but Caesars eventually decided to build a shopping mall there’the first time a casino on the Strip had done so. Since its 1992 opening, the Forum Shops has consistently been one of the most profitable retail locations in the country. A 2009 study clocked the Forum Shops with average daily sales of more than $1,400 per square foot, nearly $300 more than their closest rival.

Atwell’s defining deal might have been the 1987 acquisition of the Dunes casino and its golf course in bankruptcy court for Japanese billionaire Masao Nangaku. The $155 million deal was a blockbuster for Las Vegas at the time, and Atwell fended off competition from many of the city’s leading developers, including Hilton Hotels, Kirk Kerkorian, Caesars World, Steve Wynn and Sheldon Adelson.

The deal presaged the growing importance of international capital in Las Vegas, and while Nangaku’s ownership of the Dunes was not profitable for him (he sold it in 1992 for $75 million), new owner Steve Wynn made the most of the property, demolishing the Dunes to create Bellagio. The land included in the transaction also yielded the Monte Carlo and CityCenter. Had one of the other buyers bested Atwell in bankruptcy court in 1987, it’s likely that the Strip would look much different today.

‘That was one of the landmark deals in town,’ says Sig Rogich, president of Rogich Communications Group. ‘He was a tenacious guy who loved what he did and worked tirelessly at it.’

Atwell’s last major deal, the 2007 sale of the Frontier to Elad Properties, illustrated the heights to which the Las Vegas real estate market soared. The record-breaking sale of $1.2 billion’or $33 million an acre’may never be equaled. Although, thanks to the ensuing recession, nothing has risen to replace the Frontier, that site stands as a monument to the power of the Las Vegas dream: Build it bigger and better.

Through all the deal-making, Atwell remained tied to his hometown, particularly through his work with the March of Dimes and the Chamber of Commerce. Rebel fans may remember his singing the national anthem at basketball games. Through it all, he was committed to building the community as well the resort corridor.

‘Dave knew how to bring people together to make deals that were in this community’s best interest,’ says Jan Jones Blackhurst, former Las Vegas mayor and current Caesars Entertainment executive. ‘He had global reach, but in his heart he was a Las Vegan.’

‘He was a genius at identifying an opportunity and then finding the players to make it work,’ says Brett Torino, who has been developing land on the Strip for 20 years. ‘But his greatest genius of all was his family. And that in my book is what made the guy such a terrific individual.’

Atwell’s career was a reminder that, while the forces that drive Las Vegas development might be global, it takes local know-how to get the deals done.

A memorial service for Atwell is scheduled for 2 p.m. December 8 at the International Church of Las Vegas, 8100 Westcliff Dr.

David Atwell was known as a major real-estate broker in Las Vegas, engineering some of the city’s most famous transactions.

But Atwell enjoyed working the mic as much as the phone. He really liked to sing.

Atwell favored ‘Mustang Sally,’ specifically, and three years ago performed a medley of that song and ‘Always on My Mind’ at a talent show at Stirling Club at Turnberry Place. Atwell finished the rollicking medley with a flourish, leading friends and family through the club in a joyous conga line. As it happened, Atwell’s family requested the addition to “Always on My Mind” to that performance, and it was the final time they heard him sing.

It was hardly Atwell’s first foray into live performance. A 1974 graduate of UNLV with a bachelor’s degree in psychology, Atwell sang the national anthem before many UNLV Runnin’ Rebel games. In 1996, he took the stage with Frank Sinatra during an alumni benefit concert for UNLV at the Aladdin Theater for the Performing Arts. Wayne Newton, Glen Campbell and Sammy Davis Jr. also were in the show, and a crowd of 7,000 was in attendance.

But Atwell’s career was making deals for famous property in Las Vegas. As recently as this month, Atwell was working the phones with his characteristic zeal, even as he was bedridden while suffering from throat and lung cancer ‘ and pneumonia that had made it difficult for him to talk and even breathe. The man who boundlessly relished his life and work died Monday morning in the ICU at MountainView Hospital of complications from the cancer he’d fought for more than three years. He was 63.

A memorial service is set for 2 p.m. Dec. 8 at International Church of Las Vegas at 8100 Westcliff Drive in Las Vegas, with a celebration of life to follow at Piero’s restaurant. The family is putting together a nonprofit organization dubbed the Calling All Angels Foundation, which should be ready to take donations next week, and in a note he wrote to Heather, David said, “Spread the word and hope.” The foundation’s purpose is to raise awareness and funding for alternative cancer treatments, as Atwell opted for those types of treatments over the past three years.

‘Even up to the end, he was loving life and was full of life,’ Atwell’s daughter Aubrianna said after answering her father’s cell phone today. ‘He wanted to fight, and he fought until the very end.’

Aubrianna Atwell said her father was surrounded by his family when he passed away. He is survived by his 94-year-old mother, Candy; his wife, Aletha; daughters Heather and Aubrianna; and his fraternal-twin son and daughter Taylor and Chelsea.

Heather Atwell, David’s first-born daughter, is managing partner and vice president of Atwell’s Resort Properties of America. She has worked in the company for the past seven years. “I will continue to uphold my tather’s legacy,” Heather Atwell said in an e-mail message. “My belief in my father’s values and mission is to create and represent generous and lucrative deals across the nation, and will dictate the new direction of our company to its fullest extent.”

David Atwell negotiated many real-estate transactions involving famous landmarks along the Strip. He navigated the sale of the land at Caesars Palace that would be developed as the Forum Shops. He handled the sale of the Dunes to Japanese investor Masao Nangaku, who purchased it for $155 million in 1987 after a bidding war among Steve Wynn, Kirk Kerkorian, Sheldon Adelson and the Hilton Hotels that Atwell likened to ‘being in a dream or a movie’ (years later, Wynn would buy the property himself and implode the Dunes to make way for Bellagio).

Atwell also crafted the $1.2 billion sale of the New Frontier Hotel to Israeli conglomerate El-Ad Group. The investors had planned to build a Las Vegas outpost of its Plaza Hotel in New York, a concept that was halted by the economic downturn on the Strip five years ago. A year after the Israeli group bought the New Frontier property, Atwell filed a lawsuit to force payment for initiating the transaction. He argued that he was due a 1-percent fee, or about $12.4 million. The two sides settled out of court for what was believed to be a fee less than that $12.4 million.

Those were two of his most famous transactions, but they were just a sampling of the deal-making Atwell, who founded Resort Properties of America in 1979, executed over the years. He assembled the deals that led to the sale of land in and around Las Vegas that became the Polo Towers, Stratosphere, Main Street Station, Jokers Wild, the King 8 hotel-casino (site of Wild Wild West on Tropicana Avenue), Queen of Hearts hotel-casino (now the site of the new Las Vegas City Hall), Skyline and Landmark (now the Las Vegas Convention Center parking lot).

He had a hand in the sales of the land once occupied by some of the city’s most famous resorts, including the Sands, Hacienda, Aladdin, Sahara and El Rancho Vegas. His efforts to build a deal around the Caesars Palace property for the construction of the Forum Shops led to him being referred to as the “Strip Broker.”

Over the past several weeks, Atwell was assisting Steve Cutler in his effort to find a suitable venue for his Casino Legends Hall of Fame. Atwell would often talk passionately of presenting the collection at a Las Vegas resort, saying that he hoped the attraction would serve as part of his legacy in the city.

But Atwell was well connected in other projects, too, and at one point said he was making a dozen business calls a day from his bed. ‘I’m rockin’ and rollin’ in here!’ he said during a conversation in October. ‘I’m busier now than when I am in the office.’ Atwell also was curious about how the Life Is Beautiful festival came off during its run in downtown Las Vegas, as his father, Cecil, owned the old Paradise Inn Motel.

“That’s what’s frustrating about being in here,” Atwell said at the time. “I want to be out there experiencing things.”

Nearly a month later, Atwell was imparting words of encouragement, inspiration and solace to his family. In one of these moments, he told Aubrianna, simply, ‘Don’t be afraid.’

Prominent Las Vegas real estate broker David Atwell, who brokered some of the biggest land deals on the Strip, has died from cancer. He was 63.

Atwell, president of Resort Properties of America and a Las Vegas resident since 1955, reportedly died from throat and lung cancer Monday.

His family moved from San Francisco and became a prominent player in the Las Vegas hotel and real estate industry. His father was Cecil Atwell, an early pioneer in Las Vegas hotel land deals who died in 1998.

A 1974 graduate of the University of Nevada, Las Vegas, Atwell entered the real estate business with McKellar Realty/Development.

In 1979, he founded his private brokerage, Resort Properties of America, specializing in motel/hotel/casino property transactions, according to his company’s website.

He was known for assembling the land to create The Forum Shops at Caesars Palace in 1979, the website said.

Atwell handled big deals, such as the sale of the Dunes hotel-casino.

In 2007, Atwell initiated the $1.2 billion sale of the New Frontier hotel-casino to the Elad Group of New York.

Atwell is survived by his wife, Aletha, and four children, Heather, Aubrianna and twins Chelsea and Taylor. Aubrianna posted a photo of her father on Facebook, where friends expressed condolences.

Family friend Sue Lowden, a former state senator and current candidate for lieutenant governor, said she recalled receiving Christmas cards from Atwell and his family. ‘He was a devout family man,’ Lowden said.

Atwell’s company brokered dozens of hotel-casino land deals. They included a 59-acre package for Harrah’s hotel-casino in Laughlin in 1986, 165 acres on the Strip for the Dunes in 1988, four acres on the Strip for the Casino Royale hotel-casino in 1992, Joker’s Wild in Henderson in 1993, Main Street Station in 1993, and the 4 Queens in downtown Las Vegas in 2003.

At a bankruptcy auction in 1987, local real estate broker David Atwell was lucky enough to represent a Japanese billionaire who entered the winning bid of $157 million for the Dunes hotel.

The price was a Las Vegas record that eventually became known as a bargain, as those 168 acres would be used to build the Bellagio, Monte Carlo and, now, the $9.2 billion CityCenter.

Atwell got lucky again last year, setting a new land record in the sale of the New Frontier casino site to Israeli conglomerate El-Ad Group for $1.24 billion.

El-Ad has plans to build a megaresort resembling the company’s landmark Plaza hotel in New York. The housing downturn, which has made banks reluctant to lend money to finance big projects, has delayed the development of the proposed Plaza Las Vegas.

Like many brokers involved in big deals, Atwell’s involvement went unmentioned.

For a time, he also went unpaid.

Atwell sued El-Ad, claiming he was owed a 1 percent fee for initiating the transaction. Atwell says El-Ad was referred to him by a law firm working with New York developer The Related Cos. He had previously sold a potential condo site to Related near the Strip.

El-Ad had argued that Atwell wasn’t entitled to the fee.

Both parties have settled the lawsuit for an undisclosed sum that’s believed to be less than the $12.4 million Atwell sought.

“After months of depositions and legal maneuvers, we settled the suit amicably and I wish them well,” he said today.

South Florida-based Peebles Atlantic Development Corp., the nation’s largest African American-owned real estate developer, is planning Southern Nevada’s largest and most expensive luxury-hotel/apartment project. It’s to be built at the 13-acre site of the Las Palmas apartment complex on Paradise Road, across from the Wynn Las Vegas’ golf course.

Peebles Atlantic executives are tight-lipped about the cost of the 55-story, 1,830-room development but Las Vegas real estate appraisers estimate the total price could approach $1 billion.

“Being off the Strip, Las Palmas will be conducive to the affluent traveler who is looking for a quieter venue and who is willing to pay for it,” Peebles Atlantic CEO R. Donahue Peebles said. “This will be a place where high-profile people will be able to relax and conduct business while enjoying luxurious accommodations. We’re close enough to walk to the Strip and far enough away to afford our guests more privacy.”

R. Donahue Peebles
Jim Miller | Business Press

The Las Palmas Apartment Homes are slated to make way for a 55-story, 1,830-room luxury development planned by R. Donahue Peebles.

Courtesy Peebles Atlantic Development Peebles’ proposed condo-hotel project, as seen from the west.

Officials from Peebles Atlantic, which has real estate holdings throughout the nation valued at more than $500 million, are seeking construction permits and hope to break ground a year from now.

“We’re planning a four- to five-star hotel and it’s going to be built in phases,” said Daniel Grimm, senior vice president of Peebles Atlantic. The first phase will include an 800-room hotel at the front of the property and an 35,000-square-foot spa.

“The approach is a little less clinical and more holistic,” Grimm said of the planned spa. “It will offer creative ways to improve your life, such as tips on proper nutrition and fitness, and how to combine exercise with an enjoyable pastime, such as star-gazing trips to the desert.”

Once the hotel and spa are in operation, Peebles Atlantic will begin construction on the second phase of the project, which will include 1,030 residential units on the east side of the property, toward the back.

THE PRINCE OF SOUTH BEACH

Peebles, nicknamed “the prince of South Beach” because of his prestigious holdings in southern Florida, including the famed Residences at the Bath Club condominium project, said the upscale development is designed by Arquitectonica, an architectural firm headquartered in Miami, and will feature a “cutting-edge, cosmopolitan” design.

“We’re building a hotel comparable to a Four Seasons,” Peebles continued. “It will be architecturally spectacular and very service-oriented. If your hotel has 3,000 rooms, it’s almost impossible to execute five-star service for all your guests. But if you operate a 750- or 800-room hotel, you can exceed the expectations of your clients. That’s because you’re geared to providing service for the affluent traveler who expects service and is willing to pay for it.”

A former Congressional page, Peebles started in real estate while still a high school senior. He worked as an appraiser for his mother, a Washington, D.C., realtor. Peebles, 46, enrolled at Rutgers University as a pre-med student but dropped out after a year and plunged head-first into the real estate business.

At age 23, Peebles was appointed to Washington’s property-tax-appeal board. He also began investing in commercial property. Within a few years, he became one of the most successful developers in the D.C. area. A registered Democrat, Peebles has lobbied for and contributed to the campaigns of both Democratic and Republican national leaders including New York City Mayor David Dinkins, Florida Gov. Jeb Bush and President Bill Clinton.

“I believe in supporting the individual, not the party,” said Peebles, whose front lawn in Washington was the scene of Clinton’s press conference during the Rodney King riots, in April 1992.

THE BIGGEST CHALLENGE

But while Peebles has met success courting national figures from both parties and has built the nation’s 10th-largest African American-owned business, some say his toughest challenge could be turning a profit at Las Palmas.

“That area is progressing and just about anything is possible, but that property is getting very expensive and financing is getting tight,” said David Atwell, president of Resort Properties of America, and one of the leading brokers of resort-corridor acquisitions.

How expensive? “It would be very difficult to find land in that area for less than $10 million per acre,” said Don Foster Scoggins of Appraisers of Las Vegas.com.

Scoggins explained the Las Palmas site is unique because its size lends itself to a large high-rise project. “There are few sites (on Paradise Road) ready for development that are 13 acres. There is great economy-of-scale opportunity here for Peebles to cross-market hotels, condominiums and apartments,” said Scoggins.

He believes some of the units at Las Palmas will be “condotels,” which are rooms in hotels sold individually to buyers who then rent them to other guests at least part of the year.

Grimm acknowledges the price of land on Paradise Road has increased considerably of late, “but we still think there’s value to be had if you take the long view. After all, Las Vegas is maturing into something beyond just a gaming destination.”

Scoggins and Atwell agree that while the costs of building residential projects on Paradise Road might seem prohibitive, the future looks promising.

“Look at the projects for Project CityCenter,” Scoggins said. “I shudder when I think of the $7.7 billion estimated construction cost. How much is that going to go into the local economy? How many people will that bring into this area? What will it do to land values?”

Atwell agrees that huge projects like CityCenter are helping to change Las Vegas into more cosmopolitan destination, and that land values in and around the resort corridor are going to continue to increase exponentially. “I see the whole area morphing in the next 10 years,” Atwell said, “into a corridor filled with mid-rise and high-rise mixed used developments.”

The Stage Door Casino at Flamingo Road and Audrie Street has changed its marquee to read, “We have 23 years left on our lease.” The move was in response to a rumor that Harrah’s was going to tear down the building for redevelopment.

A marquee just a few steps from the center Strip begs for the rumors to stop.

“This casino has NOT been sold as claimed.” Then, “We have 23 years left on our lease.”

The Stage Door Casino will not shut down at the hands of Harrah’s Entertainment, says Ron Markin, the small casino’s owner since 1976.

The gaming giant owns nearly 350 acres behind Harrah’s Las Vegas, Imperial Palace, Flamingo, Barbary Coast, Paris, Aladdin and Bally’s, west toward the Rio and east toward Koval Lane. A major redevelopment project is planned, but company officials have not announced their specific plans for the mammoth site.

Harrah’s planned center Strip project leaves staff members and patrons of Stage Door uncertain – a feeling that Markin is trying to dispel with big block letters.

“If I stay there 23 years I’m happy,” Markin said. “Our business is very good. We have an exceptional business there because of our location.”

Stage Door, at 4000 Audrie St. just east of Barbary Coast, has 46 slot machines, two bars, a liquor store and a general store. The business occupies about 7,000 square feet.

Harrah’s bought the land on which the Stage Door sits in 2005. The deal also included an Italian restaurant, Battista’s Hole in the Wall. But while Harrah’s owns the Battista’s business, Stage Door operates under a long-term lease with no buyout clause.

“I had my attorneys looking at my lease, just to make sure,” Markin said. “They say they are satisfied with the lease.”

Harrah’s spokesman Alberto Lopez said: “No, we do not have our eye on that particular spot of land.” But he would not say if that statement referred to just the present time, or to the future.

One of the leading brokers of Strip land sales predicts that Stage Door does not have much to worry about. David Atwell, president of Resort Properties of America, said a legitimate leasehold ensures the right to operate a business.

“Many times leaseholds can be purchased or bought out,” he said. “But I don’t believe Harrah’s is in any big hurry, so you may see that business operating for quite some time.”

Harrah’s announced on Oct. 2 – the same day it announced its first buyout offer by two private equity firms – that it was “nearing completion of land assemblage in Las Vegas.” It had traded land north of the Stardust to Boyd Gaming Corp., in exchange for Boyd’s Barbary Coast.

The main concern at Stage Door is that rumors are making it difficult to keep employees. One bartender worked there for five years, but quit recently because of fears about the stability of the job, said General Manager Alan Hoffman.

“I’ve lost both staff in my store and staff as bartenders. It’s tough,” he said.

The busiest times at the small slot joint are late afternoons on Wednesdays, Thursdays and Fridays. About half of the casino’s business comes from local construction workers; the rest are tourists.

But in the grand scheme of the Strip, its history and its future, the Stage Door is insignificant, according to gambling expert Bill Thompson.

“It’s meant nothing. I’m oblivious to it,” said Thompson, a professor in UNLV’s public administration department. “It means nothing for our economy. It produces revenue for the owner: It’s got a goldmine location. I would say the machines are doing double what the other machines in town do.”

Thompson predicts Harrah’s may let Markin hold onto the casino a few years, then make an offer worth millions.

The Stage Door in 1976 was dilapidated, Markin remembers. Records with the county assessor’s office show the land was first owned by a shopping center in 1970, then transferred to another company in 1973. Restaurateur Battista Locatelli took over the whole parcel in 1978.

Markin, who came to Las Vegas from Vancouver in 1958, ran retail centers until taking over the Stage Door, his first casino, in 1976.

“We’ve been there so long, we know so many people,” Markin said. “They’ve asked me many times, ‘Are you going to sell?’ We have no intention of selling. They say: ‘Good – we’ve been coming here for years. It’s our home we want to stay there.'”

Nunez owns six aging, cinder-block apartment buildings near a stretch of the Strip where Harrah’s Entertainment owns side-by-side casinos Barbary Coast, Flamingo, Harrah’s, Imperial Palace and O’Sheas.

Harrah’s Entertainment, the world’s largest gaming company, wants to freshen up and redevelop that part of the block, a project that could cost billions of dollars — maybe more than any other in Strip history.

To make it all work, Harrah’s is buying up the property behind its casinos where private investors own time-share condos and blue-collar apartment houses.

But so far Nunez hasn’t sold his French Villas apartments to Harrah’s. The situation has all the makings of another great Strip showdown, the kind that has played out over the years when relatively small property owners have threatened big resorts’ plans.

Probably the most notorious occurred in the 1980s, when casino owner Steve Wynn was about to redefine the Strip with the Mirage. The property Wynn wanted included a 36-unit apartment building. Its owner, Michael Flores, refused to sell.

So Wynn built around him, and the apartments stand to this day, a testament to stubbornness, tucked out of view in a back lot, sandwiched between the Mirage and Treasure Island.

The lesson: Nobody gets in the way of Strip developers. If the small guy doesn’t sell — usually for a nice profit, thank you — the big guy will just build around him.

“It’s an ages-old process that I like to call standing in the way of the gorilla,” said David Atwell, president of Resort Properties of America and one of the leading brokers of Strip acquisitions.

Hardball holdouts

Atwell said a developer’s plan to build or enlarge a project generally plays out in three stages: He, or his agent using a different name to disguise the plans, tries to buy sufficient land early without revealing what’s up. Once that cat is out of the bag, the developer hopes for reasonable negotiations. And then, you have to deal with the hardball holdouts.

Nunez is a holdout. And the question is: Will he eventually exact his price from Harrah’s or force it to build around him?

Harrah’s has been tight-lipped about its redevelopment plans but its land-buying spree in the area is no secret. It obtained development rights to the Summer Bay Resort time-share condominiums behind the Strip and has gobbled up and bulldozed other crumbling properties in the 44-year-old Flamingo Estates subdivision.

Nunez is one of two holdouts. The other, according to Clark County assessor records, is a Beverly Hills, Calif., company that owns a six-unit apartment building.

Bob Rose, the company’s Las Vegas-based property manager, hinted that there is nothing wrong with waiting for the right price on any deal, adding: “It could be sold any day now.”

Calls to Nunez were not returned, nor did he respond to a reporter’s visits to his property.

The French Villas, like the neighboring two-story apartment complexes that are owned by holding companies of Harrah’s, are still advertising for weekly and monthly tenants.

The neighboring Desert Club Apartments has been purchased by a Harrah’s holding company, according to Clark County assessor records, and is still offering tenants six-month leases — an indication nothing is going to happen right away.

But change is under way.

“I’m going to miss it because it’s hard to find a studio in Las Vegas for $130 a week,” said Jimmy Marks, a Flamingo Estates resident for 15 years. “But it’s due for a change. You go behind the Strip casinos now and you find yourself in the ghetto. That’s just not going to work.”

Atwell said that this standoff is nothing new to major Strip developers who go into such acquisitions aware they may have to pay handsomely for properties late in the game — or take other action.

Wynn encountered another showdown in 2000 when he bought the Desert Inn and started buying up golf course homes in the adjacent Desert Inn Estates.

Standoffs nothing new

When at least 10 homeowners refused to sell, he blocked some roads in the neighborhood and built large berms behind the homes of the holdout property owners, blocking their views of the venerable golf course. A four-year legal battle ended in March 2004 when the holdouts received a total of $23 million for their homes — in some cases, getting double Wynn’s initial offer, according to Atwell.

Although he’s not talking about it, Oscar Nunez is literally in a position to write the next chapter of Las Vegas Strip lore.

Nunez owns six aging, cinder-block apartment buildings between Koval Lane and a stretch of the Strip where Harrah’s Entertainment owns side-by-side casinos Barbary Coast, Flamingo, Harrah’s, Imperial Palace and O’Sheas .

Harrah’s Entertainment, the world’s largest gaming company, wants to freshen up and redevelop that part of the block, a project that could cost billions of dollars – maybe more than any other project in Strip history.

To make it all work, Harrah’s is buying up the property behind its casinos where private investors own time-share condos and blue-collar apartment houses.

But so far Nunez hasn’t sold his French Villas apartments to Harrah’s. The situation has all the makings of another great Strip showdown, the kind that has played out over the years when relatively small property owners have threatened big resorts’ plans.

Probably the most notorious occurred in the 1980s, when casino owner Steve Wynn was about to redefine the Strip with the Mirage. The property Wynn wanted included a 36-unit apartment building. Its owner, Michael Flores, refused to sell.

So Wynn built around him, and the apartments stand to this day, a testament to stubbornness, tucked out of view in a back lot, sandwiched between the Mirage and Treasure Island.

The lesson: Nobody gets in the way of Strip developers. If the small guy doesn’t sell – usually for a nice profit, thank you – the big guy will just build around him.

“It’s an ages old process that I like to call standing in the way of the gorilla,” said David Atwell, president of Resort Properties of America and one of the leading brokers of Strip acquisitions.

Atwell said a developer’s plan to build or enlarge a project generally plays out in three stages: He, or his agent using a different name to disguise the plans, tries to buy sufficient land early without revealing what’s up. Once that cat is out of the bag, the developer hopes for reasonable negotiations. And then, you have to deal with the hardball holdouts.

Nunez is a holdout. And the question is: Will he eventually exact his price from Harrah’s or force it to build around him?

Harrah’s has been tight-lipped about its redevelopment plans but its land-buying spree in the area has been no secret. It has obtained development rights to the Summer Bay Resort time-share condominiums behind the Strip and has gobbled up and bulldozed other crumbling properties in the 44-year-old Flamingo Estates subdivision.

Nunez is one of two holdouts. The other, according to Clark County assessor records, is a Beverly Hills, Calif., company that owns a six-unit apartment building.

Bob Rose, the company’s Las Vegas-based property manager, hinted that there is nothing wrong with waiting for the right price on any deal, adding: “It could be sold any day now.”

Calls to Nunez were not re-turned, nor did he respond to a reporter’s visits to his property.

Two French Villas tenants said they’ve received no word about the fate of the complex, a collection of studio and one-bedroom apartments.

In fact, the French Villas, like the neighboring two-story apartment complexes that are owned by holding companies of Harrah’s, are still advertising for weekly and monthly tenants.

The neighboring Desert Club Apartments has been purchased by a Harrah’s holding company, according to Clark County assessor records, and are still offering tenants six-month leases – an indication nothing is going to happen right away.

Speculation is that Desert Club will become the replacement time shares for the doomed low-rise Summer Bay Resort buildings .

But change is clearly under way, and not many tears are being shed over the seemingly inevitable loss of the Flamingo Estates community.

“I’m going to miss it because it’s hard to find a studio in Las Vegas for $130 a week,” said Jimmy Marks, a Flamingo Estates resident for 15 years. “But it’s due for a change. You go behind the Strip casinos now and you find yourself in the ghetto. That’s just not going to work.”

Clark County historian Mark Hall-Patton says Flamingo Estates was a far more significant neighborhood when it was built in 1962 by developer Albert Winnick.

“In the 1960s a lot of families had only one car, so if both parents were going to work, at least one had to be within walking distance of a job,” Hall-Patton said. “Today because many families have multiple cars, proximity to a job is not the issue it once was for so many.”

Even Nunez is an agent for change in the neighborhood. Harrah’s intentions notwithstanding, Nunez has won Clark County Commission zoning approval for his own 16-story condominium tower to replace his aging apartments.

Since Nunez isn’t talking, it’s not known whether he is seriously pursuing those plans or trying to strengthen his negotiating position with Harrah’s.

Atwell says the mere act of obtaining land-use approval for a condo high rise may have added as much as $30 million to the currently assessed $3 million value of Nunez’s property. It raises questions, Atwell said, about whether Harrah’s will have to rethink its plans for that part of the site or offer Nunez a wheelbarrow of money for his land.

Atwell said such a dilemma is nothing new to major Strip developers who go into such acquisitions aware they may have to pay handsomely for properties late in the game – or take other action.

“Some landowners believe they are sitting on gold mines, but if some developers cannot reach a deal with them they will simply build around the holdouts,” Atwell said.

That’s what happened when Wynn built around the 36-unit Villa de Flores apartments.

Wynn encountered another showdown in 2000 when he bought the Desert Inn and started buying up golf course homes in the adjacent Desert Inn Estates.

When at least 10 homeowners refused to sell , he blocked some roads in the neighborhood and built large berms behind the homes of the holdout property owners, blocking their views of the venerable golf course. A bitter four-year legal battle ended in March 2004 when the holdouts received a total of $23 million for their homes – in some cases, getting double Wynn’s initial offer, according to Atwell.

Other holdouts also have commanded and raked in big numbers.

Bob Cohen fetched a premium price when he sold his Vagabond Motel to Wynn, Atwell said. Bellagio escalators now stand on the site.

Owners of the Desert Rose Motel also received a hefty price from the Monte Carlo’s developers for that 2.5-acre frontage parcel, Atwell said.

Still other negotiations with holdouts have had unusual endings.

In the late 1970s, Atwell said he was quietly buying parcels to make way for the Forum Shops at Caesars. One of the last landowners in the way of the project was Louis Brauer, who found out that Caesars was behind Atwell’s purchases. When Brauer drove his asking price way up, Atwell’s wife cooked the elderly bachelor a Thanksgiving dinner that the couple delivered to Brauer. By meal’s end, a touched Brauer agreed to sell at the going rate.

Harrah’s might need not only a turkey with all the trimmings but also a generous Christmas goose to seal a deal with Nunez.

Mass firings, possible selloffs may follow Hard Rock purchase

Did Morgans Hotel Group overpay for the Hard Rock Hotel & Casino? How will it make the numbers pencil out? And what will become of the oldest profession?

Those are some of the questions swirling in the wake of Morgans’ $770 million buyout of the hipster hangout on Harmon Avenue.

“‘Overpaid’ is kind of a nebulous term,” said resort broker David Atwell, president of Resort Properties of America. “Overpaid on comparable sales in the area for similar usages? Yes. Overpaid, considering that they want to develop this into a 1,800-room property (it currently has 647 rooms) producing $140 million (cash flow) eventually? Maybe not.”

The new owners of the Hard Rock plan to raise room rates and increase revenue.

Wall Street reacted negatively to the news. “The stock never stuck above its offering price of $20 per share after its February launch,” wrote Forbes.com, “and with the Hard Rock announcement, it has hit a new low,” bottoming out at $15.49 a share.

HIGHER PRICES, LESS STAFF

“We are going to extract every drop of value from those 40 acres,” Morgans CEO Ed Scheetz vowed to stock analysts. “We will ultimately dominate the most attractive segment in Las Vegas.”

His deal breaks down as follows:

* $421 million for the hotel-casino proper.
* $259 million for 23.8 acres of developable land.
* $69 million for intellectual property rights.
* $20 million for the nearby Hard Rock Cafe.
* $1 million for owner Peter Morton’s condo-development plans.

That’s a lot of nickels in the jukebox. Given the Hard Rock’s 2005 cash flow of $40 million, Morgans paid an EBITDA multiple of 10.5 for the hotel-casino. That’s compared to a recent industry average of eight times EBITDA, which would have seen the resort go for $320 million. Morgans has stated that it thinks it can get that multiple down to 8 or 9.

Jeremy Aguero of Applied Analysis believes that Morgans is computing the value of the underlying land into the cash flow, thereby obtaining a lower multiple. Whether Morgans overpaid, he added, depends on how it exploits its excellent new asset and brand. Of the latter, Scheetz said he’d be sticking with the Hard Rock imprimatur “for now.” He also vowed to improve cash flow by flipping as much as two-thirds of the overall purchase to joint-venture partners and by creating internal efficiencies.

According to a recent briefing for analysts, the Hard Rock’s on-site reservation, marketing, merchandising and accounting departments will be given the sack under the new regime. Morgans expects to push room revenues higher through a mix of higher rates, a new management culture and upgraded room product. A corporate spokesperson added that Morgans would “utilize our revenue management system and customer lists to attract a more affluent clientele, which will spend more money throughout the property.”

During his analyst huddle, Scheetz further explained that the older, more affluent clientele could be transitioned to Morgans’ Mondrian and Delano brands when those open as part of Boyd Gaming’s Echelon Place.

MOOLAH FOR MORTON

Morgans believes one way it can improve cash-flow margins is by unloading almost $13 million paid to the elder Morton annually for management services and personal expenses.

Scheetz downplayed the importance of gaming revenues and in a conference call with investors, characterized the Hard Rock’s casino as an “amenity.” Operations will be farmed out on a fixed-payment basis. This tactic is largely to expedite the takeover, although Morgans said it will seek a gaming license further down the road.

Despite Morgans partnership with Echelon Place, when asked if Boyd Gaming would be running the Hard Rock casino, company spokesman Rob Stillwell’s response was succinct: “Nope!”

Scheetz defended the Hard Rock’s price tag by stressing the uniqueness of the opportunity; the volatility of Vegas real estate as witnessed by the frenzied bidding war over the Tropicana; the chance to build a customer base for Echelon Place; and having a foothold on Harmon Avenue when development eventually ramps up there. As Scheetz told analysts, by making one high-impact purchase instead of several smaller ones, Morgans has achieved the first two years of its growth plan in one fell swoop.

His views are supported by Forbes.com and CB Richard Ellis Senior Vice President Carlton Geer. The former posited that the Hard Rock gives Morgans an instant Vegas revenue stream while it builds at Echelon Place. The latter pointed to the Hard Rock’s boutique-like character, contending that it’s an ideal vehicle for Morgans’ Vegas debut.

“Yes, they paid an aggressive price for that property,” Aguero said. “They’d certainly be hard-pressed to construct a property at the same price.”

Geer, however, scoffed at Aguero’s analysis. “The transaction is not as easy as putting a multiple on it. This is not a simple multiple deal,” he said, noting that it also involves intellectual property that includes rights to the Hard Rock brand west of the Mississippi and internationally. That has little value, Geer added, unless you use it outside the Vegas market.

Majestic Research analyst Matthew Jacob seconded Geer’s view, saying that the 8-times casino-industry average reflects the lower multiples achievable in regional markets, where taxes are higher. “Nevada is much more stable. You know what you’re getting,” Jacob remarked, adding that Las Vegas assets tend to be valued at 10 times cash flow, “so that does make sense. I was more surprised by the value they applied to the (adjacent) land, because it is off-Strip.” He noted that he hadn’t seen comparable land prices away from the Strip but it’s good news for companies like Wynn Resorts and MGM Mirage that have similar off-Strip acreage that’s underutilized.

Seven years ago, Atwell said, he had those 24 acres — the Paradise Bay Club — in escrow for $41 million, or $1.7 million an acre. In September 2004, Morton bought them for $85 million ($3.6 million per acre). Their value has increased exponentially since then.

Morgans’ breakdown puts it at $11 million per acre, while Aguero’s and Atwood’s analyses would place it higher.

“We valued the land at $10 million to $20 million in our bid offering,” said Geer, whose company represented another would-be Hard Rock buyer. “Land values are based on scarcity. Land is irreplaceable. They pegged the value about right, based upon what is happening in Las Vegas right now.”

“The question,” offered Aguero, “is whether these guys’ crystal ball is that clear.” Over the next decade, $30 billion worth of construction is slated here, he noted, including as many as 37,000 new hotel rooms.

SAME COW, MORE MILK?

One of the first things Scheetz plans to do, to hit his target of increasing Hard Rock earnings by 25 percent in the short term, is raise room rates, which currently average $169. “That’s a shame but probably almost inevitable, given who’s taking over,” said “Las Vegas Advisor” publisher Anthony Curtis. “If all of a sudden they try to start pricing it like their other properties, people aren’t going to go for it.”

Of Morgans’ approach to its new Vegas acquisition, he said, “they don’t want to fiddle too much with that machine. They bought the machine and now they want to tinker it to death.”

“That’s unrealistic to believe you’re going to make it up just out of room rates,” Aguero said of Scheetz’s $50 million revenue target. Pointing out that hotel rooms only account for 21 percent of casino revenues in Clark County, Aguero said that believing significant additional revenue could be achieved by tweaking yield management in the rooms is naive. “That’s the $20,000 question: How do they get more milk out of the same cow?”

BROADEN APPEAL

Aguero speculated that Morgans might try to broaden the brand appeal of the Hard Rock or synergize with Echelon Place. “It’s possible (to hit that 25 percent mark) but it’s not going to be easy.”

Although Morgans hasn’t decided whether to redevelop the Paradise Bay Club site itself, with a joint-venture partner or re-sell it, Scheetz said the condominium project aborted by Morton last winter could be resumed almost immediately … and more efficiently. Scheetz might also cannibalize the Hard Rock’s surface parking to facilitate expansion. Implosion of the Hard Rock, however, was ruled out.

So, too, might be prostitution. Morgans is rumored to be planning to evict the ladies of the evening. “Unbelievable!” Curtis exclaimed when informed of this. “If you start taking the girls out of the place, it’s going to affect the property in general. There’s not a casino in town that doesn’t have them somewhere in the joint.”

A major mixed-use project on the Strip has received a big financial boost.

Ian Bruce Eichner, developer of the $2 billion Cosmopolitan Resort & Casino south of Bellagio on the Strip, said Wednesday that Deutsche Bank has loaned $415 million in construction financing to the project. The money will allow Eichner to develop the Cosmopolitan’s underground elements, which include a 3,900-space parking garage.

Eichner said the Cosmopolitan’s financing came through based on three factors: the project’s sales, a construction agreement with a big builder and a marketing relationship with Hyatt. Buyer reservations on condominiums at the Cosmopolitan began a year ago; the property’s managers began converting those reservations to hard sales in April. Consumers have snapped up about 1,600 of the development’s 2,000 condominiums at prices ranging from $400,000 to $1.7 million, for a total sales volume of more than $1.2 billion, Eichner said.

And unlike many proposed local condominium projects, the Cosmopolitan has a contractor. Perini Building Co., a construction giant with substantial experience on the Strip, has undertaken site work, such as setting up construction trailers and signage, and the company has issued a guaranteed-maximum-price contract for the project’s underground portion. That pricing agreement will help the Cosmopolitan avoid the big jumps in construction costs that have brought down plans for other local high-rises.

Finally, Grand Hyatt — which Eichner said has access to a 6 million-customer database — will manage the Cosmopolitan’s condominium-rental program and 1,000 hotel rooms at the property.

Eichner said Hyatt is also contributing $50 million to the construction of the Cosmopolitan. “We really aimed at trying to address what I’m going to call the down side,” Eichner said. “That was the purpose of the (condominium) sales — to deal with the issue of cost and not having an overly large loan you reviewjournal.com — Business – Cosmopolitan secures loan of $415 million have to worry about servicing. And the whole concept of having Hyatt is having a reservation system to leverage existing capacity so you’re not trying to build something from scratch.”

Local real estate and gaming analysts said the construction loan is a positive milestone for the Cosmopolitan. “You’ve got a lot of great names combined there,” said David Atwell of Resort Properties of America, the real estate brokerage that handled land deals for the Hawaiian Marketplace and Polo Towers across the Strip from the Cosmopolitan. “With a guy of Eichner’s caliber behind it, and now Deutsche Bank, I would say it’s a for-sure success.”

Brian Gordon, who covers gaming for local research consultant Applied Analysis, said the financing demonstrates that lenders continue to find bright spots in Las Vegas development. “(Deutsche Bank’s backing) is pretty impactful, particularly when we talk about concerns hanging over the condominium market in Southern Nevada,” Gordon said. “This shows that the market remains relatively healthy, especially for those projects with strong brand identities, superior locations and experienced development teams. The financing of projects of this magnitude by well-known institutions demonstrates (banks’) support of the condominium market, as well as Las Vegas as a destination.”

The Cosmopolitan has moved forward despite the resignation last month of President David Friedman, a former Las Vegas Sands executive who acquired the land for the project and brought in Eichner and Hyatt.

Friedman could not be reached for comment Wednesday, but Eichner said Friedman has merely yielded his day-to-day role as president, while continuing to hold a financial interest in the project.

Even as Deutsche Bank’s funds came through, Eichner was plotting future development at the Cosmopolitan once its underground portion is complete. Eichner said that he has hired Ron Thacker, a 30-year gaming veteran who has worked for the Flamingo and Casino Windsor, to spearhead operation of the Cosmopolitan’s planned 75,000-square-foot casino. Eichner said he’s also negotiating with several retailers and restaurateurs to take space in the project’s 275,000-square-foot shopping center. He said he’ll begin announcing tenants within the next three months. The development will also have 150,000 square feet of meeting space.

In the next 30 days, Perini will obtain permits to begin major excavation on the parcel. In the third quarter, Eichner said, steel will rise above the ground. In coming weeks, he’ll begin marketing the priciest of his property’s condos, which will range from 2,500 square feet to 6,000 square feet and have asking prices of as much as $5 million. And at the end of 2006, Eichner plans to seek $1.4 billion more in financing from Deutsche Bank. He said he expects his request for additional funds to be greeted well.

“The project speaks for itself given the status of its sales,” Eichner said. “If you have a project with an overall cost of slightly under $2 billion, and you have a projected sellout of $1.7 billion, that leaves a relatively low level of debt for the combination of retail, casino and hotel. There’s a lot of collateral and little debt. That puts the project in a completely different light for any lender.”

Eichner said the Cosmopolitan’s first phase, including 1,000 units, the retail space, casino and an 1,800-seat theater, should open around Sept. 1, 2008. The rest of the condominiums and hotel rooms should come on line by April 1, 2009.