The trend of leapfrog housing development outside of the Las Vegas Valley entered a new market this week when MGM Mirage and two developers announced a partnership to build a mixed-use project on 166 acres in Jean.
On April 18, MGM will close the 302-room Nevada Landing on the west side of Interstate 15 to pave the way for the master-planned community of single-family homes, condominiums, retail, and a locals-style casino. The developers are touting the project as offering affordable workforce housing, some set aside for MGM Mirage workers commuting to the Strip.
The deal, from MGM‘s perspective, represents a change in direction for the company, from being a developer of hotels to a developer of real estate.
„The days of looking at real estate in terms of, ‚How much acreage do I have to build a casino hotel‘ are over,“ said Jim Murren, MGM Mirage president and chief financial officer. „That is not smart development or reflective of the issues and challenges we have in terms of transportation, water, building cost and housing, which has become out of reach for many people.“
MGM Mirage has a 50-50 joint venture with American Nevada Company – developer of Green Valley and The District – and Diamond Resorts, owned by Stephen Cloobeck, who developed the Polo Towers and Jockey Club time shares on the Strip. American Nevada is owned by the Greenspun family, which also owns In Business Las Vegas.
„We are delighted that we have this opportunity with MGM and Diamond to use our four decades of mixed-use and community development experience to help provide Southern Nevada with a more positive and enriching environment in Jean,“ said Brian Greenspun, chairman of The Greenspun Corporation. „We have always believed in the future of Southern Nevada, and this is another ANC commitment to play our part in making the dream of Las Vegas better.“
Despite the announcement, there’s a major hurdle to overcome before the mixed-used project ever gets built – approval by Clark County. The 166 acres is zoned for resort use with zoning that allows up to 50 housing units per acre, but commissioners would have to sign off on the project first.
Even though the proposed development may be as much as five miles or longer from the planned Ivanpah Valley Airport, with an exact location between Jean and Primm has yet to be determined, it is part of a noise compatibility area yet to be established by the county. Once it gets federal approval for the airport, Clark County plans to acquire 17,000 acres of federal land around it to limit development to airport-compatible uses, which is likely to include commercial and industrial.
„The first thing that came to mind when I saw that (the proposed development), is that the airport staff will have to evaluate its potential affect on the Ivanpah Airport facilities and whether it’s a compatible or incompatible use,“ Clark County Commissioner Bruce Woodbury said. „We want to keep residential development away from the airport. I don’t know whether the distance or direction of the proposal from the airport will cause a problem or not, but that will definitely have a prime consideration for any land-use application.“
One group believes the proposed project is not a good idea.
„The impact of subdivisions going up many miles for the urban center will be to increase traffic congestion and air pollution because of the long commutes involved,“ said Launce Rake, spokesman of the Progressive Leadership Alliance of Nevada. „The environmental community is concerned that developers are building farther and farther from the urban core in a pattern that can only be called sprawl.“
Ivanpah, which the county plans to open in 2017 to relieve congestion at McCarran International Airport, will have two runways that would run north and south along I-15. Much of the land surrounding Jean is owned by the federal government, including areas that are set aside for conservation. It falls outside the federal disposal boundary and isn’t eligible for auction.
The prospect of development edging closer to Ivanpah was one reason Clark County opposed Henderson annexing tens of thousands of acres that extended to the outskirts of Jean. The Bureau of Land Management asked Henderson to withdraw its request but did allow the city to extend its boundary to the Sloan area.
The developers‘ plans won’t be fleshed out for at least 18 months, Cloobeck said.
Clark County airport officials said they need more information on the development proposals before they can be assessed for their impact.
Clark County Manager Virginia Valentine said it’s premature to comment about the project since no plans have been submitted to the county. The developers have been good about working with the county in the past, she said.
„We will have plenty of opportunity to discuss the impacts,“ Valentine said. „We are responsible for master planning, zoning and entitlements, and we will be talking to them.“
Clark County Planning Manager Chuck Pulsipher said the county will have plenty of other questions in addition to the compatibility of residential uses north of the airport. Water lines may need to be extended from the Las Vegas Valley, and it must be determined how the development can be served by police and fire, he said.
MGM Mirage’s interest in mixed-use projects has been clear with the evolution of Project CityCenter, its USD 7 billion development on the Las Vegas Strip. In addition to a locals-oriented casino, the development includes a mix of boutique hotels, condominiums and a major retail component.
With the continued pressure on real estate prices, company officials felt it made sense to monetize the Nevada Landing asset while contributing to a solution for a Southern Nevada problem, affordable housing.
„As the world around us was changing, it became evident that we had to take a step back and realize that we had to think like and act like a real estate developer,“ said company spokesman Alan Feldman.
The two Jean properties were once Mandalay Resort Group locations, but little was said about the land around them when MGM bought Mandalay two years ago because most of the focus was on the casinos.
Feldman explained that a big part of the acquisition of Mandalay involved real estate and the portfolio has become more valuable with the rise in land values.
„Part of the strategy of taking Mandalay was the real estate holdings,“ Feldman said. „We know the casino-hotel business best, but we can also do retail and residential development as well.“
MGM Mirage’s partnership with Cloobeck and American Nevada is another example of the company’s efforts to develop strategic partnerships with companies with a focused expertise. The partnership is similar to MGM Mirage’s past dealings with the Mashantucket Pequot Tribe and its Foxwoods Casino and Mubadala Development Co. of Abu Dhabi, United Arab Emirates.
In those partnerships, the company strategized to develop MGM-branded hotel properties with the tribe and non-gaming properties with Mubadala.
As for the fate of Nevada Landing, the company plans to close the 302-room hotel by April 18, demolish it and shift employees and assets to other MGM Mirage properties, including the Gold Strike across the highway.
The Gold Strike, the companion casino in Jean, will remain open for now, but its fate hasn’t been determined. It could be upgraded or demolished and replaced by the planned locals casino.
If it remains, the Gold Strike will, in essence, become a locals casino for the area with 800 hotel rooms at the property. About 100 slot machines will be moved from Nevada Landing to the Gold Strike.
The 300 employees at Nevada Landing will be encouraged to take jobs within MGM Mirage, including with the company’s 10 major properties in Las Vegas. Workers will also be directed to the company’s casinos in Primm (which are being sold to Herbst Gaming) and to Gold Strike. The Gold Strike will expand to take up the Landing’s consumer base.
„We’re highly confident in our ability to find places for each and every one of those employees,“ Feldman said.
Housing does not seem to be an issue. „Many of them live in Las Vegas already,“ Feldman said.
Though the company is not offering buyout and severance packages to everyone, it may offer those to individuals who cannot find a good match elsewhere in the company. The handling of employees is similar to what happened when the Boardwalk Casino on the Strip closed in 2006.
MGM Mirage – the state’s largest taxpayer and private employer – is considering providing transportation to ferry workers to their jobs, as it has done with employees at Primm. MGM Mirage built apartments and rented them at a discount to Primm employees, shuttling workers from Las Vegas to the casino. The company is selling the Primm casinos for USD 400 million.
„When we talk to our workers, issues No. 1 and No. 2 are housing and health care,“ Murren said.
Casinos have been studying affordable housing for years, acknowledging the struggles of workers who can’t afford homes in a still-robust housing market.
Murren said the decision to build housing in Jean probably wouldn’t have been contemplated years ago when financing wasn’t as flexible and home prices were much lower.
The community will take longer to build than expected for typical housing developments because developers intend to incorporate environmentally friendly building techniques, unique home designs, greenbelts and other features, Murren said.