Market upsets Jean plan

Friday, Oct. 12, 2007 | 7:25 a.m.

02.07

MGM Mirage, in a joint venture with American Nevada, announces plans to close Nevada Landing to make way for the construction of new homes and a casino.

04.07

Nevada Landing closes as planned, scattering workers to other MGM Mirage properties in Southern Nevada, to casinos in Primm and to the nearby Gold Strike.

The bid to build a master-planned development in Jean has stalled , and the developers blame the real estate slump in Southern Nevada.

MGM Mirage, which closed one of its two casinos in Jean, and American Nevada Company announced in February that they planned to work together to build a community of single-family homes, condominiums, retail and a casino on a 166-acre site. The companies said they hoped to include housing that is affordable to casino workers who struggled to buy in what had been a robust market.

Since then, however, the real estate market has turned down more sharply, and the economics of the project have changed.

"Very candidly, we're struggling with what exactly to do there," MGM Mirage President and Chief Operating Officer Jim Murren said recently.

"The economics of a lot of the residential development are not there right now," Murren said. "We're fortunate that we're not sitting on inventory like homebuilders are currently. But the pricing umbrella and the cost of construction have created a difficult environment to make residential pencil out right now."

Bruce Deifik, president and chief executive of American Nevada, added that much of the problem involves paying for the extension and expansion of water and sewer pipelines, utilities and other infrastructure to Jean.

Deifik explained that some lines are in place, serving the two casinos that straddled Interstate 15 about 25 miles south of Las Vegas, but they can't accommodate the volume necessary to support a major residential development.

"As we did our due diligence, we found that it would be very, very expensive to bring those utilities to the site just for developing those 75 acres to 80 acres on the west side of the (Interstate) 15," Deifik said.

Murren said many factors make the project "more difficult than simply - and with all due respect to some of the homebuilders - getting a tract of land and putting up single-family houses. That's not what we're going to do there. That might not even be a good idea, but it certainly is an easy idea relative to what we're thinking about , and we still don't have the answer yet."

MGM Mirage announced in February its plans for the joint-venture partnership with American Nevada, which developed Green Valley and built The District adjacent to the Green Valley Ranch Station Casino. American Nevada is owned by the Greenspun family, which publishes the Las Vegas Sun.

Under MGM Mirage's plan, the company planned to close the 302-room Nevada Landing on the west side of I-15 but leave its 800-room Gold Strike property on the east side of the highway open.

Nevada Landing closed as planned in April , and 300 employees were scattered to 10 other MGM Mirage properties in Southern Nevada or encouraged to apply for jobs at three casinos in Primm , about 15 miles farther south. At the time, MGM Mirage was completing a $400 million sale of those three properties to Herbst Gaming. Some Nevada Landing workers moved over to the Gold Strike.

The planned development was viewed as a turning point for MGM Mirage, which had begun increasing its role in the real estate business with a series of joint ventures with partners interested in nongaming development.

Prospects are better for the land in the long term. Jean isn't far from the proposed Ivanpah Valley airport, which would be a reliever airport for McCarran International.

But Deifik said the partners are reluctant to do too much while the county is in the midst of environmental impact studies on the property surrounding the airport site. Still, demand for housing close to the airport is expected to increase over the years.

Clark County would have to approve any residential development with more than 50 units per acre , the maximum allowed on the 166 acres surrounding the two Jean casino sites .

In addition, some critics of the project have emerged. The Progressive Leadership Alliance of Nevada, an environmental group, said a major development at Jean would lead to long commutes, increasing traffic congestion and air pollution. A spokesman for the organization called the proposal an example of urban sprawl.

Murren explained that the Jean project isn't meant to be exclusively for gaming company workers.

"We're not in the housing business, that's not what we do, and we're certainly not in the subsidized housing business," Murren said. "But it was something that we looked at as being a potential amenity to our employees if we could pull it off."

Deifik said his company is monitoring options to come up with a plan for the Jean site. One consideration is to use property in the area temporarily for parking of recreational vehicles and buses.

A version of this story appears in the Oct. 12-18 issue of In Business Las Vegas.

Richard N. Velotta can be reached at 259-4061 or at velotta@lasvegassun.com.