|By Arnold M. Knightly, Las Vegas
Review-JournalMcClatchy-Tribune Regional News
Jan. 5, 2008 - Plans for a Paramount branded hotel-casino on the old Klondike Inn site on the south Strip have been sidelined by the tightening credit market, the developer behind the project said.
Royal Palm Las Vegas, a subsidiary of Florida-based Royal Palm Communities, owns the land.
The developer gained approval from Clark County officials in October 2006 for a 1,864-room hotel with an 80,000-square-foot casino and resort amenities for 10.5 acres east of the historic Welcome to Fabulous Las Vegas sign.
The developer enlisted a pair of local heavy hitters to design the project: Marnell Corrao Associates as the project architect; Paul Steelman Design Group is handling the interiors.
Then financing for large projects became less available. Banks tightened lending standards for all borrowers as the housing bubble burst.
"Right now, everyone is scrambling," Royal Palm Chief Executive Officer and President Daniel Kodsi said. "I've never seen lenders scramble so much. It's not that there is no interest, it's everyone is dealing with their current portfolio."
Royal Palm acquired the Klondike for $23.7 million in September 2005 and added the parcel to 5.25 adjoining acres the company bought in May 2005 for $42 million.
Boca Raton, Fla.-based Royal Palm Communities is a developer of mixed-use developments, condominiums, single-family homes, multifamily apartment communities, and custom homes primarily in south Florida.
The Paramount development would be the company's first in Las Vegas.
The site, which has 760 feet of Strip frontage, borders private airport hangars at McCarran International Airport across the street from Bali Hai Golf Club.
The narrowing credit market has stalled other proposed projects including ones at the Tropicana, the Silverton and Southern Highlands Resort by Olympia Gaming. The credit crunch has also stalled the possible sale of the Riviera.
"There doesn't seem to be a great appetite for somewhat speculative development in the Strip corridor," Deutsche Bank gaming analyst Bill Lerner said. "I'm not sure when the credit window opens back up but I don't think we're there yet."
The land has sat unused since the hotel-casino was closed for good in June 2006. Now Kodsi is unsure what the future holds.
"We're sitting on a very key site that's going to be developed, whether we do it or someone else, over the next few years," he said. "All the economics for a successful casino resort are there. It's not a Las Vegas issue, it's a capital markets issue."
Royal Palm is looking for another investor. Although the developer is not yet offering the land for sale, it may consider selling the land for the right price.
Lerner said the value of the land, which was bought at approximately $6.2 million an acre, has probably appreciated and Royal Palm could make a healthy profit if it decides to sell.
"There are a number of parties looking for Strip acreage, particularly with Strip frontage, to bring brands that aren't already here to the Strip," Lerner said.
John Knott, the executive vice president of CB Richard Ellis' Global Gaming Group, said the land would probably fetch $14 million to $16 million per acre if the developer decided to sell.
A sale may be under more serious consideration given that the Paramount project hit a setback in late August. That's when an unnamed private-equity investor decided to pull out "three or four days" before closing on restructuring the land loan.
"After that, we spent the rest of the year seeing what other capital was out there," Kodsi said. "People, right now, are kind of on the sidelines and it's put us on the sidelines."
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