Archive for August, 2007

23 August, 2007 | No comments

JOINT VENTURE: Arena plan unveiled for Las Vegas

Harrah’s, AEG to build facility for NHL, NBA

Plans unveiled Wednesday outline a new sports and entertainment arena off the Strip, a facility to be built without taxpayer dollars jointly by Harrah’s Entertainment and AEG, the biggest worldwide player in sports facilities and events.  The $500 million arena is to be built about a block off the Strip behind Bally’s and Paris Las Vegas, officials for Harrah’s and Los Angeles-based Anschutz Entertainment Group said during a news conference at Bally’s. 

The 20,000-seat arena to be built on 10 acres owned by Harrah’s will be funded privately by both companies. In a joint venture, AEG will develop, build and manage the arena for Harrah’s. 

“I’m 100 percent for being in a position where taxpayers are not at risk,” AEG Chief Executive Officer and President Tim Leiweke said. “Harrah’s presented us with the best opportunity.” 

AEG and Harrah’s said they have funding for the project and will not have to rely on the volatile credit market. 

Reid said it was important that the arena be developed privately while addressing the issue of the 24-year-old Thomas & Mack Center and other older venues. 

“Las Vegas has always been able to compete as the entertainment mecca of the world,” Reid said. “To continue, we need a new and superior arena.” 

The new arena must be available to the entire community, Leiweke added, not just visitors filling the 200,000-hotel rooms within “comfortable” walking distance of the facility.  Plans are to break ground in June and open by September 2010. The arena will be built to National Basketball Association and National Hockey League standards so it can be home to one of their franchises. One of the keys to the success of the new arena will be working with other gaming companies to bring events to the new facility, he said. If the arena was able to bring in a professional sports franchise, Leiweke said, companies such as Wynn Resorts Ltd., MGM Mirage, Las Vegas Sands Corp, Boyd Gaming Corp and others might buy luxury suites and ticket packages to support the franchise. By ARNOLD M. KNIGHTLY
REVIEW-JOURNAL        

 

23 August, 2007 | No comments

MGM MIRAGE DEAL: Dubai buys into Strip

Dubai World pays $5.1 billion for half of CityCenter project

MGM Mirage’s $5.1 billion deal to sell half of its CityCenter development and a nearly 10 percent stake in the casino operator to Dubai World, a holding company for the Persian Gulf state, is more than just another joint venture investment. 

Company Chairman Terry Lanni believes the transaction, announced early Wednesday, may be the single-most significant event in MGM Mirage’s history, eclipsing in importance the $6.4 billion buyout of Mirage Resorts in 2000 and the $7.9 billion purchase of Mandalay Resort Group in 2005. 

Lanni said the transaction, in which Dubai World will invest $2.7 billion into CityCenter and $2.4 billion to acquire more than 28 million shares of MGM Mirage stock, brings the company a long-term partner with an interest in enhancing the company. 

The deal also gives MGM Mirage access to the relatively untapped market of Dubai, which attracts wealthy visitors from Russia, India and Middle Eastern countries. Lanni said Dubai World would help bring those customers to MGM Mirage resorts on the Strip.  Dubai World will pick up 50 percent ownership of CityCenter and initially purchase 14.2 million new MGM Mirage shares at $84 a share, a 13 percent premium to Tuesday’s $74.32 closing price.

Dubai World will also tender an offer to buy an additional 14.2 million shares on the open market for $84 per share. If Dubai World is able to complete the stock purchase, the company would own approximately 9.5 percent of MGM Mirage. 

“Partnering with Dubai World should also help MGM Mirage penetrate international markets in which it currently does not have a presence,” Greff said. “In addition, the deal immediately improves the company’s balance sheet, as it reduces leverage for other development deals, share buy backs, and or special dividends.” 

“For Dubai, this announcement provides them with a major entrance into the commercial gaming arena,” Wieczynski said. “Dubai plans on getting gaming licenses in Nevada and New Jersey, which we believe is a clear sign that a larger investment in MGM Mirage is forthcoming.” 

MGM Mirage will remain CityCenter’s developer and will be paid a management fee of 2 percent of the gross revenues from the hotel-casino and the Vdara condo-hotel. Lanni said the company will receive 5 percent of the operating profits and a flat $3 million annual fee for managing the shopping center, before its 50 percent share of the net profit is determined, Lanni said. 

In addition, MGM Mirage is entitled to a $100 million bonus payment from Dubai World if the 76-acre CityCenter project is finished on budget and by the scheduled time of late 2009. More than $2.7 billion of the total construction cost is already expected to be offset by the sale of condo units. 

By HOWARD STUTZ
REVIEW-JOURNAL

14 August, 2007 | No comments

Age-Qualified Adult Housing Has Some Growing Up to Do

 

The aging of the baby boomers and the rising share of the U.S. population comprised of people who are 55 or older suggest room for significant growth in age-qualified active adult housing, but so far that segment of the marketplace hasn’t reached its potential, according to a special study by NAHB housing analysts Paul Emrath and Helen Fei Liu.

Out of the 69 million owner-occupied housing units in the country, age-qualified active adult housing — communities that generally require residents to be 55 or older, based on the provisions of the 1995 Housing for Older Persons Act — accounts for just under one million, about a 1.4% share.

In sharp contrast, the NAHB researchers found that most 55+ households live in other communities.

Data available from the 2005 American Housing Survey (AHS) show that there are 21.6 million 55+ home owners who are living in ordinary communities, about a 31.2% share of the total owner-occupied housing units. And there were seven million 55+ households who reported that their neighbors are mostly their age but that the neighborhood is not explicitly age-qualified, accounting for 10% of the units.

In addition, the report says, age-qualified active adult homes are not evenly distributed across the country or within localities. Compared to the other communities where 55+ home owners are living, a disproportionate share of age-qualified active adult homes are in the South Census region and fewer are in the Midwest. Nearly one-half of the households in these homes are in the South, compared to only 7.5% in the Midwest. “Possible explanations for this pattern include population density, climate and the price of homes,” according to the study.

The AHS also shows that 71% of age-qualified adult homes are in the suburbs; only 14.3% of them are in the central city.

Capturing Only One-Third of Potential Customers

Looking at today’s home buying market, the analysts conclude that “55+ communities are capturing only about one-third of their potential customers — and again, most of these are in communities that are not age-qualified.”

Applying the AHS percentages of market shares to NAHB’s housing forecast, the economists estimated that housing units sold to or occupied by 55+ households will account for more than 370,000 housing starts this year, about 263,000 of these single-family. The estimates also show that 55+ customers should account for more than 190,000 of the projected new single-family sales and more than 800,000 of the projected existing single-family home sales in 2007.

New housing built in age-qualified active adult communities in 2007 will have an estimated value of $7.3 billion, based on the average values of the new units from the 2005 AHS.

“In one sense, the estimate of $7.3 billion represents a substantial number,” the report says. “However, it’s relatively small compared to the $74.1 billion of new housing purchased by 55+ households that is neither in an age-qualified community nor in a community that is occupied primarily by 55+ households. This is a further indication that age-qualified active adult construction is still capturing a relatively small share of the maximum potential number of customers.”

According to the U.S. Census Bureau, the number of Americans who are 55 or older increased from 52.2 million, or 21.0% of the total population, in 1990; to 59.3 million, 21%, in 2000; to 67.0 million, 22.6%, in 2005.

Based on NAHB’s forecast, the 55+ population will grow to 76.6 million, a 24.5% share of the population, in 2010; to 85.6 million, 26.3%, in 2014.

Higher-Quality Homes Wanted

As a result of NAHB working with the Department of Housing and Urban Development and the Census Bureau to improve the quality of the data they collect on 55+ housing markets in the AHS, which is conducted in odd-numbered years, the researchers were also able to find some information on the reasons that 55+ households moved:

• Nearly 20% of the recent movers who chose age-qualified active adult housing reported that they wanted higher-quality housing units, compared to under 15% of those 55+ households who moved into either unrestricted but predominantly 55+ communities or communities with no particular age dominating.
• Only 1.5% of the households moving into age-qualified active adult homes reported moving because they wanted larger housing units, compared to about 10% for households moving into other 55+ communities.

Among the reasons that 55+ buyers of age-qualified active adult homes chose a specific community:

• A full 45.0% of those surveyed said they liked the design and looks of the community.
• Almost 25% cited the proximity of the community to friends and relatives.
• More than 22% said the community was close to leisure activities; this response for choosing a community was cited by only 6.9% of those living in non-55+ communities.

While suggesting approaches for builders and developers to improve the popularity of age-qualified homes for active adults, the AHS only listed a limited number of possible responses to these questions, which resulted in 58.6% of the respondents in age-qualified housing identifying “other reasons” for moving and 23.1% of them citing other unspecified reasons for choosing a community.

Location of Health Care Facilities

A 2003 collaborative study by NAHB and AARP may suggest additional reasons for elderly households moving or choosing a community that were not captured by the AHS.

“The survey asked respondents if particular community features would be important to them in their later years, and whether they currently have these features,” the authors said. “The results show that a hospital, doctor’s office or drug store is important to over 80% of 50+ households.”

“Moreover,” they said, “there is a gap of at least 20 percentage points between these percentages and the share of 50+ households reporting that they actually have these health-related facilities in their communities. This suggests that there may be market opportunities for developers to located age-qualified communities within range of healthcare facilities.”

Other findings from a review of the AHS data:

• Many new home buyers age 55 or older are moving out of an owner-occupied, single-family home. “This is especially true among new home buyers in age-qualified adult communities, where the share of previous single-family home owners approaches 100%.”
• Buyers who are 55 or older are more likely to buy new homes: total 55+ households account for 18% of the home buying market, but about 21% of the market for new homes.
• Older new home buyers have a somewhat greater tendency to buy new custom homes, with 55+ households accounting for more than 24% of that market.

For more information, e-mail Paul Emrath at NAHB, or call him at 800-368-5242 x8449; or contact Helen Fei Liu, x8697.

14 August, 2007 | No comments

Micro-Booms Defy the Downturn

Although real estate sales and prices are flat or down in dozens of metropolitan areas, they may be up in micro-markets within those areas — along as there is at least moderately good local job and income growth. These strong markets are characteristically located in close-in, established neighborhoods convenient to the urban center’s employment and cultural attractions. The areas have above median incomes, with housing prices to match, and the homes are primarily purchased with prime, not subprime, mortgages. For example, in the 20815 Zip code (Bethesda-Chevy Chase, Md.), the dollar volume of sales was up 22% from June 2006 to June 2007, the average selling price was up 11.5% and the median price was up 6%, according to multiple listing service data provided by Dale Mattison, a broker with Long & Foster. Just across the Washington, D.C. line in the 20015 Zip code, the average sale price increased 6.6% and the median price 3.5% from June to June, though total dollar volume was down 2.5%. By contrast, in Washington, D.C. as a whole, dollar volume was down more than 16%, the average sales price fell 6.8% and the median price dropped 3.5%. In the Miami area, close-in communities such as Coral Gables are handling the downturn far better than more distant, lower-cost communities such as Homestead and Florida City. In San Francisco, highly regarded in-town neighborhoods such as Pacific Heights and the Marina continue to outperform the metro area and the state as a whole. (www.washingtonpost.com)
Washington Post (8/11/07); Kenneth R. Harney