AEG's Ted Fikre, Tim Leiweke and Gene Hale await their turns to speak in front of the L.A. City Council. Fikre is leading an effort on behalf of Leiweke and AEG to partner with MGM for a 20,000-seat arena on the Las Vegas Strip.
Several years after plans were originally announced to bring a 20,000-seat arena to the Las Vegas Strip, the project is on the fast track to groundbreaking.
Back in 2008, AEG and Bally's parent company Harrah's recommitted to a similar effort, which stalled out due to the financial crisis and worries about the credit markets for the estimated $500-million building.
The project was rebooted this week when MGM Resorts and AEG announced an agreement to develop a similar, privately-funded 20,000-seat indoor arena on the Las Vegas Strip between the New York-New York and Monte Carlo hotels.
"We're in the final stages of design after considering a project like this for up to three years," said Gordon Absher, vice president of Public Affairs for MGM Resorts International. "MGM Resorts is the largest landholder on the Vegas strip and much of that land is under- or unutilized, so we contemplated multiple sites and decided on this one midstrip to create an energy that would help energize not only our properties but other company properties as well."
By MGM's reckoning, the new, as-yet-unnamed venue would be within a mile of nearly 50,000 hotel rooms. With no final designs available, Absher said a cost projection for the venture was not available at press time.
Current plans call for final designs and necessary proposals to be finished soon with a groundbreaking before year's end and a 24-30 month construction timetable. MGM and AEG are the two equity partners in the arena, with what Absher described as "significant interest" from some as-yet-unnamed third party financiers.
AEG's Chief Legal and Development Officer Ted Fikre said the company has been interested in the Las Vegas market for nearly a decade.
"We kept our eye on it [the market] and it wasn't until the second half of 2012 that we started to look at it again," said Fikre. "We feel the economy had turned the corner and things were improving and that rekindled the conversations."
The building will also include retail shops, dining and entertainment options and Fikre estimated that it could host over 100 events a year. As for why the long talked-about project appeared to stall out for several years, Absher also said the interest was there all along, but the pause button was hit during the financial meltdown. "Like everyone, we were trying to survive the recession, and capital projects were curtailed," he said. "We were waiting for the right time and opportunity to make the investment ourselves and make it attractive to other investors."
While AEG has arenas around the globe, as well as such legendary Las Vegas spaces as the Colosseum at Caesars Palace, MGM also brings some operational experience to the project, with two busy buildings on the Strip, the 12,000-capacity Mandalay Bay Events Center and the 15,000-capacity MGM Grand Garden. The third building would add one important additional capability to MGM's arena portfolio: size.
"This new arena would increase the gross potential for different types of bookings, which would allow us to attract new events," said Absher. "We're looking to bring more events to town, not to shut down one of the other arenas. It's not a change in our arena inventory, it's a supplement."
With 160,000 hotel rooms to fill every night, more sit-down, long-running shows than anywhere on earth and an audience of locals, visitors and patrons willing to fly in for specific shows or events, Absher said there is room in the market for another building on the strip. "It's not unusual to find a classic rock act playing the Grand Garden and a country act the same weekend at the Mandalay Bay," he said. "There is the capacity and appetite for more entertainment."
Fikre said MGM will handle day-to-day management of the arena, while AEG will offer its expertise and resources in sales, booking, naming rights, sponsorship, premium seating and access to content. And, like Los Angeles' Staples Center, he said the new arena will be open to shows from other promoters while aggressively going after AEG Live events.
There has already been talk of having a coordinated booking and sales approach between the three MGM live properties, and Fikre said AEG hopes to also be involved in similar aspects at Mandalay and the Grand Garden in the future. "MGM would like us to be involved in booking [all three] so they work in a complementary fashion," he said. "Like we do with Nokia and Staples Center."
He wouldn’t go so far as saying that there are acts that are bypassing the city because of its lack of a 20,000-seater, but Absher said the new building will be the first modern arena in MGM's Las Vegas portfolio to offer premium suites and seating, in addition to being sports-ready for any future major-league opportunities. "While we're not relying on a professional sports team, we would be able to handle it if the opportunity arose, or if Las Vegas was considered for a professional basketball or hockey team," he said, noting that the Grand Garden will be hosting four college basketball tournaments over the next week.
One of the big questions hanging over the deal is how the pending sale of AEG could impact the MGM deal. "Our management team expects to be around once the sale occurs and we are very committed to this project," Fikre said. "We've made it clear in all the discussions we've had with prospective buyers about our enthusiasm for this project."
The new arena would also be wired and ready to take on live televised events or awards shows in addition to sports and concerts. "We think there's room for growth there and a niche that needs to be filled by a modern arena with all the amenities," said Fikre. "It could attract dates that they're not getting in the marketplace and maybe instead of acts doing an extra play in L.A. they might add a show in Las Vegas."
Interviewed for this story: Gordon Absher, (702) 891-1840; Ted Fikre, (213) 742-7155