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LAS VEGAS-It’s Las Vegas: a city that never sleeps and where everyone plays a hunch, including developers. The latest roll of the dice–the $1.5-billion Cosmopolitan–breaks ground in August with a plan to crack the crowd of high-rollers and fierce competition with a red-carpet design that puts an eclectic retail mix at the mega-resort’s doorstep and sets up the first “for sale” condo play right at the heart of the fabled Strip.

“Going into it, I thought I was going to have to do a lot more educating of the tenants to get the mix we wanted. They’re savvy about Vegas. They’ve just been waiting for the right property to come along,” James Reding, retail director for the development group, 3700 Associates LLC, tells GSR. On the condo side, reservations reportedly outnumber the 2,000 hotel-condo units, ranging from 550 sf to 1,150 sf and entry-level pricing upward of $700,000.

Backing the Cosmopolitan’s mega-resort development are Ian Bruce Eichner, who’s built more than $2 billion of mixed-use space in the Northeast and Florida; David Friedman, a gaming industry developer with credits like the Venetian and Sheldon Adelson; and an affiliate of Dune Capital Management LP, which is controlled by Steven T. Mnuchin. The high-rollers are placing their bet on a nine-acre tract historically used, though somewhat illegally, as a parking lot and right beside the Bellagio.

“It is probably the last remaining choice piece of property in the Center Strip Corridor,” says a 3700 Associates spokesman. The tract was bought in April 2004 from a private seller.

The mega-resort, penciled to deliver in early 2008 at 3700 Las Vegas Blvd., will have 300,000 sf of retail, of which 130,000 sf is restaurant space; 1,000 hotel rooms and 2,000 condos; 75,000-sf casino; 1,800-seat theater; 150,000 sf of meeting space; five-acre Cosmo Beach Club; and 3,800-space underground parking garage. The Cosmopolitan will be set apart from its peers by a show-stopping, floor-to-ceiling glass skin showcasing street-front retail at the irreplaceable hard corner of Harmon Avenue and Las Vegas Boulevard. Reding envisions it will become another retail landmark like Rodeo Drive, Times Square and Fifth Avenue.

Reding says the retail chase began with primarily word-of-mouth marketing that’s already produced negotiations for 40,000 sf or 25% of the grand total and 40 to 50 letters of intent. He predicts the first leases will be inked by June 1. As for the cost, the Strip’s up- and-coming space is being marketed with an annual effective rent of $125 per sf to $350 per sf.

“We’re involved with a New York firm with a whole entourage of retailers from France, Spain and England that were waiting for the right opportunity to come to the US. They’re trying to decide between New York and Los Angeles and we’re sharing the benefits of Vegas and the Cosmopolitan,” Reding says. Hip, cool and boutique retailers and restaurateurs with local followings and few locations in key US metros and abroad are tickets for opening talks, he says. “We want established brands, but not too many brands,” he explains about the strategy to mine creme de la creme specialty names from locales like South Beach, Los Angeles, Chicago, San Francisco, New York City and Washington, DC.

Reding, who spent the last 12 years at the Venetian’s Grand Canal Shops, says the mix will be mostly women’s and men’s fashions, jewelry, gifts and specialty wares. “It’s not just high-end,” he stresses. “The high-end market is very well served in Vegas. We are not looking to duplicate the Forum shops.”

Reding says Las Vegas research shows tourists are now spending an average of $400 in its shops. “It’s getting very close to people’s gambling budgets,” he says.

Las Vegas market watchdog, John Restrepo of Restrepo Consulting Group LLC, says locals have their eyes on the number of condos on the rise for the city’s skyline more so than the Cosmopolitan’s retail. “Retail vacancy on the Strip is virtually zero,” he says. “What we don’t know yet is how much condo and timeshare units Vegas can support.”

Just in the “resort corridor” of the central and south Strip and downtown, Restrepo says construction is under way on 13 mid- and high-rise projects, three condo hotels, six casino resorts, four timeshare plans and two mixed-used developments. And, he says, the drawing boards are holding another 22 mid- and high-rise projects, eight condo hotels, 25 casino resorts, eight timeshare plans and 11 mixed-use developments.

Developers are pushing hard to be first out of the ground, Restrepo says, citing the race between the Cosmopolitan and MGM’s City Center. He says the Cosmopolitan will stand out for its architecture and the gain to be made by being the first condo play on the Central Strip in a city that’s high on the list of second-home and “lock and leave lifestyle” buyers.

“We won’t be overbuilt with hotel rooms, but the question is whether this market can support the number of timeshares and condos,” Restrepo says. At last count, the Vegas market has 130,000 hotel rooms. The five-year outlook is another 25,000 to 30,000 rooms will be added per year.

In a breakdown of under-construction product, Restrepo says 6,500 units are mid- and high-rise projects, 1,700 hotel rooms, 9,100 casino rooms, 672 timeshare units and 286 units in mixed-use developments that could be condos or traditional hotel-type rooms. Planned projects break down to 30,000 units in mid- and high-rise projects, 8,400 hotel rooms, 47,000 resort rooms, 5,900 timeshare rooms and 5,100 mixed-use rooms that could end up all or part as condos. “Our estimate, based on what we know, is probably only half of the planned developments will get built,” Restrepo says.

How much more development can the Strip support? No one knows, Restrepo says. The reality is that the four-mile stretch of neon is on the cusp of required redevelopment. “At the end of the day, the value’s in the land,” he says. Owners of older casinos like Circus Circus, the Riviera and Frontier “will have to do something if they’re going to stay competitive,” Restrepo says. “The talk is whether they’re going to remodel or rebuild.”

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