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LAS VEGAS-MGM Mirage Inc. and Kerzner International Holdings Ltd. have signed a letter of intent to form a joint venture for the development a multibillion resort on 40 acres MGM acquired last month next to its Circus Circus property at the north end of the Las Vegas Strip. The two companies said Wednesday morning they hope to have a 50-50 joint venture agreement hammered out by the end of the third quarter, after which they would spend one year planning and three years developing.

The property is located at the corner of Las Vegas Boulevard and Sahara Avenue. Kerzner will lead the planning and conceptualization of this project, according to the two parties. Per the tentative agreement, MGM Mirage would contribute the land, valued at $20 million an acre, and Kerzner International and one of its financial partners would provide an equal amount of cash equity. No determination has been made with regard to branding.

Kerzner International chairman Sol Kerzner says he has studied the Las Vegas market “for some time” and, given the site and the two companies combined experience developing destination resorts, believes “this is an outstanding opportunity to create one of the most innovative and exciting destination resorts in the world.” MGM chairman Terry Lanni says the partnership is a way for the company to leverage its land and development experience and accelerate growth while conserving capital for additional opportunities. “We see this type of relationship as a major part of our company’s future,” he says.

MGM in May paid two different owners $576 million, about $17 million per acre, for 33.5 contiguous acres that abut MGM’s existing assets there as well as Las Vegas Boulevard, giving the company a total of 102 acres to master plan. When MGM Mirage put the properties under contract in April, company CFO Jim Murren intimated that the company would take on a partner with which it would design an integrated resort, adding that he already had received “significant interest” from third parties.

Brokered by Michael Mixer and Alexander Rodrigo, executives of the local Colliers International office, the acquisition involved 1031 exchange money from MGM’s sale of its Primm, NV portfolio and the recapitalization of its holdings in Jean, NV, which it also plans to develop via a partnership.

All told, MGM now controls along Las Vegas Boulevard 865 acres with three miles of Strip frontage, cementing its position as the area’s largest landholder. Its largest current project is the $7.4-billion CityCenter project, which got under way this time last year. Located between the Bellagio and Monte Carlo resorts, the first phase of the development will include a 4,000-room luxury hotel and casino, two 400-room non-gaming hotels, 2,900 condominium units and 500,000 sf of commercial space.

Kerzner, through its subsidiaries, is an international developer and operator of destination resorts, casinos and luxury hotels. Kerzner’s flagship brand is Atlantis, which includes Atlantis, Paradise Island, a 3,700-room ocean-themed destination beach resort in The Bahamas built around a 100-acre waterscape with over 20 million gallons of fresh and saltwater lagoons, pools and the world’s largest open-air marine habitat. A second Atlantis is being developed on a portion of the Palm, a manmade series of islands off the coast of Dubai. In addition, Kerzner manages six luxury One & Only hotels around the world and is developing a resort in Morocco under a new brand that has not yet been announced.

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